Completion Report

Project Number: 33442 Loan Number: 1850 July 2008

PRC: Ganzhou–Longyan Railway Project

CURRENCY EQUIVALENTS

Currency Unit – yuan (CNY)

At Appraisal At Project Completion 1 September 2001 31 March 2007 CNY1.00 = $0.1208 $0.1293 $1.00 = CNY8.2768 CNY7.7342

ABBREVIATIONS

ADB – Asian Development Bank BOEPTC – Beijing Oasis Environmental Protection Technology Company DMIS – dispatch management information system EA – executing agency EIA – environmental impact assessment EIRR – economic internal rate of return FCTIC – Foreign Capital and Technical Import Center FIRR – financial internal rate of return GDP – gross domestic product GLR – Ganzhou–Longyan Railway ICB – international competitive bidding M&E – monitoring and evaluation MOR – Ministry of Railways NRA – Nanchang Railway Administration PPTA – project preparatory technical assistance PRC – People’s Republic of China RCSO – railway construction support office RI-SJU – Research Institute of the Southwest Jiaotong University WACC – weighted average cost of capital

NOTE

In this report, "$" refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations 2 Director General Klaus Gerhaeusser, East Asia Department (EARD) Country Director Robert Wihtol, People’s Republic of China Resident Mission, EARD

Team leader Wang Fang, Financial Management Officer, EARD Team members Zhu Wenlong, Resettlement Officer, EARD Niu Zhiming, Project Officer (Environment), EARD Gao Yanli, Assistant Project Analyst, EARD

CONTENTS

Page

BASIC DATA ii MAPS vi I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Consultant Recruitment and Procurement 6 I. Performance of Consultants, Contractors, and Suppliers 6 J. Performance of the Borrower and the Executing Agency 6 K. Performance of the Asian Development Bank 7 III. EVALUATION OF PERFORMANCE 7 A. Relevance 7 B. Effectiveness in Achieving Outcome 8 C. Efficiency in Achieving Outcome and Outputs 8 D. Preliminary Assessment of Sustainability 9 E. Impact 9 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12 A. Overall Assessment 12 B. Lessons Learned 12 C. Recommendations 13 APPENDIXES 1. Project Framework 15 2. Chronology of Major Events in the Project’s History 18 3. Project Costs and Financing Plan 20 4. Projected and Actual Contract Awards and Disbursements 21 5. Planned and Actual Implementation Schedule 22 6. Organization Chart 23 7. Compliance with Covenants 24 8. Contract Packages Financed by the Asian Development Bank 29 9. Environmental Impact Analysis 37 10. Evaluation of Land Acquisition and Resettlement Activities 40 11. Economic Reevaluation 46 12. Financial Reevaluation 49 13. Social Impact and Poverty Reduction in the Project Area 54

BASIC DATA

A. Loan Identification

1. Country People’s Republic of China 2. Loan Number 1850 3. Project Title Ganzhou–Longyan Railway Project 4. Borrower People's Republic of China 5. Executing Agency Ministry of Railways 6. Amount of Loan $200,000,000 7. Project Completion Report PCR: PRC 1034

B. Loan Data 1. Appraisal – Date Started 10 May 2001 – Date Completed 26 May 2001

2. Loan Negotiations – Date Started 27 August 2001 – Date Completed 29 August 2001

3. Date of Board Approval 30 October 2001

4. Date of Loan Agreement 21 December 2001

5. Date of Loan Effectiveness – In Loan Agreement 21 March 2002 – Actual 2 April 2002 – Number of Extensions 1 interim extension

6. Closing Date – In Loan Agreement 31 December 2006 – Actual 16 January 2008 – Number of Extensions 2

7. Terms of Loan – Interest Rate LIBOR-based – Maturity (number of years) 25 – Grace Period (number of years) 5

8. Terms of Relending (if any) not applicable – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

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

2 April 2002 9 October 2007 66 months

Effective Date Original Closing Date Time Interval

2 April 2002 31 December 2006 57 months

b. Amount ($) Last Category Original Revised Amount Net Amount Amount Undisbursed Allocation Allocation Canceled Available Disbursed Balancea 1 Civil Works 95,200,000 112,710,000 0 112,710,000 112,119,737 590,263 2 Equipment 82,200,000 85,000,000 0 85,000,000 84,999,086 914 and Materials 3 Consulting 300,000 290,000 0 290,000 265,995 24,005 Services 4 Front-End Fee 2,000,000 2,000,000 0 2,000,000 2,000,000 0 5 Unallocated 20,300,000 0 0 0 0 0 Total 200,000,000 200,000,000 0 200,000,000 199,384,818 615,182 a Canceled at loan closing.

10. Local Costs (ADB-Financed): None

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 254.7 199.4 Local Currency Cost 520.3 582.0 Total 775.0 781.4

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower-Financed 531.1 529.6 ADB-Financed 198.0 197.4 Other External Financing 0.0 0.0 Total 729.1 727.0 IDC Costs Borrower-Financed 43.9 52.4 ADB-Financed 2.0 2.0 Other External Financing 0.0 0.0 Total 45.9 54.4 ADB = Asian Development Bank, IDC = interest during construction.

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3. Cost Breakdown by Project Component ($ million) Component Appraisal Actual Estimate A. Base Cost 1. Civil Works 353.8 446.3 2. Railway Track and Bridges (including rails, sleepers, 124.7 64.2 ballast, bridge beams) 3. Signaling, Communications, and TMIS 26.6 29.1 4. Electric Power 17.4 16.2 5. Operational Equipment 31.4 45.8 6. Buildings and Facilities 34.3 41.5 7. Land Acquisition, Compensation, and Resettlement 34.4 40.3 8. Environmental Protection, Mitigation, and Monitoring 10.0 10.0 9. Administration, Consulting Services, and 20.3 33.6 Miscellaneous Costs

B. Contingencies 1. Physical 43.0 0.0 2. Price 33.2 0.0

C. IDC and Front-End Fee 45.9 54.4

Total 775.0 781.4 IDC = interest during construction, TMIS = transport management information system.

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants For Construction Supervision January 2002 November2001 For Marketing and Business Development July 2006 Completion of Engineering Designs October 2001 August 2002 Civil Works Contract Date of Award January 2002 May 2002 Completion of Work March 2006 October 2004 Equipment and Supplies First Procurement July 2003 October 2002 Last Procurement June 2006 June 2006 Completion of Equipment Installation June 2006 July 2007 Start of Operations Completion of Tests and Commissioning December 2006 March 2005 Beginning of Start-Up July 2006 April 2005

5. Project Performance Report Ratings Ratings

Development Implementation Implementation Period Objectives Progress From March 2002 to September 2004 Satisfactory Satisfactory From October 2004 to December 2007 Satisfactory Highly Satisfactory

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D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersa Fact-Finding 27 February–16 March 2001 5 72 a, b, d, e, f Appraisal 10–26 May 2001 4 60 a, b, c, d Loan Negotiations 27–29 August 2001 4 12 a, c, g, h Special Loan Administration 4–11 December 2001 1 8 a Review Inception Mission 25–30 November 2002 3 18 i, j Review 1 6–10 September 2003 2 10 i, j Review 2 7–13 December 2004 2 14 i, j Joint Review and Handover 13–16 December 2005 3 12 i, j, k Review 3 19–22 September 2006 3 12 j, k, l Project Completion Review 15–19 October 2007 4 20 e, j, k, l a a = engineer, b = financial analyst, c = counsel, d = economist, e = environment specialist, f = social development specialist, g = programs officer, h = control officer, i = transport specialist, j = project analyst, k = finance officer, l = resettlement officer.

Map 1

o o 100 00'E M O N G O L I A 120 00'E GANZHOU-LONGYAN RAILWAY PROJECT INNER MONGOLIA IN THE t o Jining U r u PEOPLE'S REPUBLIC OF CHINA Hohhot m

q i (as completed) Baotou (Y Huang He el low Datong R ive BEIJING r) Qinhuangdao Dongsheng Shuoxian TIANJIN Yumen Bazhou Tianjin Bohai Yinchuan Shenmu North HEBEI Sea Huanghua Yuanping SHENMU-YAN'AN RAILWAY Shijiazhuang Yulin Taiyuan Zhongwei Hengshui Yantai Yuci Dezhou Gantang Suide NINGXIA Mucun SHANXI Shehe Jinan Xining Fengteng SHANDONG TAIYUAN-ZHONGWEI RAILWAY 35 o 00'N Xiaoyi Tunilu JING-JIU RAILWAY Qingdao QINGHAI Lanzhou Yan’an North Linfen Shijiusuo SHANXI-XIAOLIU RAILWAY Xin Xiang Yanzhou Hancheng Jiaozuo Yellow Sea o Yueshan Heze Linyi 35 00'N Houma Zhengzhou Zhongjiacun Lianyungang Tongguan Xuzhou GANSU Baoji Xinfeng HENAN Shangqiu Xinyi Xi'an Qingling Tunnel JIANGSU Huaiyuan HEFEI-XI'AN RAILWAY ZHENGZHOU-XI'AN RAILWAY Shangnan Yangping Yangpingguan SHAANXI Xixia Bengbu Danjiangkou Nanyang Fuyang Hanan To s ngb Xiaolin in Changfeng Ankang ai M ta Nantong Gucheng oun Xinyang un tains o Hefei M Nanjing Jiangyin e SHANGHAI Xiangfan Huangchuan bi Lishan a Lu'an Yixing SICHUAN DAXIAN-WANXIAN RAILWAY D Wuxi Daxian HUBEI Macheng Wuhu Shanghai Jingmen Hankou ANHUI Changxing XIZANG Chengdu (Ya Wanzhou ngt Hangzhou ze R Yichang Anqing (Wanxian) ive Wuhan CHONGQING Lichuan r) HEFEI-JIUJIANG RAILWAY Ningbo Fuling Huaiyuan YICHANG-WANZHOU RAILWAY Jiujiang ZHEJIANG Neijiang Chongqing Scenic Area Nanchang Yibin DALI-LIJIANG RAILWAY Xiangtang Yiyang Wenzhou g Changsha Sanjiangcheng Jian ang Yingtan Zhongdian Ch GUIZHOU Loudi Zhuzhou JIANGXI Lijiang GUIZHOU-SHUBAI RAILWAY Huaihua HUNAN Ji'an Lanping FUJIAN Liupanshui o Dukuo Nanping 25 00'N Henyang Fuzhou Guiyang Guiding Ganzhou Zhanyi Baiguo GANZHOU-LONGYAN RAILWAY Hongguo Pingzha Baoshan Dali Guilin Qujing Weishe o Kunming Longyan 25 00'N Chuxiong Luocheng Dingnan Xiamen Ruili Hechi YUNNAN Yiliang GUANGXI Meizhou Zhangzhou Sancha Longchuan Lincang Liuzhou Kaiyuan GUANGDONG Heshan Laibin Chaozhou Shiping Guangzhou Mohei Litang Sanshui Shantou Changping Shenzhen GUANG-MEI-SHAN RAILWAY Nanning Yunfu Yaogu Jinghong Ping Xiang Zhuhai Kowloon Qinzhou HONG KONG SAR Hepu Hechun Macau Fangcheng MACAU SAR MYANMAR Zhakou Maoming VIET NAM Beihai National Capital Zhanjiang YAOGU-MAOMING RAILWAY LAO PEOPLE'S Provincial Capital DEMOCRATIC Santang City/Town REPUBLIC Gulf of Tonkin Yangpu Haikou Existing Railway Nada Chahe Planned Railway Shilu Basou HAINAN Railway Projects Financed by the Asian Development Bank Sanya Completed N Under Construction Proposed South China Sea 0 50 100 150 200 250 River Provincial Boundary Kilometers International Boundary Boundaries are necessarily authoritative.

100 o 00'E 120 o 00'E

08-0783a HR 116 o 00'E

GANZHOU-LONGYAN RAILWAY PROJECT IN THE PEOPLE’S REPUBLIC OF CHINA

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Yong'an J I A N G X I 319

RUIJIN COUNTY 205 Huanglin Ruijin Changting LIANCHENG 323 Xijiang COUNTY Yudu Jinfengshan Liancheng Hetian Meihuashan Shimenyu Luo'ao Zhongfu Nature Reserve o o 25 50'N Ganzhou Maodian 319 25 50'N 206 CHANGTING COUNTY XINLUO 105 YUDU Guanzhishan DISTRICT Zhangping Shaoguan COUNTY 5 km. Nankang Huichang Xinquan Hul’an Xiaochi Longyan West Xuanyuan GANXIAN HUICHANG Shanghang Tieshanyang DISTRICT COUNTY

t SHANGHANG Longyan 324 o

S COUNTY h e n z Shanghang X. Tong-an h e n 319

205

Officially designated Kanshi XIAMEN Poverty Counties in 2007 Zhangzhou City/County/District F U J I A N Railway Station 205 Route Number

National Highway MEIZHOU Ganzhou-Longyan Railway Existing Railway N Railway under Construction County Boundary Provincial Boundary 0 50 100 0

8 Boundaries are not necessarily authoritative. Kilometers M - 0 7 a 8 3 p b

H o 116 00'E 2 R

I. PROJECT DESCRIPTION

1. Railway is the primary mode of transport for long-distance and bulk transport in the People’s Republic of China (PRC). Railway projects provide a cost-effective mode of transport and catalyze rapid economic growth. They enhance the investment environment in the project areas, enable access to wider markets and better prices for local products, and generate large- scale employment opportunities for local people. Consequently, these projects have significant impacts on improving the incomes and living standards of people in general and reducing poverty in particular. Between 1978 and 2006, railway freight traffic increased from 535 billion ton-km to 2,172 billion ton-km, equivalent to an annual growth rate of 5.14%. Passenger traffic grew at 6.65% annually from 109 billion passenger-km to 666 billion passenger-km. Despite such growth rates, railway capacity has seriously lagged behind demand. The Government’s plan for railway development gave priority to expanding the railway network and constructing new lines to provide economical transportation and catalyze growth in poor inland regions. The Ganzhou–Longyan Railway (GLR) was proposed in the 10th five-year plan (2001–2005) of the Ministry of Railways (MOR) as a direct outgrowth of the initiatives.

2. GLR starts from the east Ganzhou station of Beijing–Kowloon Railway in southern Jiangxi Province and ends at the west Longyan station in western Fujian Province. It traverses eight counties in two prefectures. The two prefectures were among the PRC’s first set of national poverty-stricken areas identified in 1987. Poor accessibility and high cost of motorized transport had limited their economic development. The project’s objective was to promote sustainable economic growth that would help reduce poverty in the project area by providing economical railway transportation in unserved, less-developed, and poor areas to create the conditions necessary for developing local resources and generating employment and income- enhancing opportunities that raise living standards (particularly for the poor). GLR provides the first railway linkage in the region and greatly reduces transport costs. It also provides a strategic railway linkage between the port of Xiamen and the Jing–Jiu Railway1, and its connections to the national network improve traffic maneuverability, reduce transportation constraints for other parts of the railway network, and lower network transportation costs. The project framework is in Appendix 1 and the chronology of major events is in Appendix 2.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

3. At the time of appraisal, Asian Development Bank’s (ADB’s) strategy for the PRC emphasized three broad objectives: (i) improving economic efficiency, (ii) promoting growth in poor inland provinces to reduce poverty, and (iii) protecting the environment and managing natural resources. In pursuit of these objectives, the strategy supported developing efficient and integrated transport networks to meet the needs of a growing market economy and contribute to reducing poverty through investment targeting poorer areas coupled with policy and institutional reforms. Recognizing the importance of railway transport in the development of the national economy, ADB’s strategy for the railway sector focused on (i) expanding the railway system by constructing new lines in unserved, less-developed, and poor areas; (ii) modernizing and increasing the capacity on key routes of the national railway system to improve transport efficiency; and (iii) commercializing railway operation to sustain efficient operation. GLR forms a

1 ADB. 1994. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Jing–Jiu Railway Technical Enhancement Project. Manila.

2 railway route traversing Fujian and Jiangxi provinces in an area that previously had no rail service. The line connects the poor mountain-locked interior region to the wealthy coastal region. GLR stimulates industrial, agricultural, natural, and human resources development and creates employment and income-generating opportunities. The Project conforms to ADB’s country operational strategy for the PRC and supports the Government’s objective of greater developmental emphasis on poor interior and underserved areas by improving transportation linkage with growth centers. The Project is consistent with ADB’s country strategy as well as ADB’s strategy for the railway sector.

4. ADB provided project preparatory technical assistance (PPTA)2 to review the feasibility study, environmental impact assessment, and proposed resettlement plan. The PPTA strengthened the project design, refined the resettlement plan, and incorporated measures to enhance social development and reduce poverty. The PPTA also devised measures for improving railway operational efficiency and financial sustainability.

B. Project Outputs

1. Ganzhou–Longyan Railway

5. At appraisal, the project scope comprised constructing 277 kilometers (km) of single-track standard-gauge railway between Ganzhou and Longyan, including 141 bridges with total length of 33 km, 970 culverts, and 99 tunnels with total length of 61 km, and constructing 14 new railway stations. The actual length of railway is 290.1 km (132.3 km in Jiangxi Province and 157.8 km in Fujian Province), including 156 bridges with total length of 35.7 km, 1,200 culverts, 120 tunnels with total length of 68.5 km, and 16 railway stations. In Longyan, GLR connects to the coastal Zhangping–Longyan–Meizhou Railway and in Ganxian station, it connects to the Jing–Jiu Railway. Differences relative to appraisal were mainly due to rationalization and adjustments to the project design during construction. The increased number of culverts and bridges mainly reflected converting level crossings to vertical crossings to incorporate designs for transport safety, convenient passages for farming activities, and irrigation schemes. More tunnels reduced the required land acquisition and resettlement.

6. GLR is well designed and the quality of construction is high by international standards. The track and infrastructure, together with the stations, platforms, and passenger waiting areas, are appropriate for the intended purposes. The GLR track structure follows modern practice, using continuously welded rail on concrete sleepers with spring clip fastenings. Slope protection and drainage works are incorporated into the earthworks. The railway design allows maximum gradients of 0.6% with traction from one locomotive and 1.25% using a double locomotive, minimum curve radius of 800 meters (m) and 550 m for difficult sections, and maximum speed of 120 km/hour for passenger trains and 100 km/hour for freight trains. The PRC’s common DF4D-type locomotive is used with a permitted 3,500 ton trailing load. Direction and monitoring is provided from the control center of Nanchang Railway Administration (NRA). Dispatching management information system (DMIS) facilities are provided at each station along the route. The Nanchang control center establishes train order priority and provides dispatching instructions that are then carried out by the station dispatchers. The line is equipped with hot wheel bearing detectors located at a spacing of approximately 30 km. This safety facility, which would provide early detection of any hot wheel bearing, minimizes the risk of derailment in a difficult operating environment. Long tunnels are equipped with ventilation fans that operate

2 ADB. 2000. Technical Assistance to the People's Republic of China for Preparing the Ganzhou–Longyan Railway Project. Manila.

