PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB5904 China: Anhui Shaying River Channel Improvement Project Project Name Public Disclosure Authorized Region EAST ASIA AND PACIFIC Sector Ports, waterways and shipping (100%) Project ID P118647 Borrower(s) MINISTRY OF FINANCE Implementing Agency Anhui Provincial Communications Department 8th Floor, Huayi Mansion No. 95 Shouchun Road Hefei, Anhui Province China Tel: (86-551) 262-9089 Fax: (86-551) 263-0290 Email: [email protected] Public Disclosure Authorized Anhui Provincial Ports & Shipping Construction and Investment Group No.1157, Changjiang East Road Hefei, Anhui Province China Tel: (86-551) 429-9912 Fax: (86-551) 429-9522 Email: [email protected] Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared November 16, 2010 Date of Appraisal August 24, 2010 Authorization Public Disclosure Authorized Date of Board Approval April 14, 2011 I. Country and Sector Background 1. Inland Waterway Transport Development in China. China has 123,000 km of navigable waterways, of which 61,000 km are officially classified for commercial navigation purposes. Most of the commercial waterways are well positioned to link the prosperous eastern coastal regions, which have increasing demand for raw materials, with the resource-rich but less- developed inland and western regions. This mutually beneficial connection helps to achieve the nation’s central and western development strategies. 2. China’s inland waterway transport (IWT) industry already handles about the same volume of freight as the USA and the EU waterways combined. Accelerated economic growth in China is generating a greater demand for the transport of coal, construction materials and other Public Disclosure Authorized bulk materials and goods. Accordingly, IWT has been increasing rapidly in recent years with an annual average growth rate of 8.8 percent during the period 2000-2008 (and 13.1 percent p.a. in tonne-kms). 3. Despite the fast growth in the past years, IWT in China is still under-developed compared with other transport modes. Its share in the total freight of all transport modes was only 3.8 percent in tonne-kms in 2008. Currently, the main constraint of IWT is weak infrastructure. A high proportion of the classified waterways have poor navigation infrastructure, which sometimes limit navigation capacity and particularly restricts the ability to reliably handle larger vessels that can deliver much lower unit cost of transport than smaller vessels. Therefore investment in IWT infrastructure is critical to realize the mode’s major development potential. 4. The Government of China (GOC), recognizing the higher energy efficiency, lower greenhouse gas emissions, and lower use of scarce land resources associated with IWT, plans to increase the contribution of IWT to China’s transport needs. In 2007, China adopted the National Inland Waterways and Ports Plan to 2020 (NIWPP2020) that aims to develop a ‘high- class’ waterway network (Class IV to Class I) of around 19,100 km (from the current 15,000 km). This waterway network will extend to twenty provinces and serve a catchment area that contains approximately a quarter of China’s population. An analysis carried out for the NIWPP2020 estimates that the total cargo traffic by IWT in China will increase from 1.16 billion tonnes in 2006 to 1.6 billion tonnes in 2010 and further to 2.35 billion tonnes in 2020. 5. IWT Development in Anhui Province. Anhui Province, with a population of about 65 million and an area of 139,600 square kilometers, is a land-locked province in central China. Anhui is one of the six economically under-developed central provinces supported by GOC’s “Rise of Central China” initiative. Transport is one of the priorities in the provincial development strategy. Over the past decade, the growth of IWT has lagged behind road and rail transport in Anhui though it has a good natural river network. The Province has now decided to pursue a more balanced transport strategy that gives more prominence to IWT, which can supplement road and rail transport by providing competitive services for bulk and low-value cargo. 6. Anhui, despite its land-locked location, is rich in water resources with many rivers running through it, which contribute to three big water systems: the Yangtze River, the Huai River, and the Xin’an River systems. The total length of inland waterway network in Anhui is over 6,500 km with around 1,100 km of high class waterways (Class IV and above); Anhui has the seventh longest provincial network in China. There are 17 main ports in Anhui, in addition to thousands of small local wharves and jetties. Around 30,000 commercial vessels are registered in the Province. 