Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT ( IBRD ) ON A LOAN IN THE AMOUNT OF US$ 225 MILLION

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT ( IBRD ) ON A LOAN IN THE AMOUNT OF US$ 225 MILLION TO THE PEOPLE S REPUBLIC OF CHINA FOR A TRI-PROVINCIAL HIGHWAY PROJECT November 19, 2007 China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region Report No:ICR000032

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 6, 2007) Currency Unit = RMB1.00 = US$ US$ 1.00 = RMB FISCAL YEAR January 1-December 31. ABBREVIATIONS AND ACRONYM ADT - Average Daily Traffic BDH - Baotou-Dongsheng Highway BDR - Baotou-Dongsheng Road BFH - Baiyinchagan-Fengzhen Highway CAS - Country Assistance Strategy CPS Country Partnership Strategy EAP - Environmental Action Plan EIA - Environmental Impact Assessment ENPV - Economic Net Present Value EIRR - Economic Internal Rate of Return FIDIC - Fédération Internationale des Ingénieurs-Conseils FIRR - Financial Internal Rate of Return FNPV - Financial Net Present Value GDP - Gross Domestic Product GOVAI- Gross Output Value of Agriculture and Industry GPCD - Gansu Provincial Communications Department GWH - Guyaozi-Wangquanliang Highway HTH - Hekou-Tungouwan Highway ICB - International Competitive Bidding ICR - Implementation Completion and Results Report IMCD - Inner Mongolia Communications Department LZE - Liugouhe-Zhonghe Expressway MOC - Ministry of Communications MOF - Ministry of Finance MTE - Medium Truck Equivalent NCB - National Competitive Bidding NCD - Ningxia Communications Department NDRC - National Development and Reform Commission NTHS - National Trunk Highway System PAD - Project Appraisal Document PMO - Project Management Office

3 RAP - Resettlement Action Plan RIPA - Roads Improvement Program for Poverty Alleviation RMB - Renmimbi (China s currency) XJH - Xujiamo-Jiepaicun Highway YXH - Yanchi-Xingren Highway Vice President: James W. Adams Country Director: David R. Dollar Sector Manager (Acting): Magdolna Lovei Project Team Leader: Boping Gao ICR Team Leader: Wenlai Zhang

4 CHINA Cn-Tri-Provincial Highway Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP-IBRD29472: National Trunk Highway System MAP-IBRD29473: Inna Mongolia Highway Transport System MAP-IBRD29474: Inner Mongolia-Detail of Project Roads MAP-IBRD29475: Gansu Highway Transport System MAP-IBRD29476: Gansu-Detail of Project Roads MAP-IBRD29477: Ningxia Highway Transport System

5 A. Basic Information Country: China Project Name: CN-Tri-Provincial Hwy Project ID: P L/C/TF Number(s): IBRD ICR Date: 12/27/2007 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Environmental Category: A Implementing Agencies: Gansu Communications Department Ningxia Communications Department Inner Mongolia Communications Department Cofinanciers and Other External Partners: B. Key Dates PEOPLE'S REPUBLIC OF CHINA USD 230.0M Disbursed Amount: USD 225.0M Process Date Process Original Date Revised / Actual Date(s) Concept Review: 03/19/1997 Effectiveness: 03/18/ /18/1999 Appraisal: 04/14/1998 Restructuring(s): Approval: 06/23/1998 Mid-term Review: Closing: 06/30/ /30/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Satisfactory Low or Negligible Satisfactory Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Performance: Satisfactory Overall Borrower Performance: Satisfactory i

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Roads and highways Sub-national government administration 16 5 Theme Code (Primary/Secondary) Access to urban services and housing Primary Primary Infrastructure services for private sector development Secondary Secondary Municipal governance and institution building Primary Primary Rural services and infrastructure Primary Primary E. Bank Staff Positions At ICR At Approval Vice President: James W. Adams Jean-Michel Severino Country Director: David R. Dollar Yukon Huang Sector Manager: Junhui Wu Jeffrey S. Gutman Project Team Leader: Wenlai Zhang Hatim M. Hajj ICR Team Leader: ICR Primary Author: Wenlai Zhang Kek Choo Chung F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the Project is to assist the Borrower and the Project Provinces: (a) to increase the efficiency and safety of traffic in highway priority corridors in order to facilitate faster socio-economic development; (b) to provide improved access to targeted poor counties; (c) to improve highway sector institutional capacity; and (d) to improve the safety of road transport. ii