3 continuously. Safety refuges are provided at regular intervals along the tunnels to protect maintenance and inspection staff.

7. Several adjustments were carried out to enhance the GLR’s technical specifications. Using a new type of sleepers and changing the signaling system from the semi-autonomic block to autonomic block system enables higher maximum speed and larger capacity. Introducing DMIS, an axle-counting system, and a radio-based train number and locomotive number identification system that locates the positions of cars and locomotives has reduced the number of employees and improved operational efficiency. To improve transport safety, all level crossings have been converted to bridge crossings or flyover culverts. Fences have been installed at sections along densely populated villages and towns. Roadbeds were protected against 100-year floods. Railway station spaces were expanded and station facilities upgraded to provide better services to passengers.

2. Service, Access, and Link Roads

8. Under the Project, 13.4 km of station access roads have been completed and 222.2 km of construction access roads (179.4 km in Fujian Province and 42.8 km in Jiangxi Province) have been handed over to the local governments. These roads are converted to village roads, providing local villagers convenient access to farms and communities. In addition, most local governments have upgraded the existing roads to railway stations and constructed new roads in surrounding areas as part of city or county development plans. One industrial siding in Ruijin railway station has been constructed. Four industrial sidings along GLR are planned, and four enterprises will invest into these.

3. Track Maintenance Equipment

9. An important component financed by ADB loan was modern technology and equipment for signaling, communications, a management information system, freight and container yard operation, and mechanized track maintenance. As detailed in paras. 6 and 7, modern technology and equipment has significantly improved the operational efficiency. In particular, the ADB loan financed a package of track maintenance equipment containing ballast tamping machines, ballast stabilizer cars, turnout rail grinding machines, mobile track welding machines, and a track geometry car. This equipment enables mechanized track maintenance, which reduces by 50% interruption to operations due to major track repair as compared with conventional manual methods, and it improves maintenance quality. As a result, the maintenance interval can be prolonged from 8 months to 18 months. Using mechanized track maintenance equipment has significantly improved efficiency and reduced the workload of maintenance staff. The same equipment and technology are being utilized in other MOR railway tracks, which has helped reduce redundant workers in the railway sector.

4. Institutional Capacity Strengthening

10. The institutional capacity strengthening component was originally envisaged to cover two parts: (i) evaluating the implications of the PRC’s accession to the World Trade Organization on the development, operation, and management of the railway system; and (ii) strengthening marketing and business development functions of MOR. As ADB later provided a separate technical assistance project 3 to evaluate the impact of World Trade

3 ADB. 2004. Technical Assistance to the People's Republic of China for World Trade Organization-Policy Reform Support to the Ministry of Railways. Manila.

4

Organization accession on PRC railways, only the second part was implemented under the Project. The consulting services for marketing and business development were procured following the quality and cost-based selection method and included 7.5 person-months of international and 7 person-months of national consulting services. The consulting services strengthened MOR's marketing and business development functions by conducting a market environment assessment for GLR, presenting options for transport organization and logistic arrangement, developing business development strategies, and training key railway staff. Six staff from MOR and NRA undertook an overseas tour to observe various railway passenger and freight operations in the United States, including the operations of a package division of United Parcel Service, intermodal operation in a railway yard of Burlington Northern Santa Fe Railroad in Chicago, the operation of an American passenger transport company (Amtrak), and a metropolitan rapid transport agency. A workshop was conducted to disseminate the study results to senior MOR officials.

C. Project Costs

11. The actual project cost was $781.4 million, comprising $199.4 million foreign exchange cost and $582.0 million local currency cost. This was close to the appraisal estimate of $775.0 million. The actual civil works cost was 26% higher than the appraisal estimate, mainly due to the complex geological conditions at the construction sites. Modifications to the original design were made to optimize the structural design and ensure the construction quality. Converting level crossings to vertical crossings, increased work for slope protection and drainage, and more culvert works to meet the requirements of local traffic and irrigation contributed to the higher civil works cost. Including the costs of slope protection, vegetation, and restoration of spoil and borrow pits, as well as the cost of ballast, also added to the civil works cost. The cost of operational equipment was higher than appraisal estimates by 46%. Actual costs for administration, consulting services (including construction supervision), and miscellaneous were 65% higher. The cost for railway track and bridges (including rails, sleepers, and bridge beams) was 50% lower than appraisal estimates because of low bid prices (particularly for bridge beams) and because the cost of ballast was actually included in the civil works contracts but had been classified at appraisal under the item for railway track and bridges.

12. The financing plan envisaged at appraisal included an ADB loan of $200 million, a loan from China Development Bank of $266 million, and equity input from MOR of $309 million, representing 25.8%, 34.3%, and 39.9% of project costs, respectively. ADB actually financed $199.4 million, representing 25.5% of the project cost. The actual counterpart funds were composed of an MOR equity investment of $254.8 million (32.6%), a railway bond of $61.0 million (7.8%), a loan from China Development Bank of $262.3 million (33.6%), and local government investment of $3.9 million (0.5%). Appendix 3 provides the updated project cost and financing plan.

D. Disbursements

13. Disbursement followed reimbursement, commitment letter, and direct payment procedures. An imprest account with an initial advance of $3.0 million was also used. MOR, through the Foreign Capital and Technical Import Center (FCTIC), had established adequate internal control, accounting, and auditing procedures to apply appropriate disbursement methods and ensure compliance with ADB disbursement requirements. Disbursement began in April 2002 and was completed in October 2007. Loan savings of $615,182.47 were canceled at loan closing. The loan closing date was extended, mainly to accommodate the domestic requirement that final payment under civil work contracts can only be made after the project

5 completion audit is conducted (the project completion audit of GLR was conducted in the first half of 2007). The projected and actual contract awards and disbursements are shown in Appendix 4.

E. Project Schedule

14. The project's major components were completed ahead of the schedule envisaged at appraisal. Prequalification and bidding processes started in August 2001, 2 months later than planned, but were completed on time. Purchase of the package for track inspection cars was delayed, then completed in July 2007, but the delay did not affect the trial operation. Land acquisition and resettlement activities began in February 2002 and were completed in December 2003, about 6 months later than envisaged at appraisal. Civil works and buildings started in December 2001 and were completed in October 2004, which was 17 months earlier than envisaged at appraisal. Track laying started in August 2003 and was completed in December 2004 (18 months earlier than envisaged at appraisal). Telecommunications, signaling, and electrification started in October 2003 and were completed in May 2006 (1 month earlier than planned). Trial operations commenced on 1 April 2005 for freight transportation and on 11 October 2005 for passenger transportation (15 months ahead of schedule). A comparison of the appraisal and actual implementation schedules is presented in Appendix 5.

F. Implementation Arrangements

15. Project implementation was originally under joint supervision of the Shanghai and Nanchang railway administrations. Two construction headquarters were established—one under each administration. In May 2004, railways in Fujian Province were merged into NRA in a streamlining of the MOR’s internal organization. Subsequently, NRA through the GLR Construction Headquarters, undertook full responsibility for the GLR construction. MOR, through FCTIC, undertook procurement of ADB-financed components, submitted withdrawal applications for the ADB loan, and maintained liaison with ADB. The organization chart for project implementation is in Appendix 6.

16. The resettlement offices under GLR Construction Headquarters were responsible for coordination, fund raising, and internal monitoring for land acquisition and resettlement of the Project. Railway construction support offices (RCSOs) were established under Ganzhou and Longyan municipal governments, as well as at county and township levels. These RCSOs were responsible to implement land acquisition, house demolition, and relocation.

17. GLR Construction Headquarters was responsible for environmental management and supervision for the Project during the implementation period. During construction, the designated personnel, with the help of the environmental consultants, were in charge of the mitigation measures set out in the environmental impact assessment (EIA). Monitoring and mitigation measures were included in the covenants of the civil works contracts. Contractors and construction supervision companies had designated staff in the site management team to deal with environmental issues.

18. Ten domestic consulting firms were engaged for the construction supervision of the civil works contracts. Services of the supervision consultants commenced in November 2001 and were completed in December 2004. The Beijing Oasis Environmental Protection Technology Company Limited (BOEPTC) was engaged to monitor the noise pollution, ambient air quality, surface water quality, and the ecological environment, as well as to supervise implementation of the mitigation plan. BOEPTC carried out 13 monitoring reports since June 2002 and submitted

6 the environment evaluation report for 1 year after completion of construction in December 2006. The Research Institute of Southwest Jiaotong University (RI-SJU) was engaged as the external agency to conduct independent monitoring and evaluation (M&E) of the land acquisition and resettlement activities under the Project. RI-SJU prepared and submitted a baseline survey report in April 2002, No. 1 and No. 2 resettlement M&E reports in April 2003 and May 2004, and a resettlement completion report in May 2005. The postevaluation report was submitted in October 2007, 2 years after resettlement was completed.

G. Conditions and Covenants

19. Most of the loan covenants have been complied with or are being complied with. No covenants were modified, suspended, or waived during implementation. Counterpart funds were provided adequately and in a timely manner. All required M&E reports, including audited project accounts and financial statements, were submitted on time and in good quality. The capacity expansion for connecting railway lines and facilities has been completed. Covenants related to environmental protection, land acquisition, and resettlement have been generally complied with. The covenant on operating ratio of not higher than 70% may not be complied with before 2011. This is mainly due to the actual tariffs, which are significantly below the appraisal estimate. The compliance with loan covenants is in Appendix 7.

H. Consultant Recruitment and Procurement

20. The ADB loan financed the consulting services for marketing and business development (para.10). The consultants were recruited in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time) following the quality and cost-based selection method. The consulting services were carried out satisfactorily. Using its own resources, the Executing Agency (EA) engaged national consultants for project survey and design, construction supervision, and tendering. As covenanted in the Loan Agreement, the EA also directly engaged agencies for M&E on environmental protection, and for land acquisition and resettlement.

21. Of the 21 civil works contracts under the Project, 18 were partly financed by ADB and 3 entirely by the counterpart funding. The ADB-financed civil works contracts were all procured through international competitive bidding (ICB), including 16 for the main line and 2 for track laying and bridge erection works. The contracts for materials and equipment were procured through ICB and international shopping. No significant problems were encountered in the procurement process. The details of contract packages are in Appendix 8.

I. Performance of Consultants, Contractors, and Suppliers

22. Civil works contractors performed satisfactorily, completing all works 18 months earlier than planned despite the difficult geological conditions and complex tunnels and bridges. Telecommunications, signaling, and electrification were also completed earlier than scheduled. Equipment and materials were delivered on time and in good quality. The suppliers’ performance was satisfactory. Adequate qualified supervising engineers were fielded on site. The supervision consultants played an important role in ensuring the good construction quality.

J. Performance of the Borrower and the Executing Agency

23. The EA’s performance is considered highly satisfactory considering the effective control of construction schedule, quality, and cost; efficient procurement processing; and efficient

7 arrangement for operation. The EA mobilized the resources of design institutes, contractors, and supervision engineers to meet the challenges of constructing complex tunnels and bridges. The application of advanced geological underground detection technology provided accurate underground information to determine physical characteristics of rock, rock formations, and faults. It also determined the distribution of underground water and ensured the safety of construction. Remedial measures, such as strengthened support in tunnels, use of mini-size anchored bolts on tunnel roofs, and slope reinforcement using anti-slide stakes, were applied to protect tunnel construction from landslide. Innovative bridge erection methods were created in constructing the Diaozhongyan and Songtoujiang extra large bridges, which were recognized by an MOR technological advancement prize. The EA managed to overcome the problem of low-priced bidding through effective contract management and intensive monitoring of construction quality. The EA engaged a professional defect testing agency to evaluate the covered works and the soundness of bridges, roadbeds, and steel structures. The EA completed the preparation for trial operation within 3 months after laying the track, thus demonstrating strong capacity in the organization and administration. FCTIC, with the help of tendering agencies, is experienced in handling procurement following ADB guidelines. Most of the bids were processed on time and in consistency with the project implementation schedule.

K. Performance of the Asian Development Bank

24. ADB’s performance was satisfactory. There were no procurement or disbursement delays. ADB loan proceeds were released in a timely manner. A total of six review missions were fielded during implementation. Review missions and frequent communications with the EA resolved the problems encountered during implementation. The EA expressed appreciation for ADB’s efficiency in the procurement and disbursement processes and in responding to other implementation issues. ADB provided training to the EA in various areas, and particularly in procurement, consulting services, disbursement, project financial management, and financial reporting. The EA was invited to attend the annual country portfolio review missions, where common implementation issues and specific sector issues were highlighted. The EA benefited greatly from such activities. ADB should strengthen the resettlement supervision, considering the fact that only 3 years after completion of land acquisition and house relocation did ADB review missions start to include the resettlement officer.

III. EVALUATION OF PERFORMANCE

A. Relevance

25. The project’s goal was to promote economic development and help reduce poverty in its area. The rationale of the Project is reconfirmed at completion. GLR traverses the less- developed area in southern Jiangxi and western Fujian provinces and plays an important role in reducing poverty in the region. It provides railway infrastructure in that mountainous region, enabling economical transport of raw materials, agriculture products, and industrial goods. GLR is stimulating the development of natural resources exploration and processing industries, and it is creating employment opportunities for local people. Affordable railway services are stimulating mobility of the local labor. Development of link roads and stations is extending the railways’ poverty reduction impacts. GLR connects the prosperous coastal area in the east and the inland area in the west, thus stimulating movement of commodities and people between the two regions. Its connection with the north–south railway artery (Jing–Jiu Railway) has relieved capacity constraints in congested parts of the railway network while significantly reducing transportation costs and travel time. The Project pursued application of new technologies to improve efficiency. It also strengthened the EA’s marketing and business development capacity,

8 which is critical to GLR’s operating on a commercial basis. The poverty reduction effect of the Project is analyzed in detail in paras. 36–39 and in Appendix 13. The design of the Project is considered highly relevant.

B. Effectiveness in Achieving Outcome

26. The Project is considered highly effective in achieving outcomes because it (i) provides an economical option for transporting freight and passengers in the project area; (ii) stimulates industrial development, natural resources exploration, and tourist industry development in the project area; (iii) facilitates the process of relocating labor-intensive industries from the coastal to inland region; and (iv) reduces network transportation costs by relieving congestion in the national railway network and neighboring highways while enabling intermodal shipment.

27. Currently, seven pairs of freight trains and five pairs of passenger trains are scheduled on GLR. Seven stations are open to freight and all are open to passenger operations. In 2006, the first full year of operation, GLR’s freight and passengers originated and arrived were 0.95 million tons and 1.79 million passengers. The freight traffic totaled 1,749 million ton-km, and passenger traffic reached 498 million passenger-km. The year 2007 brought significant growth in both freight and passenger traffic, which were 25% and 48% higher, respectively, than in 2006. In the passenger market, GLR primarily serves long-distance passengers, tourists, and local travelers. Long-distance travel demand keeps increasing, which demonstrates the railway’s competitive advantages. GLR’s hard seat services provide affordable access for rural people to the cities of Ganzhou and Longyan. It also provides connections to such long-distance destinations as Quanzhou, in the vicinity of Xiamen, and thus offers access to important areas of employment. In the freight market, GLR has obvious competitive advantages in shipping bulk materials. Demand is growing in the project area for transportation of mineral ores, construction material, cement, fertilizer, and timber. Local traffic, originating, and terminating traffic are still underdeveloped, however, as indicated by the fact that the initial freight traffic has been largely transit traffic (about 85%).

28. The Project is highly effective in reducing network transportation costs by relieving congestion in the national railway network and neighboring highways. Transit freight traffic has represented a high proportion of the total traffic, reflecting the advantages of routing traffic over GLR as opposed to the highly congested original route. GLR also relieved the burden on highways, and particularly for transporting such bulk cargos as iron and copper ore, coal, and barite. There is potential for intermodal traffic to grow in the GLR area. GLR’s opening has given greater rail access to the port of Xiamen, and this is reflected in the increased number of containers arriving at the port by rail. The container traffic has nevertheless not been large, although GLR could be competitive in shipping containers from the region to Xiamen and the ports in Hong Kong and Shenzhen.

C. Efficiency in Achieving Outcome and Outputs

29. The financial internal rate of return (FIRR) was recalculated at 4.27% (details in Appendix 12), compared with 6.4% estimated at appraisal. This variance is mainly due to the substantially lower freight tariff. The tariff was assumed to be CNY0.2143 per ton-km at appraisal, while the actual level is CNY0.10 per ton-km. The FIRR is, however, higher than the weighted average cost of capital (WACC) of 2.23%, indicating that the Project is financially viable.

9

30. The reevaluated economic internal rate of return (EIRR) for GLR is 14.2%, compared with 14.4% estimated at appraisal (details in Appendix 11). Three types of economic benefits were quantified in the calculation: cost savings for freight traffic diverted from the original railway route and highways, cost savings for passenger traffic diverted from highways, and the travel time savings of passengers. Although the reevaluated EIRR is close to the appraisal estimate, the composition of economic benefits is different. This is mainly due to the significantly higher economic benefits from passenger traffic.

31. The Borrower and EA were highly efficient in project implementation. Despite difficult geological conditions and the high proportion of bridges and tunnels, track laying was completed 18 months ahead and the trial operation 15 months ahead of schedule (para. 14), indicating the high efficiency in the construction work. Several features of the implementation arrangements contributed to this efficiency. First, engaging professional tendering agencies helped the EA to comply with the procedures and requirements of ADB procurement guidelines, particularly those for the ICB process. Second, the FCTIC, under the EA, undertook procurement, disbursements, and daily communication with ADB, while the construction headquarters was responsible for all other aspects of the implementation, including supervision and execution of all contracts. Such an institutional arrangement has been followed for all ADB-financed national railway projects, enabling FCTIC to accumulate experience and familiarity with implementing ADB policies and procedures. Third, making the railway construction supporting offices responsible to implement land acquisition and resettlement was proven to be an efficient arrangement (para. 16). Fourth, the prequalification and competitive bidding process selected qualified contractors with strong design and engineering capacity, most of which specialize in railway construction, including complex tunnels and bridges. Based on this analysis, the Project is rated “highly efficient.”

