ASIAN DEVELOPMENT BANK PPA: PRC 23032 PPA: PRC 24335 PROJECT PERFORMANCE AUDIT REPORT ON THE SHENYANG-BENXI HIGHWAY AND JILIN EXPRESSWAY PROJECTS (Loans 1168 and 1262-PRC) IN THE PEOPLE’S REPUBLIC OF CHINA October 2000 CURRENCY EQUIVALENTS Currency Unit – Yuan (Y) Shenyang-Benxi Highway (Loan 1168-PRC) At Appraisal At Project Completion At Operations Evaluation (May 1992) (September 1998) (March 2000) Y1.00 = $0.18 = $0.12 = $0.12 $1.00 = Y5.44 = Y8.34 = Y8.28 Jilin Expressway (Loan 1262-PRC) At Appraisal At Project Completion At Operations Evaluation (October 1993) (October 1998) (March 2000) Y1.00 = $0.18 = $0.12 = $0.12 $1.00 = Y5.70 = Y8.34 = Y8.28 ABBREVIATIONS AADT – annual average daily traffic ADB – Asian Development Bank EA – Executing Agency EIA – environmental impact assessment EIRR – economic internal rate of return FIRR – financial internal rate of return ICB – international competitive bidding JPCD – Jilin Provincial Communications Department JPEAB – Jilin Provincial Expressway Administration Bureau JPEC – Jilin Provincial Expressway Corporation LCB – local competitive bidding LPCD – Liaoning Provincial Communications Department LPEMB – Liaoning Provincial Expressway Management Bureau MTU – medium truck equivalent units MOC – Ministry of Communications NECL – North East Corporation, Ltd. NTHS – National Trunk Highway System O&M – operation and maintenance OEM – Operations Evaluation Mission PCR – project completion report PPAR – project performance audit report PRC – People’s Republic of China SE – special engineering TA – technical assistance VOC – vehicle operating cost NOTES (i) The fiscal year (FY) of the Government and the Executing Agency ends on 31 December. (ii) In this report, "$" refers to US dollars. Operations Evaluation Office, PE-553 CONTENTS Page BASIC DATA ii EXECUTIVE SUMMARY iv MAP vii I. BACKGROUND 1 A. Rationale 1 B. Formulation 1 C. Purpose and Outputs 1 D. Cost, Financing, and Executing Arrangements 2 E. Completion and Self-Evaluation 2 F. OEO Evaluation 3 II. PLANNING AND IMPLEMENTATION PERFORMANCE 3 A. Formulation and Design 3 B. Cost and Scheduling 3 C. Consultants’ Performance, Procurement, and Construction 6 D. Organization and Management 7 III. ACHIEVEMENT OF PROJECT PURPOSE 8 A. Operational Performance 8 B. Performance of the Operating Entity 9 C. Economic Reevaluation 11 D. Sustainability 12 IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 12 A. Socioeconomic Impacts 12 B. Environmental Impacts 13 C. Impacts on Institutions and Policy 14 V. OVERALL ASSESSMENT 15 A. Relevance 15 B. Efficacy 16 C. Efficiency 16 D. Sustainability 16 E. Institutional Development and Other Impacts 16 F. Overall Project Rating 17 G. Assessment of ADB and Borrower Performance 18 VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 19 A. Key Issues for the Future 19 B. Lessons Identified 19 C. Follow-Up Actions 20 APPENDIXES 21 BASIC DATA Shenyang-Benxi Highway Project (Loan 1168-PRC) Institution Building TA No. Project Title Type Consultant TA Amount Approval Date Person-Months 1724 Institutional Strengthening ADTA 14.1 $500,000 2 Jul 1992 for Highway Operation and Management Improvementa 1725 Jilin Province Highway PPTA 13.9 $600,000 2 Jul 1992 a Network Study a Associated technical assistance grant. Key Project Data ($ million) As Per ADB Loan Actual Documents Total Project Cost 166.0 201.38 Foreign Exchange Cost 62.3 79.74 Local Currency Cost 103.7 121.64 ADB Loan Amount/Utilization 50.0 50.00 Foreign Exchange Cost 50.0 50.00 Local Currency Cost 0.0 0.00 ADB Loan Amount Cancellation 0.0 0.00 Key Dates Expected Actual Fact-Finding 5-21 Aug 1991 Appraisal 16 Feb-3 Mar 1992 Loan Negotiations 25-26 May 1992 Board Approval 2 Jul 1992 Loan Agreement 5 Oct 1992 Loan Effectiveness 16 Dec 1992 16 Dec 1992 First Disbursement 15 Mar 1993 Project Completion 31 Dec 1996 30 Sep 1996 Loan Closing 30 Jun 1997 16 Dec 1997 Months (Effectiveness to Completion) 48 45 Key Performance Indicators (%) Appraisal PCR PPAR Financial Internal Rate of Return (%) 9.0 6.2 (0.5) Economic Internal Rate of Return (%) 17.6 13.6 4.9 Borrower People's Republic of China Executing Agency Liaoning Provincial Communications Department Mission Data Type of Mission No. of Missions Person-Days Fact-Finding 1 85 Appraisal 1 96 Project Administration: Inception 1 3 Review 3 20 Project Completion Review 1 36 Total 5 59 Operations Evaluationa 1 25 a Operations evaluation of Loans 1168-PRC and 1262-PRC. iii BASIC DATA Jilin Expressway Project (Loan 1262-PRC) Project Preparation/Institution Building TA No. Project Title Type Consultant TA Amount Approval Date Person-Months 1725 Jilin Province Highway PPTA 13.9 $600,000 2 Jul 1992 Network Study 1972 Policy and Institutional ADTA 47.5 $1,200,000 9 Nov 1993 a Support in the Road Sector a Associated technical assistance grant. Key Project Data ($ million) As Per ADB Loan Actual Documents Total Project Cost 423.5 291.0 Foreign Exchange Cost 153.9 136.6 Local Currency Cost 269.6 154.4 ADB Loan Amount/Utilization 126.0 126.0 Foreign Exchange Cost 126.0 126.0 Local Currency Cost 