7 The project development objective found in the Project Appraisal Document is expressed differently from that stated above which is obtained from Schedule 2 of the Loan Agreement. The difference, however, is only of verbal expression and not of substance. Revised Project Development Objectives (as approved by original approving authority) The development objectives remained unchanged throughout the implementation of the Project. (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Average daily traffic on proposed and existing high priority roads increase over time (mte per day) BDH-7897mte/d BFH mte/d LZH mte/d XJH mte/d GWH mte/d YXH - 745mte/d Date achieved 12/31/ /31/ /31/2005 Actual traffic on the two most important highways, BDH and LZE exceeded Comments target values by 37% and 28% respectively. The remaining highways were (incl. % close to the target values or with high growth rates except for GWH. (See section achievement) 3.2 of main report.) Average speed on proposed and existing high priority roads improves over time Indicator 2 : (km per hour) Value quantitative or Qualitative) Ranging from Ranging from Ranging from Date achieved 12/31/ /31/ /31/2005 Comments (incl. % Average speed on highways improved 12% to 50%. achievement) Indicator 3 : Traffic accident rates on proposed and existing high priority road are reduced (fatalities per 10 million vehicle km) Value Ranging from 4.4 Ranging from 0.4- quantitative or Ranging from 7-11 to Qualitative) Date achieved 12/31/ /31/ /31/2005 Comments (incl. % achievement) Indicator 4 : Fatalities on project highways were about 12% less than targeted on completion of the Project. Gross output value of agriculture and industry increases (RMB billion) iii

8 Value quantitative or Qualitative) BDH and BFH 27.6 Liugouhe-Jiepaicun corridor 22.9 Lingwi-Yanchi-Tongxing corridor Date achieved 12/31/ /31/ /31/2005 Comments GOVAI on main corridors in the 3 project provinces exceeded targets by 60% in (incl. % Inner Mongolia, 57% in Gansu and 36% in Ningxia achievement) Indicator 5 : Sum daily traffic on RIPA roads increases over time Value quantitative or Qualitative) Inner Mongolia 3696 Gansu 1635 Ningxia Date achieved 12/31/ /31/ /31/2005 Comments Sum of daily traffic on RIPA roads was higher than expected by 56% in Inner (incl. % Mongolia, 320% in Gansu but fell short by about 8% in Ningxia.. achievement) Indicator 6 : Sum of days on RIPA roads are closed to traffic Value quantitative or Qualitative) Inner Mongolia 779 Gansu 332 Ningxia Date achieved 12/31/ /31/ /31/2005 Comments (incl. % achievement) The closure of RIPA roads in Ningxia was only 8% of the target closure on completion of the Project; there was no closure of RIPA roads at all in Inner Mongolia and Gansu Indicator 7 : Bank loan to each province is recovered through tolls on main highways Value quantitative or Qualitative) Toll system to be implemented Toll system implemented By 10/31/2000 in Ningxia; 10/31/2002 in Gansu and 10/31/2003 in Inner Mongolia Date achieved 12/31/ /31/2003 Comments (incl. % Collection of tolls at each main highway was instituted as it became operational achievement) iv

9 (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Construction of 6 main highways, 2 each in Gansu and Ningxia and 2 in Inner Mongolia ( BDH+BFH): % of completion Value (quantitative or Qualitative) Date achieved 12/31/ /30/ /30/2005 Comments (incl. % achievement) Indicator 2 : All 6 main highways in the original scope of the Project had been completed by the original loan closing date of 6/30/2005. However, the newly added rehabilitation of HTH approved in June 2004 was not completed until end Complete construction of low volume road in poor counties (RIPA component)- % of completion Value (quantitative or Qualitative) Date achieved 12/31/ /31/ /31/2000 Comments (incl. % The RIPA component was completed a year ahead of schedule. achievement) Indicator 3 : Institutional strengthening and training Value (quantitative or Qualitative) Date achieved 12/31/ /31/ /31/2006 Comments (incl. % achievement) Training fell short of target by about 2% due to incompletion of overseas training program in Inner Mongolia. Indicator 4 : Highway safety-% treatment of 57 black spots, traffic safety manual, safety audit procedures. Value (quantitative or Qualitative) Date achieved 12/31/ /31/ /31/2003 Comments (incl. % Completed satisfactorily as planned achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 07/21/1998 Satisfactory Satisfactory 0.00 v

10 2 04/21/1999 Satisfactory Satisfactory /22/1999 Satisfactory Satisfactory /29/2000 Satisfactory Satisfactory /14/2000 Satisfactory Satisfactory /26/2001 Satisfactory Satisfactory /19/2001 Satisfactory Satisfactory /19/2002 Satisfactory Satisfactory /29/2002 Satisfactory Satisfactory /26/2003 Satisfactory Satisfactory /29/2003 Satisfactory Satisfactory /28/2004 Satisfactory Satisfactory /28/2004 Satisfactory Satisfactory /13/2005 Satisfactory Satisfactory /09/2005 Satisfactory Satisfactory /24/2006 Satisfactory Satisfactory /26/2007 Satisfactory Satisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile vi