7. The Anhui Provincial Government has established ambitious targets for IWT development in the Anhui Inland Waterway Transport Development Plan (2005-2020). During the period 2007 - 2020, the Plan aims to increase the total IWT freight volume in Anhui from 98 million to 395 million tonnes, and the total tonne-km from 45 billion to 158 billion through a total investment of RMB25 billion. The Plan divides navigable inland waterways in Anhui into three levels of importance: national high-class, regional, and local. A “Two-Trunk and Three- Branch” waterway network of national high-class commercial waterways in the Province was laid out. The Shaying River, one of the three branches, is planned to be upgraded to Class IV for year-round navigation of 500 dwt vessels. 8. Shaying River. The Shaying River is the largest tributary of the Huai River in central China. It originates from Henan Province and converges with the Huai River in Anhui Province. The total length of the River is 620 km, of which 206 km flows through Anhui Province. The River’s hinterland has extensive reserves of coal and other minerals and is also a major producer of farming products, cement and fertilizers. The Shaying River provides a continuous waterway link to the prosperous and fast-growing industrial Yangtze Delta area via the Huai River and the Grand Canal. Given the increasing demand for transport in the river basin and the cost- effectiveness of waterway transport, particularly for coal, building materials, chemicals and grains, waterway traffic on the Shaying River has grown at an annual average of 10.6 percent in the period 1995-2008, reaching 5.26 million tonnes by 2008. 9. Nonetheless, future traffic growth is severely constrained by the low capacity of navigation infrastructure along the River. The river section upstream of Fuyang has a mixture of standards and generally only permits navigation of 300 dwt vessels in the low-water season. The section downstream of Fuyang was blocked in the 1980s by the construction of a sluice dam across the River at Fuyang, which resulted in all upstream shipping being diverted to the Cihuaixin River - a man-made canal whose primary purposes are irrigation and supply of drinking water. Waterway traffic often suffers from low water levels when the Cihuaixin River water is needed for these primary purposes. Traffic is further impeded by four small-sized locks which become congested at busy periods. The Cihuaixin route has almost reached its capacity, and due to its primary water resources functions, cannot be upgraded. This restricts further growth of traffic in the upper Shaying River. 10. The traffic capacity of the Shaying River is therefore at a plateau, and without a solution to the constraints described, cannot play a more significant role in the continuing economic development of its hinterland. As noted, both national and provincial governments are committed to improving the transport capacity of the River by eliminating the infrastructure constraints. Anhui and Henan provinces have been working together with the support of MOT to re-open the Shaying River route and raise its navigation standards. In the past three years, the Province has built two new large locks, the Genglou at upstream and the Yingshang at downstream of Fuyang, that allow larger vessels to pass through the existing sluice dams. The third lock at Fuyang is currently under construction with domestic funds, and when completed, will finally re-open the River for through navigation. By then, the waterway traffic downstream of Fuyang will be diverted back to the Shaying River from the current Cihuaixin route. Alongside the throughnavigation, the river channel is to be upgraded to attain Class IV standard according to the national and provincial inland waterway plans. The river channel improvement is the main physical component of the proposed Bank-funded Project. II. Objectives 11. The development objective of the proposed Project is to contribute to the increased cargo throughput of the Shaying River in Anhui Province through infrastructure improvements and capacity building. III. Rationale for Bank Involvement 12. In response to a proposal from Anhui Province, GOC has requested the Bank’s financial and technical support for the implementation of a Project to re-open and upgrade the Shaying River to Class IV navigation standards. The improved Shaying route will be capable of handling year-round 500 dwt vessels and even larger vessels outside the dry season. 13. The World Bank has already provided financial and technical support to China’s inland waterway development through lending to six projects in seven provinces over the past fifteen years. In 2009, the Bank also completed a major sector review of IWT in China with the objective of identifying impediments to its sustainable development. The outcomes of the study will underpin Bank support for developing IWT in China. Through its involvement in the strategic review and in lending interventions, the Bank has become the leader among international financial institutions in supporting China’s IWT sector. The Bank’s expertise and experience, both international and national, can contribute to successful project implementation and strengthen the institutional capacities of IWT inAnhui Province.