Document of The World Bank

Public Disclosure Authorized Report No: ICR00001408

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-71430)

ON A

Public Disclosure Authorized LOAN

IN THE AMOUNT OF US$150 MILLION

TO THE

PEOPLE’S REPUBLIC OF CHINA

FOR

THIRD XINJIANG HIGHWAY PROJECT Public Disclosure Authorized

June 24, 2010

China and Mongolia Sustainable Development Unit Sustainable Development Department Public Disclosure Authorized East Asia and Pacific Region

CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2010)

Currency Unit = RMB Yuan RMB 1.00 = US$ 0.146 US$ 1.00 = 6.83

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ADT Average Daily Traffic CAS Country Assistance Strategy CPS Country Partnership Strategy CPMS China Pavement Management System EAMS Equipment Asset Management System EIA Environmental Impact Assessment EMP Environmental Management Plan ERR Economic Rate of Return FYP Five Year Plan GDP Gross Domestic Products GOVAI Gross Output Value of Agriculture and Industry ICB International Competitive Bidding IDRP Institutional Development and Reform Plan IEG Independent Evaluation Group (World Bank) IRI International Roughness Index KSH Kuitun-Sailimuhu Highway LRRP Local Roads Rehabilitation Program M&E Monitoring and Evaluation MOC Ministry of Communications MOF Ministry of Finance NCB National Competitive Bidding NTHS National Trunk Highway System PAD Project Appraisal Document PDO Project Development Objectives PEO Project Execution Office QAG Quality Assurance Group (in the World Bank) RAP Resettlement Action Plan VOC Vehicle Operating Costs XCCAB Xinjiang Communications Construction Administrative Bureau XCD Xinjiang Communications Department XHAB Xinjiang Highway Administration Bureau XUAR Xinjiang Uygur Autonomous Region

Vice President: James W. Adams, EAPVP Country Director: Klaus Rohland, EACCF Ede Jorge Ijjasz-Vasquez, EASCS; and Sector Managers: Narasimham Vijay Jagannathan, EASIN Project Team Leader: Fei Deng, EASIN ICR Team Leader: Fei Deng, EASIN

CHINA Third Xinjiang Highway Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 12 4. Assessment of Risk to Development Outcome ...... 19 5. Assessment of Bank and Borrower Performance ...... 19 6. Lessons Learned ...... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 23 Annex 1. Project Costs and Financing ...... 25 Annex 2. Outputs by Component ...... 26 Annex 3. Economic and Financial Analysis ...... 28 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 31 Annex 5. Beneficiary Survey Results ...... 34 Annex 6. Stakeholder Workshop Report and Results ...... 37 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 38 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...... 50 Annex 9. List of Supporting Documents ...... 51 MAP

A. Basic Information CN-3rd Xinjiang Hwy Country: China Project Name: Project Project ID: P058847 L/C/TF Number(s): IBRD-71430 ICR Date: 06/24/2010 ICR Type: Core ICR PEOPLE'S REPUBLIC Lending Instrument: SIL Borrower: OF CHINA Original Total USD 150.0M Disbursed Amount: USD 150.0M Commitment: Revised Amount: USD 150.0M Environmental Category: A Implementing Agencies: Xinjiang High Grade Highway Construction Bureau Cofinanciers and Other External Partners:

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/16/2001 Effectiveness: 01/14/2003 01/14/2003 Appraisal: 06/10/2002 Restructuring(s): Approval: 09/05/2002 Mid-term Review: Closing: 12/31/2007 12/31/2009

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance:

i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No Satisfactory at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Roads and highways 94 94 Sub-national government administration 6 6

Theme Code (as % of total Bank financing) Infrastructure services for private sector development 40 40 Other public sector governance 20 20 Rural services and infrastructure 40 40

E. Bank Staff Positions At ICR At Approval Vice President: James W. Adams Jemal-ud-din Kassum Country Director: Klaus Rohland Yukon Huang Sector Manager: Ede Jorge Ijjasz-Vasquez Jitendra N. Bajpai Project Team Leader: Fei Deng Jacques M. Tollie ICR Team Leader: Fei Deng ICR Primary Author: Hernan Levy

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The project aims to improve transport infrastructure and sector governance in support of social and economic development in Xinjiang Uygur Autonomous Region (XUAR), a remote province in Western China.

To meet the above development objective, the project will produce the following outputs:

ii A. Traffic congestion relieved and mobility increased along the regional and international trade corridor between Kuitun and Sailimuhu close to the Kazakhstan Border, part of the main east-west section of China's National Trunk Highway System (NTHS);

B. Accessibility to selected poor areas in the Region improved through a Local Roads Rehabilitation Program (LRRP); and

C. Efficiency and effectiveness in public sector management of the road network enhanced.

Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised.

(a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Gross Output Value of Agriculture and Industry for affected counties/cities in Indicator 1 : Kuisai Corridor (in Y100 m): a) Kelamayi; b) Kuitun; c) Wusu; d) Bole; e) Jinghe; f) Wenquan; g) Yili a) 402.46; b) a) 948.9; b) 30.6; c) Value a) 285.63; b) 13.89; c) 13.78; c) 20.19; d) 35.1; d) 25.1; e) quantitative or 13.39; d) 7.45; e) 14.42; 9.32; e) 15.61; f) 12.2; f) 5.16; g) Qualitative) f) 2.82; g) 92.21 3.71; g) 105.52 415.5 Date achieved 12/31/2002 12/31/2007 09/30/2009 Comments (incl. % Achieved. Overall, actual GOVAI was some 2-4 times the target. achievement) Gross Output Value of Agriculture and Industry for selected counties under Indicator 2 : LRRP (Y100 m): a) Awati; b) Mulei; c) Baicheng; d) Yuepuhu; e) Pishan; f) Yinjisha; g) Gongliu a) 11.03; b) 6.24; Value a) 8.34; b) 2.51; c) 6.63; a) 15.3; b) 7.8; c) c) 10.67; d) 4.12; quantitative or d) 3.28; e) 4.00; f) 3.41; 17.3; d) 7.9; e) 6.6; e) 5.03; f) 6.06; g) Qualitative) g) 4.08 f) 10.8; g) 10.8 7.54 Date achieved 12/31/2002 12/31/2007 09/30/2009 Comments (incl. % Achieved. Overall, actual GOVAI was some 50 percent higher than target. achievement) Balance of provincial Road Exp. programs: (a) Total maintenance expenditures Indicator 3 : in million Y; (b) Net annual increase in % Value quantitative or (a) 535; (b) 4.7% (a) 650; (b) 5.0% (a)784; (b) 6.5% Qualitative) Date achieved 12/31/2002 12/31/2007 09/30/2009

iii Comments (incl. % Achieved. Targets were surpassed by 20 and 30 percent, respectively. achievement) Traffic Safety: Number of traffic accidents involving fatalities per number of Indicator 4 : vehicles Value quantitative or 22/10,000 vehicles 20/10,000 vehicles 11/10,000 Qualitative) Date achieved 12/31/2002 12/31/2007 12/31/2008 Comments Achieved. The target was largely surpassed. The improvement was the result of (incl. % more attention to safety as a result of the project and the extensive road achievement) improvements in Xinjiang during the period.

(b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Traffic congestion in Kui-Sai Corridor: a) Kuitun-Wusu; b) Wusu-Bole; c) Bole Indicator 1 : Crossing (traffic in veh/day) a)14,560 (of which Value 6,327 on the new a) 11,313; b) 6,441; c) a) 14,962; b) (quantitative Expressway) 2,377 8,833; c) 3,100 or Qualitative) b)6,918 c)4,434 Date achieved 12/31/2002 12/31/2006 09/30/2009 Comments Achieved. This indicator needs to be taken together with Indicator 2. While (incl. % traffic increased on the corridor, speeds increased, showing a drop in the level of achievement) congestion. Average travel speed in Kui-Sai Corridor: a) Kuitun-Wusu; b) Wusu-Bole; c) Indicator 2 : Bole Crossing (speed in km/hour) Value a)120 (quantitative a) 47; b) 45; c) 30 a) 90, b) 80; c) 60 b)80 or Qualitative) c)60 Date achieved 12/31/2002 12/31/2006 12/30/2008 Comments (incl. % Achieved. achievement) Indicator 3 : Highway maintenance: Improved road condition on the paved road network Value (quantitative IRI 5.6 IRI 5.2 IRI 4.9 or Qualitative) Date achieved 12/31/2002 12/31/2006 10/31/2009 Comments Achieved. Road condition as measured by the IRI is 16 percent better than (incl. % expected. achievement)

iv G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 12/10/2002 Satisfactory Satisfactory 0.00 2 03/27/2003 Satisfactory Satisfactory 8.50 3 06/10/2003 Satisfactory Satisfactory 14.46 4 12/09/2003 Satisfactory Satisfactory 43.87 5 04/29/2004 Satisfactory Satisfactory 43.87 6 12/08/2004 Satisfactory Satisfactory 57.19 7 06/20/2005 Satisfactory Satisfactory 69.84 8 12/06/2005 Satisfactory Satisfactory 83.44 9 06/15/2006 Satisfactory Satisfactory 92.78 10 02/14/2007 Satisfactory Satisfactory 119.30 11 05/29/2007 Satisfactory Satisfactory 129.12 12 11/15/2007 Satisfactory Satisfactory 137.75 13 05/29/2008 Satisfactory Satisfactory 145.42 14 02/13/2009 Satisfactory Satisfactory 145.42 15 07/08/2009 Satisfactory Moderately Satisfactory 146.92 16 01/14/2010 Satisfactory Satisfactory 150.00

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

The government strategy in the early 2000s regarding the highway sector aimed to ensure that the highway system helps integrate China’s national economy and facilitates mobility of goods and services. The investment priority during the Ninth Five-Year Plan (1996-2000) was given to developing the National Trunk Highway System (NTHS). The first phase, totaling 17,000 kilometers was expected to be completed by 2003. The development of some 130,000 kilometers of provincial and rural roads feeding into the NTHS was planned and undertaken in parallel to maximize the benefits of the NHTS. High priority was also given to providing all-weather roads to remote/low income areas in poor provinces.

Under the Tenth Plan (FY2001-2005), highway sector institutional reforms were expected to intensify as the country moved towards a more open and competitive economy. Such reforms included:

 Giving the market a growing role in providing both infrastructure and transport services  Decentralizing and reorganizing the sector to maximize the use of resources through better planning and programming, increase reliance on outsourcing works and services, improve supervision and quality control  Mobilizing new sources of user charge based revenues and promoting public/private financing mechanisms  Improving rural accessibility in all provinces and links to and within the Western provinces  Improving traffic safety while minimizing environmental and social impact on people affected by highway development

A government program in support of Western Development was especially relevant to Xinjiang. The program covered 12 provinces (including Xinjiang Autonomous Region) that make up the Western Region, representing a total area of 6 million square kilometers, about 60 percent of the country’s total land area and 25 percent of its population. Since adoption of economic reforms in 1978, development greatly accelerated in the east, in part thanks to large investment in improving transport infrastructure. By 1998, per capita income in the east was three times that in the western region. The Tenth FYP had as a major objective to develop Western Provinces, which had great potential for the extraction and processing of natural resources, including agriculture. For the road sector, actions were contemplated at three levels:

 East-West connections: Developing eight corridors totaling about 15,000 kilometers to link the Western Region and East China  Network improvements within the Western Region: Rehabilitating and upgrading of about 180,000 kilometers of the road network in this region

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 Rural access: Alleviating poverty in rural towns and villages through the improvement or construction of 150,000 kilometers of rural roads.

The project aimed to address the following sector issues: (a) sector management, focusing on developing institutional capacity and improving transport facilitation, (b) managing road sector expenditures, by sustaining road maintenance through the use of more modern tools and improving budget allocations for maintenance and by improving construction quality through better designs and improved construction supervision, (c) managing revenues and resources, mainly by improving the organization and management of toll roads and through a better utilization of pavement management software (d) enhancing accessibility to remote/low income areas, especially to about a third of XUAR’s 87 counties, which are designated as poor counties and located mostly in the southwest and northwest of Xinjiang.