D. Preliminary Assessment of Sustainability

32. The project’s sustainability was assessed from the financial, operational, environmental, and social perspectives. There need be little concern as to the financial sustainability of GLR considering that actual traffic in the initial years of operation has exceeded the appraisal estimates and that sufficient funds are being provided by MOR for operation and maintenance of the project assets. MOR’s financial strength provides a reasonable assurance on GLR’s financial sustainability, because GLR is being operated as part of the national railways under MOR administration. ADB’s continuous support to MOR’s institutional reform will help the sector to further increase productivity, improve operational efficiency, and reduce cost. On the operational aspect, GLR has been allocated sufficient locomotives and cars. Its DMIS and other telecommunication equipment have significantly improved GLR’s operational efficiency. The installation of wheel bearing heat detectors lowers the risk of derailment in mountainous areas (para. 6). Risks associated with environmental and social impacts of the Project have been minimized by avoiding forested lands and nature preserves. In addition to the mitigation measures for construction activities, the wastewater treatment facilities and solar and electricity heated boilers installed in stations reduce environmental impact during the operation period. The affected people are satisfied with the compensation, and income restoration is obvious. Considering all these aspects, the sustainability of the Project is rated “likely”.

E. Impact

33. Environmental Impact. The environmental monitoring and mitigation measures were carried out during implementation according to the EIA and summary EIA. Adverse effects of the project construction on the surrounding environment were minimized by taking the following primary measures: (i) using spoils from tunnels and other excavations in building embankments,

10 railway stations, or local access and linkage roads, while carefully spreading unused spoils on hillsides with vegetation coverage to minimize interference with natural watercourses; (ii) building cofferdams while constructing bridge piers to prevent sedimentation into rivers; (iii) integrating grass and bushes with concrete grids to stabilize slopes and embankments; (iv) relocating schools affected by noise out of sensitive locations with full compensation; (v) building wastewater treatment facilities in nine passenger stations to alleviate pollution from station wastewater; and (vi) replacing coal-fired boilers with solar and/or electrical boilers to reduce air pollution. The State Environmental Protection Administration approved acceptance of the environmental protection facilities for GLR on 30 November 2006. It concluded that the environmental protection facilities planned under the Project had been constructed adequately and meet the requirements and standards under national EIA laws and regulations. Appendix 9 presents details of the Project’s environmental impacts.

34. Resettlement Impact. Land acquisition and resettlement were implemented based on the resettlement plan, the 1998 Land Administration Law, agreements between MOR and Fujian and Jiangxi provinces, and circulars issued by municipal governments. A total 14,336 mu4 of land (of which 6,482 mu were farmland) was permanently acquired, which was 6% less than the 15,254 mu estimated in the resettlement plan. The number of people affected by land acquisition was 8,654. A total of 491,892 m2 of buildings was demolished, which was 2% greater than estimated in the resettlement plan. The number of people affected by house demolition was 12,889. The total disbursed compensation for land acquisition and resettlement was CNY311.58 million, which was 1% less than the CNY313.7 million in the resettlement plan. In addition, 8,483.9 mu of lands were acquired by local governments. The latter was mainly due to constructing expanded railway station squares, which cost around CNY184.08 million.5 All the affected people belong to the Han nationality, and GLR’s construction had no adverse or significant impact on indigenous people.

35. In general, the compensation standards adopted by Fujian Province were higher than or close to the standards indicated in the resettlement plan and higher than those applied in Jiangxi Province. The actual house compensation rates in Ganzhou municipality were less than the rates suggested in the resettlement plan but higher than the replacement costs. Compared with other infrastructure projects in the same area, the project’s compensation rates for land acquisition and house relocation were generally higher than those in highway projects but lower than those in real estate projects. The affected people strongly supported construction of the railway and were generally satisfied with the compensation. Income restoration of affected people has been achieved, and the training provided by local governments proved to be effective in improving the villagers’ skills in planting, animal husbandry, and processing of agriculture products. With the operation of railway, meanwhile, an increasing number of enterprises and investments have been attracted from developed regions to the project area, and new enterprises have generated abundant job opportunities for the affected people. Appendix 10 presents details of the project’s resettlement impacts.

36. Impact on Economic Development and Poverty Reduction. The Project has produced significant economic development and poverty reduction impacts in the region. Per capita gross domestic product (GDP) in the counties and cities along the GLR alignment increased by 76% to 151% from 2000 to 2006, or by 21% annually on average. The fiscal revenues of local governments increased by 78% to 330%, or by 31% annually on average. The

4 A traditional land area measurement, 1 mu = 1/15 hectare. 5 The expanded railway station squares were not considered part of the Project. The associated impacts and costs had not been included in the resettlement plan.

11 incidence of poverty in the project region has diminished significantly. The number of people living in poverty within the eight counties and districts along the alignment decreased by 21% (from 270,456 in 2000 to 213,430 in 2006), even though most of the poverty lines had been raised. The per capita income of farmers rose by 32% to 53% in those counties and cities during the same period. Appendix 13 presents a detailed analysis of the project’s social and poverty reduction impact.

Table 1: Social and Poverty Reduction Impact of Ganzhou–Longyan Railway Per capita Growth Per Capita Net Growth Poverty Population GDP Rate Income of Rate Line Living in County/City Year (CNY) (%) Farmers (CNY) (%) (CNY) Poverty 2000 2,495 1,388 685 45,032 Ganxian 2006 6,255 151 1,859 34 924 19,132 2000 2,219 1,928 625 60,531 Yudu 2006 4,728 113 2,610 35 685 56,000 2000 2,546 1,332 668 64,028 Huichang 2006 4,633 82 1,798 35 924 43,410 2000 2,921 2,157 668 32,100 Ruijing 2006 6,049 106 3,108 44 683 32,500 2000 7,782 2,959 800 11,000 Longyan 2006 16,394 111 4,492 52 1,200 12,797 2000 4,814 2,486 1,000 36,500 Changding 2006 8,485 76 3,692 49 1,000 29,200 2000 5,329 2,741 1,000 17,719 Liancheng 2006 11,289 112 4,082 49 1,000 14,691 2000 17,222 3,934 1,100 3,546 Xinluo 2006 32,255 87 6,030 53 1,200 5,700 GDP = gross domestic product. Sources: Statistical yearbooks of Fujian and Jiangxi provinces and railway construction support offices along GLR.

37. These impacts are largely attributable to GLR. Its construction directly contributed to the poverty reduction in project areas by providing employment opportunities of 85,710 person- months for unskilled laborers, of which 55,710 person-months went to local laborers. A total of 39,000 person-months, or 70%, went to laborers from poor households, and CNY23.4 million was disbursed to local poor households during construction. In addition, local procurement of about CNY500 million worth of construction materials and supplies for GLR construction provided employment opportunities of about 83,000 person-months for local laborers.

38. GLR’s opening created conditions conducive to local economic development. Local enterprises have directly benefited from GLR for the transportation of such bulk raw materials as cement, limestone, and coal. GLR attracts external capital investments, as demonstrated by all the new industrial parks constructed close to GLR. At Yudu, an industrial development zone was established in 2001, about the same time that GLR construction was started. In 5 years, 102 enterprises have moved to the zone. There have been cement factories established in Ruijin, textile factories in Changting, chemical plants in Liancheng, and mineral mines in Shanghang. According to the local governments’ estimates, the investments along GLR could amount to CNY6 billion. Since the late 1990s, there has been a trend of relocating processing industries from the coastal to inland regions to take advantage of the cheaper labor and rich raw

12 materials there. Jiangxi province is one destination for such relocation. GLR facilitates this, as it provides an economical transportation option to the region. In addition, the opening of GLR has clearly contributed to development of the local tourist industry. The number of tourists in the region rose by 25% in 2006 when GLR began operating. These labor-intensive processing industries and tourism bring large employment opportunities. Labor shortage is reported in some places, particularly for the textile and electronics plants.

39. While contributing to economic development, GLR helps improve labor mobility in the region. GLR not only makes travel easier for migrant workers by providing comfortable and affordable railway services, but also promotes local employment of surplus rural labor. Agriculture long had the largest share in the local economy, and the proportion of secondary and tertiary industry was quite low. The local economy had limited capacity to absorb surplus rural labor. Most surplus laborers had to migrate long distances to work in the coastal regions. With the opening of GLR and local economic development, labor employed by local enterprises has risen significantly, and a large proportion is from local surplus labor. Farmers have more choices to work locally or in coastal regions according to their family needs. While working in coastal regions can bring better pay, local employment reduces the social costs of separating family members and facilitates caring for children.

40. Overall, the adverse environmental impact was minor and mitigated effectively, and the socioeconomic as well as other impacts resulting from the Project are rated positively.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

41. The Project was implemented as planned with no significant changes. Its main components were completed and open to traffic ahead of schedule. The quality of completed works is high. The project’s formulation and design were technically sound and highly relevant to achieving its development goals. GLR provides the project region economical railway transportation facilities that stimulate natural resources exploration and development of processing and tourist industries. GDP and per capita income grew significantly from 2001 to 2006. Income restoration of affected people has been achieved. Poverty incidence diminished substantially during the same period. The objective of the Project has been achieved. The reevaluation of the EIRR and FIRR indicated the Project is economically and financially viable. The financial strength of MOR provides reasonable assurance for the project’s financial sustainability. Environmental mitigation measures were adequate and effectively implemented. There are no outstanding issues related to land acquisition or resettlement. Overall, the Project was well implemented and is rated “highly successful.”

B. Lessons Learned

42. Traffic Forecasting. The actual traffic in the initial years of operation indicates that the traffic forecast at appraisal significantly underestimated the passenger traffic. The appraisal estimates did not anticipate the strong demand for long-distance passenger services. Transit represents more than 85% of the total freight traffic, which was much higher than the estimates at appraisal (para. 27). As a result, for both freight and passenger operations, the average length of journey estimated at appraisal was substantially lower than the actual figures. Future traffic forecasting needs to have a more realistic assessment of the demand composition.

13

43. Coordination between Railway and Local Government. The interchange facilities between train and bus do not appear to be well coordinated. In some railway stations, while MOR has completed its portions of the station entryways, the remaining station access roads to be completed by local governments have not been paved or were still in poor condition at completion. In some cities, bus routes have not been extended to railway stations and passengers must walk long distances to reach the stations. Parking areas were not available or were inadequate in some stations. All these discouraged use of the railway and impaired local people’s and local economies’ realization of the railway’s benefits.

44. Resettlement. Although the resettlement activities were carried out in a sound manner overall, several lessons can be drawn. During implementation, local governments enlarged the squares in front of the railway stations from their own funding, which induced a large amount of land acquisition (para. 34). This was not anticipated when the resettlement plan was prepared in 2000 (at feasibility study stage). Because this was beyond the original project scope, monitoring of this part was not as effective as that of originally envisaged resettlement. Due diligence, if conducted during project preparation and implementation, would have helped to assess and mitigate the impacts of such associated development.

45. Industrial Sidings. Of the planned industrial sidings, only one is in active service. This limits the potential for large-volume freight shipment. MOR policy requires a minimum annual tonnage for constructing an industrial siding. It may consider flexible criteria to encourage the construction of industrial sidings, such as an estimate of the expected revenue and profitability of the traffic. Profitability of sidings can vary widely, depending on the commodity and distance hauled.

C. Recommendations

1. General

46. To improve implementation of land acquisition and resettlement activities, it is recommended that (i) resettlement plans pay greater attention to station sites and be updated after detailed measurement is conducted; (ii) affordability for local governments to provide compensation funds should be evaluated at appraisal and a mechanism should be in place so that the compensation funds can be provided adequately and in a timely manner; (iii) the quality of external M&E should be improved, to facilitate timely reporting of any discrepancy with the resettlement plan and necessary corrective action; and (iv) in future projects, ADB should strengthen its resettlement safeguard supervision at an early stage of project implementation. It is important that adequate monitoring budgets be provided for these activities.

47. The project completion audit shall be conducted as early as possible to minimize the need for extension of loan closing date (para.13). ADB loan processing team shall also consider this factor when the project implementation schedule and loan closing date are formulated.

48. The coal-fired boilers originally proposed to be installed in the railway stations under the Project were replaced by solar and electrical heating boilers (para. 33). This initiative by the EA will substantially reduce the pollutant emissions from boilers during GLR’s operation stage. Such practices should be encouraged in future projects.

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2. Project Related

49. There is a good potential for increasing the passenger market on GLR, especially for local daily, tourist, and business travel (para. 27). It is recommended that one more pair of local trains be scheduled on GLR to serve local travelers, and that the number of long-distance trains be increased when the demand by tourists and business travelers warrants. To tap the freight market, GLR should take measures to complete the construction of the planned industrial sidings as early as possible, and undertake proactive marketing to encourage high-value traffic, particularly container traffic.

50. The local governments should improve urban public transportation to ensure that railway stations are an integral part of the network (para. 43). There is a need to review the existing planning and service coordination arrangements for urban buses, taxis, and trains to promote travel by train.

51. The expressway that is currently under construction in parallel with GLR will significantly increase the competition for traffic in the region, especially for container traffic and light and time-sensitive cargos. GLR should compete on the bases of prices, improved logistics management, and quality of service. It should also offer services that the expressway cannot, such as services for large volume and weight capacities and specialized cars for the products being shipped.

52. It is recommended that the project performance evaluation be conducted in 2011. By then, GLR will have been fully operational for more than 5 years. The several connecting railway lines currently under construction will be completed in 2011, and an accurate assessment of GLR’s traffic situation can be made in the project performance evaluation report.

Appendix 1 15

PROJECT FRAMEWORK

Design Performance Indicators/Targets Monitoring Assumptions Summary Mechanisms and Risks Appraisal Actual Goal

To promote economic z To increase per z Per capita z Surveys and z Planned development growth and reduce capita incomes income of statistics regarding of industries and poverty in poor areas of z To reduce the farmers the project, post natural resources two provinces traversed incidence of rural increased by project, 2 years after along GLR by the Ganzhou–Longyan poverty 32% to 53% on start of operation. z Timely completion of Railway (GLR) county basis Contents: Gross infrastructure and z Poverty domestic product per within budget incidence capita, rural net z Supporting social decreased by income, and poverty programs 21% from incidence 270,456 in 2000 to 213,430 in 2006

Purpose

1. Develop rail transport z Trends in freight and z GLR traffic z Financial z Realizing traffic to improve accessibility passenger volumes reached 1,749 performance of GLR forecasts for GLR and integrate less for GLR million ton-km z Progress reports z GLR can compete developed and poor and 498 million z Project review successfully with other areas with more passenger-km in missions transport modes developed regions 2006

2. Increase productivity z Trends in railway z Tariff of z Progress reports z Satisfactory operation and reduce and road tariffs CNY0.10 per and management of transportation costs for ton-km and GLR domestic and CNY0.14 per international shippers passenger-km

3. Induce industrial and z Number of z Induced z Project performance z Coordinated economic natural resources developmental investments of monitoring system growth development projects set up CNY6 billion

Outputs

a 1. Land acquisition, z Final location survey, z 14,336 mu of z Progress reports z Strong implementation compensation, and land acquisition, and land were z Monitoring by the capacity of local resettlement resettlement to be acquired Research Institute of governments completed as per the z 12,899 persons the Southwest z Adequate resettlement plan were relocated Jiatong University compensation and z Compensation (RI-SJU) funds as per was paid for resettlement plan land acquisition and resettlement

2. Construction of the z Start of construction z Construction z Contract awards z Advance action for 277 km GLR line preparation in early commenced in z Progress reports procurement 2002 December 2001 z Project z Strong implementation and completed administration capacity z Completion of by December missions z Adequate counterpart construction by June 2004 with 290.1 z Construction funds 2006 km railway. contract awards

16 Appendix 1

Design Performance Indicators/Targets Monitoring Assumptions Summary Mechanisms and Risks Appraisal Actual

3. Construction of access z Completion of roads z 13.4 km of z Progress reports z Funding is forthcoming roads between GLR and industrial sidings station access z Project review for industrial sidings stations and township in accordance with road and 222.2 missions and link roads link roads, and agreed schedules km of provision of industrial construction sidings access roads, and one industrial siding have been constructed

4. Procurement of z Equipment procured z Procurement z Contract awards z Strong implementation equipment for during 2003 to 2005 completed in z Progress reports capacity operation and May 2006 z ADB review missions z Provision of adequate maintenance counterpart funds

5. Minimization of z Environmental z Mitigation z Surveys during and z Strong commitment of adverse measures agreed in measures post construction the Government and environmental the environmental adequately z Monitoring provinces impacts impact assessment carried out environmental z Commitment and (EIA) and summary protection and experience of EIA mitigation measures environmental by BOEPTC protection bureaus z Surveys of new z Expertise of BOEPTC industrial locations in the project area

z Development of an z Consulting z Progress reports z Suitable consultant 6. Institutional effective marketing services and z Consultant’s reports input strengthening program to attract training provided new industry along by consultants GLR satisfactorily

7. Additional employment z Creation of 76,000 z 85,710 person- z Progress reports z Implementation as per and hiring of workers person-years of months of z Monitoring by schedule and from poor households construction-related construction- implementing commitment of local that will raise incomes employment and related agency and RI-SJU governments and living standards 33,600 person-years employment, of while reducing of employment in which 55,710 poverty supplying materials person-months and roads of local construction employment, and 39,000 z Hiring of local poor person-months workers up to the provided by stipulated limits poor households

z 83,000 person- months of employment in supplying materials

Appendix 1 17

Activities with Milestones Inputs

1. Preparatory Activities, 1999–2001 z Approval of project proposal z Arrangement of counterpart funds z Environmental impact assessment z Approval of feasibility study z Survey and design z Advance action for procurement

2. Land Acquisition and Resettlement, 2002–2003 z Preliminary survey and design z Acquisition of land and resettlement of affected persons z Monitoring by RI-SJU

3. Civil Works Construction and Equipment Procurement, 2001–2006 z Engagement of national consultants z Prequalification of bidders 3.1 Procurement of Civil Works z Invitation to bid z Evaluation of bids z Award of contracts

3.2 Construction of Civil Works z Implementation according to contract schedules

3.3 Environmental Protection and Mitigation Measures z Implementation of mitigation measures recommended by EIA and summary EIA z Monitoring by BOEPTC

3.4 Procurement of Equipment z ADB approval of bidding documents z Bidding and evaluation of bids z Award of contracts and approval by ADB

4. Consulting Services for Marketing and Business Development, 2006–2007 z Engagement of international consultants z Staff training

ADB = Asian Development Bank, BOEPTC = Beijing Oasis Environmental Protection Technology Company, EIA = environmental impact assessment, km = kilometer, RI-SJU = Research Institute of the Southwest Jiaotong University. a The mu is a traditional land area measurement. 1 mu = 1/15 hectare.

