Document of The World Bark Report Po. 16477-4C£Hi STAFF APPRAISAL REPORT CHINA THIRD NATIONAL HIGHWAY PROJECT April 15, 1998 Transport Sector Unit East Asia and Pacific Regional Office CURRENCY EQUIVALENTS (As of March 1998) Currency Name = Renminbi Currency Unit = Yuan (Y) I Yuan = 100 fen $1.00 = Y 8.30 Y 1.00 = $0.12 FISCAL YEAR January 1-December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS 7FYP - Seventh Five-Year Plan 8FYP - Eighth Five-Year Plan 9FYP - Ninth Five-Year Plan IOFYP - Tenth Five-Year Plan ADB - Asian Development Bank ADT - Average Daily Traffic BMS - Bridge Maintenance System BOT - Build-Operate-Transfer CITC - China International Tendering Company CMC - China Machine Corporation E&M - Electrical, Electronic and Mechanical EA - Environmental Assessment EAP - Environmental Action Plan EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return GNP - Gross National Product GOC - Government of China GOVAI - Gross Output Value of Agriculture and Industry HDM - Highways Design and Maintenance Standards Model HIPCD - Hubei Provincial Communications Department HPEB - Hubei Provincial Expressway Bureau HCPDI - Hubei Communications Planning and Design Institute HRI - Highway Research Institute HSDI - Highway Survey and Design Institute Hurong - Shanghai-Chengdu Expressway Vice President Jean-Michel Severino, EAPVP Country Director Yukon Huang, EACCF Sector Manager Jeffrey Gutman, EASTR Task Manager Alfred Nickesen, Senior Transport Specialist, EASTR ICB - International Competitive Bidding IFC - International Finance Corporation IRP - Interconnecting Roads Program IS - Institutional Strengthening IST - Institutional Strengthening and Training Jingzhu - Beijing-Zhuhai Expressway JST - Joint Supervision Team LA&R - Land Acquisition and Resettlement LAB - Levying Administration Bureau LGTPA - Leading Group for Transportation for Poverty Alleviation MAAP - Microcomputer Accident Analysis Package MIGA - Multilateral Investment Guarantee Agency MOC - Ministry of Communications MOF - Ministry of Finance mte - Medium truck equivalent mvpd - Motor vehicles per day NCB - National Competitive Bidding NH - National Highway NPV - Net Present Value NR - National Road NTHS - National Trunk Highway System PAPs - Project-Affected Persons pcu - Passenger car unit PHRD - Policy and Human Resources Development PIC - Public Information Center PIP - Project Implementation Plan PMO - Project Management Office PMS - Pavement Management System PR - Provincial Road PSB - Public Security Bureau PTS - Provincial Traffic School PTTS - Provincial Traffic Technical School RAP - Resettlement Action Plan RDB - Road Data Bank REO - Resident Engineer's Office RMF - Road Maintenance Fee RO - Resettlement Offices SAA - State Audit Administration SOE - Statement of Expenditures SPC - State Planning Commission STC - Staff Training Center TCU - Technical Coordination Unit TES - Traffic Engineering Society ton-km - Ton-kilometer TOR - Terms of Reference TRL - Transport Research Laboratory VS - Vocational School CHINA THIRD NATIONAL HIGHWAY PROJECT LOAN AND PROJECT SUMMARY Borrower: People's Republic of China Beneficiary: Hubei Province Poverty Category: Not applicable Amount: $250 million Terms: 20 years, including 5 years of grace, at the standard interest rate for LIBOR-based US dollar single-currency loans Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver Financing Plan: See para. 3.37 Economic Rate of Return: 23.2 percent for the project overall Maps: IBRD 28749,28750 Project ID Number: CN-PE-36949 CONTENTS 1. HIGHWAY DEVELOPMENT AND REFORM ............................................1 A. Highway Strategy and Policy ..............................................1 B. Linkage to Country Assistance Strategy ..............................................2 C. Bank Group Participation ..............................................2 D. Lessons From Private Toll Highway Finance .............................................. 3 E. Lessons From Previous Bank Operations ..............................................4 2. THE TRANSPORT SECTOR IN HUBEI ............................................5 A. Geography and Transport ..............................................5 B. Traffic Growth and Road Safety ..............................................6 C. Highway Administration, Planning and Financing .............................................7 D. Engineering, Construction, Maintenance and Training ......................................9 E. Highway Development Program 1996-2000 ............................................. 10 3. THE PROJECT ............................................. . 12 A. Original and Formulation ............................................. 12 B. Objectives and Rationale for Bank Involvement ............................................. 12 C. Project Monitoring ............................................. 14 D. Project Components ............................................. 15 E. Civil Works Construction and Supervision ............................................. 16 F. Institutional Capacity Building ............................................. 18 G. Environmental Assessment ............................................. 21 H. Land Acquisition and Resettlement ............................................. 