In addition to these sectoral issues, the project intended to focus on two externalities: road safety, continuing the work initiated the preceding two Xinjiang highway projects (X1 and X2) and addressing the needs of minorities, on the basis of social assessments undertaken for the project.

1.2 Original Project Development Objectives (PDO) and Key Indicators

The project aims to improve transport infrastructure and sector governance in support of social and economic development in Xinjiang Uygur Autonomous Region (XUAR), a remote province in Western China.

To meet the above development objective, the project will produce the following outputs:

A. Traffic congestion relieved and mobility increased along the regional and international trade corridor between Kuitun and Sailimuhu close to the Kazakhstan Border, part of the main east-west section of China’s National Trunk Highway System (NTHS);

B. Accessibility to selected poor areas in the Region improved through a Local Roads Rehabilitation Program (LRRP); and

C. Efficiency and effectiveness in public sector management of the road network enhanced.

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The principal outcome/impact indicators for monitoring progress toward the PDO were:

 Gross Output Value of Agriculture and Industry (GOVAI) in affected counties along the Kuitun-Sailimuhu corridor and the local roads supported by the project  Transport cost at selected locations  A balanced program of road expenditures (to assess funding for road maintenance)  Traffic accident fatality rates  Traffic volume and travel time along the Kuitun-Sailimuhu corridor  Road network condition

1.3 Revised PDO and Key Indicators, and reasons/justification

The PDO was not revised. The indicator on transport cost was dropped, as it was found that the impact on cost could not be assessed in a way that it would provide useful outcome or impact information (see Section 2.3).

1.4 Main Beneficiaries

The main beneficiaries would be the users of the project-financed KSH highway, who would enjoy a major reduction in operating costs of vehicles and in travel time. The benefits of this highway, because it would foster inter-regional and international trade facilitation, would spill beyond the road users themselves, to producers for whom the reduction of transport cost would expand their markets, and to consumers who would benefit from more competition. The total affected population in the KSH corridor was estimated at 3.2 million.

The project would also benefit residents of the poor counties in the Region, where the project will finance improvement of rural roads, through improved access to health, education and other services as well as to markets. The total affected population in the poor counties was estimated at 2 million.

Also benefiting from the project would the Xinjiang highway agency and its various departments, in particular in the areas of planning, design, financing, supervision, construction, operation and maintenance of highways. Highway users throughout the XUAR would benefit from improved highway safety over Xinjiang highway network, including national, provincial and county roads.

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1.5 Original Components

The project consisted of the components listed below:

Component 1: KSH Corridor, US$271.74 million.

(a) Subcomponent 1A: Construction of Kuitun-Sailimuhu Highway (KSH), US$248.93. This 312 kilometer highway represents the remaining gap of the NTHS on the 1,430 km long stretch of the National Highway 312 traversing Xinjiang. This route is also the main trunk line of Xinjiang, serving an area of large and diverse economic potential and an important international link since ancient times, because it was part of the northern section of the Silk Road. The Kuitin-Wusu section of the KSH (18 kilometers) was designed as an expressway on a new alignment, some 1-3 kilometers away from the old road. The remaining section Wusu-Bole Fork-Sailimuhu would mostly improve the existing road, making it wider and safer (about 80 percent of the KSH would be on the existing alignment) and adding by-passes of the main cities traversed by the road.

(b) Subcomponent 1B: Construction supervision, US$8.42 million. Supervision of the KSH would be carried out by a Joint Supervision Team (JST), an association of a foreign firm and a local firm.

(c) Subcomponent 1C: Land acquisition and resettlement, US$14.39 million. Construction of the KSH would require permanent use of about 407.5 hectares of land, and would affect 1,450 persons, who would need to be relocated.

Component 2: LRRP program, US$44.88 million

This component would consist of a Local Road Rehabilitation Program (LRRP), aimed to improve accessibility to poor areas in the Region. Some 600 kilometers of local roads in poor areas would be improved under the LRRP, without changes to their existing alignment. A preliminary LRRP, composed of 12 links, had been agreed.

Component 3: Institutional, studies and equipment, US$16.08 million

(a) Subcomponent 3A: Institutional strengthening/training, US$1.00 million. This component would help finance strengthening departments of the XCD that were not included in the institutional strengthening program under the previous two Bank highway projects in Xinjiang. The current project would target the XCD Head Office (XHGHAB), the Xinjiang Provincial Survey and Design Institute (XRSPDI) and the QCMC.

(b) Subcomponent 3B: Studies and technical assistance, US$0.63 million. This component would consist of: (i) a road maintenance management improvement (RMMI) activity, intended to provide XCD with a modern tool for managing road assets and making optimal use of funds in the road sector, and (ii) continuous support to other critical activities, to support implementation launched under other previous projects in the

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areas of road safety, improving management of toll highways and improving transport services.

(c) Subcomponent 3C: Equipment for institutional strengthening and operations and maintenance, US$14.45 million. This would include equipment for institutional strengthening (US$3.64 million) and for operations and maintenance of the road network (US$10.81 million).

1.6 Revised Components

The components were not revised.

1.7 Other significant changes

A Supplemental Letter in 2002, part of the Loan Documentation added baselines and targets for the performance indicators, which had not been included in the PAD. The Supplemental Letter also modified some of the descriptions of the PDO’s Outcome and Output Indicators (See Section 2.3).

The original closing date, December 31, 2007, was extended twice: the first time to December 31, 2008, and the second time was to December 31, 2009, in order to allow completion of the LRRP and of the training program. More details of the extension are given in Section 5.2.

In 2003, XCD decided to upgrade, with local finance, the BF-S section, which had steep gradients and many accidents, to a Class I, 4-lane highway. The upgrading works were launched when the original project works for the section were practically completed. This had impact on Bank’s original plan to improve the safety condition of this road section based on recommendations of a series of safety audits which were made on the Class II road.

Under the LRRP program, four of the 12 roads included in the PAD as a tentative selection, were replaced by four new LRRP roads.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

Preparation

Taking into account previous lessons learned. The Bank had prepared two highway projects in Xinjiang prior to the current project, Xinjiang 1 (XPH1) that was closed at the time of Xinjiang 3 (XPH3) appraisal and Xinjiang 2 (XPH2) that was ongoing. Preparation was carried out in conjunction with supervision of Xinjiang 2, and benefited from the experience with these two projects.

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Preparation took into account lessons from the overall highway portfolio in China and experience specific to Xinjiang. The former included issues such as engineering design, bid documentation and cost estimates of civil works; construction quality control, and slow pace of policy and institutional reforms. The latter considered that XCD was engaged in policy matters which had been started under XHP1 and XHP2. Thus, selection of institutional reforms under XPH3 needed to ensure that reforms would be truly supported by XCD, and that reforms would first require building consensus among critical stakeholders.

A major difference between XHP3 and the two preceding highway projects was the attention it gave to local roads. In contrast, XHP2 focused on improving provincial roads, while XHP1 did not include improvement of either local or provincial roads.

Design

Considering alternatives to improve project design. Various alternatives were considered regarding different aspects of the project. On the KSH, an alternative of public/private provision was considered, but discarded because of the reluctance of private investors for greenfield operations in China at that time, as well as the specific financial characteristics of the KSH. Route alternatives were also considered, such as a new alignment parallel to the existing national highway 312, but were rejected based on findings of the prefeasibility study. Alternative on using the existing road alignment except at locations where it crosses cities and towns was considered but rejected, due to higher cost. Under the LRRP, alternative links were considered based, on the one hand, on their socioeconomic impact, and, on the other, the technical urgency due to poor road condition. This analysis led to the tentative selection of 12 roads.

Regarding the institutional components, consideration was initially given to including in the project a strong trade facilitation component, which would have helped support the western development strategy through domestic market integration and facilitating international trade between China and Central Asia. However, due to other regional initiatives ongoing during preparation of the XHP3, it was decided to limit the scope to improving the physical infrastructure. A decision was made during preparation to consider the Institutional Development and Reform Plan (IDRP) as a dynamic document that needed to be adjusted periodically reflecting changes taking place in XCD, concurrently with reforms in Xinjiang. The IDRP was a five-year plan focusing on five main sector issues in XCD: institutional strengthening and training, traffic safety, toll highway management and rate structure, transport facilitation, and road management and maintenance improvement.

Risks

Strong counterpart commitment to mitigate risks. None of the risks identified in the PAD were rated as being high. Three risks, all institutional, were identified in the ‘output to objective’ sequence. They were: (i) the need to internalize of improved procedures for sector organization, management and operation, mitigated by detailed TOR for the

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studies and close Bank supervision; (ii) continued commitment to implement TA recommendations, mitigated by XCD strong ownership in the preparation of the various action plans, and (iii) that the reorganization of XCD does not prove disruptive, mitigated with assurances obtained from XCD on stability of core staff involved in project management. Risks listed in the ‘component to output’ sequence included timely availability of counterpart funds, performance of contractors and consultants, political pressures interfering with implementation of plans and opportunities for trainees to apply their skills in the workplace. These risks were mitigated by strong XUAR commitment, careful review of procurement awards and close contract supervision, a carefully prepared Project Implementation Plan (PIP) and a high demand for skilled staff.

Quality at Entry

The Bank’s Quality Assessment Group did not carry out a Quality at Entry Assessment (QAE) for this project.

2.2 Implementation

Personnel Changes in XCD. During implementation, XCD was reorganized and several major changes happened in management and senior technical positions in the XCCAB. These changes had some negative impact on the carrying out of the institutional strengthening program.

KSH

Early implementation. Construction of the KSH proceeded at a fast pace since the beginning of the project. By September 2005, or about 3 years after approval of the project, all KSH contracts had been substantially completed. Some of the contracts had been completed as early as October 2003.

Technical problems. A number of technical problems arose during implementation, including quality of pavement, settlement of embankments, and treatment of contamination. These issues were satisfactorily dealt with.

Safety issues. Traffic safety was an important concern during construction of the KSH. Some safety issues stemmed from engineering drawings not showing in detail areas of potential safety problems. Safety measures identified in the design were normally shown only in tables, rather than in the drawings, and this created a number of safety issues during implementation. A significant safety issue was the transition between the expressway and connecting roads, which generally lacked appropriate warnings to the drivers of the change in type of road. Safety issues also arose from the fact that KSH looks like a four-lane expressway all the way through, but in fact it is a combination of expressway and Class I road. The Class I road sections in KSH have the same type and color of road signs, same cross-sections, and same straight and smooth alignments, as the expressway section. This gave drivers on the Class I road the feeling that it was a high speed road with no intersections or urban areas, reducing their alertness in the at-grade

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crossing with other roads and in the urban crossings, and increasing the risk of accidents. Bank supervision missions focused on these issues and provided recommendations (see Section 5).

Design changes of Bole Fork-Sailimuhu section. During implementation, after the original 2-lane road improvement had been completed, and following a string of accidents attributed to a long and steep downhill, this section was converted to a 4-lane road with two separate carriageways. The redesign kept the existing lanes as the uphill road, while a new downhill road was built with a new alignment, 7.6 kilometers longer, to reduce gradients. This effective solution was commended by the Bank team.

LRRP

Changes in composition. Four of the preselected LRRP roads, listed in the PAD, were taken off from the project as they were improved by the local governments with their own finance. These roads were substituted by other four roads, also located in poor counties.

Implementation. Carrying out the road construction and improvements under the LRRP program was complicated as some of the road works completed in 2004 suffered damages following heavy snow in February 2005. One of the road sections under the LRRP program, Akasi-Xihexiu road, encounters extreme geological conditions and technical difficulties. As a result, it experienced change of contractors, management teams, modification of design, and delay in implementation.

Contract prices. Contracts were all fixed-price, which created problems during implementation due to significant increases in the cost of labor, material and fuel, particularly during 2007 and 2008. Price variations overall were small (8.6 percent) although variations in individual roads reached substantially higher values (up to 43 percent).