18 Appendix 2

CHRONOLOGY OF MAJOR EVENTS IN THE PROJECT’S HISTORY

Date Project Events 5 September 2000 TA 3486-PRC: Technical Assistance to the People’s Republic of China (PRC) for Preparing the Ganzhou–Longyan Railway Project approved by Asian Development Bank (ADB) for $750,000. 27 February–16 March 2001 Fact-Finding Mission. 9 April 2001 ADB approved advance action for procuring civil works. 10–26 May 2001 Appraisal Mission. 27–29 August 2001 Loan negotiations. 30 October 2001 Loan approval. 14 November 2001 Feasibility study for the Project approved by PRC’s State Council. 4–11 December 2001 Special Loan Administration Review Mission. 21 December 2001 Loan Agreement signed. 2 April 2002 Loan became effective. First disbursement of loan proceeds was made for payment of the front-end fee. 22 May 2002 ADB approved award of 16 international competitive bidding (ICB) civil works contracts. 30 May 2002 Signing of 16 civil works contracts. 18 October–17 November 2002 ADB approved award of four ICB contracts for concrete beams and steel bearings. 25–30 November 2002 Inception Mission. 10–11 December 2002 Signing of four ICB contracts for concrete beams and steel bearings. 26 December 2002–31 January 2003 ADB approved award of eight ICB contracts for track maintenance and machinery. 8 January–5 March 2003 Signing of eight ICB contracts for track maintenance and machinery. 27 March–10 April 2003 ADB approved award of 10 ICB contracts for tracks. 8–16 April 2003 Signing of 10 ICB contracts for tracks. 18 August 2003 ADB approved award of two ICB contracts for track laying and erection. 29 August 2003 Contract signing of two ICB contracts for track laying and erection. 6–10 September 2003 Loan Review Mission 1. 9 December 2003 ADB approved award of ICB contract for hot wheel bearing detection equipment. 15 December 2003 ADB approved award of two ICB contracts for electric power equipment. 19 December 2003 Signing of two ICB contracts for electric power equipment. ADB approved award of three ICB contracts for signaling equipment. 22 December 2003 Signing of ICB contract for hot wheel bearing detection equipment. December 2003 Completion of land acquisition and resettlement. 8 February 2004 Signing of three ICB contracts for signaling equipment. 12 March–3 May 2004 ADB approved award of 11 ICB contracts for telecommunication equipment.

Appendix 2 19

Date Project Events 22 March–22 June 2004 Signing of 11 ICB contracts for telecommunication equipment. 9 May 2004 Responsibility for the Fujian section transferred from Shanghai Railway Administration to Nanchang Railway Administration. 12 June 2004 ADB approved award of four ICB contracts for environment equipment. 5 July 2004 Signing of four ICB contracts for environment equipment. 11 August 2004 ADB approved award of two ICB contracts for dispatch management information system equipment. 20 August 2004 Signing of two ICB contracts for dispatch management information system equipment. 23–26 August 2004 ADB approved award of eight ICB contracts for station equipment. 1 September 2004 Contract signing of eight ICB contracts for station equipment. 9 September 2004 ADB approved award of three international shopping contracts for station equipment. 12 September 2004 Signing of three international shopping contracts for station equipment. 7–13 December 2004 Loan Review Mission 2. 1 April 2005 Start of trial operation for freight transportation. 11 October 2005 Start of trial operation for passenger transportation. 13–16 December 2005 Joint Loan Review and Handover Mission. 16 December 2005 Transfer of project administration to ADB’s Resident Mission in the People’s Republic of China. 29 May 2006 ADB approved award of ICB contract for track geometry car. 14 June 2006 Contract signing for track geometry car. 23 June 2006 ADB approved award of consulting services for marketing and business development. 10 July 2006 Contract signing of consulting services for marketing and business development. 19–22 September 2006 Loan Review Mission 3. 9 November 2006 ADB approved loan reallocation and adjusting financing percentage for remaining payments of civil works contracts from 32% to 35%. 23 November 2006 First extension of loan closing date by 6 months to 30 June 2007. 19 June 2007 Second extension of loan closing date by 3 months to 30 September 2007. 9 October 2007 Final disbursement of loan proceeds. October 2007 Submission of resettlement postevaluation report. 15–19 October 2007 Project completion review mission. 16 January 2008 Cancellation of loan savings and effective date of loan closing. ADB = Asian Development Bank, ICB = international competitive bidding, PRC = People’s Republic of China. Source: Asian Development Bank.

20 Appendix 3

PROJECT COSTS AND FINANCING PLAN

Table A3.1: Detailed Project Cost ($ million) Appraisal Actual Component Foreign Local Total Foreign Local Total A. Base Cost 1. Civil Works 113.5 240.3 353.8 112.1 334.2 446.3 2. Railway Track and Bridges (including 45.1 79.6 124.7 40.3 23.9 64.2 rails, sleepers, ballast, bridge beams) 3. Signaling, communications and TMIS 10.3 16.3 26.6 6.4 22.7 29.1 4. Electric Power 2.8 14.6 17.4 0.9 15.3 16.2 5. Operational Equipment 23.2 8.2 31.4 18.4 27.4 45.8 6. Buildings, and Facilities 6.8 27.5 34.3 18.1 23.4 41.5 7. Land Acquisition, Compensation, and 0.0 34.4 34.4 0.0 40.3 40.3 a Resettlement 8. Environmental Protection, Mitigation, 0.8 9.2 10.0 0.9 9.1 10.0 and Monitoring 9. Administration, Consulting services, 0.3 20.0 20.3 0.3 33.3 33.6 and Miscellaneous Costs Subtotal (A) 202.8 450.1 652.9 197.4 529.6 727.0

B. Contingencies 1. Physical 13.4 29.6 43.0 0.0 0.0 0.0 2. Price 14.1 19.1 33.2 0.0 0.0 0.0 Subtotal (B) 27.5 48.7 76.2 0.0 0.0 0.0

C. Interest During Construction and 24.4 21.5 45.9 2.0 52.4 54.4 Front-End Fee

Total 254.7 520.3 775.0 199.4 582.0 781.4 ADB = Asian Development Bank, CDB = China Development Bank, MOR = Ministry of Railways, TMIS = transport management information system. a The total cost for land acquisition and resettlement in domestic price numeraire was CNY311.58 million. Source: Asian Development Bank.

Table A3.2: Summary Financing Plan ($ million) Appraisal Actual Source Foreign Local Total % Foreign Local Total % MOR 54.7 254.3 309.0 39.9 0.0 315.8 315.8 40.4 CDB 0.0 266.0 266.0 34.4 0.0 262.3 262.3 33.6 ADB 200.0 0.0 200.0 25.8 199.4 0.0 199.4 25.5 Local Governments 0.0 0.0 0.0 0.0 0.0 3.9 3.9 0.5 Total 254.7 520.3 775.0 100.0 199.4 582.0 781.4 100.0 ADB = Asian Development Bank, MOR = Ministry of Railways, CDB = China Development Bank. Source: Asian Development Bank.

Appendix 4 21

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENTS

Table A4: Cumulative Contract Awards and Disbursements ($ million) Contract Awards Disbursement Year Projected a Actual Projected a Actual 2002 70.0 117.6 7.0 40.4 2003 181.6 177.9 88.8 103.9 2004 187.9 189.9 181.3 144.6 2005 195.9 194.7 154.6 170.4 2006 196.7 197.4 178.9 193.6 2007 197.4 197.4 199.4 199.4 Total 197.4 197.4 199.4 199.4 a Annual projected plus cumulative contract awards or disbursement of previous year. Source: Asian Development Bank.

Figure A4.1: Projected and Actual Contract Awards

250.0

200.0 150.0

100.0 50.0

Amount ($ million) 0.0 2002 2003 2004 2005 2006 2007

Year Projected Actual

Figure A4.2: Projected and Actual Disbursements

250.0

200.0 150.0

100.0 50.0

Amount ($ million) 0.0 2002 2003 2004 2005 2006 2007 Year

Projected Actual

PLANNED AND ACTUAL IMPLEMENTATION SCHEDULE 22

2001 2002 20032004 2005 2006 2007 5 Appendix JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASOND

1 Detailed Planning, Engineening and Document Preparation

2 Prequalification and Bidding

3 Land Acquisition and Resttlement

4 Civil Works and Buildings

5 Track Laying

6 Telecommunication,Sig - naling and Electification

7 Consulting Services for Marketing and Business Development 8 Test and Operation

Projected: Actual: Sources: Asian Development Bank and Ministry of Railways.

Appendix 6 23

ORGANIZATION CHART

Ministry of Railways

Nanchang Railway Bureau Ganzhou–Longyan Railway Project Construction Headquarters

Commander

Railway Construction Support Offices Vice Commander General Engineer

Engineering Planning and Comprehensive Longyan Department Financial Department Comprehensive Department Department

Environmental Monitoring: Coordination Resettlement Beijing Oasis Office for Fujian Office Environmental Protection Section Technology Co. Ltd.

Resettlement Monitoring: Research Institute of the Southwest Jiaotong University

Source: Ministry of Railways.

24 Appendix 7

COMPLIANCE WITH LOAN COVENANTS

Covenants Reference to Loan Status of Compliance Agreement

1. MOR shall be the Executing Agency responsible Schedule 6, para. 1 Complied with. for overall implementation of the Project.

2. MOR shall set up a project coordination office to Schedule 6, para. 1 Complied with. coordinate the two implementing agencies and this office is to be supported by MOR’s planning, construction, financial, and technical departments as well as FCTIC of MOR.

3. Nanchang and Shanghai Railway Administration Schedule 6, para. 2 Complied with. Bureaus shall be responsible for construction The responsibility for the and operation of the Project railway, including Fujian section was planning and scheduling of works, contract transferred from the preparation, bidding, supervision, quality and Shanghai Railway payments. Administration to the Nanchang Railway Administration in May 2004.

4. Connecting Railway Lines. The Borrower shall Schedule 6, para. 3 Complied with. Four ensure, through MOR, that the connected signaling stations in railway improvements on the Longyan–Zhangping line Longyan–Zhangping line and the expansion of were upgraded in yards at the terminals of the Project railway are December 2004. completed in a timely manner.

5. Construction Quality. The Borrower shall Schedule 6, para. 4 Complied with. ensure, through MOR, that the Project railway is constructed in accordance with the national technical standards, and that construction supervision, quality control, and contract management are performed satisfactorily.

6. Counterpart Financing. The Borrower shall Schedule 6, para. 5 Complied with. provide, on a timely basis, all funds and resources necessary for construction and operation and maintenance of the Project railway and cause MOR to cover any project cost overrun.

7. Environment. The Borrower shall ensure, Schedule 6, para. 6 Complied with. through MOR, that the Project railway is constructed and operated in accordance with the national environmental laws and provincial regulations, and meets ADB guidelines and procedures for the environment.

8. The Borrower shall ensure, through MOR, that Schedule 6, para. 7 Complied with. any adverse environmental impacts arising from construction and operation of the Project railways are minimized by implementing the

Appendix 7 25

Covenants Reference to Loan Status of Compliance Agreement mitigation measures and monitoring programs recommended in the EIA and the summary EIA.

9. The Borrower shall cause MOR, together with Schedule 6, para. 7 Complied with. the provincial and county environment protection bureaus, to ensure that the station access and link roads are constructed in accordance with national environmental requirements.

10. The Borrower shall ensure that environmental Schedule 6, para. 8 Complied with. monitoring is carried out by the Beijing Oasis Environmental Protection Technology Co. Ltd. in accordance with the EIA and the summary EIA.

11. The Borrower shall cause MOR to submit the Schedule 6, para. 8 Complied with. The results of the environmental monitoring to ADB evaluation report was through the quarterly progress reports on submitted to ADB in project implementation, annual reports on December 2006. environmental monitoring, and an evaluation report one year after the completion of construction.

12. The Borrower, through Fujian and Jiangxi Schedule 6, para. 8 Complied with. Provinces, shall ensure that any project-induced economic activities, particularly mining and industrial developments, will undergo appropriate environmental assessment and review under national laws and provincial regulations and any adverse environmental impact will be appropriately mitigated.

13. Financial Performance and Tariffs. The Schedule 6, para. 9 Being complied with. Borrower shall, through MOR, monitor the operational performance of the Project railway on the basis of agreed indicators of physical operation and MOR’s financial performance and submit to ADB such indicators of physical operation and MOR’s financial performance for the first five full years of operation of the Project railway within 9 months after the end of the fiscal year.

14. Tariff. The Borrower shall ensure, through Schedule 6, para.10 Being complied with. The MOR, that tariffs are set at levels sufficient to MOR incorporated the ensure full cost recovery, including operation tariff study in the and maintenance costs, depreciation, debt Borrower’s project service, taxes, and a reasonable profit. Six completion report. months prior to opening of the Project railway for commercial traffic, the Borrower shall carry out a tariff study to determine the tariffs to be applied and provide this study to ADB.

26 Appendix 7

Covenants Reference to Loan Status of Compliance Agreement 15. The Borrower shall cause MOR to maintain for Schedule 6, para. Being complied with. the Project railway, for each of its fiscal years 11(a) commencing the commercial operation of the Project railway, a ratio of total operating expenses to total operating revenues not higher than 70 percent.

16. Gender and Development. The Borrower, Schedule 6, para. 12 Complied with. through MOR, shall cause Fujian and Jiangxi provinces to follow ADB’s policy on gender and development, and take all necessary actions to encourage women living in the project area to participate in implementing the Project.

17. The Borrower shall cause MOR, with the help of Schedule 6, para. 12 Complied with. the Research Institute of Southwest Jiaotong University (RI-SJU), in consultation with the local representatives of All China Women’s Federation, to monitor the Project’s effects on women through gender-disaggregated data.

18. Industrial Sidings. The Borrower shall ensure, Schedule 6, para. 13 Being complied with. through MOR, that potential major shippers along the Project railway will be encouraged and assisted as necessary to construct and operate industrial sidings.

19. Land Acquisition and Resettlement. The Schedule 6, para. 14 Complied with. Borrower shall ensure, through MOR, that all land and rights-of-way required for the Project are made available in a timely manner.

20. The Borrower shall cause MOR to assume the Schedule 6, para. 14 Complied with. lead responsibility for implementing the resettlement plan (RP) and ensure that MOR, under arrangements with Fujian and Jiangxi Provinces, carries out the RP promptly and efficiently in line with the Borrower’s Land Administration Law 1998, the provincial guidelines on land acquisition and resettlement, and ADB’s policy on involuntary resettlement.

21. The Borrower shall ensure, through MOR, that Schedule 6, para. 15 Complied with. all persons are compensated and assisted prior to displacement from their houses, land, and assets in accordance with the RP such that they are at least as well off as they would have been in the “without the Project” scenario.

22. The Borrower shall ensure that funds for land Schedule 6, para. 15 Complied with. acquisition and resettlement are provided as scheduled in the RP and meet any unforeseen obligations in excess of the cost estimate.

Appendix 7 27

Covenants Reference to Loan Status of Compliance Agreement 23. The Borrower shall cause Fujian and Jiangxi Schedule 6, para. 15 Complied with. Provinces to provide the same compensation and assistance for station access roads and link roads as set out in the RP.

24. The Borrower shall cause MOR to ensure that Schedule 6, para. 16 Complied with. The the RI-SJU carries out independent monitoring resettlement and regular reporting during resettlement postevaluation report was implementation, and evaluates resettlement and submitted to ADB in achievement two years after completion and October 2007. such monitoring and evaluation include annual survey updates during resettlement implementation as required in the RP.

25. The Borrower shall cause MOR to report to ADB Schedule 6, para. 17 (i)Complied with; on the progress of land acquisition and (ii)Complied with; resettlement through (i) the quarterly progress (iii)Complied with. reports during the resettlement period; (ii) a report to be submitted on completion of the resettlement; and (iii) an evaluation report to be submitted two years after completion of the resettlement.

26. Monitoring and Evaluation. The Borrower Schedule 6, para. 18 Complied with. shall cause MOR to monitor the Project’s performance through the project performance management system to ensure that the objective of poverty reduction is achieved and the project facilities are managed efficiently. The Borrower shall cause MOR to collect the necessary information on Project performance as agreed to by ADB.

27. Poverty Reduction. The Borrower shall cause Schedule 6, para. 19 Complied with. MOR to ensure through appropriate stipulations in contracts that, subject to satisfying the requirements of suitability and economy, (a) half of the total requirement of unskilled labor for the construction of the project facilities will be hired from poor households, and (b) local materials that meet the requirements of quality and economy will be arranged by contractors to implement the poverty reduction programs in the Project area, and provide half the unskilled jobs for the construction of station access roads and link roads to poor households.

28. The Borrower shall cause MOR to monitor the Schedule 6, para. 20 Complied with. Poverty impacts on poverty with the help of the RI-SJU reduction impact report and to provide to ADB and submit to ADB was submitted in annual monitoring reports of RI-SJU and an December 2007. evaluation report to be submitted two years after the start of operation of the Project railway.

28 Appendix 7

Covenants Reference to Loan Status of Compliance Agreement 29. Railway Operation. The Borrower shall cause Schedule 6, para. 21 Complied with. MOR, through the Nanchang and Shanghai Railway Administrations to ensure (a) an efficient and economic management, day-to-day operation, and repair and maintenance of the Project railway, (b) the provision of an adequate number of trained staff and resources to meet the Project railway’s operational needs, and (c) the provision of sufficient quantity of rolling stock (locomotives, freight cars and passenger cars) to meet the demand for transportation on the Project railway.

30. The Borrower shall cause MOR to ensure the Schedule 6, para. 21 Complied with. safety of passengers and freight in accordance with the Borrower’s Railway Law.

31. Station Access Roads and Link Roads. The Schedule 6, para. 22 Being complied with. Borrower shall cause Fujian and Jiangxi Provinces to take all measures to construct the station access roads and link roads in a timely manner to maximize the benefits of economic transport to the poor people.

32. Worker Safety and Health. The Borrower shall Schedule 6, para. 23 Complied with. cause that MOR take measures to ensure the safety of workers during construction, and that MOR ensure that the contractors disseminating information on the risks of socially transmitted diseases to those employed during construction.

33. Audit Report. The Borrower shall cause MOR Section 4.05(b) Complied with. to (i) maintain separate accounts for the Project during construction; (ii) have such accounts and related financial statements audited annually; (iii) furnish to ADB not later than nine months after the end of each related fiscal year, certified copies of such accounts and financial statements and the report of the auditors relating thereto (including the auditor’s opinion on the use of the loan proceeds and compliance with the covenants of the Loan Agreement, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

ADB = Asian Development Bank, EIA = environmental impact assessment, km = kilometer, MOR = Ministry of Railways, RI-SJU = Research Institute of the Southwest Jiaotong University, RP = Resettlement Plan.