22 I. Cost Estimates ............................................. 23 J. Financing ............................................. 24 K. Implementation ............................................. 26 L. Procurement ............................................. 27 The project was prepared and appraised by Alfred Nickesen (Senior Transport Specialist, Task Manager), Jean-Marie Braun (Highway Engineer, Consultant), Ms. Alla Weinstein (Operations Consultant), Rodrigo Archondo-Callao (Transport Economist), Dick Jonsson (Institutional/Traffic Safety/Training Specialist, Consultant), Anil Somani (Environ- mental Specialist), Tosun Aricanli (Resettlement Specialist), and Mitchel Stanfield (Private Infrastructure Consultant). Mr. Liu E of the Bank's Resident Mission in China also contributed to the preparation of the project. The peer reviewers for the project were Jose Irigoyen (Engineering), Colin Gannon (Transport Economics), Stein Lundebye (Institutional Strengthening, Traffic Safety and Training), and Jeff Ruster (Private Highway Finance). - ii - M. Disbursements .............................................. 30 N. Auditing .............................................. 32 0. Project Supervision, Monitoring, and Reporting .............................................. 32 4. ECONOMIC EVALUATION .............................................. 34 A. Overview .............................................. 34 B. Evaluation of the Expressways .............................................. 34 C. Delayed Yangtze Bridge Construction .............................................. 41 D. Evaluation of Other Roads .............................................. 42 E. Overall Project Economic Evaluation .............................................. 42 5. AGREEMENTS REACHED AND RECOMMENDATION ................................... 43 TABLES Table 2.1: Classification of Road Network in Hubei .46 Table 2.2: Hubei: Comparison of Freight and Passenger Volume by Mode, 1980 and 1995 .47 Table 2.3: Hubei Highway Revenues and Expenditures, 1986-95 .48 Table 2.4: Hubei: Highway Revenues and Expenditures, 1986-2000 .49 Table 2.5: Highway Construction Plan During 9FYP in Hubei .50 Table 3.1: Interconnecting Roads-Existing Conditions .51 Table 3.2: Estimated Disbursement Schedule .54 Table 4.1: Vehicle Fleet Characteristics .55 Table 4.2: Expressway Sections Data .56 Table 4.3: Typical Road User Costs .57 Table 4.4: EXCEL Economic Evaluation Model Sample .58 Table 4.5: Economic Evaluation Results .59 Table 4.6: Expressway Sections Data .60 Table 4.7: Expressway Sections Results .61 Table 4.8: Risk Analysis Methodology .62 Table 4.9: Risk Analysis Input Multipliers .63 Table 4.10: Risk Analysis Results: Quanli-Shenshan Section ......................................... 64 Table 4.11: Risk Analysis Results: Entire Project ............................................. 65 ANNEXES Annex 1: Project Monitoring Indicators ............................................. 67 Annex 2: Environmental Assessment and Action Plan Summary ..................................... 72 Annex 3: Review of the Resettlement Action Plan ............................................. 76 Annex 4: Implementation Schedule ............................................. 81 Annex 5: Supervision Mission Plan ............................................. 89 - 111 - Annex 6: Selected Documents in the Project File .................................. 91 MAPS 1. China: Major Highway Development Program-National Trunk Highway System (NTHS), IBRD 28750 2. Third National Highway Project, IBRD 28749 - 1 - 1. 1HIGHWAY DEVELOPMENT AND REFORM A. HIGHWAY STRATEGY AND POLICY 1.1 At the central level, the basic strategy is to develop a National Trunk Highway System (NTHS). The Ministry of Communications (MOC) is in charge of planning the NTHS, consisting of 12 interprovincial trunk expressways, with a total length of some 35,000 km and connecting 95 major Chinese cities. While immediate priority is being given to two north-south and two east-west corridors ("two verticals and two horizontals") and three other major transport corridors (Beijing-Shanghai, Beijing- Shenyang, Chengdu-Beihai), the Beijing-Zhuhai (Jingzhu) Expressway, which is one of the "two verticals," constitutes the highest-priority corridor in this program. This expressway crosses the provinces of Hebei, Henan, Hubei, Hunan, and Guangdong over a distance of approximately 2,500 km and will connect, once completed, Beijing with Guangdong's fast-growing Pearl River Delta and Hong Kong. Shanghai-Chengdu Highway (Hurong), which is one of the "two horizontals," is also a main route linking the East to the West of China over a distance of approximately 2,000 km passing through Shanghai, Jiangsu, Anhui, Hubei and Sichuan. Both routes have the highest priority among the 12 national trunk routes in the NTHS. Both are designed as high-grade, high- performance facilities, at a minimum four lane standard, fully access controlled, and will be operated throughout as toll highways. Jingzhu and Hurong are scheduled for substantial completion by the year 2003. 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 more than 1 million km, to provide greater mobility and to stimulate socioeconomic development, particularly in less developed areas. 