Technical Assistance Consultant’s Report Project Number: TA 7117 – PRC October 2009 People’s Republic of China: Heilongjiang Road Development II Project (Yichun-Nenjiang) FINAL REPORT (Volume I of IV) Submitted by: H & J, INC. Beijing International Center, Tower 3, Suite 1707, Beijing 100026 US Headquarters: 6265 Sheridan Drive, Suite 212, Buffalo, NY 14221 In association with WINLOT No 11 An Wai Avenue, Huafu Garden B-503, Beijing 100011 This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, ADB and the Government cannot be held liable for its contents. All views expressed herein may not be incorporated into the proposed project’s design. Asian Development Bank Heilongjiang Road Development II (TA 7117 – PRC) Final Report October 31, 2009 Ms. Erdene Oyunchimeg Transport Specialist East Asia Department Transport Division Asian Development Bank 6 ADB Avenue, Mandaluyang City 155 Metro Manila, Philippines Re: Final Report Submission TA 7117-PRC: Heilongjiang Road Development II Project (Yichun-Nenjiang) Dear Ms. Oyunchimeg: In accordance with the discussions during the loan fact-finding mission and subsequent comments received, the PPTA Consultant (H&J, Inc.) has incorporated the comments and is herewith submitting the Final Report for the referenced project. The report was prepared based on the Consultant’s analysis, the evaluation of the Feasibility Study Report provided by EA, and the Terms of Reference for the project. Should you have any question about the submission, please do not hesitate to contact me. Very Truly Yours, H & J, Inc. Yinbo Liu, PhD, PE Team Leader Encl. Cc: Morgan Yang (w/o enclosure) file 2 Heilongjiang Road Development II (TA 7117 – PRC) Final Report CURRENCY EQUIVALENTS (As of 15 September 2009) Currency Unit – yuan (CNY) CNY1.0000 = $ 0.1464 $1.0000 = CNY 6.830 ABBREVIATIONS ADB – Asian Development Bank BOT – Build-Operate-Transfer CDB – China Development Bank CNY – Chinese Yuan CAREC – Central Asia Regional Economic Cooperation DFR – Draft Final Report DPA – Direct Project Area DSCR – Debit Service Coverage Ratio EA – Executing Agency EIA – Environment Impact Assessment EIRR – Economic Internal Rate of Return EMP – Environmental Management Plan FIRR – Financial Internal Rate of Return FSR – Feasibility Study Report GDP – Gross Domestic Product GNP – Gross National Product HLJ – Heilongjiang Province HPDRC – Heilongjiang Provincial Development and Reform Commission HPEPB – Heilongjiang Provincial Environmental Protection Bureau HRDP I – Heilongjiang Road Development Project - I HPG – Heilongjiang Provincial Government HPSDI – Heilongjiang Provincial Survey & Design Institute HPCD – Heilongjiang Provincial Communication Department HPTB – Heilongjiang Provincial Transport Bureau HLJFMB – Heilongjiang Farm Bureau HLJFRB – Heilongjiang Forest Bureau IA – Implementing Agency IPSA – Initial Poverty and Social Analysis LAR – Land Acquisition and Resettlement LIBOR – London Interbank Offered Rate MLR – Ministry of Land and Recourse MLSS – Minimum Living Standard Scheme MOF – Ministry of Finance MOT – Ministry of Transportation (communication previously) Mu – Chinese Land Measuring Unit (1 hectare = 15 mu) NDRC – National Development and Reform Commission NGO – Nongovernment Organization O&M – Operation and Maintenance PCR – Project Completion Report PCU – Passenger Car Unit PIU – Project Implementation Unit PLR – Provincial Land and Recourse Bureau PMO – Project Management Office PPMS – Project Performance Management System 3 Heilongjiang Road Development II (TA 7117 – PRC) Final Report PPTA – Project Preparatory Technical Assistance PRC – People’s Republic of China PSA – Poverty and Social Analysis PSB – Public Security Bureau PSP – Private Sector Participation RAMS – Road Asset Management System RP – Resettlement Plan RRP – Report and Recommendation of the President to the Board of Directors SDAP – Social Development Action Plan SEIA – Summary Environmental Impact Assessment SEPP – Soil Erosion Prevention Plan TBD – To be determined TOR – Terms of Reference NOTES (i) The fiscal year of the Government and its agencies ends on 31 December. (ii) In this report, “$” refers to US dollars. (iii) The exchange rate of the yuan is determined under a floating exchange rate system. In this report, a rate of $1.00 = CNY 6.830, the rate prevailing at project appraisal, was used. 4 Heilongjiang Road Development II (TA 7117 – PRC) Final Report Table of Contents 1. INTRODUCTION ................................................................................................................ 11 1.1 PROJECT BACKGROUND ......................................................................................... 11 1.2 HEILONGJIANG PROVINCIAL GOVERNMENT ......................................................... 