CONTRACT PACKAGES FINANCED BY THE ASIAN DEVELOPMENT BANK

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($)

A Civil Works CW1 CW17.41KM ICB 22-May-02 30-May-02 China Railway Shisiju Corp. CNY 141,426,625.81 161,934,814.03 6,420,885.03 China Railway Engineering CW2 CW15.63KM ICB 22-May-02 30-May-02 CNY 130,682,920.27 191,127,192.75 7,704,838.42 Corp. China Railway 11th Bureau CW3 CW15.70KM ICB 22-May-02 30-May-02 CNY 140,337,333.34 177,091,612.39 7,133,398.18 Group Cooperation CW4 CW18.49KM ICB 22-May-02 30-May-02 China Railway Wuju Corp. CNY 161,275,401.41 199,101,475.93 7,964,714.27 China Railway 24th Bureau CW5 CW16.53KM ICB 22-May-02 30-May-02 Nanchang Railway CNY 103,831,840.95 123,908,343.10 4,936,937.15 Engineering Co. Ltd CW6 CW17.86KM ICB 22-May-02 30-May-02 No. 4 Engineering Co., Ltd CNY 115,161,561.97 141,773,651.63 5,687,715.12 China Railway 16th Bureau CW7 CW9.95KM ICB 22-May-02 30-May-02 CNY 127,610,871.25 164,576,533.73 6,616,985.82 Group Co., Ltd China Railway Tunnel Group CW8 CW11.42KM ICB 22-May-02 30-May-02 CNY 127,512,263.00 151,584,203.99 6,039,660.27 Co. China Railway Electrification CW9 CW14.61KM ICB 22-May-02 30-May-02 Bureau Xi'an Railway CNY 108,826,057.43 119,563,220.61 4,712,131.18 Engineering Co., Ltd

China Railway 24th Bureau CW10 CW15.21KM ICB 22-May-02 30-May-02 CNY 80,968,796.00 90,919,085.79 3,606,557.58 Group Co., Ltd China Railway 17th Bureau CW11 CW15.00KM ICB 22-May-02 30-May-02 CNY 137,872,214.84 137,076,573.77 5,357,090.93 Group 8 Appendix China Railway 19th Bureau CW12 CW10.39KM ICB 22-May-02 30-May-02 CNY 126,249,993.92 166,575,575.65 6,714,545.30 Group Cooperation

CW13 CW16.13KM ICB 22-May-02 30-May-02 3rd Engineering Group Co. CNY 189,159,148.18 149,241,210.12 5,841,894.98 China Railway 17th Bureau

CW14 CW14.50KM ICB 22-May-02 30-May-02 CNY 159,896,996.31 160,828,203.07 6,270,504.19 29 Group

30

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($) Appendix 8 Appendix

CW15 CW11.68KM ICB 22-May-02 30-May-02 China Railway First Group Co. CNY 196,180,715.68 188,072,612.21 7,322,474.45

China Railway 11th Bureau CW16 CW15.94KM ICB 22-May-02 30-May-02 CNY 192,758,744.82 352,909,017.18 14,661,550.00 Group Cooperation Subtotal 2,239,751,485.18 2,676,283,325.95 106,991,882.87

B Track Laying and Erection China Railway Wuju (Group) 1 Track 132.34371KM ICB 18-Aug-03 29-Aug-03 CNY 35,328,909.15 37,023,364.50 1,453,977.16 Corporation Joint Venture of Fujian Railway Construction (Group) 2 Track 157.81137KM ICB 18-Aug-03 29-Aug-03 Company and Shanghai CNY 64,935,948.87 89,720,005.57 3,673,876.94 Railway Construction (Group) Co., Ltd. Subtotal 100,264,858.02 126,743,370.07 5,127,854.10 Total Civil Works CNY 2,340,016,343.20 2,803,026,696.02 112,119,736.97

C Concrete Beams and Steel Bearings Lot1 Hubei Machinery & Equipment Concrete Beams ICB 30-Oct-02 10-Dec-02 $ 4,793,454.08 4,751,272.25 4,751,272.25 (N) Import & Export Corp. Lot2 Beijing Huafeng Trading Co., Steel Bearings ICB 18-Oct-02 10-Dec-02 $ 459,741.89 464,991.28 464,991.28 (N) Ltd. Lot3 (S) Concrete Beams ICB 17-Nov-02 11-Dec-02 CITIC International Co., Ltd. $ 9,457,249.49 9,457,249.49 9,457,249.49 Lot4 (S) Steel Bearings ICB 18-Oct-02 11-Dec-02 CITIC International Co., Ltd. $ 944,854.36 944,854.36 944,854.36 Subtotal $ 15,655,299.82 15,618,367.38 15,618,367.38

D Track Materials Concrete Sleeper 1 ICB 27-Mar-03 8-Apr-03 CITIC International Co., Ltd. $ 2,287,645.92 2,287,645.92 2,243,861.52 (Jiangxi) Concrete Sleeper Hainan Flywheel Industries 2 ICB 27-Mar-03 8-Apr-03 CNY 23,008,500.00 24,450,850.00 2,955,109.80 (Fujian) Trading Co.

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($)

Wooden Sleeper & Shenzhen Sunray Group Co., 3 Turnout Sleeper ICB 27-Mar-03 9-Apr-03 $ 401,915.10 401,915.10 369,346.13 Ltd. (Jiangxi) Wooden Sleeper & Chengdu Huaheng Materials 4 Turnout Sleeper ICB 27-Mar-03 8-Apr-03 CNY 2,656,820.00 2,937,820.00 354,938.28 and Equipment Supply Corp. (Fujian) Fastenings (Jiangxi) Pangang Group International 5 ICB 27-Mar-03 9-Apr-03 1,117,015.80 1,117,015.80 1,092,316.88 Economic & Trading Corp. $ Fastenings (Fujian) Pangang Group International 6 ICB 27-Mar-03 9-Apr-03 1,281,245.80 1,281,245.80 1,281,245.80 Economic & Trading Corp. $ Rails & Fishplates China United Electric Import & 7 ICB 10-Apr-03 16-Apr-03 6,274,125.38 6,274,125.38 6,444,533.53 (Jiangxi) Export Corp. $ Rails & Fishplates CITIC International 8 ICB 10-Apr-03 16-Apr-03 7,564,310.40 7,564,310.40 7,862,230.40 (Fujian) Cooperation Co., Ltd. $ Switch (Jiangxi) China Railway Shanhaiguan 9 ICB 27-Mar-03 9-Apr-03 1,158,035.82 1,158,035.82 1,084,962.47 Bridge Group Co., Ltd. $ Switch (Fujian) China Railway Turnout Bridge 10 ICB 27-Mar-03 9-Apr-03 832,587.04 832,587.04 982608.98 Inc. $ Subtotal 24,671,153.79

E Track Maintenance Machinery Double Sleeper 1 ICB 31-Jan-03 12-Feb-03 Kunming Machinery Factory 4,320,000.00 4,320,000.00 4,320,000.00 Tamping Car 4 sets $ Turnout Tamping Car 2 ICB 26-Dec-02 8-Jan-03 Kunming Machinery Factory 1,960,000.00 1,960,000.00 1,960,000.00 1 set $ Continuous Tamping

3 ICB 26-Dec-02 8-Jan-03 Kunming Machinery Factory 1,600,000.00 1,600,000.00 1,600,000.00 8 Appendix Car 1 set $ Electric Generator 4 ICB 26-Dec-02 8-Jan-03 Kunming Machinery Factory 1,940,000.00 1,940,000.00 1,940,000.00 Stabilizing Car 2 sets $ Ballast Distributing 5 and Finishing Car 3 ICB 26-Dec-02 8-Jan-03 Kunming Machinery Factory $ 990,000.00 990,000.00 990,000.00

sets 31 Turnout Rail Grinder 1 $ 6 ICB 31-Jan-03 5-Mar-03 Yardway Ltd. 4,264,801.00 4,264,801.00 4,264,801.00 set

32

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($) Appendix 8 Appendix

Track Geometry Car 1 7 ICB 29-May-06 14-Jun-06 Yardway Ltd. 2,380,760.00 2,380,760.00 2,380,760.00 set $ Mobile Rail Welding 8 ICB 26-Dec-02 8-Jan-03 Yardway Ltd. 436,378.00 436,378.00 436,378.00 Machine 1 set $ Track Welding 9 ICB 7-Jan-03 12-Jan-03 ESAB Asia/Pacific Pte. Ltd. 543,845.70 543,845.70 543,845.70 Machine 10 sets $ Subtotal $ 18,435,784.70 18,435,784.70 18,435,784.70

F Electric Power Equipment Chengdu Huaheng Material & 1 High-voltage Cable ICB 15-Dec-03 19-Dec-03 CNY 5,966,000.00 5,963,842.00 720,815.95 Equipment Supply Co. Reinforced Concrete China United Electric Import & 2 ICB 15-Dec-03 19-Dec-03 $ 221,056.00 221,056.00 221,056.00 Pole Export Corp. Subtotal 941,871.95

G Signaling Equipment SG01 Composite, 1 plastic Sheathed ICB 19-Dec-03 8-Feb-04 Jiangsu Dongqiang Co., Ltd CNY 1,951,339.19 1,538,630.06 186,849.60 Cable SG02 Hump Route China United Electric Import & 2 and Retarder ICB 19-Dec-03 8-Feb-04 $ 188,595.95 188,595.95 188,595.95 Export Corp. Controlling System SG03 Signal CCECC International Trading 3 Integrative Intelligent ICB 19-Dec-03 8-Feb-04 CNY 2,521,570.00 2,521,570.00 305,470.62 Company Ltd. Power Supply Subtotal 680,916.17

H Telecommunication CCECC International Trading 1 Communication Cable ICB 12-Mar-04 23-Mar-04 CNY 6,648,889.28 6,368,200.37 771,519.57 company Ltd. Yangtze Optical Fiber and 2 Optic Fiber Cable ICB 12-Mar-04 23-Mar-04 $ 330,582.00 330,582.00 330,582.00 Cable Co., Ltd

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($)

Automatic Optical China Railway Materials 3 Fiber Monitoring ICB 12-Mar-04 22-Mar-04 $ 145,492.00 145,492.00 145,492.00 Import & Export Co., Ltd. System Digital SPC Switching China United Electric Import & 4 ICB 12-Mar-04 23-Mar-04 CNY 721,087.00 721,087.00 87,467.66 Equipment Export Corp. Digital Transmission System and Optical Beijing Century Real 5 ICB 12-Mar-04 22-Mar-04 $ 667,351.00 667,351.00 667,351.00 Fiber Access Network Technology Co., Ltd System Radio Locomotive China United Electric Import & 6 ICB 3-May-04 22-Jun-04 CNY 10,213,598.44 10,213,598.44 1,236,586.21 Dispatch System Export Corp. Digital Dispatching & Special China United Electric Import & 7 ICB 2-Apr-04 26-Apr.04 CNY 1,237,787.00 1,237,787.00 152,931.60 Communication Export Corp. System Telecommunication New Cosmos (Hong Kong) 8 ICB 12-Mar-04 23-Mar-04 $ 173,060.00 173,060.00 173,060.00 Instrument Limited Centralized Power Shandong Machinery & Equipment and 9 ICB 7-Apr-04 24-Jun-04 Equipment Imp. & Exp. Group $ 63,023.00 63,023.00 63,023.00 Environment Corp. Monitoring System High-Frequency China United Electric Import & 10 ICB 12-Mar-04 23-Mar-04 CNY 545,242.00 545,242.00 66,137.71 Switch Power Export Corp. Digital Dispatching &

Special China Network Technology 8 Appendix 11 ICB 12-Mar-04 25-Jun-04 $ 124,568.00 124,568.00 124,568.00 Communication Co., Ltd. System Subtotal 3,818,718.75

33

34

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($) Appendix 8 Appendix

Beijing Dongqiao Mechanical. Hot Wheel Bearing I ICB 9-Dec-03 22-Dec-03 Electrical & Chemical CNY 9,979,720.00 9,979,720.00 1,233,535.83 Detection Equipment Equipment Co., Ltd. Subtotal CNY 9,979,720.00 9,979,720.00 1,233,535.83

J Environment Equipment General Machinery SBR Wastewater 1 ICB 2004-6-12 5-Jul-04 Development Co., Ltd. of $ 289,831.28 289,831.28 289,831.28 Treatment Equipment Hong Kong, China The First Grade Strengthened Shanghai Electric Import & 2 Wastewater ICB 2004-6-12 5-Jul-04 Export Corp. of the People’s $ 115,139.70 115,139.70 115,139.70 Treatment Control Republic of China Systems Engineering Water Supply Centralized control Hubei Machinery & Equipment System Engineering, 3 ICB 2004-6-12 5-Jul-04 Imp. & Exp Corp. of the $ 335,116.13 335,116.13 335,116.13 Display and Alarm People’s Republic of China Water Level System Engineering Micro-power Multifunctional Electronic Remote Hubei Provincial Jiaxin 4 ICB 2004-6-12 5-Jul-04 $ 142,510.92 142,510.92 142,510.92 Transmission Machinery Imp. & Exp. Corp Summing Up Flowmeter Subtotal 882,598.03 882,598.03 882,598.03

K Container Equipment Container Reach- 1 ICB 28-Sep-04 15-Oct-04 Kalmar Industries AB $ 7,500,000.00 7,500,000.00 7,500,000.00 Stacker Container Reach- 2 ICB 14-Jan-05 28-Jan-05 Fantuzzi Reggiane S.P.A € 4,032,000.00 4,032,000.00 4,870,979.00 Stacker Subtotal 12,370,979.00

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($)

L Station Equipment General Purpose Machine Tools Chongtan International Capital 1 IS 9-Sep-04 12-Sep-04 $ 308,771.13 308,771.13 308,771.13 Implement and Limited Accessories Maintenance Tackles 2 IS 9-Sep-04 12-Sep-04 Latkeen Limited $ 497,562.21 497,562.21 497,562.21 for Track Network Management System for Equipment and Intelligent 3 IS 9-Sep-04 12-Sep-04 Beijing Holdings Ltd. $ 167,950.00 167,950.00 167,950.00 Security patrol Network Management System Subtotal $ 974,283.34 974,283.34 974,283.34

M Station Equipment Crane and Henan Desen Industrial Co., 1 ICB 26-Aug-04 1-Sep-04 $ 567,832.80 567,832.80 567,832.80 Attachments Ltd. Transporting Hubei Machinery & Equipment 2 ICB 23-Aug-04 1-Sep-04 $ 513,792.14 513,792.14 513,792.14 Equipment Import & Export Corp. Electrification Equipment and 3 ICB 23-Aug-04 1-Sep-04 Latkeen Limited $ 908,501.09 908,501.09 908,501.09 Generation Electricity Equipment Retarder and Maintain Shenzhen Topking Inc. Co., 4 ICB 26-Aug-04 1-Sep-04 $ 147,437.90 147,437.90 147,437.90 Equipment (A) Ltd. Appendix 8 8 Appendix Retarder and Maintain Shenzhen Topking Inc. Co., 5 ICB 26-Aug-04 1-Sep-04 $ 224,968.87 224,968.87 224,968.87 Equipment (B) Ltd. System of Tunnel Beijing Century Real Tech. 6 ICB 23-Aug-04 1-Sep-04 $ 410,595.00 410,595.00 410,595.00 Venting Facilities Co., Ltd. Bridge Maintaining Shenzhen Topking Inc. Co.,

7 ICB 23-Aug-04 1-Sep-04 $ 602,597.73 602,597.73 602,597.73 35 Equipment Ltd.

36

Contract Original Contract Final Contract ADB Financing No. Contract Description Mode Approved Contractor/Supplier Signing Amount Cost ($) Appendix 8 Appendix

Safeguards Defense RAILFORCE Engineering 8 ICB 23-Aug-04 1-Sep-04 CNY 11,534,439.29 11,534,439.29 1,396,503.75 Equipment Limited

Subtotal 4,772,229.28

N DMIS & Section Axle-Counting & Inspecting Equipment Shanghai CCECC Imp. & Exp. 1 DMIS ICB 11-Aug-04 20-Aug-04 CNY 2,591,975.00 2,591,975.00 314,032.01 Trading Co., Ltd. Section Axle-Counting CCECC International Trading 2 & Inspecting ICB 11-Aug-04 20-Aug-04 CNY 2,300,000.00 2,300,000.00 284,615.97 Co., Ltd. Equipment Subtotal CNY 4,891,975.00 4,891,975.00 598,647.98

Total Equipment and Materials 84,999,086.20

O Consulting Services Consulting Services for Marketing and 1 Business ICB 23-Jun-06 10-Jul-06 Wilbur Smith Associates, Inc. $ 288,195.00 288,195.00 265,995.00 Development

Total Consulting Services $ 288,195.00 288,195.00 265,995.00 CW = civil works, ICB = international competitive bidding, IS = international shopping, DMIS = dispatch management information system.

Appendix 9 37

ENVIRONMENTAL IMPACT ANALYSIS

A. Introduction

1. The Ganzhou–Longyan Railway (GLR) Project crosses eight counties in two provinces (Jiangxi and Fujian). The Project was classified as Asian Development Bank (ADB) environmental category A. The overall conclusion of the environmental impact assessment (EIA) was that the environmental impacts of the Project would be minimized to acceptable levels by implementing fully funded environmental mitigation measures and monitoring programs.

2. In March 2001, a summary EIA was prepared by the project preparatory technical assistance (PPTA) consultants, circulated to ADB’s Board of Directors, and made public. The EIA was approved by the State Environmental Protection Administration in May 2001. The final alignment was selected through a combination of technical suitability that ensures economic efficiency of design and construction, minimum involuntary resettlement, and minimum environmental impacts by avoiding forested lands and nature preserves.

B. Environmental Protection and Management

3. The Ganzhou–Longyan Railway Construction Headquarters under the Nanchang Railway Administration was responsible for environmental management and supervision for the Project. During construction, the designated personnel (with help from the environmental consultants) were in charge of the mitigation measures set out in the EIA. They reviewed the environmental monitoring reports, responded to any adverse environmental impacts, supervised the contractors and construction supervision companies, and reported to the relevant agencies and ADB. All important environmental matters and decisions were referred directly to the top management of GLR Construction Headquarters and the Ministry of Railways (MOR). At the request of GLR Construction Headquarters, each contractor and construction supervision company designated staff from the site management team to deal with environmental issues.

4. At appraisal, it was estimated that the total cost of environmental protection and mitigation measures would be about CNY91.2 million. According to the MOR completion report, the actual total investment for environmental protection was CNY164.6 million, which included investments for slope stabilization, ecological rehabilitation, and revegetation of spoil banks.

C. Environmental Monitoring

5. Environmental monitoring took place at two levels: (i) daily environmental monitoring by the contractors and construction supervision companies on-site, and (ii) periodic environmental monitoring by specialist staff, who took samples for analysis in accordance with the monitoring procedures and guidelines.