1.2 In terms of highway and road transport policy, growing attention is being paid to removing administrative barriers to interprovincial trade and to redefining the Central Government's role in transport, in light of rapid administrative decentralization and growing private sector involvement in highway development and road transport services. Provincial and municipal governments are expected to continue mobilizing most investment resources required, including access to private investment and capital markets, and to seek greater expenditure efficiency through improved highway planning and investment strategies, as well as to modernize maintenance management and improve cost recovery from road users. Local governments are also expected to further the development of road transport services and the road construction industry through deregulation and promotion of competition, access to modem technology and improved management. The Bank has prepared a report (No. 11819-CHA dated February 1994), CHINA: Highway Development and Management-Issues, Options and Strategies, which serves as the basis for the Bank Group sector assistance strategy. -2 - B. LINKAGE TO COUNTRY ASSISTANCE STRATEGY 1.3 In highways, the key problem facing China is its comparative neglect of the sector over several decades. Accordingly, China's road network ranks among the sparsest in the world relative to geographic area or population and is quite unsafe. The Bank's Country Assistance Strategy (CAS) for China, presented to the Board on March 18, 1997 and the progress note to be presented on May 28,1998, support China's needs to rapidly modernize and expand its highway system. To achieve this, the Government of China (GOC), with Bank and other multi- and bilateral assistance, is giving high priority to developing the system of expressways leading to the NTHS. Among other priority corridors, the Bank is already heavily involved in the construction of substantial sections of Jingzhu expressway, between Beijing and Guangzhou. Under the still ongoing National Highway (NH1) Project, two important sections have already been completed in Hebei and Henan. Under the Second National Highway (NH2) Project, two priority sections in Guangdong and Hunan are being undertaken. Under the Third National Highway (NH3) Project, several important expressway sections will be undertaken in Hubei Province. A Fourth National Highway (NH4) Project would cover two important expressway sections in Hunan and Hubei, as well as a major Wuhan Yangtze River bridge under a proposed Build-Operate-Transfer (BOT) arrangement. These four National Highway Projects constitute a well-thought-out and well-balanced series of investment operations that assist GOC and the concerned provinces in the timely completion of China's highest-priority expressway corridor. In general, the Bank's program of support in the highway sector will continue to assist China in the foreseeable fuiture in the financing, development and management of its priority expressway system. C. BANK GROUP PARTICIPATION 1.4 The Bank Group has supported initiatives by the Government in the transport sector through loans and credits totaling $6.0 billion for 34 projects. The dialogue between the Government and the Bank Group on transport sector strategy and policies has been strengthened through long-term strategy studies for railways, highways and ports development, and through project preparation activities and project-financed studies as well as sector studies carried out in collaboration with Chinese authorities. The most recent Bank Group reports on the transport sector, besides Highway Development and Management: Issues, Options and Strategies also include China's Railway Strategy (No. 10592-CHA) issued in February 1993, and Strategiesfor Road Freight Development (No. 12600-CHA) issued in January 1995. In addition, studies on the trucking industry, highway finance, the road construction industry, interprovincial traffic facilitation, and improved prioritization of highway investments and highway feasibility methodology have been undertaken. On the basis of its project and sector work, the Bank is deepening its involvement and assisting the Government in the design and implementation of institutional and sectoral reforms in areas such as strategy formulation and investment planning; policy, legal, and regulatory framework for private transport provision; sector financing; deregulation of transport services, and transfer of advanced technology through training and - 3 - equipment. Chinese authorities and the Bank Group also have prepared a transport sector strategy paper to help guide sector development in a consistent and cohesive framework. D. LESSONS FROM PRIVATE TOLL HIGHWAY FINANCE 1.5 China's experience in securing private participation in the development of toll highways effectively started with Hopewell's Guangzhou-Shenzhen Superhighway (GSZ). With extensive guarantees at the provincial level to close the debt financing for this highway, it is clear that China does not want a repetition of this project type and, in fact, has chosen a more prudent course for future BOT-type expressway projects. The caution with which the central government is approaching the evolving policy framework for BOT toll highway projects should not be construed as indecision or confusion on the part of the State Council. The process that is ongoing in Beijing represents a careful analysis of global experience and a considered approach with private investors and lenders that will work in China, given the country's size, diversity, and vast requirements for highway finance and development. Limited-recourse debt financing of highway projects in China will materialize in the future, as the result of an evolving legal and regulatory framework built largely on the success of individual projects. 