Institutional Strengthening and Training

This was the slowest part of the project, the training as well as the studies. In addition to delays in starting this component, expected actions once the component was started were regularly late. Overseas tours, which were a minor part of the overall training program, were curtailed due to the decision of Xinjiang Finance Bureau in May 2009 to cancel all remaining training and study tours.

Project Cost

The final project cost is $390.95 million, which is 17.5 percent higher than estimated at appraisal. The main factors for the higher cost are the devaluation of the dollar relative to the RMB, and work order variations on the KSH.

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2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

The PAD listed four outcome indicators as key performance indicators (PAD, Annex 1) and a larger number of output indicators. The PAD did not, however, include specific targets against which to assess outcome. A Supplemental Letter, part of the project’s loan documents, included specific targets and baseline values, together with a minor reformulation of the indicators. They are shown in the Data Sheet of this ICR. This ICR uses the PAD indicators, but excludes one indicator (transport costs), as discussed below. Baselines and targets in the Data Sheet are mainly from the Supplemental Letter. The exceptions are the indicators of economic activity (GOVAI) in the KSH corridor, and the target speeds in that corridor. These were corrected during a detailed analysis of the performance indicators in June 2005.

The selected indicators were appropriate to monitor achievement of the project objective, although some were overly complex and were simplified during implementation, and the simplified ones did not materially change the purpose of the indicators. One such case was an indicator regarding provincial expenditures, which originally intended to divide into type of work (new construction, rehabilitation and maintenance) and between classes of roads.

Most of the indicators were easy to monitor, since they required data that was periodically collected by Xinjiang provincial government (economic data) and XCD (transport data). Only one indicator, intended to assess the impact of the improved roads on transport costs, proved to be inadequate. The indicator was based on transport rates, which are set and regulated by Xinjiang government, rather than actual operating costs to providers of transport services. Had it been the latter, it would have been a better reflection of the impact of the road improvement, but it would still have been difficult to measure. Therefore, though the transport cost indicator was monitored, it could not provide any useful information to achieve the intended purpose.

The PAD’s M&E included a detailed table regarding the institutional components, showing for each subcomponent, the end results, the outputs, and the indicators. The subcomponents covered in this table were: (i) the IDRP, ii) traffic safety, iii) institutional strengthening and training, (iv) toll highway management and rate structure, (v) road management and maintenance, and (vi) transport facilitation.

Values of the indicators were regularly requested by the Bank missions and reported in the supervision reports. However, PEO’s reports on the performance indicators were often late, and occasionally, there were problems with the credibility of the values reported, especially regarding traffic and the IRI (road roughness). XCD carried out revisions requested by the supervision missions. Monitoring of the indicator on transport costs was not pursued, after a XCD survey of transport rates showed that they would not be altered as a result of road improvements.

Most of the indicators were utilized by the XCD for their own planning and monitoring purposes. Of special interest to the XCD were the indicators, such as on road congestion,

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road safety and improved road condition, that directly reflected the impact of the XCD actions on improving the quality of road service.

As shown in the data sheet, most of the project targets were achieved.

2.4 Safeguard and Fiduciary Compliance

Rating: Satisfactory

Environmental Aspects. Environmental protection during implementation followed the Environmental Management Plan (EMP). The project was Category A. However, the alignment of the KSH posed relatively few environmental issues, since the alignment goes mainly through desertic lands. The LRRP’s major potential environmental issues were noise and dust pollution, for which appropriate mitigation measures were applied during construction.

Social Aspects. Land acquisition and resettlement for the construction of the KSH was carried out in accordance with the Resettlement Action Plan (RAP). Independent monitoring of resettlement was carried out. Actual resettlement resulted in 748 people affected in 196 households, and land acquisition of 1,333 ha. Total compensation paid was 120 million Yuan, which was more than double the RAP estimate. The difference is mainly due to an increase in the actual amount of agricultural land acquired, coupled with an increase in the number of persons and households affected and higher compensation rates than stipulated in the RAP.

Some variations occurred between planned and actual values, as shown in the table below:

Planned (RAP) Actual Change (%) Land acquisition, (ha) 1,333.00 1,333.00 0 Of which, cultivated 1.95 4.29 +220.00 Houses removed (000 sq m) 33.99 35.90 5.60 Trees (000) 193.03 193.03 0 Total cost (million Yuan) 53.80 120.00 +123.00

Some important aspects of the land acquisition and resettlement process were

 A Land Utilization Division was established under XCCAB, and was responsible for land acquisition and resettlement  A special account was set up to control cost and ensure that compensation was correctly provided  Information on land acquisition and household removal were made public, as part of social monitoring, which was carried out by an external, independent agency  Restoration of irrigation was carried out in consultation with local governments and local people

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Upon completion of the resettlement process, the living standards of the displaced families were better than before (Refer to Annex 7, G).

The LRRP did not involve any land acquisition.

Financial Management

The overall financial management compliance was satisfactory. The financial management system during implementation had no significant changes from appraisal, which was deemed acceptable to the Bank. The implementing agency complied with the legal agreement to submit annual audit reports and periodical financial monitoring reports to the Bank in a timely manner. All these reports were reviewed by the Bank and considered as acceptable to the Bank.

Procurement

Procurement of works, goods and consultant services was generally carried out in accordance with the Bank guidelines.

Under the Local Road Rehabilitation Program (LRRP) component, contracts for some of the local roads were split into small lots which were burdensome for the Client to manage, and which resulted in small contracts of little interest to larger contractors that could have offered better prices. One very remote local road (NCB procured) with extremely difficult geological conditions suffered delay in completion. It was later found that force account may have been a more appropriate procurement method for this type of work which is too challenging to attract any contractor.

2.5 Post-completion Operation/Next Phase

The Xinjiang Communications Construction Administrative Bureau, XCCAB (formerly known as Xinjiang High Grade Highway Administration Bureau, XHGHAB) was initially responsible for the operation and maintenance of the KSH highway. Following administrative changes in XCD in 2009, XCCAB now is only responsible for construction, while XHAB has taken over responsibility for operations and maintenance.

The management of the KSH benefits from an improved maintenance system, modern maintenance equipment and better coordination with the police to ensure a higher degree of road safety.

The LRRP roads are maintained by the local offices of the XCD.

Financing for the maintenance and operations of the KSH and the LRRP roads is provided under the XCD annual budget.

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3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

The project objective was highly relevant to Xinjiang. As noted in Section 1.1, construction of the XSH was a key part of the government strategy to develop the highway network to help integrate China’s national economy. The KSH was especially relevant to the development program of the Western Region, which lagged substantially behind in development compared to the eastern provinces

The CAS1 prevailing at appraisal, reflecting the Bank’s strategic directions of fostering growth, reducing poverty, supporting better governance, and improving the environment, had identified infrastructure improvement as one of the key areas of China’s development to be supported by the Bank.

Since the time of project appraisal, the rationale for the project has remained, or even increased. With China’s growing needs for natural resources, the Xinjiang region, having many untapped natural resources, has become increasingly important to serve the Chinese economy, and exploration of the region’s natural resources has intensified. The improvements of the road network under the project will make a significant contribution to facilitating such exploration.

At the same time, the fact that the Xinjiang region has borders with eight countries in Central Asia, makes its transport system, both its infrastructure and the quality of transport logistics, an important asset for the Region as well for China.

The project objective is also consistent with the Country Partnership Strategy (CPS) 2006-2010, and the project components that improve road access to trade and services and more efficient sector management support especially three CPS areas:

 Reduce internal and external barriers to trade  Reduce poverty, inequality and social exclusion through expanding access to social and infrastructure services  Manage resource scarcity and environmental challenges

3.2 Achievement of Project Development Objectives

The project objectives were substantially achieved. The outputs made an important contribution to improving transport infrastructure and sector governance, and supported social and economic development in XUAR. The areas served by the project, around the KSH and the LRRP roads, gained more in economic growth (GOVAI in 2009 being 2-4 times greater than in 2007, depending on specific road) than Xinjiang or China as a whole

1 CAS documents: 16321-CHA dated March 18, 1997 and Progress Report R98-107, dated May 28, 1998.

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(that about doubled the value of GOVAI during the same period).2 Project outputs, which were well selected to reflect achievement of objectives, were attained thanks to the successful implementation of the project.

Relieving traffic congestion and increasing mobility along the KSH corridor

The KSH opened to traffic in November 2006. It includes an 18 kilometer section, between Kuitun and Wusu, (K-W) built as a four-lane, access controlled expressway, and the remaining as a four-lane highway. The project-financed work on the KSH represents a major improvement of the road system in the XAUR region, and especially for the purpose of trading, since the KSH reaches close to the border with Kazakhstan on the west, and with an expressway which is part of the national trunk highway system on the east.

The following indicators reflect the improvement in travel along the KSH corridor, caused by the project:

 Average travel speed on the corridor rose in the sections Kuitun-Wusu (K-W), Wusu – Bole Fork (W-BF), and Bole Fork-Sailimuhu (BF-S), increasing from a baseline of 47, 45 and 30 kilometers per hour, respectively, to 120, 80 and 60 kilometers per hour, at completion.

 Mobility increased, and congestion fell, in the corridor, as traffic increased in the W-BF and BF-S sections, while average speeds also increased, as illustrated by the above figures. In the K-W section, traffic has taken more time than expected to build up. However, this is a rather common phenomenon in the newly constructed expressways in China. In the case of the KSH, factors identified as causing a delay in traffic build up include the paving in recent years of roads to many villages, that has diverted traffic from the KSH; the central government instruction to remove (starting in 2008) toll collection on roads Class II and below, that has further diverted traffic from KSH; truckers on long-distance travel modernizing and using larger-capacity trucks, from an average of 8 tons a few years ago to many truckers using 30-ton trucks today, thus reducing the number of trucks travelling on the road.

 The overall quality of the XUAR’s road network improved, as shown by the improvement in the quality of the surface of the road network (road roughness index improved from IRI5.6 at start of project to IRI 4.9 at closing). While the improvement exceeded the target, and XCD increased the allocation for maintenance (in real terms) during the project period, the extensive road construction and improvement in Xinjiang during the 2000s may have also been a major factor influencing the quality of XUAR’s road network.

2 Source: http://zh.wikipedia.org/wiki.

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 Road safety improved as exemplified by the drastic reduction in the rate of traffic accidents involving fatalities (from 22/10,000 vehicles in 2003 to 11/10,000 vehicles in 2008), the fixing of blackspots and the stronger police enforcement of traffic safety on the KSH highway. Safety audits carried under the project also helped to improve safety.

The improved travel conditions along the KSH corridor led, as expected, to an increase in the economic output in the counties served by the KSH, as stated at the start of this section It is, however, not possible to separate the impact on economic growth caused by the improved KSH travel from other growth factors in XAUR.

Increasing accessibility in counties served by the LRRP program

Traffic on LRRP roads increased substantially, as shown by the data below for the four LRRP roads selected to monitor traffic developments. This traffic increase is an indicator of the increased mobility in the areas of the LRRP roads.

Average Annual Daily Traffic (ADT) Equivalent (veh/day)

2000 2008 (base year) Actual S303 Jimusar-Santai (Santai Station) 2,833 5,290 S303 Mulei-Qitai (Wumachang Station 2,405 6,889 S311 Jiashi-Shile 3,804 5,851 G315Keriya-Pishan (Hetian) 2,085 2,504

The LRRP program benefitted local minorities, which in several of the LRRP roads accounted for more than 90 percent of the population living along the roads.

Road Percentage Local Minorities Santai-Quitai 24.5 Mulei-Tuyuantun-Qitai 24.7 Bayitouhai-Tekese-Zaosu 68.9 Awati-Akesu 53.1 Baicheng-Yuergun 97.9 Yuepuhu-Tazihong 93.7 Keriya-Pishan 98.7 Jiashe-Sule 96.5 Yuepuhu-Yingjisha 98.1 Tuoli-Tachackou 72.6 Akasi-Xihexiu 94.2 Cele-Bositan Xian 98.4

Economic and social development in the counties served by the LRRP also improved, and exceeded project targets. The same caveat regarding separating the impact of the LRRP relative to other growth factors mentioned for the KSH applies to the LRRP.