11 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal The Project was initiated at a time when China s GDP grew consistently at a rate of 8%- 10% a year, placing a burden on the country s historically underinvested transport infrastructures, especially roads. Few expressways existed at the time and about 22% of rural communities had no all-weather vehicular access. Studies undertaken by the Bank concluded that the country's road network capacity was insufficient to meet demand; deficiency in capacity had led to transportation bottlenecks that restricted the development of the economy; and that the problem was due mainly to inadequate investment, insufficient reforms and management and operational weaknesses. These studies included "China Highway Development and Management: Issues, Options and Strategies" (February 1994) and "China, Forward with One Spirit: A Strategy for the Transport Sector" (April 1998). Inadequate capacity and poor accessibility had undermined the development of China's interior provinces, resulting in an economic disparity between rich coastal areas with access to deep-water ports and poor landlocked provinces. To overcome the shortcomings in the country s road network, the Ministry of Communications (MOC) at the central level prioritized the rapid development of the National Trunk Highway System (NTHS) consisting of 12 inter-provincial trunk expressways and totaling some 35,000 km. At the provincial/regional level, the strategy was to concentrate on network maintenance and the expansion and improvement of provincial and rural road networks totaling some 1.2 million km to provide greater mobility and to stimulate socio-economic development particularly in less developed provinces. On road transport policy, growing attention was being paid to removing administrative and physical barriers to inter-provincial trade and to a redefinition of the government s role in transport. Provinces and municipalities were to mobilize more investment resources, seek greater efficiency through improved highway planning, maintenance and investment strategies, and to improve cost recovery. The Project which addressed the key issues of expansion of highway capacity; increase of accessibility to rural population in poor counties; highway safety; highway maintenance; and cost recovery of investments through imposition of tolls on road users supported objectives of the Bank s Country Assistance Strategy (CAS): (i) alleviating infrastructure bottlenecks and increasing road network capacity and (ii) helping to alleviate poverty in China, as expressed in the CAS Document R97-30 (IDA/R97-14) of March 18, 1997 and in Progress Report R of May 28, Original Project Development Objectives (PDO) and Key Indicators 1

12 The objective of the Project was to assist the Borrower and the Project Provinces: (a) to increase the efficiency and safety of traffic in highway priority corridors in order to facilitate faster socio-economic development; (b) to provide improved access to targeted poor counties; (c) to improve highway sector institutional capacity; and (d) to improve the safety of road transport (Schedule 2, Loan Agreement). Key indicators for monitoring performance (Annex 1, PAD) included: a) Average daily traffic (ADT) on proposed and existing highways in selected high priority corridors b) Average speed on proposed and existing highways c) Traffic accident rates on proposed and existing highways d) Gross output value of agriculture and industry of main highway corridors e) ADT on roads included in the Road Improvement Program for Poverty Alleviation (RIPA) f) Number of days/year the roads in RIPA were closed to traffic g) Bank loan to each province is recovered through tolls on main highways 1.3 Revised PDO and Key Indicators (as approved by original approving authority), and Reasons/Justification The development objective and key indicators remained unchanged throughout the implementation of the Project. 1.4 Main Beneficiaries The measured benefits of the Project were savings in vehicle operating cost and travel time savings for vehicle occupants. Benefits generated by the RIPA component in the form of an increase in children s accessibility to schools, the population s access to medical services and an increase in the average annual income per capita of the local population were acknowledged but not quantified. However, local governments impacted by the component furnished data that illustrated the extent of the benefits that had accrued. (See also section 3.5). Other important benefits in support of the Project that were not quantified were a reduction in road accidents particularly fatalities, and a strengthened capability of the agencies responsible for the planning, design, supervision, construction, operation and maintenance of the highways in each of the Project Provinces. Benefits that were not quantified were not taken into account in the economic and financial analysis in justification of the Project. The primary target group was the population of the Provinces of Inner Mongolia, Gansu and Ningxia, which were ranked respectively the third, eighth and fifteenth poorest among the thirty-one provinces and municipalities of China measured by income per capita (China Statistical Yearbook, 1997). The six main project highways would pass through towns and counties that comprised about half of the population of the three 2

13 project provinces, some 6.2 million for Inner Mongolia, 6.1 million for Gansu and 2.1 million for Ningxia. The improvement of rural roads would benefit counties whose population constituted about 15% of the total poor population of the three provinces (1.3 million). Institutional capacity building would directly benefit the Communications Departments of Inner Mongolia, Gansu and Ningxia and their related entities and agencies. 1.5 Original Components The Project consisted of the following components (See Block 1: Project Description, PAD): (a) Construction of Main Highways with a total length of about 687 km comprising (i) Baotou-Dongsheng Highway (103 km) of which 92 km are a 4-lane Class 1 highway and 11 km are a 2-lane Class 2 highway in Inner Mongolia; (ii) Baiyinchagan-Fengzhen Highway (142 km) a 2-lane Class 2 highway in Inner Mongolia; (iii) Liugouhe-Zhonghe Expressway (33.5 km) a 4-lane expressway in Gansu; (iv) Xujiamo-Jiepaicun Highway (64 km) a 2-lane Class 2 highway in Gansu; (v) Guyaozi-Wangquanliang Highway (94 km) of which about 83 km provide 2 lanes for traffic on a 4-lane Class 1 highway subgrade and about 11 km are a 2-lane Class 2 highway in Ningxia; and (vi) Yanchi-Xingren Highway (250.5 km), a 2-lane Class 2 highway in Ningxia. (b) Road Improvement Program for Poverty Alleviation (RIPA) comprising the construction and improvement of about 1892 km of rural roads in poor counties, of which 803 km are in Gansu, 836 km in Inner Mongolia and 253 km in Ningxia. (c) A program to strengthen institutional capacity in highway planning, design, supervision, construction, operation and maintenance in each of the Project Provinces. (d) A highway safety program to reduce traffic accidents on highways. The Project was described in Schedule 2 of the Loan Agreement as consisting of three parts, with a part each in Inner Mongolia Autonomous Region (Part A), Gansu Province (Part B) and Ningxia Hui Autonomous Region (Part C). There was no inconsistency between the Loan Agreement and the Project Appraisal Document (PAD). The difference was merely in the manner in which the Project was presented in the two documents. The PAD presented the Project thematically while the Loan Agreement described in detail the developments that would be undertaken in each of the Project Provinces. The project components were similar in all three Project Provinces. 1.6 Revised Components There was no revision of the Project's components. There were, however, changes within the component for the construction of the main highways. 3