1.6 Through study tour observation and project analysis, the Ministry of Finance (MOF), the State Planning Commission (SPC), MOC and the more developed provinces in the coastal regions are well aware of the characteristics of successful private toll highway projects. China recognizes that government guarantees are not the answer to a BOT highway program built on the assumption that qualified infrastructure developers would be willing to assume the commercial risks for projects that are financially viable. 1.7 China's strategy with its toll highway program is to minimize the risk of defeat, which is well known in Mexico, and to maximize the chances for success with private investors and lenders. Government support for minimum traffic and revenue levels may be necessary to launch the first several BOT projects in the highway sector. The Wuhan Junshan Yangtze River Bridge BOT Project, which is now part of the proposed Fourth National Highway Project, is likely to be an important test case for future government policy in this area. While results of specific BOT highway projects will not be known for some time, it is clear that China will not rush into offshore debt financing at the risk of failure or unintended long-term consequences simply to close a few key transactions. 1.8 Private toll highway projects that have been completed in China include equity financing from a limited number of Hong Kong developers who have used their own balance sheets and the Shenzhen and Hong Kong stock exchanges to raise additional capital. Many of China's provinces are actively pursuing development of new expressways utilizing the securitization of existing traffic volumes and toll revenues to leverage funds from the equity markets. Although this approach is an expensive alternative for finding new road development capital, it appears to be working well in China and can be looked to as the precursor of large-scale project financing in the future. Bank-financed toll highway assets will continue to play an important role in helping China make steady progress toward this objective. - 4 - E. LESSONS FROM PREVIOUS BANK OPERATIONS 1.9 Previous highway projects in China emphasize the importance of rigorous, early preparation for major civil and traffic engineering works and for procurement processes, where tendering often takes longer than expected. Advance preparation of bidding documentation and independent design reviews have also fostered smooth implementation and have helped reduce variations during the implementation period. The design of traffic-engineering facilities (traffic monitoring, telecommunications, tolling and lighting) must be advanced so that these works would be finished shortly after completion of the civil works for high-grade highways. 1.10 Land acquisition and resettlement of affected people has also led to implementation difficulties, including delays, in Chinese highway projects. A large number of people are typically affected by resettlement in China, particularly along important economic corridors where highways are being upgraded and constructed. The institutional requirements for resettlement of these numbers of people are significant. Under the proposed NH3 project, resettlement has received considerable attention to ensure institutional capability to provide adequate compensation and to implement Resettlement Action Plans. 1.11 Experience in the environmental area in China has generally been favorable. However, more attention should be paid to environmental supervision during construction, training of environmental personnel, and environmental monitoring during both the construction and operation phases. 1.12 Bank experience emphasizes the importance of adequate construction quality of roads. Poorly constructed roads lower economic benefits and vehicle-operating cost savings. Higher costs also result from premature deterioration, where corrective actions in the form of increased maintenance and/or rehabilitation are required. Effective remedial actions include stringent contractor prequalification, careful formulation of supervision arrangements, including engagement of foreign experts, training of local supervision staff and equipping the supervision teams. 1.13 Project design must put more emphasis on highway management and operation, especially in the context of toll expressways. There is also a growing concern that adequate funding for highway maintenance is not now being generated to cover an expanding and more expensive highway system. Previously, this was not an issue since adequate funds were being set aside for this purpose. 