Report No. PID5289 Project Name China-Tri-Provincial I-Highway Project (@) Region East Asia and Pacific Sector Transportation Public Disclosure Authorized Poverty Category Program of Targeted Intervention Project ID CNPE45788 Borrower People's Republic of China Beneficiary Provincial Governments in Inner Mongolia, Gansu and Ningxia Implementing Agency Communications Department of Inner Mongolia Autonomous Region Mr. Hao Ji-ye (in charge of Project) Tel. No. 86-471-696-8624 Mr. Wang Quan (contact person) Public Disclosure Authorized Tel. No. 86-471-696-8638 ext. 60280 Fax No. 86-471-696-7588 Gansu Provincial Communications Department Mr. Xu Shuanlong, Director GPCD No. 45, Huayingmen Lanzhou City, Gansu Province 730030 People's Republic of China Tel. No. 86-931-846-1216 Fax No. 86-931-846-4035 (office) Fax No. 86-931-846-3861 (Planning Division) Communications Department of Ningxia Hui Autonomous Region Public Disclosure Authorized Mr. Chen Min-qiu, Director NPCD No. 27, West North Ring, Road Yinchuan City, Ningxia Province 750001 People's Republic of China Tel. No. 86-951-503-2396 Fax No. 86-951-504-4965 Date of this PID Prepared June 3, 1998 Date of the Initial PID Prepared February 25, 1997 Appraisal Date April 14, 1998 Tentative Board Date June 23, 1998 Public Disclosure Authorized Project Cost/Financing IBRD US$230.0 million Central Government US$176.8 million Provincial Government US$251.9 million Total costs US$658.7 million Country and Sector Background 1. China's economic development since the opening of its economy in the late 1970s has resulted in a 9.5 percent average annual rate of economic growth. Key facets of this growth are rapidly increasing domestic and foreign trade as well as increasing personal mobility and consumption of energy (derived mainly from coal burning). These, in turn, have caused the demand for transport and higher quality transport services to surge. Supply capacity, however, is constrained and recognized as one of the most serious bottlenecks to future economic growth and efficiency. In particular, motorization (including use of heavier trucks) is growing rapidly but road transport, due to historical reasons, has not been widely developed in much of China outside its cities. The road network ranks among the sparsest in the world relative to geographic area or population and is quite unsafe. Few expressways exist, and about 22 percent of rural communities have no all-weather vehicular access of any kind. Governments at all levels have therefore embarked on a major highway investment and improvement program. 2. At the central level, the basic strategy is to develop a National Trunk Highway System (NTHS) for the exclusive use of motorized vehicles. The Ministry of Communications (MOC) has been developing the NTHS, consisting of 12 interprovincial trunk expressways spanning China and totaling some 35,000 km. The Bank is already heavily involved in the construction of substantial sections of NTHS. At the provincial/regional level, the strategy is to concentrate on network maintenance and the expansion and improvement of provincial and rural road networks, currently totaling about 1.2 million km, to provide greater mobility and to stimulate socioeconomic development, particularly in less developed regions. 3. On the road transport policy agenda, growing attention is being paid to removing administrative and physical barriers to interprovincial trade and to a redefinition of government's role in transport in light of rapid administrative decentralization and growing non-state sector involvement. MOC needs to be strengthened to carry out its reformed mandate in matters such as finance, standards for planning, design and operation of the NTHS. Provincial and municipal governments are expected to continue to mobilize most investment resources required (including access to private investment and capital markets) and to seek greater expenditure and system efficiency through improved highway planning- and investment strategies, as well as to modernize maintenance capacity and improve cost recovery. Local governments are also expected to further the development of the road user services and road construction industry through deregulation and promotion of competition, access to modem technology and better management. The Bank has prepared a report (No. 11819-CHA dated February 1994), "CHINA-Highway Development and Management Issues, Options and Strategies", and a report on "China Forward with One Spirit: A Strategy for the Transport Sector" (No. 15959?CHA dated April 23, 1998), which provides recommendations for action in the foregoing areas which will form the basis for future Bank Group assistance in the sector. 