14 1.7 Other Significant Changes Significant changes in the design, scope and scale of the component for the construction of the main highways included the following. The original design of the Baotou-Dongsheng Highway (BDH) in Inner Mongolia, had a 50 km section in which the two southbound lanes were separated from the two northbound lanes, the former to be constructed on a new alignment and the latter being upgraded from the existing Class 2 highway. During implementation a decision was made to construct new northbound lanes alongside the southbound lanes and integrate all four lanes into a single roadway, and the old Class 2 Baotou-Dongsheng Road (BDR) was rehabilitated to function as an auxiliary road to serve slow moving local traffic and non-motorized vehicles. The Guyaozi-Wangquanliang Highway (GWH) in Ningxia, originally to be a 4-lane Class 1 highway sub-grade with 2-lane pavement from Guyaozi to Yanchi and a 2-lane Class 2 highway from Yanchi to Wangquanliang, was upgraded to a full 4-lane expressway standard for safety and maintenance reasons. The Bank agreed to the change in the scope of the development following the review of the supplemental feasibility study. The Loan Agreement was amended accordingly on February 1, However, work on the higher construction standard had commenced before prior approval of the Bank was obtained, and Ningxia decided to withdraw from Bank financing the contract (one of four) where work had advanced too far to justify Bank retroactive financing. The cost of upgrading would increase the original cost of the GWH by about 62% (RMB220 million). Part of the increase in cost was financed by the funds (US$4 million) released from the contract that was withdrawn from Bank financing. Nevertheless, competitive bidding in accordance with Bank procurement guidelines resulted in Ningxia s loan savings of some $5 million. This amount was cancelled from the loan on December 7, At the request of Gansu, the scope of the development in this province was revised to include the rehabilitation of an existing 85 km Class 2 road from Hekou to Tungouwan (the Hekou-Tungouwan Highway (HTH)). The Bank agreed with the proposal in light that the highway was the only road linking Lanzhou to Gulang, serving 7 townships, carrying about 3,000 vehicles (MTE) a day and was in a poor state of condition. The Loan Agreement was amended accordingly on June 8, The rehabilitation of this highway was not in the original scope of work of the developments for the province and was approved for inclusion in the Project only after a justification was made, and an environmental impact assessment and a social assessment had been done and a resettlement action plan had been prepared to the satisfaction of the Bank task team. The Loan Agreement was revised again on November 23, 2005 to increase the disbursement percentage for Category (2) (a) for Civil Works under Part B.1 from 49% to 65% to enable the use of loan savings to finance the rehabilitation. This additional scope of work led to the extension of the loan closing date to June 30,

15 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The Project was predicated on the premise that improving road network capacity would help to generate economic development, alleviate poverty, and improve the quality of life in the project areas. The preparation of the Project took into account lessons learned from 19 highway projects in China, of which 9 had been completed. Problems encountered in the past included (i) poor construction quality, (ii) late start of the design of traffic engineering facilities, (iii) difficulty in implementing highway safety programs due to limited experience of the implementing entities, and (iv) inadequate advance notification of Bank requirements relating to land acquisition and resettlement. To mitigate the risk of an inadequate design, the designs and bid documents for the main highways in the Project were reviewed by international design engineers. To ensure that the quality of construction would meet acceptable standard, construction supervision was enhanced by engaging foreign consultants to jointly supervise construction with local consultants. The difficulty in implementing safety programs in past projects was traced to the lack of coordination between traffic police and highway departments. To overcome the problem, a coordinating mechanism that included a system for accident data collection and analysis was developed with the assistance of an international safety expert for all three Project Provinces. To make known early the Bank s requirements relating to resettlement and land acquisition and to assist in meeting them, a resettlement specialist and a social scientist were involved from the very beginning in the preparation of the Project. As this was the first Bank-financed project in which social analyses with emphasis on minorities were carried out, a Minorities Development Plan was developed with the assistance of the social scientist whose assessment (undertaken in conjunction with local consultants) was widely reviewed and commented upon. Attention given to the preparation of the plan was considerable. The negative impacts of highway construction (erosion particularly the effect on graves, silting of fields, competition for water between local communities and construction activities, and crossing of roads by school children) were addressed in the Resettlement Action Plan (RAP), the Environmental Action Plan (EAP), engineering designs, and during construction supervision. 5