6. Beijing Oasis Environmental Protection Technology Company Limited (BOEPTC) was engaged to supervise the overall environmental monitoring program for the Project. BOEPTC monitored noise pollution, ambient air quality, surface water quality, and the ecological environment; verified the EIA evaluation; and implemented the mitigation plan. BOEPTC staff visited the site for periodic environmental monitoring and inspection, gave guidance and advice on environmental monitoring, trained project staff, planned the implementation of mitigation measures, and reported its findings. BOEPTC produced 13 environmental monitoring reports since June 2002 and in December 2006 submitted the environmental evaluation summary monitoring report for 1 year after completion of construction.

38 Appendix 9

D. Implementation of Mitigation Measures

7. During implementation, the environmental monitoring and mitigation measures were carried out in accordance with the EIA and summary EIA. The following primary measures have been taken to minimize adverse environmental effects: (i) using spoils from tunnels and other excavations in building embankments, railway stations, or local access and linking roads; (ii) carefully spreading unused spoils on hillsides with vegetative coverage to minimize interference with natural watercourses; (iii) building cofferdams during construction of bridge piers to prevent sedimentation into rivers; (iv) integrating grass and bushes with concrete grids to stabilize slopes and embankments; (v) relocating schools affected by noise out of sensitive locations, and with full compensation; (vi) building wastewater treatment facilities in nine passenger stations to alleviate pollution from station wastewater; and (vii) replacing proposed coal-fired boilers with solar and electrical boilers to reduce air pollution.

E. Environmental Impact

1. Noise

8. During construction, the contractors used low-noise equipment and adopted noise mitigation measures to reduce noise at sensitive locations mentioned in the EIA. Eleven schools affected severely by noise were relocated to sites 200–1,000 meters away from the railway. Locations such as schools and villages where noise reduction measures had already been implemented met the class II standard (GB 3096-93: Standard of Environmental Noise in Urban Areas). The present equivalent sound level of the railway was monitored at residential locations within 30 meters of the centerline of the outer track of the railway and was found to meet the standard GB 12525-90: Railway Boundary Noise Limits and Measurement Methods.

2. Environmental Air

9. During implementation, all proposed coal-fired boilers in stations were replaced with solar and electrical boilers. Air pollution expected from boilers has been eliminated. During operation, the primary air pollution source is the waste gas discharged by locomotives, which has been observed to be insignificant.

3. Surface Water

10. During operation, the primary water pollutants are comprised of wastewater from railway stations. The water quality monitoring results showed the discharged sewage during both construction and operation stages met the Class I standard for integrated wastewater discharge (GB8978-1996: Comprehensive Discharge Standards for Wastewater).

4. Solid Wastes

11. Major components of solid wastes during the operational phase were domestic refuse from railway staff, train wastes generated by passengers, station domestic wastes, and sludge from station wastewater treatment plants. All wastes are collected and disposed of by the local sanitation force.

Appendix 9 39

5. Ecological Environment

12. During construction, the contractors carried out the environmental protection provisions in their contracts. All sites temporarily occupied during construction were restored. Cutting surface, subgrade, and embankment slopes were generally stabilized through appropriate vegetative and structural measures (i.e., retaining walls, riprap, antiskid piles, rock bolts, and side ditches) to prevent soil erosion. Spoil banks have been covered with vegetation to control erosion.

13. The Project permanently occupied 337 hectares (ha) of forests, 373 ha of paddy, 85 ha of orchard, and 58 ha of other cultivated lands. All lands used have been replaced and compensated in other places to balance the local land use. There have been no significant changes in the five main indices of environmental quality (i.e., the area of forest cover, the extent of water and soil erosion, paddy fields as a percentage of cultivated land, the percentage of steep slopes, and the percentage of bare land).

F. Conclusions

14. During construction, all the contractors fulfilled their obligation to protect the environment and to implement mitigation measures in their construction schemes. The adverse effects of the project construction on the surrounding environment were thus minimized.

15. According to the monitoring results, the railway operation has not affected the habitat of any protected species. The noise level and environmental air quality meet the Government’s regulatory standards, and there is no significant impact on the water quality of receiving rivers. The Project has met its objective of environmental protection.

40 Appendix 10

EVALUATION OF LAND ACQUISITION AND RESETTLEMENT ACTIVITIES

A. Scope of Land Acquisition and Resettlement

1. The resettlement plan for the Ganzhou–Longyan Railway (GLR) Project was drafted by the Ministry of Railways (MOR) in 2000. Subsequently, it was refined by a project preparatory technical assistance consultant to address the concerns of Asian Development Bank (ADB) and incorporate the results of a socioeconomic sample survey carried out under that technical assistance in 2001. The resettlement plan showed that the railway project construction would involve land acquisition, demolishment of buildings, and resettlement of affected persons. Total land acquisition was estimated to be 1,017 hectares (ha) (15,254 mu1), which included land required for constructing the railway line and for railway stations. The impact of land loss was estimated to be equivalent to loss of livelihood for 8,493 persons relocated across 127 villages. Building demolitions were estimated to total 465,474 square meters (m2) and require about 17,061 people to be relocated. In addition, the Project was to temporarily borrow land for construction purposes, but the resettlement plan contained no information related to that.

2. According to MOR’s project completion report, most resettlement activities began in November 2001 and were completed by the end of 2003. In total, 14,336 mu of land were permanently acquired, which was 6% less than the estimation in the resettlement plan. The number of people affected by land acquisition was 8,654. A total of 491,892 m2 of buildings were demolished, which was 2% more than the estimation in the resettlement plan. The number of people affected by house demolition was 12,899. Total cost for land acquisition and resettlement was CNY311.58 million, which was 1% less than the CNY313.7 million in the resettlement plan. A total of 8,483.9 mu of lands were additionally acquired by local governments, mainly for constructing expanded railway station squares and access roads, which cost around CNY184.08 million. Table A10.1 presents the actual project impacts as compared to those estimated in the resettlement plan.

Table A10.1: Project Land Acquisition and Resettlement Impacts Item Unit Ganzhou Longyan Total A. Permanent Land Acquisition RP mu 6,112 9,142 15,254 Actual mu 7,1577,179 14,336 Actual vs RP % 117 79 94 in which: Farmlands RP mu 3,308 3,315 6,623 Actual mu 3,3453,137 6,482 Actual vs RP % 101 95 98

B. Building Demolition RP m2 303,585 161,889 465,474 Actual m2 303,806 188,086 491,892 Actual vs RP % 100 116 106 C. Affected Persons C1. By Land Acquisition RP persons 4,488 4,005 8,493 Actual persons 5,120 3,534 8,654 Actual vs RP % 114 88 102 C2. By House Demolition RP persons 11,927 5,134 17,061 Actual persons 7,331 5,568 12,899 Actual vs RP % 61 108 76 RP = resettlement plan. Source: Project completion report of GLR, Ministry of Railways.

1 The mu is a traditional land area measurement. 1 mu = 1/15 hectare.

Appendix 10 41

3. Because MOR was not responsible for temporary land acquisition, there was no corresponding data available on the exact amount of temporary land acquired and temporary land compensation. Compensation for such land was settled by the contractors. During the railway construction, whenever temporary acquisition needs arose, the construction contractor signed agreements directly with farmers, groups, or villages, negotiating and deciding the temporary land compensation according to the relevant policies.

B. Resettlement Policy and Compensation Rates

4. Land acquisition and resettlement was implemented based on the resettlement plan, the 1998 Land Administration Law, and the following government rules, regulations, and agreements: (i) agreements on GLR’s construction among MOR, Fujian provincial government, and Jiangxi provincial government (12 December 2000); (ii) circular no. 344 for resettlement work plan and circular no. 345 for land acquisition and house relocation compensation rates issued by Longyan municipal government in 2001; and (iii) circular no. 9 for land acquisition and house relocation compensation rates issued by Ganzhou municipal government in 2002. The main reason for differences in compensation rates was that the average annual output value estimated in the resettlement plan was different from those subsequently issued by local governments. The adopted multiples of average annual output values for land compensation and resettlement subsidy ranged from 11 to 18 according to the per capita land holdings in affected villages. Table A10.2 compares the actual land compensation rates under the Project with the rates outlined in the resettlement plan.

Table A10.2: Land Compensation Rates (CNY/mu) Item Ganzhou Longyan RP Actual RP Actual A. Permanent Land Acquisition Vegetable Land (suburb) 23,400–32,400 — 28,600–39,600 26,000–53,400 Paddy Field 11,700–16,200 8,600–8,800 15,600–21,600 10,000–16,000 Dry Land 6,500–9,000 5,300 9,100–12,600 5,000–8,400 Orchards 6,500 6,400 9,100 8,000 Fishpond 9,000 8,600–8,800 13,000 13,500 Residential Land 6,500 5,300 9,100 13,000 Undeveloped Land 500–1,000 700 1,200 2,000 Forested Land 3,000–5,000 2,800 4,000–7,000 2,000–5,000 B. Young Crop Compensation Vegetable Land 520 650 Paddy Field 400 500–1,450 500 600–1,200 Dry Land 300 400 C. Temporary Land Use Dry Land 1,200 2,000 400–5,000 1,200–8,400 Undeveloped Land 500 800 — = no data available, RP = resettlement plan. Source: Resettlement post-evaluation report of GLR, Ministry of Railways.

5. Compensation rates for land occupied temporarily by the Project included funds for both compensation and for restoring land to its original use. In formulating compensation rates, consideration was given to the length of occupation, the average annual output value of the land, as well as damage to the lands. Contractors paid compensation directly to affected persons.

42 Appendix 10

6. Two sets of uniform compensation rates for house demolition were formulated in the resettlement plan for similar structures in Ganzhou and Longyan municipalities, respectively. The rates actually implemented varied in a similar structure, which was considered easier to implement due to varying conditions of affected houses. Actual house compensation rates in Ganzhou municipality were less than those suggested in the plan (Table A10.3). According to the replacement costs along the alignment provided by county construction bureaus, the actual compensation rates for house demolition were higher than the replacement costs.2

Table A10.3: Building Compensation Rates Ganzhou Longyan Item Unit RP Actual RP Actual A. Building Compensation Frame Structure CNY/m2 — 265–300 — 340–430 2 Brick-Concrete CNY/m 280 225–260 300 220–330 2 Brick-Timber CNY/m 210 120–205 230 180–250 2 Earth-Timber CNY/m 170 100–170 180 145–170 B. Relocation Subsidy CNY100/HH CNY100/HH CNY3/m2 CNY6/m2 C. Transition CNY10/person- CNY10/person- Allowance month month CNY3/m2 CNY1000/HH HH = household, — = no data available, RP = resettlement plan. Source: Resettlement postevaluation report of GLR, Ministry of Railways.

7. Compared with other infrastructure projects along the alignment, the project compensation rates for land acquisition and house relocation were generally higher than those in highway projects but lower than those in real estate projects. Considering the railway’s contribution to the public interest, the affected peoples strongly supported its construction and were generally satisfied with the compensation received.

C. Resettlement Measures and Income Restoration

8. All relocated households received compensation for buildings and attached properties from railway resettlement offices. A total of 2,413 households constructed new houses, which accounted for 90% of total affected households. The other 10% of affected households, which did not construct new houses, either have other houses or moved into towns. In addition to cash compensation for lost houses and properties, the affected households were provided with new housing plots in their same villages or nearby concentrated resettlement sites. Affected households also received relocation subsidies and transition allowances. Most of the new houses are storied brick-concrete buildings that are much better than those before relocation.

9. All affected villages were aware of the land compensation rates that had been adopted, and they received the correct amount of compensation. For those villages that still had sufficient land, the remaining lands were readjusted for all farmers within the village; thus the affected persons owned the same land areas as others. These villages used land compensation funds and resettlement subsidies for collective purposes or distributed the funds equally to all villagers. Land for readjustment came from three sources: (i) lands reserved by a village or group, (ii) farmlands abandoned by people engaged in long-term migrant labor, and (iii) full readjustment among all villagers within the group or village. In addition, local governments provided training for affected villagers to improve their skills in planting, animal husbandry, and processing agriculture products. With the operation of the railway, meanwhile, more and more

2 Ministry of Railways , 2007, Resettlement Postevaluation Report of GLR (section 5.2.2).

Appendix 10 43 enterprises and investments from Quanzhou, Shanghai, Shenzhen, Xiamen, and Zhejiang have come into the project area. The new enterprises have generated a great many job opportunities for the affected people. According to the resettlement postevaluation report, the per capita income of affected people rose significantly after resettlement. Table A10.4 provides the details.

Table A10.4: Income Restoration of Affected People (%)

Ganzhou Longyan Total Per Capita Income (CNY/person/year) 2001 2007 2001 2007 2001 2007 ≤635 19.35 3.40 3.05 0.00 11.71 1.90 635–1,120 51.61 3.4015.24 4.30 34.57 3.80 1,120–1,600 21.51 3.4026.22 4.30 23.71 3.80 1,600–2,500 6.45 6.9028.66 8.70 16.86 7.70 2,500–4,000 1.08 24.1014.02 13.00 7.14 19.20 >4,000 0.00 58.6012.80 69.60 6.00 63.50 Source: Resettlement posevaluation report of GLR, Ministry of Railways.

10. Railway resettlement offices and local governments provided various forms of assistance for vulnerable groups affected by the Project. For example, Liao Nanhai, a mental patient in Meigan Village in Ruijing City, received an additional subsidy of CNY5,000 from the railway resettlement office to purchase construction materials, and built his new house with assistance from the local government. An elderly couple in Gutian Village in Yudu County received an additional subsidy of CNY2,000 and built their new house with assistance from the project contractor. Numerous other vulnerable individuals received assistance in cash or in kind that enabled them to rebuild their houses and restore their livelihoods.

D. Land Acquisition and Resettlement Cost

11. The total actual cost of compensation for land acquisition, building relocation, and affected facilities was CNY311.58 million. That accounts for 99% of the CNY313.73 million estimated in the resettlement plan. Table A10.5 provides details of the resettlement cost.

Table A10.5: Variation of the Resettlement Cost (CNY million) Actual Item RP Ganzhou Longyan Total Variation (%)

1. Permanent Land Acquisition 119,094 57,203 57,488 114,691 96

2. Building Demolition 127,251 87,421 41,379 128,799 101 3. Temporary Land Use, Affected Facilities, and Others 67,382 37,250 30,843 68,093 101

Total 313,727 181,873 129,709 311,583 99 RP = resettlement plan. Source: Resettlement postevaluation report of GLR, Ministry of Railways.

44 Appendix 10

E. Institutional Arrangement

12. The resettlement offices under the GLR construction headquarters of Nanchang and Shanghai railway bureaus were responsible for coordination, fund raising, and internal monitoring and evaluation (M&E) for land acquisition and resettlement. In addition to the railway construction support offices (RCSOs) established under the Ganzhou and Longyan municipal governments, 8 county railway supporting offices and 29 township railway supporting groups were also established. The RCSOs under the governments at various levels along the alignment were responsible for implementing land acquisition, house demolition, and relocation.

F. Monitoring and Evaluation

13. The Research Institute of the Southwest Jiaotong University (RI-SJU) was engaged as the external agency to conduct independent M&E for the Project. RI-SJU prepared and submitted a baseline survey report in April 2002, and it subsequently submitted resettlement M&E report numbers 1 and 2 in April 2003 and May 2004, respectively. In May 2005, RI-SJU submitted the resettlement completion report for GLR. The resettlement postevaluation report was submitted to ADB in October 2007.

G. Participation and Information Disclosure

14. Participation and transparency were the key principles through the entire process of land acquisition, house demolition, and relocation. The representatives from affected villages, local governments, and the Fourth Survey and Design Institute participated in the process of formulating the resettlement plan. During the detailed measurement survey, the affected households participated in measuring affected lands and properties, and they endorsed the final inventory. Before implementation of land acquisition and house demolition, the county governments along the alignment made two announcements. They first announced the scope of the project impact, compensation policy, and compensation rates. The second announcement regarded the detailed amount of land acquisition and house demolition, as well as the compensation funds. In addition, many consultative meetings were held during implementation among GLR construction headquarters, local RCSOs, village committees, and the representatives of affected households to discuss issues regarding house plots allocation and house rebuilding, disbursement and distribution of compensation funds, restoration of community facilities, and so on. These timely announcements and consultations ensured a transparent process of land acquisition and resettlement.

H. Conclusions and Lessons Learned

15. Equitable and transparent principles prevailed in land acquisition, house demolition, and relocation. The local governments and established RCSOs and railway supporting groups made great efforts in disclosing and consulting the land acquisition policies and rates related to land acquisition, house demolition, and relocation, as required by the city, provincial, and national governments. Some of the compensation rates were lower than those stipulated in the resettlement plan, however, indicating that the resettlement plan was not endorsed or approved by local governments. This is now a standard ADB requirement for resettlement plan preparation.

16. Railway administrations and governments at various levels consulted extensively with villages, groups, enterprises, and people affected by the Project due to land acquisition and house relocation. Throughout the process of land acquisition, house demolition, and relocation,

Appendix 10 45 affected groups and persons were able to report their difficulties and problems, appeal for aid, and make complaints through various channels. Railway administrations, all levels of government, and various RCSOs and railway supporting groups worked proactively to solve the problems reported by affected people. In addition, the railway administrations and local governments also made great efforts to improve incomes for affected people by providing skills training and job opportunities. According to the resettlement postevaluation report, the per capita income of affected people has increased significantly after resettlement.

17. The impacts of land acquisition and resettlement within the project scope had been well estimated in the resettlement plan. The impacts associated with the station squares had not been given adequate due diligence, however, even though these impacts were beyond the project scope. The project impacts in the resettlement plan were estimated according to the feasibility report, which was prepared pursuant to People’s Republic of China regulations and guidelines for railway design. The designs of station squares did not meet the local governments’ demands for urban development, and during construction, therefore, local governments enlarged the railway station squares to support their urban development plans. These enlargements were not included in the Project and were entirely financed by local governments. It was observed that some railway stations and squares were expanded excessively. It is suggested that future railway designs consider the reasonable requirements of urban development. Meanwhile, the scope of land acquisition and house demolition for railway stations and squares should be minimized through design optimization and careful decisions as to the locations of railway stations.

18. The cost of land acquisition and resettlement was not adequately budgeted. According to the agreements on GLR construction among MOR and the Jiangxi and Fujian provincial governments, MOR provided a lump-sum resettlement fund based upon a comprehensive rate, and the budget deficits were covered by governments. Given the poor fiscal condition of the local governments, and particularly in Jiangxi Province, such an arrangement became a burden for the local governments. It is suggested that in future projects the cost of land acquisition and resettlement should be budgeted adequately and included in the project budget.

