Technical Assistance Report Project Number: 39655 March 2006 Technical Assistance People’s Republic of China: Preparing the Xinjiang Regional Road Improvement Project The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. CURRENCY EQUIVALENTS (as of 1 March 2006) Currency Unit – yuan (CNY) CNY1.00 = $0.1244 $1.00 = CNY8.0402 ABBREVIATIONS ADB – Asian Development Bank CAREC – Central Asia Regional Economic Cooperation EIA – environmental impact assessment GDP – gross domestic product O&M – operation and maintenance PRC – People’s Republic of China RP – resettlement plan TA – technical assistance XCD – Xinjiang Communications Department Xinjiang – Xinjiang Uygur Autonomous Region TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification – General intervention Sector – Transport and communications Subsector – Roads and highways Themes – Sustainable economic growth, regional cooperation Subthemes – Promoting economic efficiency and enabling markets, and fostering physical infrastructure development NOTE In this report, "$" refers to US dollars. Vice President C. Greenwood, Jr., Operations Group 2 Director General H. Rao, East and Central Asia Department (ECRD) Director N. Rayner, Transport and Communications Division, ECRD Team leader H. Wang, Principal Project Economist, ECRD Team members N. Davis, Transport Specialist, ECRD S. Ferguson, Senior Resettlement Specialist, ECRD A. Maxwell, Environment Specialist, ECRD o o 78 00'E RUSSIAN 93 00'E FEDERATION XINJIANG REGIONAL ROAD IMPROVEMENT PROJECT Olgiy IN THE PEOPLE'S REPUBLIC OF CHINA Hovd Altay Provincial Capital City/Town Tacheng M O N G O L I A Expressway K A Z A K H S T A N o Project Road o 46 00'N Takeshiken 46 00'N National Road Yarantai Other Road Karamay Bole Alataw Shankou Railway River Sayram Lake to Atmaty Provincial Boundary Dahuangshan Korgas Yining Kuytun International Boundary Urumqi Boundaries are not necessarily authoritative. Hami to B Toksun Turpan is he KYRGYZ REPUBLIC k 314 k Hosud to Li Naryn Kuqa 314 any Osh ung Korla ang Aksu Sary Tash Torugart GANSU nbe to Dusha 314 Artux Irkeshtam XINJIANG UYGUR Kashgar AUTONOMOUS REGION TAJIKISTAN Kalasu 314 o o 38 00'N 38 00'N QINGHAI Kunjirap Hotan AFGHANISTAN N 0 50 100 150 200 250 Kilometers 0 XIZANG 6 - 0 2 3 2 o o H 78 00'E 93 00'E R I. INTRODUCTION 1. During the country program consultation held from 28 November to 2 December 2005, the Government of the People’s Republic of China (PRC) requested technical assistance (TA) from the Asian Development Bank (ADB) for preparing the regional road improvement project in the Xinjiang Uygur Autonomous Region (Xinjiang). In response, the TA1 has been included in ADB’s 2006 assistance program for the PRC. The Fact-Finding Mission visited the PRC on 6–12 January 2006 to prepare the TA proposal. The Mission (i) held discussions with central and local government officials, (ii) visited the project areas, and (iii) carried out an initial poverty and social assessment and a rapid environmental assessment. This report is based on (i) the agreement reached with the Government on the impact, outcome, outputs, cost, financing and implementation arrangements, and consultant’s terms of reference for the TA; and (ii) the Mission’s findings. The TA’s design and monitoring framework is in Appendix 1. II. ISSUES 2. The PRC, with the largest territory in Asia and rapid economic growth over the past two decades, plays an important role in regional cooperation and integration. Strong growth has increased intraregional trade and capital flows. The PRC supports regional cooperation and is actively participating in the ADB-initiated Central Asia Regional Economic Cooperation (CAREC) Program, which aims to strengthen economic links among Afghanistan, Azerbaijan, PRC (especially Xinjiang), Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan. Xinjiang, in northwest PRC and bordering eight countries,2 is the PRC’s gateway to Central Asia and a bridge between Central Asia and eastern PRC. Xinjiang and neighboring countries have many cultural similarities and economic complementarities, providing a strong rationale for economic cooperation. Transport is a priority area under CAREC. A Regional Transport Sector Road Map for 2005–2010, which was developed in March 2005, identifies development and improvement of regional transport corridors as a strategic priority for transport cooperation among CAREC countries. While the Government is investing in road infrastructure, due to large funding requirements it needs external assistance to improve regional road infrastructure in Xinjiang, which will facilitate traffic and trade between the PRC and Central and South Asia, and strengthen regional cooperation. 