16 There was an inherent risk that traffic on toll roads would increase at a lower rate than estimated because of the imposition of the user charge. This risk was mitigated by ensuring that tolls that would be imposed for the use of the highways would be appropriate. Commitment in the Project was strong from the provincial governments, which actively participated in all stages of project preparation from the conduct of feasibility studies to the detailed engineering design. Participatory processes in the preparation and design of the Project were extensive. Affected communities were involved in the selection of the alignment of the various roads as well as the number and the location of interchanges, underpasses and grade separations. During the preparation of the Environmental Impact Assessment, the local population was intensively consulted through workshops, meetings with local government representatives, and public polling supplemented by interviews. Documents relating to these consultations were made public. Special attention was given to consultation with affected persons and their representatives during the preparation of the Resettlement Action Plan. Extensive field socio-economic surveys of selected communities containing significant minorities along three of the highways were undertaken in the form of focus groups, household case studies, individual interviews, questionnaires and direct observations. Their findings were reflected in the designs of the various highways. For the developments in Ningxia, an additional survey was carried out with the participation of experts on cultural property to assess the impact of the developments on the Great Wall, and measures to mitigate any possible adverse impact were included in the EAP. The Bank-financed Second Shaanxi Highway Project and the Second Henan Highway Project showed that basic access through all-weather roads and the provision of nonmotorized means of transportation contributed significantly to the reduction of poverty in rural areas. In light of this finding, the Road Improvement Program for Poverty Alleviation for each of the three provinces was formulated to focus on the lower-category roads in the poorest counties. Procurement arrangements were meticulously planned and clearly spelt out in the Project Agreement as were the actions and measures that were to be taken in implementing the road safety program. These explicit arrangements and requirements helped to simplify project implementation planning. The formulation of the Project to include developments dispersed over 3 provinces with a part of the loan on-lent to each of the provinces to correspond with the cost of the works and services at the province, however, did not facilitate the supervision of the Project as a unitary whole. Separate project implementation units were established by each of the Project Provinces and the Project was implemented and supervised as if they were 3 separate projects independent of one another. Resources for Bank supervision of the Project, consequently, were greater than usual. 6

17 2.2 Implementation Project implementation was generally satisfactory. Construction of the 6 original main highways commenced in March 1999 in Gansu (7 contracts) and Ningxia (8 contracts) and in May 1999 in Inner Mongolia (12 contracts). All contracts were awarded under ICB procedure and on FIDIC conditions of contract. The highways were completed by September 2001 in Ningxia, October 2002 in Gansu, and October 2003 in Inner Mongolia. There were numerous contract variations due to differences between actual geological conditions on site and those adopted in design drawings which were based on geological surveys conducted prior to detailed design, changes in the design and scope of works of BDH in Inner Mongolia, and in the upgrading of GWH in Ningxia. These variations in aggregate came to some RMB683.4 million for civil works of the main highways (RMB371 million in Inner Mongolia, RMB230.6 million in Gansu and RMB81.8 million in Ningxia). Unexpected severe climatic conditions affected construction in Ningxia and heavy storms in July 1999 ruined the sub-grade, destroyed bridges and culverts of the GWH. The outbreak of SARS curtailed construction activities in Inner Mongolia in Initial delays in contracts affected, however, were subsequently overcome. The whole of the Project was completed as designed with the exception of the changes mentioned in Section 1.7. These changes are amplified below. The change along the 50 km section of the BDH in Inner Mongolia, in which new northbound lanes were built on the same roadway as the southbound lanes instead of upgrading part of the old Class 2 road to Class 1 standard, was due to conditions on the old road having seriously deteriorated since the time of project appraisal. It was not financially viable to re-build part of the old Class 2 road as the half width of BDH which would also have the effect of cutting off from use the concerned section as a part of the existing Class 2 road. Moreover, traffic forecasted for the old road during project appraisal was based on traffic counts taken in 1995 and actual traffic since then had increased faster than expected. The decision was taken in August 2000 to build new northbound lanes over this section and rehabilitate the old road as an auxiliary road to serve slow moving local and non-motorized traffic. The GWH in Ningxia originally was to be developed on a new right-of-way to a 4-lane Class 1 highway sub-grade from Guyaozi to Yanchi (83.4 km) but with only 2 lanes paved, and as a standard Class 2 highway from Yanchi to Wangquanliang (10.7 km). The unpaved portion of the sub-grade from Guyaozi to Yanchi would only be paved when the traffic warranted. After construction had started in March 1999, Ningxia Communications Department, upon approval from the then State Planning Commission, decided to upgrade the whole length of the highway to expressway standard and to have all 4 lanes paved at the same time. Approval of the Bank to revise the scope of the contract was sought in June The Bank agreed to the change in August