0.0 0.0 ADB Loan Amount Cancellation 0.0 0.0 Key Dates Expected Actual Fact-Finding 17 May-4 Jun 1993 Appraisal 26 Jul-13 Aug 1993 Loan Negotiations 5-8 Oct 1993 Board Approval 9 Nov 1993 Loan Agreement 5 Jan 1994 Loan Effectiveness 5 Apr 1994 5 Apr 1994 First Disbursement 8 Jun 1994 Project Completion 31 Dec 1997 19 Sep 1996 Loan Closing 31 Dec 1998 16 Oct 1997 Months (Effectiveness to Completion) 44 29 Key Performance Indicators (%) Appraisal PCR PPAR Financial Internal Rate of Return (%) n.c. 7.5 10.4 Economic Internal Rate of Return (%) 19.7 21.0 12.5 n.c. = not calculated. Borrower People's Republic of China Executing Agency Jilin Provincial Expressway Corporation Mission Data Type of Mission No. of Missions Person-Days Fact-Finding 1 114 Appraisal 1 42 Project Administration: Inception 1 9 Review 3 21 Loan Disbursement 1 2 Project Completion Review 1 56 Total 6 88 Operations Evaluationb 1 25 b Operations evaluation of Loans 1168-PRC and 1262-PRC. EXECUTIVE SUMMARY Both expressway projects are located in the northeast provinces of Jilin and Liaoning of the People’s Republic of China. The Jilin Expressway Project from Changchun to Siping was part of the priority National Trunk Highway System program under the Eighth Five-Year Plan (1991-1995), which targeted highways where traffic congestion on the existing trunk roads was hindering regional economic activity. The Shenyang-Benxi Highway Project, located in Liaoning Province, was the first expressway financed by the Asian Development Bank in the People’s Republic of China. Classified outside of the first priority National Trunk Highway System, it aimed at providing infrastructure support for the continued economic and social development of Dalian-Shenyang and Shenyang-Benxi corridors and the adjacent hinterland. Both projects are reviewed in the same project performance audit report in light of their joint contribution toward the development of the country’s northeast transport corridor and of the common issues facing them. These issues relate to cost-recovery objectives through toll revenues, corporatization and asset securitization, and sustainability of operation and maintenance (O&M) as linked with the issue of the corporate management setup of the expressways. The main objectives of the Jilin Expressway Project were to (i) reduce traffic on existing roads, (ii) improve access of the hinterland economy to Dalian Port, and (iii) reduce congestion on the overburdened railway by diverting traffic to the expressway. The Project comprised (i) construction of a 133.3-kilometer four-lane, limited-access toll expressway connecting the cities of Siping and Changchun; (ii) procurement of equipment and facilities for construction supervision, road maintenance, road safety, and communications; and (iii) consulting services for construction supervision and training. In addition, 32 person-months of technical assistance (TA) and 20 months of overseas training were provided to assist the Government formulate policy reforms and to assess the institutional support needs of the road subsector. The Shenyang-Benxi Highway Project was designed to improve the efficiency and capacity of the road transport network in the area and the adjacent hinterland. The Project comprised (i) construction of a 75-kilometer, four-lane, controlled-access toll expressway from the provincial capital of Shenyang to Benxi and onward to Nanfen; (ii) procurement of equipment for road monitoring, road safety, and communication; and (iii) consulting services for construction supervision and training. Two TA grants comprising a total of 42 person-months were provided to (i) recommend improvements in the finance and operations of the expressways management bureau and assist in the development of more efficient vehicle inspection systems and weight regulation programs, and (ii) formulate a provincial highway network plan covering key aspects of highway and road transportation in Jilin Province. The rationale for both projects was sound, taking into account the priority given to development of the northeast transport corridor to provide quick, efficient access to and from the northeast hinterland to major maritime ports at Dalian and Dandong. Both projects benefited from competent executing agencies, complemented by effective supervision of civil works implementation, and from capacity-building management related to timely execution of civil works projects. The Jilin Expressway Project fully achieved its target in terms of cost-effective completion within budget (at $423.5 million equivalent) and 15 months ahead of schedule, all the while generating the anticipated benefits. Economic and social welfare gains associated with faster travel times, reduced vehicle operating costs, and enhanced economic progress all contributed to v generating a fairly robust economic return as per the reestimated economic internal rate of return of 12.5 percent. The corresponding financial performance at 10.4 percent is an acceptable measure of the degree of financial cost recovery attained through toll-based revenues.