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Strengthening institutional capacity

Institutional Development and Reform Plan. The project supported, via training and studies and technical assistance, a major restructuring of the XCD, concluded in 2006, that included separating political from management functions, providing autonomy to XCD-owned enterprises, simplifying bureaucratic procedures, and streamlining construction and maintenance under different agency units.

Training. The main topics covered were environmental protection, highway engineering supervision, financial management, project management, and human resource development. Overall 1,036 persons (996 man-months) were trained, substantially more than the PAD estimate of 817 persons (762 man-months). Training targets were largely exceeded in domestic training in Xinjiang and elsewhere in China, which was the largest part of the training program (953 persons actual versus 696 in the PAD) but fell short in overseas training and study tours (83 persons actual versus 121 in the PAD).

Road Maintenance Management Improvement. Management of road maintenance was strengthened as the Chinese Pavement Management System (CPMS), a useful maintenance management tool, which existed but was not operational prior to the project, has now become a standard tool for XCD. The CPMS has been used in the preparation of Xinjiang’s 2005-2007 maintenance plan. This was made possible by each maintenance unit of XCD collecting data and feeding it into the CPMS program. Outputs from the CPMS have also been used to provide the Bank data on the evolution of the road network, financing of road maintenance, current maintenance plans and pavement condition.

Equipment Asset Management (EAMS). Although there were initial problems in the design and implementation of the system, it is currently in operation and helping XCD make decisions on equipment management. XCD is considering introducing further improvements.

Transport Facilitation Study. The conclusions and recommendations of this study were discussed and approved by policy-makers at a Forum on Transport and Logistics, held in Xinjiang in September 2008. A Bank supervision in May 2008 suggested that further efforts should be made to better standardize and regulate the large number of freight terminal companies in XUAR (469, more than ten times the number in most of the large European countries), and increase the efficiency and quality of freight and passenger transport. It is expected that the study and the mission’s recommendations will be used as an input for the formulation of Xinjiang Logistics Development Plan, expected to be put in operation during 2010.

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3.3 Efficiency

Economic evaluation

KSH. At appraisal, the economic rate of return of the KSH improvement was estimated at 20 percent. At completion, following the same methodology used at appraisal, the ERR is also estimated at 20 percent. There are, however, differences between the appraisal and actual depending on the road section, as shown below (for details, see Annex 3).

Appraisal Estimate Actual ERR ERR Section (%) (%) Kuitun – Wusu 21 16 Wusu – Bole 18 22 Bole – Sailimuhu 31 17 Total 19.6 20.4

The upgrading, under local finance, of the Bole-Sailimuhu section from Class II (two lanes) to Class I (four lanes), decided by XCD because of the traffic risks posed by the steep gradients of this section, was economically justified, although the ERR is lower than the original estimate for a two-lane road. The economic analysis was carried out by a Bank supervision mission in October 2003, which found an ERR of 19 percent. At completion, based on actual construction cost and current traffic data, the actual return for this section is slightly lower, 17 percent, still satisfactory.

LRRP. The economic evaluation done at appraisal of twelve rural roads (total 603 km) included in the LRRP found an ERR of 32 percent. At completion, the ERR of the LRRP is estimated at 27 percent, which is satisfactory. The lower ERR at completion is due to an increase in the average construction cost per kilometer of 34 percent relative to appraisal estimates. For details, see Annex 3.

Fiscal impact

At appraisal, the fiscal impact of the ‘toll free’ roads included in the project, the KSH except the K-W expressway section, and all the LRRP program, was found to be minimal, since they represent a small fraction of the XCD funds flow and of the total maintenance expenditure of the XCD. The situation at completion is substantially the same. The fact that there were no problems with counterpart funding for any of the physical investments of the projects confirms this assessment.

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory

Considering that the project objectives were achieved as shown by the achievement of practically all the performance indicators, and that the project had a good efficiency, the project outcome is rated satisfactory.

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3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

The LRRP had a significant impact on poverty, since a majority of the counties where the roads were located were classified as poor, whether at the national or regional level.

Poverty levels in counties served by LRRP roads County National Regional None Jiashi x Shule x Cele x Yecheng x Yingjisha x Yueouhu x Pishan x Tuoli x Mulei x Awati x Tekesi x Baicheng x Qitai x

As shown in the Data Sheet (and the comparison between the KSH and LRRP areas with Xinjiang and China, at the start of Section 3.2), the counties around the KSH and in the areas served by the LRRP roads had big gains in economic growth during the project period, which likely resulted in an improvement in the standards of living of the poor population.

(b) Institutional Change/Strengthening

The training program and the various studies made a useful contribution to institutional strengthening in the management of the XAUR road network. The impact of the training sessions was evaluated by the trainees, and the new knowledge gained by the XCD staff was disseminated internally in the road agency, further extending the benefits of the training program.

The studies helped improve the management of the road network and of the road maintenance equipment, provided the basis for developing Xinjiang’s Transportation and Logistics plan, currently under preparation, and helped analyze the toll rate structure. Another important impact was the knowledge from the study on safety in the transportation companies that such companies have a much worse safety records than most other vehicles, and that therefore XCD will need to devote especial attention to ensure that these companies take appropriate actions to reduce accidents. The major deliverables and outcomes by each individual study are summarized below:

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Road Maintenance Management Improvement (RMMI). The report of “3-Year Maintenance Plan and the Lowest Maintenance Standards in 2005-2007” was completed. The report described how the objectives of RMMI were achieved by using CPMS. Equipment Asset Management System (EAMS). The development of EAMS (including users’ manual) as well as installation, trial operation and staff training had all been completed in December 2005. Currently the system is being used in all the management divisions of XCCAB. Road Safety. The Road Safety Audit Report for the operation stage of the Project was completed by the end of 2008. Also, manuals and cartoon cards on road safety topic were prepared and distributed to schools and villages to educate people to pay high attention to traffic safety. School zone signs were also installed. Improved Management of Toll Highways. The final toll study was submitted by the Xinjiang Highway Survey, Planning, Design & Research Institute and approved by the Bank in May 2004. The XCCAB made the final acceptance for the study on November 24, 2007. The toll rate of this project was approved by people’s government of autonomous region based on the result of the toll study. Improved Transport Services. The report of “Development Model of Freight Transport by Road in Xinjiang” was completed in October 2004. The final acceptance for this study was made on August 16, 2007, when the main author of the report, Beijing Polytechnic University submitted the study conclusions.

Also, after “Xinjiang Transportation (International Road Transportation) and Modern Logistics Forum” was carried out in September 2008, the team discussed the “Xinjiang Road Transportation and Logistics Development Plan and relevant policy studies” together with decision makers and property owners. Major suggestions proposed in this study approved by decision makers and would be the basis of “Xinjiang Logistics Development Plan” under general guidelines of “National Highway Transportation Hubs Plan”. The results of the study are used for construction of freight terminals in ADB financed Korle-Kuqa Expressway Project, which is under construction currently.

(c) Other Unintended Outcomes and Impacts (positive or negative)

Not applicable

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

Livelihood of affected population got significantly improved. A sample of 100 households showed significant increase in income, production facilities and household equipment. More details are shown in Annex 5.

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4. Assessment of Risk to Development Outcome

Rating: Moderate

Past experience in XAUR indicates that newly built roads are well maintained, and the KSH should follow the same trend. Toll revenues along the KSH appear to be sufficient to provide adequate maintenance. With traffic increasing rapidly on the KSH, toll revenues will rise, and the number of beneficiaries will also increase.

The LRRP has improved roads that provide important road access to local minorities, and budgetary allocations to maintain such roads are expected to be adequate.

The improvements brought about by the project’s institutional components, including training, are unlikely to be reversed.

While the above points to a low risk to development outcome, a broader view of the risk should take into account the major increase in the length of modern roads in XAUR over the last 10-20 years, and the potential large increase in maintenance requirements as these roads start to age. This will require XAUR to improve the efficiency of its maintenance management and ensure that funding for maintenance is increased along with the higher demands for maintenance that will result from the increased traffic.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory

The Bank used its experience during the two previous Xinjiang projects to prepare the third project. Project design was appropriate, with a good mix of physical components, including a key road in the XAUR, a significant amount of local roads and well selected institutional components. Identification of project risks, and mitigation measures, were correct, and helped ensure that the project would be implemented on track. The safeguards were covered comprehensively, and included a detailed social assessment.

Compared to the two previous Xinjiang projects, the PAD had an improved approach aimed to assessing the end results, outputs and indicators of the institutional development and reform component of the project. The PAD’s lack of specific targets regarding outcome and outputs of the physical components was unusual, but this was remedied by the inclusion in the loan documentation of a supplemental letter that included the targets.

The experience of supervision missions suggests that at the design stage the Bank could have been more alerted with the safety issues posed by at-grade crossings of along the Class I sections of KSH. In addition, the Bank team could have given more attention to

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the alignment selection of Akasi-Xihexiu road section under the LRRP program, which is in the remote mountainous area and poses potential technical challenges.

(b) Quality of Supervision

Rating: Satisfactory

The supervision effort was correct, with a frequency of about 2 missions per year, despite the fact that there were four different team leaders since project approval until closing, and multiple changes in other team members as well (only one of the team specialists was involved with the project through the whole implementation period). A mitigating factor was that most of the team members were experienced in Bank projects and in China, which made it easier to understand the project and supervise its implementation.

Supervision missions prepared detailed supervision reports, with a clear identification of issues, recommendations, and actions to be taken by the implementing agency until the following mission. A variety of issues were covered, including engineering problems such as settlement of embankments and the need to improve monitoring, safety problems such as insufficient measures to ensure safety related to four lane roads, in the connection with the expressway and at-grade intersections, and some procurement procedures not compliant with agreed rules.

The mission promptly carried out an economic analysis of the proposed change of standard for the B-S section of the KSH, and approved the change upon seeing the positive results provided by the analysis.

In view of the transport sector needs of Xinjiang, the Bank team has given special attention to road safety, in the areas of technical assistance and awareness raising. As an example, the Bank co-sponsored with XCCAB a 3-day international seminar on Road Safety in April 2008. The seminar attracted more than 60 representatives from various highway administration agencies, design institutes, and traffic policies. XCCAB and the stakeholders felt that the seminar successfully raised a general awareness of road safety issues, strengthened the capacity in Xinjiang Province to support sustainable reductions in road deaths and injuries, transferred safety knowledge to underdeveloped, western China, and promoted innovative infrastructure solutions to improve the safety condition in the province.

One weakness may have been a delayed focus on the slow growth of KSH traffic, understanding the reasons, and requiring XCD to closely monitor traffic trends. Attention to this issue started about some two years prior to project closing.

(c) Justification of Rating for Overall Bank Performance

Rating: Satisfactory

The overall Bank performance is rated satisfactory. The rating for overall Bank performance is based on the satisfactory quality at entry and the satisfactory quality of

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supervision. The supervision team paid adequate attention to compliance with the Bank policies and key issues presented in the transport sector of the province. The advice of the preparation and supervision team was generally appreciated and followed by the Borrower.

5.2 Borrower Performance

(a) Government Performance

Rating: Satisfactory

Overall, Xinjiang government provided sustained support to the project, from preparation to implementation. A weakness was its position regarding the training abroad, since it did not authorize the necessary funding for completing the overseas tours and training activities.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory

During the implementation period, there were many changes of XCD personnel at management levels. At the XCCAB there were three different directors, and inside its divisions there was at least the same number of changes. While these changes did not appear to have a major impact the implementation of the civil works, the KSH as well as the LRRP, they made it more difficult to make progress on the institutional components and training.

XCD, with the support of the XUAR’s government, was able to increase the funding allocation for road maintenance during the period of project implementation, an important factor behind the overall improvement in the quality of the road network that took place during the project period.

The evaluation of training and dissemination of knowledge showed the importance that XCD attributed to the training of its staff.

XCD paid good attention to improving road safety. It implemented the pilot road improvement and carried out a useful safety workshop, well attended by a variety of stakeholders.