18 following a review of the supplemental feasibility study and the Loan Agreement was revised accordingly. However, works on the upgraded standard had begun before the prior approval of the Bank was obtained, and in the contract for the construction of the section from Yanchi to Wangquanliang, work had advanced too far to warrant Bank financing. Ningxia Communications Department decided to drop the far-proceeding contract from Bank financing. The rehabilitation of 85 km of the existing Class 2 HTH in Gansu was included for Bank financing in 2004 when it was evident that Gansu would have considerable loan savings in its part of the loan. The Loan Agreement was revised on June 8, 2004 to include this work in Part B of the Project (Gansu). The closing date of the loan was extended from June 30, 2005 to June 30, In response to the request from MOF and GPCD for increase of disbursement ratio, the Loan Agreement was again revised on November 23, 2005 to increase the disbursement ratio for civil works-category (2)(a) of Part B.1 of the Loan Agreement-from 49% to 65%. The rehabilitation, costing some RMB million, consisted mainly of the reconstruction of the pavement and drainage ditches on both sides of the road, and the construction of some culverts and bridges. The rehabilitation of the road, carried out in 3 NCB contracts, commenced in April 2005 and was completed towards the end of The rehabilitated road was excluded from tolling as both sides of the road were fringed with farms and densely populated, and the imposition of a toll for its use would be inequitable to the local communities. There was no mid-term review of the Project. The Project was not at risk at any time. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The Project was monitored through a monthly progress of work on the main highways, a quarterly report on the progress of implementation of all components of the Project, an annual monitoring report covering all components and assessing the extent to which various implementation and development objectives have been satisfied. Annual accounts for the Project for each fiscal year were audited by independent auditors and reviewed by the Bank task team. Key indicators (See Section 1.2) were designed to measure the achievement of the Project's objectives. The choice of indicators used was appropriate. The rate of progress in implementing each component was also measured against planned targets. Implementation indicators, determined during project appraisal for each year of project implementation, served as bench-marks for monitoring progress of work and project activities. Data for monitoring performance were collected and reviewed in accordance with the agreed plan Bank review missions were mounted regularly to monitor progress and quality of work on site and provided advice on overcoming difficulties and issues arising from project 8

19 implementation. The utilization of the assets was also monitored in their initial years of operation during project implementation review missions. The monitoring and evaluation of the design, implementation and utilization of the Project was satisfactory and adequate. Arrangements for the collection of data have been instituted to assure the sustainability of their collection and usage for monitoring performances by the implementing entities beyond the project implementation period. 2.4 Safeguard and Fiduciary Compliance The main environmental impacts were noise and air pollution during the construction and operation phases, soil erosion during the construction phase, impact on vegetation especially in Inner Mongolia, and impact on cultural heritage property particularly in Gansu. Environmental management was built into the overall project management system. Staff from PMOs, contractors and construction supervisors were specifically assigned to ensure compliance with the EAPs. Training on environmental management was provided in the course of project implementation by international and national experts to adequately equip them for the task. Independent environmental monitoring was conducted by local environmental agencies in accordance with the EAPs. Compliance with environmental safeguards was satisfactory. Surveys undertaken for the RAP proved to be inadequate and land acquisition and the floor area of homes demolished were higher than estimated. Additionally, land use of the impacted area in Inner Mongolia was substantially revised to yield an increase in cultivable land of more that 70%, irrigation was provided to some dry land, and some low-yielding cultivated grassland were returned to forest. The total cost of resettlement more than doubled as a consequence. RAP Estimate Actual Increase (%) Land acquisition 29,655 33, Homes demolished (m 2 ) 55,229 81, Total resettlement cost (RMB million) A resettlement assessment undertaken by independent monitors after the completion of implementation of the RIPA component concluded that minor adverse impacts on affected persons had been ameliorated and the compensatory benefits provided were generally appreciated. The RAP was completed satisfactorily and in compliance with Bank and national requirements. Procurement was undertaken in accordance with Bank procurement guidelines. There was an initial misunderstanding in Ningxia of the requirement for Bank prior approval for major changes in the scope of work of contracts financed by the Bank. After the Bank task team had made clear the requirement, contract management proceeded satisfactorily and without further problem or difficulty. 9