3. Economic links between Xinjiang and neighboring countries have recently strengthened. In 2004, trade between Xinjiang and eight neighboring countries grew by 25% over 2003 to $419.5 million. The number of tourists from these countries to Xinjiang also increased rapidly. Sixty-three regional routes carried freight in 44.3 million ton-kilometers (km) and passengers in 31.4 million passenger-km in 2005, increasing by 28% and 42% over 2004, respectively. Thirty-one enterprises with about 1,300 vehicles in Xinjiang are engaged in cross-border transport services. Yet, barriers to cross-border transport continue to hinder expansion of trade and tourism. Regional roads not only need to be improved, but also border roads are poor, border facilities inadequate, and cross-border road transport procedures complicated and not harmonized. While PRC vehicles can reach Bishkek and Oshi, Kyrgyz Republic vehicles are allowed to drive only up to Kashgar (not to Urumqi, the capital of Xinjiang). Transit transport is also prohibited in Xinjiang. These barriers must be addressed to complement road infrastructure investments and facilitate the cross-border movement of freight and passengers. 1 The TA first appeared in ADB Business Opportunities on 8 December 2005. 2 Afghanistan, India, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Russian Federation, and Tajikistan. 2 4. Roads are important to Xinjiang’s economy, accounting for 95% of passengers and 83% of freight. Despite considerable investments, the road network remains inadequate for the growing economy. In 2005, Xinjiang’s road network was about 90,000 km, or 4.8% of the PRC’s total. It comprises (i) 541 km of expressways, (ii) 883 km of roads in class I, (iii) 6,450 km in class II, and (iv) 82,126 km in class III and below. Road density (5.4 km per 100 km2) and the proportion of high-standard roads3 to the total road network (8.7%) are significantly lower than the national average (19 km per 100 km2 and 14%). The central and Xinjiang governments attach great importance to road development in Xinjiang and plan to expand the road network to 150,000 km, including 22,000 km of high-standard roads (14.7% of the total road network) by 2020. 5. With its consistently strong economic growth, the PRC has significantly reduced poverty. Yet, millions of people remain poor. Remote, landlocked, isolated, and with harsh natural conditions, Xinjiang is one of the less-developed provinces, with per capita gross domestic product (GDP) at CNY11,199 in 2004. Although GDP in Xinjiang has grown rapidly since 2000 mainly because of energy (oil, gas, and coal) developments, economic growth has not proportionally improved rural life. The per capita rural income in 2004 amounted to CNY2,245, or 76% of the national average. In 2004, about 2.2 million rural people lived below the official poverty line, and the poverty incidence was 18%, higher than the national average of about 10%. About 80% of the poor in Xinjiang live in the southern part of the region. The project area has 2 poor townships and 76 poor villages, with poverty incidence close to 10%. There are many reasons for poverty, but inadequate road infrastructure is an important one: many remote and isolated villages have limited access to markets, jobs, and basic social services (e.g., health and education). The Government is implementing the Western Region Development Strategy to reduce development disparities between the western and costal regions and is committed to develop Xinjiang’s transport infrastructure. The evaluation of several completed road projects financed by ADB4 shows that investments in road infrastructure significantly reduce poverty. 6. Road safety is a concern in Xinjiang: 9,527 road accidents resulted in 3,111 fatalities and 10,437 injuries in 2005, an increase by 13.8%, 7.6%, and 17.0% over 2004. In 2005, the fatality rate was 22 per 10,000 vehicles, higher than the national average. Economic losses from road accidents amounted to more than CNY28.4 million. The major causes of road accidents are (i) lack of safety features and facilities along roads, (ii) weak enforcement of traffic regulations, (iii) poor behavior of drivers and pedestrians, and (iv) poor road conditions. Expressways have a lower accident rate than other roads because of their improved road design and divided carriageways. As vehicle ownership grows, more road accidents are likely unless urgent action is taken to prevent them. The Government plans to strengthen the public awareness program, improve data collection, and reduce risk behaviors of drivers under the 11th Five-Year Plan (2006–2010). 7. Since 1991, ADB has provided 30 loans, totaling nearly $5.6 billion, to finance road projects in the PRC. All ADB loans in the PRC are generally being implemented satisfactorily. While ADB has yet to lend to Xinjiang’s transport sector, Xinjiang has received three World Bank loans totaling $600 million for road projects in the northern region.5 The first two projects 3 High-standard roads comprise expressways and roads in classes I and II. 4 ADB. 2000. Project Completion Report on the Liaoning Expressway Project in the People’s Republic of China. Manila; and ADB. 2001. Project Completion Report on the Yunnan Expressway Project in the People’s Republic of China.