The project closing date had to be extended twice in order to be able to complete the LRRP and the training program, which pointed to problems in the execution of the project. However, these two issues are out of XCD’s control. The delay of the Akasi- Xihexiu section of the LRRP program was due to its extreme geological condition and unprecedented technical difficulties; while the delay and canceling part of the overseas training was attributed to the overarching political environment during 2008-2009 and lack of support from Xinjiang government. Despite the continuous effort made by the XCD and the Bank team, these overseas trainings still could not be implemented. In

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conclusion, overall, the performance of the XCD, considering the outputs achieved, both in the physical and the institutional components, merits a satisfactory rating.

(c) Justification of Rating for Overall Borrower Performance

Rating: Satisfactory

The overall Borrower performance is rated as satisfactory. This is based on the ratings of the government and the implementing agency and also considering the project outcome is satisfactory and is deemed largely to be sustainable.

6. Lessons Learned

Using cross-provincial learning to improve road management. Two of the institutional development activities under the project, the road maintenance management improvement and the transport facilitation study, with encouragement from XCD, investigated, as part of their research, the status and policies in other provinces. For Xinjiang, a western province and therefore relatively backward compared to coastal or central provinces, learning from the experience of other provinces is a highly effective way to design and implement institutional reforms.

Evaluating the impact of improved maintenance during periods of extensive road construction. During project implementation, XCD increased its funding for road maintenance, and introduced some improvement in management. The condition of Xinjiang’s road network at the end of the project showed to be significant better than at the start. However, during the same period, XCD, with its own funds, carried out a substantial program of improvements of the Xinjiang’s road network, which likely had a significant impact on the condition of the network. Thus, when assessing the improvement of the network over a period of time, it appears difficult to isolate the impact of XCD’s overall improvement in road maintenance funding and management, achieved under the project, from the impact of the Xinjiang’s program of road construction. This suggests that a more targeted indicator may need to be designed to assess the impact of the project, possibly excluding the roads improved outside the Bank project if this could be done without causing a major increase in the cost of the road surveys.

Maximizing the impact of the training program. XCD sought to maximize the impact of the training by requiring trainees to evaluate the various training sessions and by disseminating inside the agency the knowledge received by the trainees. Past experience has shown that a good training mix should include both domestic and foreign training. This experience appears to be well absorbed by the highway agency, but not by other authorities. Thus, the foreign training included in the XCD-designed training program could not be fully carried out due to the finance authorities in Xinjiang unwilling to allocate the required resources from the project loan for this purpose.

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Diligent geological survey and proper design for lower volume roads are just as important. Designers generally pay less attention to the design of local roads, limiting their efforts to a sketchy design much less accurate than the one of the expressway, thinking these local roads are less important. Experience showed that could lead to major problems at implementation stage, particularly for the roads in difficult topography and geology. Despite major efforts and contract variations, this design could simply not be achieved in one extreme case and led to major cost overruns in another case. Lesson for future projects is that the design process should be the same for local roads as for the expressways, in terms of topographical survey, geological investigations and accuracy of the design.

Improving road safety in roads such as the KSH requires a combination of design and operational actions. A recurrent problem in the four-lane sections of KSH road is the dangerous crossing at at-grade intersections. This problem is exacerbated when drivers move from the access-controlled K-W expressway, to the remainder of the KSH road, where they are exposed to at-grade intersections. Reducing the traffic risks would require the highway authorities to ensure that appropriate and repeated signs warn the drivers on the four-lane roads when they approach crossing traffic in the at-grade intersections, coupled with explicit safety features shown in the road’s engineering drawings.

Wider, more expensive roads, are not necessarily safer. While the upgrading of the BF- S road section from (the original) two to four lanes-lanes, with the two additional lanes on a separate alignment, substantially reduced accident risks in the very mountainous terrain and steep gradients where BF-S road, the same did not happen with the S201 road. Following a safety audit of S201, a well conceived, safe upgrading to Class II was designed, with appropriate, safe engineering features. However, a further upgrading to a 4-lane road decided by XCD (not financed under the project), did not benefit from a focus on safety. The result was a wider, and more expensive to build, but unsafe S201 road.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies

The Borrower’s own Implementation Completion Report is summarized in Annex 7. The report finds that the project objectives were met. It lists as essential elements for achieving the objectives the construction of the KSH, the construction of 640 kilometers of local roads, training of staff, the procurement of equipment for institutional strengthening and for operations and maintenance, and the preparation of several studies. The report notes the good cooperation between the Bank missions and the PEO, as well as practical recommendations provided by the missions, especially regarding quality of the works, financial management and institutional strengthening. The Borrower identifies the following as the main areas where important experience has been acquired thanks to the project: the strengthening of the XCD’s organization; the importance attached to highway design plans and the introduction of new construction technology; the attention put to high quality supervision; ensuring contract management in accordance with FIDIC terms.

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(b) Cofinanciers

Not applicable

(c) Other partners and stakeholders

Not applicable

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) KSH-Civil Works 211.39 278.52 131 KSH: E&M Works 7.62 2.81 37 KSH: Service Facilities 13.75 11.20 81 KSH: Supervision 8.42 8.87 105 KSH: Land acquisition & 14.39 18.84 131 resettlement Local Road Rehab Program 41.80 51.84 124 (LRRP) Institutional Strengthening and 0.86 1.38 160 Training Traffic Safety 2.71 3.50 129 Road Maintenance Management Improvement 0.62 0.10 16 (RMMI) Road Transport Services 0.16 0.06 38 Information System (RTSIS) Toll Study 0.08 0.06 75 Strengthening of Laboratories 11.65 13.77 118 and O&M Services 313.45 Total Baseline Cost 390.95 124

Physical Contingencies 13.04 - Price Contingencies 6.21 - Total Project Costs 332.70 390.95 117 Front-end fee 1.50 1.50 100 Total Financing Required 334.20 392.45 117 Source: XCD.

(b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 184.20 238.81 130% International Bank for Reconstruction 150.00 150.00 100% and Development

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Annex 2. Outputs by Component

Component Output Comments

Construction of KSH Highway

Kuitun-Wusu 18 km, expressway Wusu-Bole Fork 229 km, four lane (Class 1) Bole Fork-SailimuHu 55.6 km, four lane Originally designed as a 2-lane (Class 1) (Class 2), was upgraded to 4- lane (Class 1) in view of traffic safety problems. Original lanes were kept for uphill, new, longer section was designed for downhill. Total length 302.6 km Whole road opened to traffic in November 2006.

Rehabilitation of Local Roads (LRRP)

Total length 620 km Four out of the 12 roads initially identified in the PAD were substituted by 4 new roads. 8 original roads Completed Santai-Quitai 34 km, Class II Mulei-Tuyuantun-Quitai 55 km, Class II Bayitouhai-Tekese- 84 km, Class II Zaosu Awati-Akesu 59 km, Class II Baicheng-Yuergun 30 km, Class II Yuepuhu-Tazihong 48 km, Class II Keriya-Pishan 45 km, Class II Jiashe-Sule 23 km, Class II 4 new roads Yuepuhu-Yinhgjsha 68 km, Class III Tuoli-Tachakou 36 km, Class II Akasi-Xihexiu 22 km, Class IV Cele-Bositan Xian 136 km, Class III

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Capacity Building Component Output Comments Institutional 1,036 persons and 996 Overall training outputs largely Strengthening/Training man-months were exceeded PAD estimates (817 trained, divided into: persons and 762 man-months) In Xinjiang: 543/555 In China: 410/380 Overseas: 39/39 Overseas study tours:44/22

Studies and Technical Assistance Road Maintenance Completed. Report The main output was a Management covering 2005-2007 sustained improvement of the Improvement (RMMI) submitted to the Bank road network condition. Periodic reporting on road condition by XCD units . CPMS used. Equipment Asset Completed. System is in operation and Management System helping XCD make decisions (EAMS) on equipment management. Further optimization being considered by XCD, mainly to improve network connections and increase system speed. Road Safety Safety audit report completed. Toll road study Completed Results used as an input for the setting of toll rates. Transport Facilitation Completed. Recommendations will be used Study for preparing Xinjiang logistics development plan. Equipment for 44 maintenance Institutional equipment sets Strengthening and procured. Operations and Maintenance

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Annex 3. Economic and Financial Analysis

The ex-ante economic evaluation of the project done at appraisal covered the following two project components: (i) construction of the 302.6 km Kuitun – Sailimuhu Highway (KSH); and (ii) upgrading of twelve rural roads (total 603 km) included in the Local Road Rehabilitation Program (LRRP). The ex-post economic evaluation covers the KSH construction (85% of the project civil works costs) following the same economic methodology applied at appraisal that computes project benefits in terms of reduction in vehicle operating costs, travel time costs and maintenance costs over a 24 year evaluation period at a 12% discount rate.

For evaluation purposes, KSH has been divided into three sections. The table below shows the appraisal estimated lengths and the actual lengths for each road section, indicating an actual overall distance savings of 3%.

KSH Road Sections Length Appraisal Estimate Actual Actual Actual Length of the New Length of the New Length of the Distance Savings Section Road (km) Road (km) Existing Road (km) (%) Kuitun - Wusu 18.0 18.0 18.5 3% Wusu - Bole 229.0 229.0 235.5 3% Bole - Sailimuhu 55.6 55.6 58.0 4% Total 302.6 302.6 312.0 3%

Section Kuitun – Wusu was improved to expressway standard and sections Wusu – Bole and Bole – Sailimuhu were improved to Class I standard. The table below shows the estimated actual construction costs per road section. The actual overall construction cost per km is 7.4 Million RMB per km that is around 18% higher than the appraisal estimate. The construction period was defined as four years at appraisal. The actual construction period was five years and the actual overall distribution of the road work costs during the construction period was 7% in year 1, 28% in year 2, 33% in year 3, 29% in year 4, and 3% in year 5. KSH Road Sections Actual Construction Costs Actual Actual Construction Construction cost (Million cost (Million Section RMB) RMB/km) Kuitun - Wusu 184 10.2 Wusu - Bole 1,642 7.2 Bole - Sailimuhu 416 7.5 Total 2,242 7.4

The table below shows the projected KSH traffic in 2009 estimated at appraisal and the actual traffic in 2009 that shows that the actual traffic in 2009 is around 44% less than the one estimated traffic at appraisal on the Kuitun – Wusu expressway section and 33% less

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on the Bole - Sailimuhu Class I section. On the Wusu – Bole Class I section, the actual traffic is around 10% more than the one estimated at appraisal.

KSH Road Sections Traffic Appraisal Estimate Actual KSH Traffic KSH Traffic Section in 2009 (AADT) in 2009 (AADT) Kuitun - Wusu 6,514 3,657 Wusu - Bole 2,894 3,170 Bole - Sailimuhu 3,541 2,362

The ex-post economic evaluation was done by first replicating the appraisal economic evaluation results on an Excel based economic evaluation model using road user costs computed with the Highway Development and Management Model (HDM- 4) relationships and considering all the input assumptions presented on the appraisal economic evaluation annex. The ex-post economic evaluation was then done updating the main inputs of the model to reflect actual values. The ex-post economic evaluation considers: (i) actual lengths, (ii) actual construction costs, (iii) actual construction cost distribution, and (iv) actual KSH traffic in 2009. The traffic projections for 2010-2015 and 2016-2022 adopted at appraisal (4.2% and 2.3% per year respectively) were maintained at the ex-post evaluation.

The table below presents the ex-post economic evaluation results that show that the actual Economic Internal Rate of Return (EIRR) of the KSH construction is 20.4%, which is similar to the appraisal estimate (19.6%). The ex-post EIRR of the Kuitun – Wusu section is lower than the appraisal estimates (20.6% reduced to 16.0%) due to lower actual traffic observed in 2009 and the higher construction costs. The ex-post EIRR of the Bole - Sailimuhu section is lower than the appraisal estimates (31.1% reduced to 17.2%) due to lower actual traffic observed in 2009 and the much higher construction costs due to the fact that this section was improved to Class I standard instead of Class II standard as estimated at appraisal. The ex-post EIRR of the Wusu – Bole section, that accounts for 73% of the total KSH civil work costs, is higher than the appraisal estimate (18.2% increased to 21.9%) due the higher actual traffic compared to the projected traffic at appraisal that compensates the higher construction costs. Thus, the overall ex-post EIRR of the KSH is satisfactory despite the higher construction costs.