20 Project financial management met acceptable standards. Compliance with the requirement for independent auditing of annual project accounts was good. Compliance with loan covenants was generally satisfactory. 2.5 Post-completion Operation/Next Phase All roads were operated and maintained by the respective highway administration entities of the Project Provinces in accordance with current practices upon their completion. YXH and GWH are now the responsibility of Ningxia Highway Administration Bureau and Ningxia High-grade Highway Administration Bureau. LZE and XJH are managed, operated and maintained by Liugu High-grade Highway Toll Administration Department of Gansu, while BDH and BDR have been transferred to Inner Mongolia High-grade Highway Construction Development Company for their management, operation and maintenance. These operating entities belong to the Communications Department of the respective Project Provinces. Investments in the Project are likely to be sustained. Traffic on two of the main roads have exceeded targets while the rest, except for GWH in Ningxia, are either close to their target values or showing an increasing growth rate since their opening. Traffic was lower than expected in GWH because the section of the highway in Shaanxi Province to which it would connect had not been opened to traffic yet. This section of the highway is expected to be opened at the end of The target number of vehicles on RIPA roads, though short of expectation, shows an increasing trend. Bank review missions that monitored post-completion operation found a satisfactory level of maintenance. Monitoring of the utilization of project highways after their completion found that they have been maintained well by the operating entities, but overloading was a common problem. Ningxia formed a leading group at provincial government level to address the issue of overloading. Sub-leading groups were also formed in city and county levels to attend to the problem. Ningxia also established 10 permanent loading monitoring stations equipped with electronic weighing platforms, staffed jointly by the traffic police and local communications bureaus while Inner Mongolia established 3 monitoring centers. The sustainability of these efforts to curb overloading will require continuing vigilance and a strict enforcement of the regulations on highway loading. Institutional capacity to plan design, operate and manage highways in all Project Provinces has been strengthened through technical assistance and training. This is demonstrated in Inner Mongolia by the dispatch of several PMO staff to implement the program for the construction of 1300 km of expressways and 1400 km of Class 1 highways upon completion of BDH. Improvement in highway safety is expected to be maintained as a result of the establishment of a high-level traffic safety coordination group to improve communication between the traffic police and the Communications Department in each of the Project Provinces and the traffic safety manuals developed under the Project. 10

21 Plans are on hand to further improve the road infrastructure network in the Project Provinces including the new construction of 1,435 km expressway and 58 km Class 1 roads in the 11 th Five-Year Plan in Gansu; the linkage of Yinchuan, the provincial capital of Ningxia, to central cities such as Taiyuan, Beijing, Wuhan, Lanzhou and Baotou. Ningxia has also plans to develop a provincial road network that would be connected to the expressways of neighboring provinces. In Inner Mongolia, on completion of BDH, the province proceeded with the construction of some 1300 km of expressways and 1400 km of Class 1 highways as well as the development of rural roads to provide better access to poor counties. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The objectives of the Project was to assist the Borrower and the Project Provinces to: (a) increase the efficiency and safety of traffic in highway priority corridors in order to facilitate faster socio-economic development; (b) provide improved access to targeted poor counties; (c) improve highway sector institutional capacity; and (d) improve the level of safety of road transport. The Project was designed to meet these objectives through the construction of 2 high grade highways each in the provinces of Gansu, Inner Mongolia and Ningxia along their major traffic corridors and which would effectively link them to the sea. The Project was also designed to improve access to the provinces poor counties by improving the condition of rural roads. The objectives, design and implementation of the Project are consistent with the Country Partnership Strategy (CPS) for the People s Republic of China for the Period dated May 23, 2006, in terms of upgrading transport infrastructure to link inland provinces to the coast so that transportation benefits accrue to the poor while also improving network management and traffic safety expressed in Pillar 2 of the CPS. The Project would also meet China s main transport concern of ensuring that its highway system help integrate the country s economy and facilitate the movement of goods and services. The Project was, and continues to be, highly relevant to the development needs of the country in general and of Project Provinces in particular. 3.2 Achievement of Project Development Objectives The Project was predicated on the premise that improving road network capacity would help to generate economic development, alleviate poverty and improve the quality of life in the project areas. The outcome of the Project would be determined by a series of indicators that included the volume, average speed of travel and accident rates on the highways, the gross output value of agriculture and industry (GOVAI) of the project main highway corridors as well as the volume of traffic on the improved rural roads in the RIPA component and the number of days these roads were closed. 11

22 Based on the indicators for monitoring outcome, the Project has attained its development objective. GOVAI on the main corridors was higher than estimated by 60% in Inner Mongolia, 57% in Gansu and 36% in Ningxia. The average speed of travel on the project highways has improved and fatalities in road accidents have dropped (See also Results Framework Analysis in Data Sheet). Traffic on the main roads from 2005 to 2025 is expected to grow at a rate that matches the growth rate forecasted during project appraisal except for BDH which significantly exceeds forecast and YXH and GWH which fall short of expectation (See also Annex 3, para. 4). Traffic Growth Forecast : ICR vs PAD (in %) BDH BFH YXH GWH XJH LZE ICR PAD Project outputs upon completion of the Project exceeded expectation. In addition to the original list of the six main highways, two other highways were rehabilitated. This was highly valued by the clients. All these outputs were obtained within the original project cost estimates. Project outcome is rated satisfactory specifically for the following reasons: a) Transport efficiency and safety along the selected high priority highways increased. All the six highways originally planned under the project have been completed and opened to traffic on schedule. According to the latest monitoring report, traffic volume on the two most important highways (LZE in Gansu and BDH in Inner Mongolia) had exceeded the predicted values by 28% and 37% respectively. Traffic on the remaining four highways were close to the predicted values or showed high growth rates although the current volumes are lower than expected, except for GWH in Ningxia. The low traffic on GWH in Ningxia was mainly due to the delayed construction of the adjacent section in Shaanxi province. Obvious improvements in transport efficiency and safety on the six corridors were achieved. Especially, relief of traffic congestion and improvement of road conditions on the most important coal transport corridor in Inner Mongolia (by completion of BDH and BDR) and on the Lanzhou bypass (by completion of LZE) was significant. b) Accessibility to the targeted poor counties improved and poverty reduced. The completion of about 1900 km rural roads under the RIPA component contributed greatly to improving accessibility to the targeted poor communities in each of the three provinces. Closure of RIPA roads was minimal in Ningxia; none in Gansu and Inner Mongolia. According to the statistical data provided by the local government, the social and economic benefits of the investment were significant. (See Section 3.5 for details of poverty impacts and social benefits) 12