19. M&E reports did not provide systematic assessments, because they did not fully track those household samplings that were selected in the baseline survey. Instead, those reports were largely anecdotal and based on small sample sizes. Reports based on larger and consistently monitored samples would have provided a better basis for evaluating resettlement results. More representative and comprehensive M&E would however require greater budget funds.

20. ADB’s resettlement review was weak. No ADB resettlement specialists had visited the project sites before the resettlement officer in ADB’s People’s Republic of China Resident Mission participated in the Loan Review Mission in 2006. That was almost 3 years after land acquisition and house relocation had been completed. In the future, ADB should strengthen its resettlement safeguard supervision at the early stage of project implementation.

46 Appendix 11

ECONOMIC REEVALUATION

A. General

1. The economic reevaluation of the Ganzhou–Langyan Railway (GLR) Project was conducted for the “with-project” and “without-project” scenarios using actual data and updated forecasts. In the without-project case, the existing roads and alternative longer railways would be relied upon. That would result in growing traffic congestion, higher transport costs, and longer travel times. In the “with-project” case, GLR would be used by those within the project corridor to take advantage of its lower transport costs, shorter travel distances, and more conformable and safer travel. The economic reevaluation established assumptions based upon discussions with Nanchang Railway Administration and surveys conducted under the marketing and business development study financed by the Asian Development Bank (ADB) loan under the Project.

B. Costs

2. The project costs consist of capital costs, operation and maintenance costs, and the costs for equipment replacement and infrastructure rehabilitation to be undertaken during the evaluation period. A standard conversion factor of 0.92 was used to convert financial capital costs into economic costs, consistent with the appraisal estimates.

C. Traffic

3. The trial operations commenced on 1 April 2005 for freight transportation and 11 October 2005 for passenger transportation. Currently, there are seven pairs of freight trains and five pairs of passenger trains scheduled on GLR. Seven stations are open to freight, and all stations are open to passenger operations. The Nanchang Railway Administration is responsible for GLR’s operation and maintenance, and sufficient cars are being provided to meet the demand for transportation on GLR. In 2006, the first full year of operations, GLR’s originations and arrivals reached 0.95 million tons and 1.79 million passengers. Freight traffic reached 1,749 million ton-kilometers (ton-km) in that year, and passenger traffic reached 498 million passenger-km. Both freight and passenger traffic on GLR grew significantly in 2007.

4. Initial traffic has demonstrated that (i) freight traffic on GLR has been largely transit; (ii) local traffic and originating and terminating traffic are still underdeveloped, due to slower-than- anticipated construction of industrial sidings; and (iii) GLR’s most probable market is for bulk materials, including mineral ores, construction materials, cement, and grain. Moreover, it has been found that (i) the demand of long-distance passengers is underserved; (ii) the potential market for tourists has not been sufficiently explored, although there is a large demand; (iii) due to the scheduling of trains, local travelers along GLR appeared to be only partially served; and (iv) interchange between bus and train does not appear to be well coordinated, which limits growth in railway passengers.

5. Changes in the project region’s transportation network are going to impact significantly on the future traffic. The expressway that is currently under construction in parallel with GLR will significantly increase competition, especially for container traffic and other light and time-sensitive cargos. GLR must compete with comparable prices, improved logistics management, and better service quality. It must also offer services that the expressway cannot, such as large volume and weight capacity, as well as specialized cars for the products being shipped.

6. Several connecting railway lines are under construction. These will have various impacts on future GLR traffic. At GLR’s north end, construction of the Ganzhou–Shaoguan Railway began in

Appendix 11 47

2007. Expected to be operational in 2010, it will provide GLR a connection with the north–south Jingguang Railway trunk line. Longyan–Xiamen via Zhangzhou will start construction in 2007 (expected to be operational in 2010). It will provide GLR another connection to the Xiamen Port. The Xiangtangxi–Putian Railway, which is under construction and expected to be operational in 2010–2011, will provide a shorter and quicker connection to the coastal area to the east of GLR. The Xiangtangxi–Putian Railway may divert some long-distance passengers and container traffic. These factors have considered in the traffic forecast. The updated traffic forecast and comparison with appraisal estimates are presented in Table A11.1. A higher proportion of transit traffic and larger passenger traffic in the early years are the main reasons for the differences.

Table A11.1: Traffic Forecast At Appraisal and Project Completion Item 2005 2006 2007 2011 2016 2021 2026 Appraisal Forecast (million) Freight Tons 10.15 12.85 17.11 22.90 30.89 Freight Ton-kms 1,979.00 2,453.00 3,219.00 4,258.00 5,681.00 Passengers 2.73 5.19 7.88 10.94 11.08 Passenger-kms 377.00 719.00 1,091.00 1,516.00 1,535.00 Project Completion Forecast (million) Freight Tons 6.12 6.11 8.08 13.01 15.68 18.07 20.92 Freight Ton-kms 1,766.90 1,749.70 2,194.14 3,531.75 4,206.36 4,788.49 5,471.10 Passengers 0.41 2.69 4.08 7.27 9.61 11.36 11.36 Passenger-kms 74.06 498.23 735.07 1,290.13 1,693.77 2,001.67 2,001.67 Source: Asian Development Bank estimates.

D. Benefits

7. Three types of economic benefits were recalculated:

(i) Cost savings for freight transportation, which were composed of cost savings for the freight traffic diverted from the original railway route (Yingtan–Xiamen Railway), and the cost savings for the freight traffic diverted from highways to GLR. (ii) Cost savings for passenger traffic diverted from highways. (iii) Travel time savings for passengers diverted from Yingtan–Xiamen Railway, which were based on the value of time estimated according to the local income level.

8. The net economic values of freight traffic generated, economic development in the GLR station areas, and incremental tourism income were included in the appraisal analysis but not considered in the reevaluation due to the difficulty of quantifying and attributing the benefits.

E. EIRR Reevaluation

9. GLR’s reevaluated economic internal rate of return (EIRR) is 14.2% (see Table A11.2), which compares with the 14.4% estimated at appraisal. Although the reevaluated EIRR is close to the appraisal estimate, the composition of economic benefits is different. That is mainly caused by the significantly higher economic benefits from passenger traffic.

48 Appendix 11

10. Sensitivity analysis was carried out to test the impacts of (i) decrease in traffic forecast, and (ii) decrease in benefit valuation (Table A11.3). According to this analysis, the Project will continue to be economically viable under these conditions.

Table A11.2: Economic Reevaluation (CNY million) Freight Passenger Transport Transport Passenger Capital Working Cost Cost Time Net Cash Year Costs Expenditures Savings Savings Savings Flow 2001 165.60 2002 1,616.65 (1,616.65) 2003 1,830.30 (1,830.30) 2004 616.76 (616.76) 2005 397.50 109.04 116.60 11.67 278.26 (102.44) 2006 455.70 122.79 190.86 76.95 245.09 (68.33) 2007 62.91 141.26 312.28 116.07 286.75 507.79 2008 156.08 374.73 137.73 344.10 697.02 2009 169.80 430.94 158.39 395.72 811.48 2010 180.14 465.42 180.92 427.37 889.57 2011 191.58 502.65 206.69 461.56 975.07 2012 197.75 197.99 527.13 224.79 475.41 827.19 2013 203.40 552.90 236.03 489.67 1,070.68 2014 209.04 580.04 247.83 504.36 1,118.55 2015 214.93 608.64 260.22 519.49 1,168.64 2016 221.08 638.76 273.23 535.08 1,221.07 2017 226.51 664.10 286.89 545.78 1,265.24 2018 230.97 690.59 295.50 556.69 1,306.68 2019 197.75 235.56 718.26 304.37 567.83 1,151.91 2020 240.30 747.18 313.50 579.19 1,394.22 2021 245.19 777.41 322.90 590.77 1,440.43 2022 248.23 809.00 322.90 602.58 1,480.74 2023 251.37 842.03 322.90 614.64 1,522.61 2024 254.61 876.56 322.90 626.93 1,566.12 2025 257.96 912.67 322.90 639.47 1,611.35 2026 (2,216.36) 261.41 950.43 322.90 652.26 3,874.72 EIRR = 14.20% ( ) = negative. Source: Asian Development Bank estimates.

Table A11.3: Sensitivity Analysis Scenario EIRR (%) Base Case 14.20 1. Freight Benefits Decrease by 20% 13.01 2. Passenger Cost Savings Decrease by 20% 13.75 3. Passenger Time Savings Decrease by 20% 13.10 4. Traffic Decrease by 15% 12.09 Source: Asian Development Bank estimates.

Appendix 12 49

FINANCIAL REEVALUATION

A. Basic Assumptions

1. The financial internal rate of return (FIRR) for the Ganzhou–Longyan Railway (GLR) Project was reevaluated on the basis of financial and operational information obtained from Nanchang Railway Administration (NRA) and several revenue and cost assumptions. Capital cost was based on actual expenditures incurred for the Project, excluding interest and other financial charges during construction. All revenues and expenses were expressed in 2007 prices for the FIRR calculation. The calculation period covered the construction period and a 20-year operation period after the start of trial operations in 2005. Costs of equipment replacement and infrastructure rehabilitation to occur during the calculation period were included. Based on a 30-year economic life of civil works, the Project’s residual value was assumed to be 30% of its capital cost. 2. Project revenues were comprised of freight revenues, passenger revenues, and other revenues. The traffic volume projection is as described in Appendix 11. Other revenue was assumed to be 14% of freight and passenger revenues, which is consistent with the current Ministry of Railways (MOR) level. Maintenance and other operation costs were based on the actual figures and assumptions agreed with NRA. Business tax and income tax were excluded from the net benefits of the Project.

3. The average freight tariff of GLR was set at CNY0.10 per ton-km, although, according to MOR's calculation, the operating cost for freight transport of GLR was estimated to be CNY0.12 per ton-km. This is mainly because of the competition from roads. Other than the fundamental distance and commodity charges, there are additional charges (depending on individual shipments) for loading, shunting, unloading, and other operations. For certain cargo shipped on GLR, after incurring all the railway’s supplemental charges, trucking would provide better door-to-door service and cost less. A sampling of individual shippers produced the comparisons shown in Table A12.1. To maintain GLR’s competitiveness, no freight tariff increase in real terms was assumed in the financial reevaluation.

Table A12.1: Tariff Comparisons of Roads versus GLR

Rail Tariff + Rail Tariff vs. Truck Tariff Handling Distance Commodity Truck Tariff (CNY/ton) Charges (%) (CNY/ton) 400 km Albite ore 115 132.75 115% Cement by- 140 km 40 35 + 10 113% product Manganese 1000 km 300 230 + 30 87% Power 1200 km Methanol 350 250 + 50 + 8 88% Source: Survey by consultant for GLR marketing and business development study.

4. MOR’s uniform passenger tariffs are applied on GLR. Such tariffs are differentiated according to the seat category, type of train, and level of services. The train fare, in comparison to bus fare, is significantly lower in the hard seat category. GLR’s passenger service is price competitive in respect to the hard seat price. The highway currently carries the majority of passenger traffic within the Ganzhou–Longyan corridor, in spite of its higher price, because its higher-frequency service schedules permit convenient return trips. There is a potential for increasing passenger market on GLR in tourist and business travel, where higher tariffs are feasible. Although the proportion of higher value passenger traffic is expected to increase as

50 Appendix 12 compared to hard seat traffic, GLR’s average passenger tariff is assumed to remain at CNY0.14 per passenger-km in order to establish a competitive edge for GLR in the market.

B. Financial Internal Rate of Return

5. The FIRR after tax was recalculated at 4.27% (see Table A12.2), compared with the 6.4% estimated at appraisal. This variance is mainly due to the substantially lower freight tariff. At appraisal, that tariff was assumed to be CNY0.2143 per ton-km. The after-tax weighted average cost of capital (WACC), in real terms, was calculated using the actual capital mix and costs of various financing sources. The revised WACC is 2.23%. The Project’s FIRR is higher than the WACC, and the Project is therefore considered financially viable. 6. Sensitivity analysis (Table A12.3) was conducted to test the impact of variations in traffic, in operation and maintenance costs, as well as in tariff levels. The Project will still remain viable with a 20% decrease in passenger traffic volume, a 20% increase in working expenses, or a 10% decrease in tariffs. Table A12.2: Financial Internal Rate of Return (CNY million) Capital Working Freight Passenger Other Taxes Net Cash Year Costs Expenditures Revenue Revenue Revenue Paid Flow 2001 180.00 (180.00) 2002 1,757.22 (1,757.22) 2003 1,989.46 (1,989.46) 2004 670.39 (670.39) 2005 432.07 121.15 176.69 10.37 26.19 6.91 (346.88) 2006 495.33 136.44 174.97 69.75 34.26 9.04 (361.82) 2007 68.38 156.96 219.41 102.91 45.13 11.91 130.21 2008 173.42 263.30 121.32 53.85 14.21 250.84 2009 188.67 302.79 139.52 61.92 16.34 299.23 2010 200.16 327.01 158.73 68.00 17.94 335.65 2011 212.86 353.18 180.62 74.73 19.72 375.95 2012 214.94 219.99 365.65 195.09 78.50 20.71 183.60 2013 226.00 378.61 204.84 81.68 44.30 394.84 2014 232.27 392.08 215.08 85.00 49.27 410.63 2015 238.81 406.08 225.84 88.47 60.09 421.48 2016 245.65 420.64 237.13 92.09 68.51 435.69 2017 251.67 431.56 248.98 95.28 75.94 448.21 2018 256.63 442.83 256.45 97.90 82.05 458.52 2019 214.94 261.74 454.46 264.15 100.61 88.34 254.20 2020 267.01 466.46 272.07 103.39 94.84 480.09 2021 272.44 478.85 280.23 106.27 101.53 491.39 2022 275.81 491.64 280.23 108.06 105.70 498.42 2023 279.30 504.84 280.23 109.91 110.00 505.68 2024 282.90 518.47 280.23 111.82 114.45 513.18 2025 286.62 532.56 280.23 113.79 119.04 520.92 2026 (2,409.09) 290.46 547.11 280.23 115.83 123.79 2,938.02 WACC = 2.23% FIRR = 4.27% ( ) = negative, FIRR = financial internal rate of return, WACC = weighted average cost of capital. Source: Asian Development Bank estimates.

Appendix 12 51

Table A12.3: Sensitivity Analysis Scenario FIRR (%) Base Case 4.27 1. Passenger Traffic Decrease by 20% 3.95 2. Freight Traffic Decrease by 10% 3.60 3. Working Expenses Increase by 10% 4.07 4. Tariff Decrease by 10% 3.52 FIRR = financial internal rate of return. Source: Asian Development Bank estimates.

C. Financial Performance of Ganzhou–Longyan Railway

7. GLR is being operated by NRA under MOR. No separate financial statements are being prepared for GLR by either NRA or MOR. GLR’s operational and financial results are integrated into those of NRA, and MOR prepares consolidated financial statements covering all national railways. To evaluate the financial performance of GLR, pro forma financial statements were prepared based on the actual traffic information of the initial operation, forecasted traffic, and main assumptions as detailed above. The pro forma financial statements in current terms are presented in Table A12.4. Because of the low tariffs applied, GLR cannot generate sufficient funds to cover its debt services before 2012. The revenues are generally adequate to cover operating expenses, but the operating ratio will remain above 70% from 2005 to 2010. MOR will have to provide capital inputs to make up for the shortfalls.

8. MOR’s actual financial statements for 2000–2006 are presented in Table A12.5. MOR’s operating ratio increased from 70% in 2000 to 83% in 2006, indicating a greater increase in unit operating expenses as compared with the rise in tariffs. The debt service coverage declined from 2.62 in 2000 to 1.69 in 2006 but remains at a satisfactory level. The self-financing ratio declined significantly, from 0.51 in 2000 to 0.24 in 2006, indicating that MOR had to resort more to borrowing in the face of its soaring capital investment needs.

52 Appendix 12

Table A12.4 : PROJECT PRO FORMA FINANCIAL STATEMENTS (CNY million, in current prices) Income Statements 2005 2006 2007 2008 2009 2010 2011 2012 Operating Revenue Freight 176.69 174.97 222.54 254.59 283.20 315.03 350.44 373.75 Passenger 9.63 69.75 105.67 129.60 153.51 179.92 210.91 234.72 Other 26.08 34.26 45.95 53.79 61.14 69.29 78.59 85.19 Total 212.40 278.98 374.16 437.97 497.86 564.25 639.95 693.66 Less: Business Taxes 6.88 9.04 12.12 14.19 16.13 18.28 20.73 22.47 Net Operating Revenue 205.52 269.94 362.04 423.78 481.72 545.97 619.21 671.19 Working Expenses 121.15 136.44 161.38 179.17 195.39 213.19 233.22 248.23 Depreciation 97.23 97.23 194.47 194.47 194.47 194.47 194.47 194.47 Operating Expenses 218.39 233.67 355.85 373.64 389.86 407.66 427.69 442.69 Interest Expenses 0.00 0.00 229.46 219.09 208.55 197.82 186.90 175.74 Operating Profit Before Taxes (12.87) 36.28 (223.27) (168.94) (116.68) (59.51) 4.63 52.75 Income Tax 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net Profit after Tax (12.87) 36.28 (223.27) (168.94) (116.68) (59.51) 4.63 52.75 Cash Flow Statements 2005 2006 2007 2008 2009 2010 2011 2012 Sources of Funds Net Income after tax before interest (12.87) 36.28 6.19 50.15 91.87 138.31 191.53 228.49 Depreciation 97.23 97.23 194.47 194.47 194.47 194.47 194.47 194.47 Borrowings 289.57 331.96 45.83 0.00 0.00 0.00 0.00 0.00 Capital Contribution 142.50 163.36 102.55 75.00 120.00 70.00 50.00 180.00 Total Sources of Funds 516.43 628.84 349.03 319.61 406.33 402.78 435.99 602.96 Application of Funds Capital Expenditure 432.07 495.33 68.38 0.00 0.00 0.00 0.00 261.66 Debt Service 0.00 0.00 419.27 411.53 404.07 396.43 389.05 382.06 Changes in Working Capital 0.00 1.80 2.26 1.41 1.37 1.54 1.78 1.19 Total Application of Funds 432.07 497.13 489.92 412.94 405.44 397.97 390.83 644.90 Net Cash Position 84.37 131.71 (140.89) (93.33) 0.89 4.81 45.16 (41.95) Cash at the Beginning 20.00 104.37 236.07 95.19 1.86 2.75 7.56 52.72 Cash at the End 104.37 236.07 95.19 1.86 2.75 7.56 52.72 10.77 Balance Sheets 2005 2006 2007 2008 2009 2010 2011 2012 Current Assets Cash and Bank Deposits 104.37 236.07 95.19 1.86 2.75 7.56 52.72 10.77 Other Current Assets 10.62 13.95 165.53 168.72 171.72 175.04 178.82 181.51 Total Current Assets 114.99 250.02 260.72 170.58 174.47 182.60 231.54 192.28 Fixed Assets 5,479.61 5,974.94 6,043.32 6,043.32 6,043.32 6,043.32 6,043.32 6,304.98 Less: Accumulated Depreciation 97.23 194.47 388.93 583.40 777.86 972.33 1,166.79 1,361.26 Net Fixed Assets 5,382.38 5,780.47 5,654.39 5,459.92 5,265.46 5,070.99 4,876.53 4,943.72 Construction in Progress 432.07 495.33 0.00 0.00 0.00 0.00 0.00 0.00 Total Assets 5,929.43 6,525.82 5,915.11 5,630.51 5,439.93 5,253.59 5,108.07 5,136.00 Current Liabilities Total Current Liabilities 251.52 316.32 16.14 17.92 19.54 21.32 23.32 24.82 Long-Term Debt 3,883.54 4,215.51 4,025.70 3,833.26 3,637.74 3,439.14 3,236.98 3,030.66 Total Liabilities 4,135.07 4,531.82 4,041.83 3,851.18 3,657.28 3,460.45 3,260.30 3,055.49 Equity Paid-in Capital 1,807.23 1,970.59 2,073.14 2,148.14 2,268.14 2,338.14 2,388.14 2,568.14 Retained Earnings (12.87) 23.41 (199.87) (368.81) (485.49) (545.00) (540.38) (487.63) Total Equity 1,794.36 1,994.00 1,873.28 1,779.33 1,782.65 1,793.14 1,847.77 2,080.52 Total Equity and Liabilities 5,929.43 6,525.82 5,915.11 5,630.51 5,439.93 5,253.59 5,108.07 5,136.00 Ratios: Working Ratio (%) 59 51 45 42 41 39 38 37 Operating Ratio (%) 106 87 98 88 81 75 69 66 Debt Service Coverage Ratio 0.48 0.59 0.71 0.84 0.99 1.11 Debt–Equity Ratio (%) 65 65 68 68 67 65 63 59 ( ) = negative. Source: Asian Development Bank estimates.