KSH Economic Evaluation Appraisal Estimate Actual EIRR EIRR Section (%) (%) Kuitun - Wusu 20.6 16.0 Wusu - Bole 18.2 21.9 Bole - Sailimuhu 31.1 17.2 Total 19.6 20.4

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The economic evaluation done at appraisal of twelve rural roads (total 603 km) included in the LRRP considered an average construction cost per kilometer of 0.67 Million RMB per km to upgrade the roads from Class III to Class II standard and yielded and overall EIRR of 32.2%. The actual average construction cost per kilometer of the rural roads included on the LRRP is 0.90 Million RMB per km, representing a cost increase of 34% with relation to the appraisal estimates. The rural roads were improved to an asphalt concrete standard with an average width of 8.0 meters and surface thickness between 3 to 5 centimeters. The ex-post economic evaluation of the LRRP roads yields an overall EIRR of 25.7%, taking into account the higher construction costs, which is still satisfactory.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Financial Chau-Ching Shen Sr. Finance Officer CTRFC Management Social Daniel Gibson Social Development Specialist EASEN Development Procurement Dawei Yang Procurement Specialist EAPPR Assessment Gregory Guldin Consultant EASEN Anthropology Economic/Financial Han-Kang Yen Research Analyst EASTR Analysis Hoi-chan Nguyen Sr. Counsel LEGEN Legal Task Team Leader/ Sr. Highway Engineer/ Jacques M. Tollie EAPCO Engineering/ Task Team Leader Institutional Margaret Png Sr. Counsel LEGEN Legal Administrative Maria Luisa Juico Program Assistant EASTR Support Naoya Tsukamoto Sr. Environmental Engineer EASEN Environment Nina Eejima Sr. Counsel LEGEN Legal Institutional Ningyuan Li Consultant EASCS Strengthening Road Management Ole Sylte Consultant EASTR Systems Institutional Setty Pendakur Consultant EASTR Development Lead Financial Management Simon Bradbury CTRFC Disbursement Specialist Social Yasin Ashuri Consultant EASEN Development Yi-Ling Liu Finance Analyst CTRDM Disbursement Financial Yu Zhuo Finance Analyst CTRDM Management Zhefu Liu Sr. Social Development Specialist EASCS Resettlement

Supervision/ICR Former Task Team Former Task Team Leader/ Leader/ Alain M. Dube EASTE Consultant Engineering/ Institutional Chongwu Sun Sr. Environmental Specialist EASCS Environment Christopher J. De Serio Operations Analyst EASIN Procurement Highway Christopher R. Bennett Sr. Transport. Specialist EASNS Engineering

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Dawei Yang Procurement Specialist EAPPR Procurement Emily Dubin Junior Professional Associate EASIN Technical Support Task Team Leader/ Task Team Leader/ Fei Deng EASIN Engineering/ Transport Specialist Institutional Jacques M. Tollie Consultant/Procurement Specialist EAPCO Procurement Highway Jean-Marie Braun Consultant ECSSD Engineering Jianjun Guo Procurement Specialist EAPPR Procurement Jingrong He Procurement Analyst EAPPR Procurement Marcelo Donolo Procurement Specialist OPCPR Procurement Administrative Maria Luisa Juico Program Assistant EASIN Support Mingjing Zhang Team Assistant EACCF Technical Support Naoya Tsukamoto Sr. Environmental Engineer EASEN Environment Institutional Ningyuan Li Consultant EASCS Strengthening Peng Wang Junior Professional Associate EASIN Technical Support Financial Ruifeng Yuan Financial Management Assistant EACCF Management Sivalingam Milton Procurement Assistant EASIN Procurement Wen Pan Consultant EASTE Highway Engineer Xiaoke Zhai Transport Specialist EASCS Highway Engineer Program Assistant/ Yan Zhang EACCF Procurement Procurement Specialist Sr. Financial Management Financial Yi Geng EAPFM Specialist Management Financial Yi-Ling Liu Finance Analyst CTRDM Management Disbursement Officer/Financial Financial Youhua Yu EACCF Management Specialist Management

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(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY99 10.4 FY00 9 34.3 FY01 37 207.0 FY02 34 216.00 FY03 11 42.9

Total: 91 500.2 Supervision/ICR FY03 9 54.7 FY04 14 80.6 FY05 10 74.7 FY06 14 77.4 FY07 9 71.3 FY08 10 74.0 FY09 10 73.1 FY10 9 36.8

Total: 85 542.7

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Annex 5. Beneficiary Survey Results

The KSH and two of the LRRP roads (Yuepuhu-Yinjisha, and Cele-Bostan) required resettlement activities:  KSH connects Urumqi-Kuitun Expressway (UKH) in the east and the completed road in west at Salimu Lake. It affected totally 4 cities and counties, 3 State farms, 11 towns and townships and 21 villages.  Yuepuhu-Yinjisha road section impacted 22 villages and 7 townships of three counties.  Cele-Bostan road section connects G315 and Cele Town in north. The road passes through 22 villages. The LRRP resettlement was minor since these roads are narrow and most of the improvement works were on the existing alignment.

Resettlement Action Plans (RAPs) were prepared and carried out. In order to prepare the resettlement action plan, the Project Execution Office (PEO) and the affected counties, cities and villages along the roads established resettlement planning groups. The groups went to the affected villages and carried out detailed surveys. The resettlement site selection was made by villages and the re-settlers.

The preparation of RAP and implementation of resettlement works followed China’s laws and regulations and the Bank’s OD4.30. All changes during the implementation were reviewed and approved by the Bank.

Compensation standards were determined following PEO consultation and negotiation with each county involved.

After resettlement, the houses of the displaced families have been improved in terms of both size of the residential area and quality of the structure.

Independent monitoring was undertaken by East China Survey and Design Institute and Xinjiang Academy of Social Science. A Resettlement Post Evaluation Report was prepared upon completion of the resettlement activities, and is the main source of this annex.

KSH

Preparation of the RAP was started in 2000 and completed in 2002.

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Land acquisition and resettlement for the construction of the KSH was carried out in accordance with the Resettlement Action Plan (RAP). Some variations occurred between planned and actual values, as shown in the table below:

Planned (RAP) Actual Increase (%) Land acquisition, (000 mu) 20.0 20.0 0.0 Of which, cultivated 1.95 4.29 220.0 Houses removed (000 sq m) 33.99 35.90 5.6 Households removed (units) 145 196 35.2 Population affected 579 748 29.2 Total cost (million Yuan) 53.8 120.0 23.0

The total land acquisition estimate in the PAD was correct, except for the classification the land. Agricultural land turned out to be 8.6 percent of total land, compared with 3.9 percent in the RAP. The variation of households removed and population affected was mainly due to minor design changes in the KSH mainline or ramps. The increase in the amount of agricultural land is the main factor behind the higher overall cost of resettlement, other factors being the increase in the number of households removed and higher payment for compensation than stipulated in the RAP standards.

All affected houses and affiliated facilities were compensated higher than the standards specified in RAP and materials from old houses belonged to the owners. The location of house plot and distribution plan was decided by full consultation between re-settlers with local governments and resettlement offices. The old houses were demolished and rebuilt by the owners and special assistance was given by resettlement offices to the poor households in re-building new houses. All re-settlers have moved into new houses in time. Condition of new houses was much improved. Brick houses increased from 52% before resettlement to 81% after resettlement and per capita living area increased by 12%. The total compensation paid was 11,501.46 million RMBY and which is 64,533 million RMBY higher than RAP budget.

The original schools, hospitals, shops and social service facilities are still available for the re-settlers. The distance from new residential area to social service facilities is basically the same as that before resettlement.

Livelihood improved after resettlement. A sample of 100 households showed significant increase in income, production facilities and household equipment. Owners of 4-wheel tractors increased from 40 households to 67 households and the owners of full set of tools increased from 25 households to 42 households. Ownership of motorcycle and color TV increased by 18% and 21% relatively, with a corresponding decrease of bicycles and black-white TVs. LRRP

The Yuepuhu-Yingjsha road required land acquisition for a total of 1154.24mu. 149 households and 864 people were affected by the project. The compensation agreement was signed in Feb. 2006. According to external and internal survey, all actual compensation was higher than the standards specified in RAP and paid in full. The area

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of new houses is 30% higher than old houses and per capita increased by 8%. Brick house was increased from 33% to 86%. Totally 27.2mu farmland was acquired from 8 villages. Land compensation was used by the villages to reclaim 500mu of land and build a 7km channel in last 2 years. Production and livelihoods of re-settlers have restored and improved. Average annual business income and annual per capita pure income increased by about 10% annually from 2004 to 2006. Since compensation standards is relatively higher and more items were added, the actual compensation was 4.6871 million RMBY and which was 1.9738 million RMBY more than RAP.

For Cele-Bositan road, the planned land acquisition was 2855.72mu including 0.34 mu farmland, 8.08 mu forest land, 2.23 mu construction land, and 313.5 m2 various houses. 7 households and 32 people were affected. In early June 2008, compensation agreement was signed between PEO and County Government and 0.3344 million RMBY was paid to County government. By Sept. 16, 2008, all 69 re-settlers signed compensation agreement with County Government and compensation was paid to them.

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Annex 6. Stakeholder Workshop Report and Results

Not applicable

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR3

A. Project Objectives

The Proposed expressway is an important part of the National Trunk Highway System (NTHS) as well as of the main East-West corridor in Xinjiang. As part of the NTHS, the KSH will connect Kuitun (the end of the Urumqi-Kuitun Expressway financed under the second Xinjiang Highway Project) to Sailimu Lake (about 120km from the border with Kazakhstan). This 312 km long section represents the remaining gap of the NTHS yet to be completed on the 1430 km long stretch of the National Highway 312 traversing Xinjiang. It is a high grade highway with large engineering scale and investment and high technical level in Xinjiang financed by the World Bank loan and managed with international FIDIC terms.

B. The Project consists of the following parts:

(1) The total length of KSH is 302.6km, which includes the following three sections:

 Kuitun-Wusu: 18km expressway;  Wusu-Bole Fork: 229km Class I highway; and  Bole Fork-Sailimuhu: 55.6km Class 2 highway.

Class I highway and expressway are all full four lane highways, and full closed interchanges.

(2) Local Roads Rehabilitation Program (LRRP)

The primary objective of the local roads components is to assure that in poor counties villages have primary road access and townships are well connected to the provincial and national highway system. Therefore, the component was focused on road links between the major townships and the provincial and national highways in the rural areas of Xinjiang. This components includes 12 links with total length of 640km, the implementation period was scheduled for 4 years.

(3) Institutional Strengthening

Institutional Strengthening includes the following three sub-components:

 Institutional Strengthening and training

3 Subsequent to the preparation of its ICR, the Borrower sent the Bank several updates, especially on traffic and other indicators to allow assessing the outcome with the most recent data available.

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 Studies and technical assistance: road management and maintenance improvement (RMMI), road safety, improved management of toll highways, improved transport services.  Equipment for Institutional Strengthening and Operational and Maintenance

C. Execution Agency of the Project

Xinjiang Communications Construction Administration Bureau (XCCAB) (it was called Xinjiang High Grade Highway Administration Bureau before its institutional reform in 2005) is the legal reprehensive and client of the Project, acting as execution agency of KS high grade highway. XCCAB is responsible for tendering and procurement, implementation and management, equipment procurement works of the project. Project Execution Office of KSH was established under the management of XCCAB to be responsible for the specific construction management of the project on site.

D. Achievement of the Project Objectives

Through successful implementation of the project, the following objectives were achieved:

(1) KS High Grade Highway with total length of 302.6km had been built; (2) Local roads with total length of 640km had been built； (3) Trainings in the field of expressway operation and maintenance, etc. were completed; (4) Equipment for institutional strengthening and operation and maintenance were procured; and (5) Studies including road safety, improved management of toll highways, improved transport services were conducted.