23 c) Safety of road transport improved. All activities listed under the Road Safety Program have been completed. Treatment of 57 black spots showed very good results. With the completion of a number of analyses and studies (see also Annex 2, Output by Components), the awareness of road safety of the clients had been reinforced. Traffic accidents were within the values predicted at appraisal. During the implementation of this component the coordination mechanism between the Provincial Communications Departments and the traffic police was established and overloading of vehicles was effectively controlled. d) Highway sector institutional capacity strengthened. The required domestic training for all the three provinces was completed beyond expectation while the overseas training program was substantially completed. The overseas training program totaling about 267 person- months on various subjects benefited 385 persons. Under this component, a sum of US$ million worth of maintenance equipment and laboratory testing apparatus were procured by the three Project Provinces. Through the provision of the training and equipment procured under the Project, the capacity of the Provincial Communications Department in terms of highway planning, construction, operation and maintenance especially in expressways and Class I highways was enhanced. 3.3 Efficiency The investment in the Project in economic terms was cost effective although the postproject economic internal rate of return (EIRR) of the Main Highways at 19.2% was less than the PAD s estimate of 23.2%. However, the economic net present value (ENPV) of the Main Highways at a discount rate of 12% was higher than estimated at appraisal (RMB5, million vs. RMB 4,469.7 million). The RIPA component for all three provinces in aggregate had an EIRR of 43.6% and an ENPV of RMB1, 181 million. The recalculated aggregate EIRR and ENPV for the entire project were 20.7% and RMB 6,262.3 million respectively. The lower than expected EIRR was due mainly to lower traffic demand in Ningxia and higher construction cost for the majority of the new roads. The detailed economic and financial analysis found in Annex 3 is summarized below. EIRR (in %) AND NPV (12%, RMB million) OF THE PROJECT ICR PAD EIRR ENPV EIRR ENPV 1 Inner Mongolia: Highways 24.0% 4, ~ ,477.6 RIPA 40.5% Subtotal 25.5% 4, Ningxia: Highways 10.2% (244.6) 15.2 ~ RIPA 25.3% Subtotal 10.8% (155.0) Gansu: Highways 18.1% 1, ~ ,511.5 RIPA 58.4% Subtotal 20.1% 2,

24 Total Highways 19.2% 5, ,469.7 RIPA 43.6% 1, Total Project 20.7% 6, , Justification of Overall Outcome Rating Rating: Satisfactory The overall outcome of the Project has been satisfactory based on the relevance of the development (See Section 3.1), the attainment of the project development objectives (See Section 3.2), and the efficiency with which the project outputs were achieved (See Section 3.3). 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Social development in the project areas has been favorable since the Project was launched. In Gansu, as a result of the improvements made in the Project, every city or town in the project areas has regular bus and the children s education enrolment rate raised by more than 3%. In Ningxia, the 253 km of rural roads improved/constructed under the Project conveyed economic and social benefits in poor counties by increasing access to their townships from 72% in 1997 to 95% in The average annual income per capita in these counties increased from RMB869 to RMB1230 during the same period. In Inner Mongolia, the RIPA component provided all the counties impacted by the program with access to major highways, up from 35% in 1998, and average annual income per capita increased from RMB450 to RMB1066. (b) Institutional Change/Strengthening The capacities of the Communications Departments of the Project Provinces to design, manage, operate and maintain highways have been strengthened. PMO staff, many of whom were new to implementing and supervising contracts under FIDIC conditions, have benefited from their exposure to executing and supervising contracts under such arrangement. Coordination between the traffic police and the Communications Departments has been institutionalized and manuals have been developed to improve safety and maintenance standards. Overseas training provided numerous staff with an exposure to the management, operation and maintenance of highways in developed countries as well as to how environmental concerns were addressed in mature economies. Measures to strengthen institutional capacity are likely to have a continuing positive impact on matters pertaining to highway engineering, construction supervision, contract management, resettlement, environmental monitoring and highway management, maintenance and administration. (c) Other Unintended Outcomes and Impacts (positive or negative) There were no unintended outcomes or impacts 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 14