12 1.3 HEILONGJIANG HIGHWAY NETWORK ..................................................................... 13 1.4 QIANFENG FARM TO NENJIANG ROADWAY ........................................................... 14 1.5 PROJECT IMPACT AREA ........................................................................................... 15 1.6 GEOLOGICAL AND WEATHER CONDITION ............................................................. 16 1.7 UNFAVORABLE SOIL CONDITION ............................................................................ 16 2. RATIONAL: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES ............ 17 A. Performance Indicators and Analysis .......................................................................... 17 B. Analysis of Key Problems and Opportunities .............................................................. 22 C. Lessons Learned ......................................................................................................... 25 3. THE PROPOSED PROJECT ............................................................................................. 25 3.1 IMPACT AND OUTCOME ....................................................................................... 25 3.2 OUTPUTS ................................................................................................................ 26 3.3 SPECIAL FEATURES .............................................................................................. 26 3.3.1 Rural Transport Improvement .............................................................................. 26 3.3.2 Road Asset Management and Maintenance ........................................................ 27 3.3.3 Rural Bus Service Improvement Pilot Project ...................................................... 28 3.3.4 Regional Transport and Trade Facilitation ........................................................... 29 3.3.4.1 Regional Trade Development ........................................................................... 29 3.3.4.2 Interprovincial Connectivity ............................................................................... 31 3.3.5 Road Safety .......................................................................................................... 31 3.3.6 ITS Application and Weather Information System ................................................ 32 3.3.7 Overloading Vehicle Control ................................................................................. 32 3.3.8 Capacity Development ......................................................................................... 32 3.4 PROJECT COST ESTIMATES ................................................................................ 33 3.4.1 Project Investment Plan ....................................................................................... 33 3.4.2 Financing Plan ...................................................................................................... 33 3.5 IMPLEMENTATION ARRANGEMENT .................................................................... 34 3.5.1 Project Management ............................................................................................ 34 3.5.2 Implementation Period ......................................................................................... 35 3.5.3 Procurement ......................................................................................................... 35 3.5.4 Consulting Services .............................................................................................. 35 3.5.5 Advance Contracting and Retroactive Financing ................................................. 36 3.5.6 Anticorruption Policy ............................................................................................. 36 3.5.7 Disbursement Arrangements ................................................................................ 37 3.5.8 Accounting, Auditing, and Reporting .................................................................... 37 3.5.9 Project Performance Monitoring and Evaluation .................................................. 37 3.5.10 Project Review ..................................................................................................... 38 4. PROJECT BENEFITS, IMPACTS, AND RISKS ................................................................ 38 4.1 TRAFFIC FORECAST & ECONOMIC EVALUATION ............................................. 38 4.2 FUEL TAX REFORM ............................................................................................... 39 4.3 FINANCIAL ANALYSIS AND PROJECTIONS ........................................................ 40 4.3.1 Financial Evaluation ............................................................................................