Appendix 12 53

Table A12.5: Consolidated Financial Statements of Ministry of Railways (CNY million, in current prices) Income Statements 2000 2001 2002 2003 2004 2005 2006 Total Revenues after Tax 143,022 169,035 176,361 185,001 319,739 366,292 410,275 Total Working Expenses 84,544 103,557 108,752 117,577 142,088 156,478 229,155 Depreciation 15,982 19,853 22,320 21,390 23,578 26,162 36,205 Total Operating Expenses 100,526 123,410 131,072 138,967 264,376 301,528 341,794 Operating Profit 42,496 45,625 45,289 46,034 55,363 64,764 68,481 Less: Non-operating Expenses 5,288 6,635 6,596 6,738 7,576 11,224 12,477 Plus: Profit From Subsidiaries. 3,369 3,121 3,519 2,369 1,313 1,623 154 Total Operating Profit 40,577 42,111 42,212 41,665 49,100 55,163 56,158 Less: Construction Funds after Tax 35,969 37,518 36,878 38,544 42,117 44,700 46,713 Profit before Tax 6,114 4,186 5,334 3,121 6,983 10,463 9,445 Income Tax 985 1,059 2,356 1,612 3,222 4,316 6,217 Profit after Tax 5,129 3,127 2,978 1,509 3,761 6,147 3,228 Balance Sheets 2000 2001 2002 2003 2004 2005 2006 Assets Current Assets Cash and Bank Deposits 70,135 77,270 76,702 93,469 91,991 74,188 88,238 Inventories 13,847 15,382 16,748 15,137 17,130 19,113 19,667 Receivables 81,638 62,774 67,141 76,464 113,881 101,426 105,875 Others 437 347 276 453 299 363 Total Current Assets 165,620 155,863 160,938 185,346 223,455 195,026 214,143 Long Investment 57,868 41,900 48,192 46,061 24,368 23,995 25,483 Fixed Assets 627,118 696,140 781,521 818,319 990,069 1,054,530 1,195,726 Less: Depreciation 178,897 200,671 225,532 229,568 262,535 287,664 318,122 Net Fixed Assets 448,221 495,469 555,989 588,751 727,534 766,866 877,604 Construction in Progress 115,186 180,706 165,398 174,601 200,702 270,184 362,649 Others 1,717 22,263 22,778 2,783 10,560 14,409 22,479 Total Assets 788,612 896,201 953,295 997,542 1,186,619 1,270,480 1,502,358 Current Liabilities Short Term Liabilities 16,142 16,872 14,593 29,395 39,842 35,867 18,334 Payables 131,722 130,308 139,843 158,187 182,004 231,581 233,281 Total Current Liabilities 147,864 147,180 154,436 187,582 221,846 267,448 251,615 Total Long-Term Debts 187,596 224,656 242,373 211,596 237,237 209,304 388,462 Total Liabilities 335,460 371,836 396,809 399,178 459,083 476,752 640,077 Equities Capital 456,201 525,622 554,532 598,530 720,143 782,720 853,759 Capital Surplus 14,256 15,361 16,125 18,726 26,880 30,102 41,743 Revenue Surplus 16,046 17,267 18,665 17,743 20,669 26,658 25,009 Retained Profits (33,351) (33,885) (32,836) (36,635) (40,156) (45,752) (58,230) Total Equity 453,152 524,365 556,486 598,364 727,536 793,728 862,281 Total Liabilities and Equity 788,612 896,201 953,295 997,542 1,186,619 1,270,480 1,502,358 Cash Flow Statements 2000 2001 2002 2003 2004 2005 2006 Sources of Funds Profit after Tax 5,129 3,127 2,978 1,592 3,761 6,147 3,228 Construction Fund after Business Tax 37,212 38,815 38,152 39,661 43,169 45,971 48,260 Depreciation 15,982 19,853 22,320 21,390 23,578 26,162 36,205 Loans 28,938 26,011 29,865 41,859 37,646 36,901 65,033 Others 10,211 11,941 11,428 15,340 12,057 11,590 46,740 Total Sources of Funds 97,472 99,747 104,743 119,842 120,211 126,771 199,466 Applications of Funds Capital Investments 54,278 60,540 63,179 57,162 64,540 81,255 112,322 Debt Service 26,048 22,366 30,236 34,613 41,620 39,313 55,961 Interest 9,842 6,196 5,141 8,285 6,277 5,923 6,602 Repayment of Principals 16,206 16,170 25,095 26,328 35,343 33,390 49,359 Transfer to Government 1,151 1,200 1,180 1,132 1,170 1,364 1,480 Equipments Replacement 6,745 8,507 10,716 10,168 14,359 22,642 15,653 Total Application of Funds 88,222 92,613 105,311 103,075 121,689 144,574 185,416 Cash at Beginning of the Year 59,734 70,135 77,270 76,702 93,469 91,991 74,188 Difference Between Sources/Application 10,401 7,135 (568) 16,767 (1,478) (17,803) 14,050 Cash at End of the Year 70,135 77,270 76,702 93,469 91,991 74,188 88,238 Ratios: Operating Ratio (%) 70 73 74 75 83 82 83 Debt to Equity Ratio (%) 43 41 42 40 39 38 43 Debt Service Coverage Ratio 2.62 3.04 2.27 2.05 1.84 2.14 1.69 Self-Financing Ratio 0.51 0.55 0.43 0.40 0.35 0.36 0.24 ( ) = negative. Sources: Audit Reports of the Ministry of Railways, ratios calculated by Asian Development Bank staff.

54 Appendix 13

SOCIAL IMPACT AND POVERTY REDUCTION IN THE PROJECT AREA

A. Introduction

1. The Ganzhou–Longyan Railway (GLR), with a total length of 290.1 kilometers, commenced construction in December 2001, and it opened to traffic in 2005. GLR traverses eight counties and districts that are situated in a mountainous area that is less developed and poor. A poverty impact analysis was conducted during project preparation. According to that analysis, GLR will facilitate sustainable economic development by (i) providing necessary infrastructure, (ii) improving access to wider markets, and (iii) encouraging labor mobility. Cash crops production, agricultural processing, the tourism industry, and service-oriented activities in the region will particularly benefit from GLR. Incremental economic activities derived from the railway will increase fiscal revenue to the local governments, which will expand their resources to improve basic education, basic health care, and social programs for the poor.

B. Sustainable Socioeconomic Growth

2. Since reforms and opening-up began in 1978, the People’s Republic of China (PRC) has gradually evolved a pattern of unbalanced regional development. There are wide development gaps between the coastal region and inland areas. Due to labor shortages, rising land prices, and more severe environmental pressure in recent years, however, more and more enterprises and investments from the southeastern coastal areas have been gradually transferred to inland areas. One of the major obstacles hindering the project region from attracting investment was the poor transportation conditions. The GLR’s timely construction has greatly facilitated the transfer of progress to the project area. The statistical data shows that socioeconomic conditions in the project area rapid have improved in recent years. From 2000 to 2006, the per capita GDP growth in the counties and cities along the GLR alignment ranged from 76% to 151%, and fiscal revenues grew in a range from 78% to 330% (Table A13.1).

3. The operation of GLR has promoted agricultural development in the project area. The railway’s freight rate of CNY0.1 per ton-kilometer is much lower than the CNY0.4 for highway transportation, and GLR has become the main transportation mode for such agricultural outputs and inputs as grains, fruits, fertilizers, and feedstuffs. The reduced costs of transportation have made local farmers’ agricultural production more profitable. The project area is also rich in forest resources, and timber exports now depend mainly upon GLR for transport.

4. GLR’s construction and operation has greatly contributed to local industrial development. Some local enterprises—such as cement plants—have directly benefited from the railway transportation. The raw materials for cement are mainly limestone, coal, clay, and gypsum. The coal mainly comes from the northern part of the country. For these enterprises, the high costs of highway transportation would be prohibitive. Moreover, GLR has given local governments an advantage with which to attract external investments. New industrial parks have been constructed close to GLR, and more and more enterprises are beginning operations along the alignment. According to the administration committee of the Yudu industrial park, for example, that park has accommodated 102 enterprises. The value of their output is some CNY2,487 million annually, and they generate about CNY102 million in taxes. The industrial park plays an important role in utilizing that county’s surplus labor. There are now 26,300 people working in the industrial park, and local labor accounts for about 90% of the employees.

Appendix 13 55

Table A13.1: Socioeconomic Growth in the Project Areas Per capita GDP Growth Rate Fiscal Revenue Growth County/City Year (CNY/person) (%) (CNY million) Rate (%) 2000 2,495 78.01 Ganxian 151 330 2006 6,255 335.36 2000 2,219 95.53 Yudu 113 78 2006 4,728 170.10 2000 2,546 70.84 Huichang 82 92 2006 4,633 136.00 2000 2,921 115.45 Ruijing 106 83 2006 6,049 211.82 2000 7,782 2,927.18 Longyan 111 177 2006 16,394 8,100.00 2000 4,814 88.66 Changding 76 103 2006 8,485 180.28 2000 5,329 54.93 Liancheng 112 89 2006 11,289 104.00 2000 17,222 198.64 Xinluo 87 306 2006 32,255 806.00 Sources: 2000 and 2006 statistical yearbooks of Fujian Province, 2000 and 2006 statistical yearbooks of Jiangxi Province.

5. The project area is rich in tourist resources, and the opening of GLR meets a basic condition for developing tourism. The tourist resources along GLR are in particular the Hakka people’s culture, the historical scenic spots, and natural scenery. Ruijin Tourism Bureau reports that the opening of GLR has had a positive impact on development of Ruijin’s tourist industry. Visiting tourists numbered some 535,000 in 2004 (before the railway was opened), but by 2005 (after the GLR’s opening) that total was 645,000, a 21% increase. In 2006, tourist visits rose by another 25% to 808,000. The number of tourists in the first half of 2007reached 503,000. Revenues from tourism increased by 23% from CNY156 million in 2004 to CNY192 million in 2005, and reached CNY245 million in 2006, which was nearly 28% higher than that of 2005.

C. Poverty Reduction

6. With the project area’s rapid growth in socioeconomic indicators related to the railway and the increased fiscal revenue of the local governments, the standard of livelihood and incomes of local people have been significantly improved. That is particular the case for the poor. According to statistics of the county governments from 2000 to 2006, the growth of farmers’ per capita incomes ranged from 32% to 53% in those counties and cities (Table A13.2).

7. The incidence of poverty in the project area has been reduced significantly. The total number of people living in poverty in the eight counties and districts along the alignment decreased by 21%—from 270,456 in 2000 to 213,430 in 2006 (Table A13.3).

56 Appendix 13

Table A13.2: Per Capita Income of Farmers in Project Areas Per Capita Net Income of farmer Growth Rate County/City Year (CNY/person) (%) 2000 1,388 Ganxian 34 2006 1,859 2000 1,928 Yudu 35 2006 2,610 2000 1,332 Huichang 35 2006 1,798 2000 2,157 Ruijing 44 2006 3,108 2000 2,959 Longyan 52 2006 4,492 2000 2,486 Changding 49 2006 3,692 2000 2,741 Liancheng 49 2006 4,082 2000 3,934 Xinluo 53 2006 6,030 Sources: 2000 and 2006 statistical yearbooks of Fujian Province, 2000 and 2006 statistical yearbooks of Jiangxi Province.

Table A13.3: Poverty Incidence in Project Areas 2000 2006 County/City Poverty Line Poverty Poverty Line Poverty (CNY/person) Population (CNY/person) Population Ganxian 685 45,032 924 19,132 Yudu 625 60,531 685 56,000 Huichang 668 64,028 924 43,410 Ruijing 668 32,100 683 32,500 Changding 800 11,000 1,200 12,797 Liancheng 1,000 36,500 1,000 29,200 Shanghang 1,000 17,719 1,000 14,691 Xinluo 1,100 3,546 1,200 5,700 Total 270,456 213,430 Sources: County railway supporting offices along GLR.

8. GLR greatly promoted employment during the construction. According to MOR, the construction provided work for 85,710 person-months of unskilled labor, of which 55,710 person-months came from the local labor market. Among the local employment, work of 39,000 person-months went to laborers from poor households. With daily wages paid at CNY25–30, a total of CNY23.4 million was disbursed to local poor households during the entire construction period. That greatly contributed to poverty reduction in the project area.

9. Locally procured construction materials and supplies also provided a great many employment opportunities in the project area. According to the project completion report prepared by MOR, a total of CNY500 million was spent in procuring local materials and supplies, of which

Appendix 13 57

CNY50 million were the wages of the labor inputs. That created, therefore, around 83,000 person-months of employment opportunities for the local labor market. The Project also created a large amount of indirect employment opportunities in producing the required materials.

10. Since GLR began operating, a number of laborers have been hired to load and unload freight cars, as well as to work as security guards for the stations and warehouses. In the Ganzhou section, 278 local laborers have been recruited, among which 106 are from poor households. In addition, 7,776 laborers have been indirectly recruited since GLR became operational. With the growth of railway traffic, more employment opportunities will be generated for the local labor market, and particularly for the poor.

11. Local governments also implemented specific poverty reduction programs, which included technological improvements in farming, livestock husbandry, forestry, village infrastructure, basic education, irrigation, drinking water supply, village roads, extension, and microfinance. These were financed by government grants and low interest loans from the Agricultural Bank of China. In Ganxian County, Hehen and Shangguang villages along GLR were selected as the key poverty villages to be supported under the program. Each received CNY500,000 in government grants, which was used for village roads, irrigation systems, and schools, as well as planting and processing facilities. In Huichang County, four villages along GLR were included in the program. CNY100,000 of grants were used for construction of community facilities. In Ruijing and Longyan cities, in addition to the financial support, the governments provided skills training for the poor that helped surplus laborers to find job opportunities. Implementation of those poverty reduction programs has contributed to income growth among poor households in the area.

D. Labor Mobility and Social Protection

12. GLR has also had a substantial impact on the flow of the rural labor force. First, it is much safer and more comfortable to travel by train. Second, the price of a train ticket is much lower than that for a bus, which obviously benefits rural workers and the poor. The ticket price for an air-conditioned local train from Changting to Longyan, for example, is just 50% of that for an air-conditioned bus.

13. The regional economy has long lagged behind those of other regions. Agriculture made up the largest share of the local economy, and the proportion of secondary and the tertiary industries was quite low. Thus, there were very limited opportunities to absorb the surplus rural laborers. A large number of surplus rural laborers worked outside the region. With the opening of GLR, local industrial growth is accelerating and the numbers of laborers employed in local enterprises are rising. That will significantly reduce the social costs in terms of separating family members and other issues associated with migrating laborers.

E. Gender Development

14. The construction and operation of GLR has greatly promoted gender development in the project area. About 10% of laborers working on GLR were women. They were typically engaged in cleaning and maintaining trucks and other equipment, cooking for construction teams, and sanitation for the construction sites. Female employees enjoyed wages equivalent to those of male employees for similar job types. Women actively participated in the land acquisition and house relocation processes, and particularly in constructing new houses and managing the compensation fund. GLR has facilitated rapid improvement in local socioeconomic conditions. More and more girls and women are working in the nearby enterprises. The GLR has contributed to improving

58 Appendix 13 women’s empowerment, social class standing, domestic conditions, educations, and even marriage situation.

F. Monitoring and Evaluation

15. Southwest Jiaotong University was recruited as the monitoring agency to monitor GLR’s social and poverty impacts. Two monitoring reports, on poverty reduction (in 2004) and gender development (in 2005), were submitted to Asian Development Bank (ADB). The postevaluation report on poverty impact assessment was prepared and submitted to ADB in September 2007. These reports concluded that the construction and operation of GLR have greatly contributed to regional socioeconomic development, poverty reduction, and gender development.

G. Conclusions and Recommendations

16. The Project has had significant impacts on regional socioeconomic development and poverty reduction, as evidenced by (i) more and more enterprises and investments from southeastern coastal areas being transferred into the project region, (ii) increased employment opportunities for the poor during railway construction and operation, (iii) greater local labor mobility that has resulted in most of the households becoming free of poverty and reduced social costs, and (iv) tourism development that has boosted the employment opportunities.

17. During the project preparation, a set of social indicators was formulated within the project performance monitoring system. Although the monitoring reports reported some information related to those indicators, the information collection was not systematic and data for some of the indicators was difficult to obtain. It is recommended that (i) social indicators of the project performance monitoring systems for future railway projects should be easy to collect, and (ii) the monitoring agencies should closely follow those social indicators in the project performance monitoring systems with assistance from the executing agencies and local governments.