E. Implementation of the Project

Construction of the Kuitun-Sailimuhu High Grade Highway

KS Expressway was divided into 22 contract sections. Contract No. 1 to Contract No.15 are civil works, Contract No. 16 is traffic engineering, Contract No. 17 to Contract No. 22 are building and maintenance facilities. Highway civil works construction was commenced on July 1, 2002 and opened to the traffic in November 2006. The procurement type for Contract No. 1 to Contract No. 16 was International Competitive Bidding (ICB) and Contract No. 17 to Contract No. 19 was National Competitive Bidding (NCB).

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Local Roads Rehabilitation Program

The local roads with total length of 640km implemented in four years were all procured by NCB.

Among the recommended 12 local roads during project appraisal, four roads included 1) Tacheng-Emin; 2) Zeketai-Nalati; 3) Qiaoerma-Zhongfengchang; 4) Fuhai-State Farm had already been rehabilitated by domestic fund. Therefore, another four roads were newly increased to replace the above four, which are: 1) Yuepuhu-Yinjisha; 2) Tuoli- Tachakou; 3) Akazi-Xihexiu; 4) Cele-Bositan Xiang. The improper design of some road section caused large amount of variations during implementation.

F. Environmental Protection and Supervision

Construction of Xinjiang III Highway Project (Kuitun-Sailimuhu Highway) was commenced in July 2002. In order to understand the impacts on environmental during construction period and operation period, timely propose the correspondent measures to minimize or eliminate adverse impacts caused by construction, entrusted by Project Execution Office of Regional High Grade Highway Administration Bureau, Xinjiang Environmental Monitoring Center undertook environmental monitoring tasks during construction period and operation period of KS Highway between July 2002 to July 2006. In accordance with impacts of sensitive factors of people along the KS highway line and relevant content of Environmental Impacts Assessment Report of KS Highway, after on site investigation and check, the environmental monitoring spots along the line, monitoring contents and environmental monitoring implementation plan were determined.

During construction period, as required in EIA, the air, water and acoustic environments were monitored along the line every month in subgrade construction period in 2003 and in pavement construction period in second, third and fourth quarters of 2004.During trial operation period, entrusted regional monitoring station conducted monitoring to water, air and acoustic environments.

The Environmental Impacts Assessment Report (EIA) and Environmental Protection Action Plan (EAP) were strictly implemented during construction period. Quarries were mostly installed on Gobi wasteland area, and strictly controlled the scope and disposal sites. In the mean of construction of this project, the existing waste materials were handled. Upon on site investigation, there was no serious damage of ecological environment, such as large amount of fill or cut had taken place. The improved drainage works were implemented in inclined plain areas, which could properly dredge runoff. After construction, the construction sites had been cleared and trimmed; upon on site investigation, both sides of highway were basically restored. Planting was implemented in toll stations and service areas. Planting was also carried out at two sides of some road sections passing through urban area by local government. Environmental protection signs were installed in Shashanzi, Jinghe, etc. Grassland in Sailimu lake scene area had been restored already. The removed top soil had been used for site restoration.

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G. Land Acquisition and Resettlement

Kuisai Highway Project planned to acquire 20017.4 mu of land, and actually acquired 20017.4 mu ; among which, planned cultivated land 1953.7 mu, actual cultivated land 4278.02mu; it planned to remove households of 33987.58m2, and actually removed various house 35899.9135 m2; it planned to fell various kinds of trees 193,029, actually felled 193,029. Main reason for the difference between actual amount and planned amount is design variation. The land acquisition and resettlement for Kuisai Highway Project has been completed according to the Resettlement Action Plan (RAP). The RAP was completed by December 2002. Generally speaking, RAP was implemented smoothly. After resettlement, the houses of the all displaced families have been improved at different degrees both on area and structure of house. In addition, through efforts made by displaced people themselves, and supports given by relevant departments, the living standards of displaced families were all improved, generally exceeded original level. Regarding the land acquisition compensation standards for the local roads: all were compensated with upper limits of regional stipulation. Along the 12 local roads , the national level poor counties are Jiashi, Shule, Cele, Yecheng, Yingjisha, Yuepuhu, Pishan, Tuoli; the regional level poor county is Mulei; no poverty level counties are Awati, Tekesi, Baicheng and Qitai.

The average annual income of people in villages of Kuitun-Sailimuhu highway before and after land acquisition was:

The project route passed through 4 counties and cities, 3 state farms, 11 townships, 21 administrative villages; the average income per person in 2001 was RMB 2285 Yuan, in 2005 was RMB 4108 Yuan, a 79.8% increase in 4 years. The objective of economic development and farmers income increase was achieved.

The average annual income of people in villages of Yuepuhu-Yingjisha highway section before and after land acquisition was:

The project route passed through 3 counties and cities, 7townships, 22 administrative villages; the average income per person in 2003 was RMB 1184 Yuan, in 2008 was RMB 2610 Yuan, a120.4% increase in 5 years. This road brought significant social and economic effects.

The average annual income of people in villages of Cele-Bositan Xiang highway section before and after land acquisition was:

The project route passed through 4 townships, 22 administrative villages; the average income per person in 2005 was RMB 2326 Yuan, in 2007 was RMB 2687 Yuan, a15.5% increase in 2 years. The average income of people along the line had relatively fast growth every year.

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H. Institutional Development and Reform Plan (IDRP)

In recent years, according to the unified arrangement by state council and autonomous region, the Xinjiang Communication Department carried out institutional reform actively from the following aspects:

(1) Change government function, realize division of politic and enterprise. The administrative management function of XCD should focus on “overall planning, policy guiding, macro controlling, law and regulation monitoring, service coordinating”. The XCD should disconnect itself with enterprises, and no longer directly manage enterprises. Instead, it should let enterprises take their place on market, and transfer the specific affairs and functions which should be undertaken by the enterprises, and minimize the government’s specific approval rights, and control whole sector through information.

(2) Establish simple, unified and effective management system; less levels among transportation management agencies, smooth relation, reduce personnel, optimize structure, and improve efficiency.

(3) Smooth relationship between rights and responsibilities, make clear division of rights and responsibilities, minimize intersecting of functions.

(4) Be practical and realistic, adapt to local conditions, properly and scientifically handle the connection of functions of each level transportation management departments.

(5) Administrate according to law, enhance the transportation administrative management to be more systematize, normalize and institutionalize; transfer from administrative management way to administrative according to law. In the mean time, strengthen transport administrative law enforcement team, improve their quality, as well as enhance management and supervision of law enforcement works.

The institutional reform of XCD and its units were completed in 2006. The major functions of XCD and its units were further enriched and reinforced after adjustment, and rationalized highway construction and operation maintenance system, improved management organizations and the way of management, achieved objectives of retrenched staff, simplified organs, and high efficiency.

I. Institutional Strengthening

Institutional Strengthening

Staff training under XHP III consists of institutional strengthening training, supervision training and highway safety training. Trainings include workshops and study tours in Xinjiang, other places in China and abroad. The total expected trainings 817 persons and 762 man-months. The estimated cost is RMBY 8,513,100 (equivalent to USD 1.051 million), of which, foreign currency amounts to USD 900,000.

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Implementation Progress: By August 31, 2009, the accumulated completion of the training component was: 1036persons/996man-month, respectively equivalent to 126% and 130% of the plan. The actual completed amount is RMBY 1,896,784.37and USD 646,066, equivalent to USD 925,005, accounts to 88% of the total planned amount.

Total of 16 training and study tour groups were arranged under overseas training program and commenced in February 2003. Up to August 30, 2009, 11 groups were implemented, including 5 trainings (30days/training) and 6 study tours (15days/tour). The abroad training and study tour were implemented in the following fields: highway supervision; highway management system, laws and regulation; highway planning and design; highway transportation economy adjustment and planning; expressway toll management; highway maintenance; administration of maintenance equipment, construction management information system; public management; highway transportation management; expressway operation and management.

Domestic training and regional courses: the training covered the topics of environmental protection, highway engineering supervision, financial management, human resource, project management, etc. By August 31, 2009, the accumulated progress is 953persons /935 man-months and the actual completed amount is RMBY 1,896,784.37.

Planned Persons and Man/Month Actual Persons and Man/Month Within Within Oversea Overseas Within Within Oversea Overseas Xinjiang China Training Study Xinjiang China Training Study Tours Tours 400/390 296/284 55/55 66/33 543/555 410/380 39/39 44/22 817 persons and 762 man/month 1036 persons and 996 man/month

Studies and Technical Assistance: Road Maintenance Management Improvement (RMMI), Road Safety, Improved Management of Toll Highways and Improved Transport Services.

Road Maintenance Management Improvement (RMMI): The report of“3-Year Maintenance Plan and the Lowest Maintenance Standards in 2005-2007” has been completed by using of the CPMS extended by MOF and submitted to the Bank. In September 2005, Dr. Pan Yuli came to Xinjiang and discussed the relevant contents of the component. This component progresses smoothly and realized the objectives. Each maintenance units of Xinjiang conducted periodical inspection and maintenance and input the collected data to the computer and transmit the data to Maintenance Division of Highway Administration Bureau by internet for summary, prepare annual or multi-year road maintenance and rehabilitation plan according to the result of CPMS and submit it to XCD for approval. XCD generally refers to CPMS results, and according to current budget, social impacts and road safety, works out annual and multi-year construction plan. The large and medium size maintenance plans were prepared according to the operation result of CPMS.

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Equipment Asset Management System (EAMS): A Contract for developing the Equipment Asset Management System (EAMS) has been signed with the John Emery Geotechnical Limited Company in November 2004. The installation, trial operation and staff training had all been completed and the users’ manual was submitted in December 2005. At present, the system was used in all management divisions of Xinjiang Communications Construction Administration Bureau. Although running speed of the system is relatively slow, it provides assistance and convenience for equipment assets management. The traditional equipment assets management method is still in use to make up insufficiency of the system. Along with the increasing of equipment asset storage amount, it’s planed to optimize the system in future to achieve the expected objective.

Road Safety: According to the economic development of Xinjiang and the requirements of the adjusted National Communication Program, XCD decided to upgrade the rehabilitation of S201 from Class II to Class I in the early of 2003. Therefore, it was redesigned and the designed was completed in the next half of 2004. Construction commenced after the design and completed in November 2006. Accordingly, the monitoring assessment of highway safety demonstration of rehabilitated S201 has to be postponed.PEO has mandated Tongji University to conduct a revised Safety Appraisal after Implementation. The Safety Appraisal was completed and a series of recommendations were prepared. The PEO submitted these recommendations and the TOR of the Safety Appraisal to the Bank for review by April 15, 2007; the Bank provided their comments by May 9, 2007. Monitoring was commenced in June 2007 and continued up to the end of the 2008. The Safety Audit Report for the operation stage of the Project was finally completed.

For local road, the cartoon cards and manuals of road safety were prepared and distributed to schools and villagers around to educate people to pay high attention to traffic safety. The signs were installed nearby schools to remind people pay attention to safety.

Improved management of toll highways: PEO authorized Xinjiang Highway Survey, Planning, Design & Research Institute to undertake the study. The final Toll Study was completed and approved by the World Bank in May 2004. The XCCAB made the final acceptance for the study on November 24, 2007 by inviting the relevant specialists. The toll rate of this project was approved by people’s government of autonomous region based on result of above mentioned toll study.

Improved Transport Services: Major suggestions proposed in this study were approved by decision make and will be the basis of “Xinjiang Logistics Development Plan” under general guidelines of “National Highway Transportation Hubs Plan”. The result of the study is used for construction of freight terminals in ADB financed Korle-Kuqa Expressway Project, which is under construction currently.

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J. Equipment for Institutional Strengthening and Operation and Maintenance

Equipment for Institutional Strengthening: equipment for institutional strengthening for KSH to be procured according to the PAD, total estimated cost is USD 3.64 million, the actual paid amount is RMB 2,775,529.