4. Inner Mongolia, Gansu and Ningxia. The three provinces of Inner Mongolia Autonomous Region, Gansu and Ningxia Hui Autonomous Region are land locked interior provinces where the pace of development is below that in the coastal and southern areas of China. The total population in these provinces amounted to about 52.3 million (22.8 million in Inner Mongolia, 24.4 million in Gansu -2 - and 5.1 million in Ningxia) in 1995 or about 4.3w of the population of China. The three provinces have a total area of about 1.69 million km2 (1.18 million in Inner Mongolia, 0.45 million in Gansu and 0.06 million in Ningxia) or 17.7w of the total for China. This means that these provinces had a much lower population density than the national average which increases the cost of investments in transport facilities. Agriculture/livestock/forestry and mineral extraction are the main resources in these provinces. The gross domestic product per capita in the three provinces is about 62t of the national average. The three provinces had 7.2 million poor people (2.5 million in Inner Mongolia, 4.0 million in Gansu and 0.7 million in Ningxia) or 10t of the total poor population of China. Lack of transport infrastructure is one of the factors behind the depressed economic conditions in these provinces. 5. Traffic growth in the three provinces has been moderate compared to the rest of China, but high compared to most other countries. Traffic volumes reached their highest values near Hohhot He (capital of Inner Mongolia), Lanzhou (capital of Gansu) and Yinchuan (capital Ningxia) and other main cities. The road network in the three provinces totaled 88,500 km or about 7.79 of China's total. Transport by highways accounts for about 809 of the tons of freight moved and more than 95t of passengers transported and the three provinces depend more on highways than the rest of the nation. The civilian fleet amounted to about 422,000 vehicles in 1995, or 4. 1 of the national fleet. Under the Ninth Five-Year Plan (9FYP: 1996-2000) the three provinces will continue to give priority to expanding, maintaining, and strengthening the highway network; strengthening the sector institutions and training their labor force; and improving the efficiency of road user services (trucking and passenger transport). However, limited financial resources sharpen the need for better planning and prioritization of investments and for ensuring that new and improved roads are not built at the expense of maintaining the existing network. 6. The Master Plan for Poor Areas (eighth 7-year Plan for Poverty Alleviation 1994-2000 in each of the three provinces) has set as its goal to provide year-round access to every poor township and 90-95 percent of the villages. Availability of basic access through all-weather rural roads is among the highest priorities in the poverty alleviation strategy of each of the three provinces. Project Objectives 7. The objectives of the proposed project are to: (a) provide efficient and safe transport in one or two highway priority corridors in each of the three provinces; (b) provide improved access to the poor areas in each of the three provinces by supporting highway investments in county and village roads; (c) promote development of institutional capacity through training and other means, in planning, design, operations and maintenance of the highway network in each of the three provinces; and (d) increase safety of road transport. Project Description 8. The proposed project would comprise: (a) construction of a new right-of-way or improvement of the following major highways. -3- (i) Inner Mongolia (1) National Highway 210: Baotou-Dongsheng Class 1 (4 lanes) Highway (103 km) (2) National Highway 208: Baiyinchagan-Fengzhen Class 2 Auto-Only (2 lanes) Highway (142 km) (ii) Gansu (1) Liugouhe-Zhonghe Expressway (4 lanes) (33.5 km) (2) Xujiamo-Jiepaicun Class 2 Auto-Only (2 lanes) Highway (64 km) (iii) Ningxia (1) Guyaozi-Wangquanliang Class 1 Highway (94 km) (2) Yanchi-Xingren Class 2 Highway (250.8 km) (b) Program of construction/improvement of rural roads of about 1,892 km (836 km in Inner Mongolia, 803 km in Gansu, and 253 km in Ningxia) to help alleviate poverty. (c) Institutional strengthening/training of agencies/institutions involved in highway planning, design, supervision, construction, operation and maintenance of highways. This involves the training of about 2,000 people for about 2,130 person-months within China and abroad and the provision of modern equipment. (d) Highway safety component: to help reduce accidents. This component consists of establishment of a coordination mechanism between the traffic police and the provincial communications department; analyses of traffic accidents; identification, design and implementation of a pilot accident black spot program; development of highway safety manuals and safety audit procedures; and evaluation of the highway safety program by an independent local expert. Project Cost and Financing 9. The total project costs are about $658.7 million. The Bank loan of about $230 million would be onlent to the three provinces. The remainder of the cost would be met through contributions from the Ministry of Communications (MOC) and the Provinces. Implementation 10. Overall direction of the project at the central level rests with MOC.