Equipment for operation and maintenance, road network and institutional strengthening for KSH to be procured according to the PAD, total estimated cost is USD 10.81million. The actual paid amount through ICB is RMB 61,270,000. In additional, a batch of maintenance equipment were procured through NCB with total price of RMB20,156,500.

K. Achievement of objectives/components

Gross Output Value of Agriculture and Industrial (GOVAI) of KSH Mainline and Local Roads Rehabilitation Project

Improvement of the KSH mainline and local road, had pushed forward the economic development along the line, improved the accessibility of the residents along the line, and advanced the Xinjiang’s economic development.

Highway Financing of Xinjiang

The investment for highway sector has overall growth since 2002. In total investment, 5% to 10% was used for road maintenance and rehabilitation, while most funds were used for new constructions. From 2002 to 2008, the maintenance investment has relatively steady increase, since 2005 the investment to new construction works was maintain in same level. Specific details are as follows:

% of Maintenance and Growth Rate Total New Growth Rate Maintenance Rehabilitation of Investment Year Construction of New Investment of （million Maintenance （million (million Yuan) Construction Total ） Investment ） Yuan Yuan Investment 2002 4,500.10 534.69 5,034.79 10.6% 2003 8,015.19 78% 546.17 2.3% 8,561.36 6.4% 2004 11,012.44 37% 603.15 10.4% 11,615.59 5.2% 2005 11,092.97 0.7% 620.72 3% 11,713.69 5.3% 2006 10,000.51 -9.8% 687.98 10.83% 10,688.49 6.4% 2007 10,032.65 0.3% 737.00 7.13% 10,769.65 6.8% 2008 11,766.53 17.3% 783.81 6.5% 12,550.34 6.3%

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Traffic Accident Fatality Rate

Outcome Indicator Base Year 2002 Target Year 2008 Traffic Safety: number of traffic accident 22/10,000 veh. 11/10,000 veh. Fatalities rate/10,000veh.

Along with the improving of the road condition, the traffic accident rate shows a decrease. However, the traffic accident is relatively serious within a year after the KSH newly opened to the traffic due to small traffic volume, better road condition and drivers exceed the speed limits. Therefore, we installed additional road safety facilities at the urban road section along KSH to warn the drivers and pedestrian to pay more attention to traffic safety.

In addition, the road safety audit result made on a section of S201 (provincial road Karamay-Hutubi) shows that improvement of the black spots reduced accident rate and improved road safety.

Traffic Volume and Travel Time along KS Corridor

Traffic Volume of KS Mainline

Outcome Indicator Base Year 2000 Target Year2008 converted traffic volume converted traffic volume ( number of veh/day) ( number of veh/day)

Daily Average Traffic Volume 7889 6406 of KS Corridor

The traffic on KSH is significantly below the appraisal estimate and shows a decrease trend since traffic opening. The main reasons for such a gap:

 One of the main connecting roads at Guozigou has been under construction since 2006 causing vehicles to take an inconvenient detour in order to access KSH; this has significantly impacted the traffic from Guozigou to Sailimuhu.  Long distance vehicles are upgraded to a larger capacity than what was noted during Appraisal (from an average of eight tons to 30 tons). Therefore, the number of vehicles needed to transfer the same amount of commodity is decreased significantly. In addition, overloading remains an important issue which further amplifies the transportation capacity on a single vehicle.  In the past few years, smaller sized freight vehicles have changed their travel behaviour from inter-city to intra-city as the latter generates more profit. Therefore, the KSH lost some of its smaller sized freight traffic. The enforcement on overloading vehicles is much more effective on trunk highways such as KSH, so many freight vehicles would choose to avoid using this network.

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 Since 2006, the central government directed local governments to provide paved road to all villages, which further diverted the traffic from KSH.  Since January 2008, the central government removed toll collection on highways of Class II or below. This policy reduced the attractiveness of toll roads, such as KSH.  The rate at which the road network expands and improves is unprecedented. Vehicles now have many more options for travel into the Province, which could not have been foreseen at Appraisal.

We must draw above lessons from this Project and to be more complete, more accurate and more realistic in our future traffic volume forecasting and highway engineering feasibility studies. Daily Average Traffic Volume of LRRP

Outcome Indicator Base Year 2000 Target Year2008 converted traffic volume converted traffic volume ( number of veh/day) ( number of veh/day)

S303 Jimusar-Santai (Santai Station) 2833 5290 S303 Mulei-Qitai (Wumachang Station) 2405 6889 S311 Jiashi-Shule 3804 5851 G315 Keriya-Pishan (Hetian) 2085 2504

Four roads were selected from the implemented local roads for conducting traffic volume observation. The result shows that along with development of road networks, the traffic volume of some parts of local roads is larger than traffic volume of mainline.

Situation of Highway Network (IRI)

Outcome Indicator Base Year 2002 Target Year 2008 Improved Pavement Condition IRI 5.60 4.90

Through highway network improvement, the entire IRI had much improvement.

K. Operation Experience

The operation of Xinjiang III Highway Project and its sub-components is going on well. KSH has been built and opened to traffic in November 2006; engineering technical situation of the highway is basically good. Since open to traffic up to July 31, 2009, the accumulated toll collected is RMB Y 535,260,000 in total. In order to well manage, maintain and use of KS expressway, play its best role, we had set up and amplified rules and regulations, improved maintenance system, introduced advanced equipment, improved work efficiency; paid close attention to road policy management, so that ensured the road safety and smoothness. Xinjiang High Grade Highway Administration Bureau (now it called Xinjiang Communications Construction Administrative Bureau), a

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unit established in March 1995, with rich experience is responsible for the operation and maintenance of the KS highway.

L. Assessment

Project Execution Agency

The project execution agency, Xinjiang Communications Construction Administrative Bureau, and Project Execution Office (PEO) establish for KS expressway under its management, fulfilled client’s function and organized project implementation strictly in accordance with State’s basic construction procedures, State’s bidding rules, the World Bank’s procurement guidelines and FIDIC terms. The client monitored engineering progress, construction quality, safety and pricing together with Chief Supervision Engineer’s Office of KSH.

The World Bank

During project implementation, the World Bank mission reviewed the project many times and provided practical suggestions and recommendations in respect of quality, financial management and institutions. With the help of the Bank, a joint supervision team was set up to supervise the civil works. In this way, it’s not only guaranteed the construction quality, but also assisted the local engineers being trained.

Cooperation between the World Bank and PEO: the cooperation between the Bank and PEO are very good, very harmonious. The Bank officials could understand the development needs of infrastructure of Xinjiang, and provided helps and assistances. Xinjiang Regional Communication Department expresses its deep gratitude for the cooperation and assistance extended by the World Bank, and hope would have opportunity to get further assistance from the Bank and extend the cooperation.

M. Experience and Lessons

By implementing the Xinjiang highway projects, we have accumulated a wealth of experience, mainly are: a) strengthening organization and coordination, actively win the policy support, mobilizing all positive factors is the guarantee for smooth completion of the construction assignments; b) stress on design plans, alignment distribution, new technology application and testing and researching works, in order to ensure design quality of project; c) selection of high quality construction and supervision team is the key to ensure three major goals of works to be achieved; d) insist on managing the contract with FIDIC term; e) enhance quality management, continuously improving quality consciousness and engineering quality; f) improve construction quality and progress through comparison, and organizing experience exchanges; g) accept the World Bank’s guiding and actively cooperation ensured the smooth implementation of the Project.

Through institutional strengthening/staff training, work efficiency of agencies of transportation as well as professional skills of the staff engaged in highway sector were

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improved. A batch of major technical staff got trained in the field of highway management, planning, design, finance, administration, maintenance, traffic engineering. The results of trainings are good and professional skills of them were improved.

Emphasis on “safety is most important”, remain unblocked and relatively flat area on both sides of highway to reduce loss caused by traffic accidents. The installation of traffic safety protection facilities is scientific and proper, simple and practical.

The following aspects need to be further improved: applying of the World Bank’s Procurement Guideline and FIDIC terms should in combination with the actual situation of the state, region and project area, such as strict the prequalification conditions, bid evaluation method, reasonable contract packages, avoid improper lowest bid awarding, enhance performance monitoring, playing supervision engineers’ full role and rights.

Only good design could build good works. However, it is inevitable that discrepancy appears on design and actual status due to tight time for early preparation, and limitations of survey works. Therefore, when moving to the site, design drawings should be strictly reviewed and checked to timely find the improper parts and then optimize them, so as to ensure smooth implementation of works.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

Not applicable

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Annex 9. List of Supporting Documents

The World Bank, Third Xinjiang Highway Project: Project Appraisal Document (Report No.24645-CHA), August 12, 2002

The World Bank, Third Xinjiang Highway Project: Loan Agreement (Loan/Credit IBRD 71430)) between Peoples Republic of China and the International Bank for Reconstruction and Development

The World Bank, Aide-Memoires of Third Xinjiang Highway Project, from 2002 to 2009

World Bank, 2007. China’s Expressways: Connecting People and Markets for Equitable Development. EASTE Working Paper #13

The Peoples’ Republic of China. Xinjiang Uygur Autonomous Region. Xinjiang Highway Project. Implementation Completion Report. Submitted by PEO of Xinjiang High Grade Highway Construction Authority. August 2009 (and subsequent revisions)

51 IBRD 31783

CHINA THIRD XINJIANG HIGHWAY PROJECT TRANSPORT SYSTEM

PROPOSED PROJECT KSH (KUITUN-SAILIMU HIGHWAY)

COMPLETED PROJECTS (TURFAN-DAHUANGSHAN AND URUMQI-KUITUN HIGHWAYS)

NATIONAL ROADS

PROVINCE ROADS KAZAKHSTAN RAILROADS

AIRPORTS

PROVINCE CAPITAL

PREFECTURE BOUNDARIES

PROVINCE BOUNDARIES Sailimu INTERNATIONAL BOUNDARIES

KAZAKHSTAN

CHINA

FEBRUARY 2002 44 45

°

° Sailimu Hu

Existing Class 2 Highway DESTINATION OF THE PROJECT, k560+000 PROJECT, THE OF DESTINATION YINING k554 KAZAKHSTAN

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k460

Northern

k440 Xinjiang JINGHE Railway SEVERAL URBAN SECTIONS OF CLASS I ROAD

THIRD XINJIANG HIGHWAY PROJECT Aipi Hu k420 KUITUN-SAILIMU LAKE HIGHWAY k435+450 to 455+890 83 010203 BAJIAHU TOLL STATION JINGHE BRIDGE JINGHE INTERCHANGE ° k427+060 k434+570 k425+638 k400 CHINA INTERNATIONAL BOUNDARIES INTERMITTENT RIVERS RIVERS RAILROADS OTHER ROADS INTERCHANGES TWO LANE CLASS II ROAD FOUR LANE CLASS I ROAD FOUR LANE EXPRESSWAY KILOMETERS 04050 k380 TUOTUO TUOTUO TOLL STATION URBAN SECTION OF CLASS I ROAD k312+312 to 315+370 k364+530 k360 URBAN SECTION OF CLASS I ROAD k340

k303+200 to 307+600

TA

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GURTU BRIDGE N KAZAKHSTAN REPUBLIC ° KYRGYZ 84 k335+030 45 ° ° GAOQUAN

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k298+500

orld Bank. The boundaries, Area of map k320

SIKESHU

XINJIANG

any judgment on the XIZANG any territory, k300

SIKESHU TOLL STATION QINGHAI k302+200 RUSSIAN FEDERATION

THAILAND MYANMAR k262+952 and 265+219

MONGOLIA WUSU INTERCHANGES YUNNAN

KUITUN RIVER BRIDGE DEM. REP. SICHUAN PEOPLE’S LAO

WEST KUITUN INTERCHANGE GANSU k259+140

VIETNAM GUIZHOU k280

NINGXIA GUANGXI k254+998 CHO SHAANXI NG QIN G

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k260

JIANGXI

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HONG KONG

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JIN LIAONING

KUITUN JIANGSU ZHEJIANG

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HEILONGJIANG

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TAIWAN Sea

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SHANGHAI JILIN

85

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MAY 2002 Start Point k249+000

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