1.14 Based on the Bank's experience with institutional and policy aspects of highway projects, the phasing of studies and technical assistance and the intensity of Bank supervision are important for positive, sustainable outcomes. Institutional components that are implemented early in the project period tend to have a greater impact, as compared with free-standing studies carried out in the advanced stages of a project. -5- 2. THE TRANSPORT SECTOR IN HUBEI A. GEOGRAPHY AND TRANSPORT 2.1 Hubei Province lies in the center of China, in the middle reaches of the Yangtze River and to the north of Dongting Lake. Its economy is largely dominated by agriculture, but with well-developed industry and a plenty of natural resources. As of 1997, Hubei had a population of 57.7 million covering an area of 185,900 km2. Topographically, Hubei is high in the west and low in the east and north, with plains in the center and opening to the southwest 2.2 The province's commercial and industrial center is Wuhan, its capital with a population of about 6 million. Wuhan is one of China's key transportation hubs, located at the crossroads of the new North-South (Beijing-Zhuhai) and East-West (Shanghai- Chengdu) expressways, of several main railway lines, and of river routes on the Yangtze River, Asia's longest and most important river. The province is divided into 1 prefecture, 1 autonomous prefecture, 1 forest region, 4 provincial cities, 20 cities at the county level, 43 counties and 2 autonomous counties. The economy of Hubei has grown by 10.4 percent annually since 1980. Gross Output Value of Agriculture and Industry (GOVAI) per capita in the province was by 1997 at 1.3 times the national average and the growth has averaged about 13 percent per year since 1980. 2.3 The strategic location of Hubei Province at the crossroads of major North-South and East-West expressway, waterway and railway corridors will attract large amounts of traffic. Transport demand has grown substantially over the last five years, in view of sustained economic growth in the province and the rest of the country. 2.4 Historically inland waterways constitute the main transport mode in Hubei province. They have a navigation mileage of 8,969 km. The main ports along the Yangtze River are Badong, Yichang, Jinsha, Shayang, Xiangfan, Ezhou, among others, each handling over 1 million tons of cargo. 2.5 The railway network in Hubei includes: three longitudinal Beijing-Guangzhou, Beijing-Jiulong, Jiaozuo-Liuzhou and four lateral Xiangfan-Chongqing, Wuhan-Datong, Datong-Shashi, Hankou-Danjiangkou railway lines with a total length of 1,978 km. The principal commodities transported by railroads and inland waterways are coal, petroleum, grain, mineral ore and construction material. 2.6 Air transport, especially passenger traffic, has been developing rapidly during the 8FYP and 9FYP. Wuhan Tiahe and Enshi airports were constructed and 72 international and domestic routes were opened. Total mileage of the air line connections was 78,307 km in 1997. -6- 2.7 The highway network in Hubei comprises about 48,700 kmn, of which only 5,608 km (about 11.5 percent of the total) are class I and class 2 roads. The roads with bituminous and cement pavements amount to 41,135 km (84 percent of total) (Tabgle2.1). The administrative classification of the road network in Hubei at the end of 1997 was as follows: Hubei Province Road Classification Kilometers Percent National 3,774 8 Provincial 9,429 19 County 11,014 22 Country (local) 23,617 49 Special 894 2 Total 48,728 100 2.8 As in the rest of the country, most of the highways in Hubei were built in the 1960s and 1970s, and their design standards were suitable for the light vehicles and low traffic levels prevailing in China at the time. Due to the substantial growth in traffic levels and steady rise in the use of heavy vehicles, these roads have increasingly become inadequate to meet present and future needs. In addition, frequent flooding causes a serious damage every year due to the inadequate drainage and subgrade designs. 2.9 Vehicle Fleet. The vehicle fleet in Hubei grew three times in 10 years between 1986 and 1997, on an average of 11 percent per year. The fleet of agricultural tractors, large trucks and buses grew between 2 and 10 percent per year. The fleet of passenger cars, light vans and pickups grew at 20-21 percent per year, reflecting the growth in prosperity as well as the light-vehicle needs of the growing number of smaller enterprises in the evolving socialist market economy. The most rapid growth occurred in the motorcycle fleet at 37 percent per year, reflecting the desire for personal mobility now made affordable through growing prosperity. B. TRAFFIC GROWTH AND ROAD SAFETY 2.10 Traffic. In Hubei from 1985 to 1995 freight traffic grew at about 4 percent per year and passenger traffic at 8.5 percent per year (Tabl2..2). In freight and passenger traffic, the fastest-growing mode during this period was air transport, which grew at about 28 percent per year. The highway mode followed at about an annual 5 percent in freight and 11 percent in passenger traffic. By the year 1997, about 75 percent of freight and about 90 percent of all passenger movements were undertaken by road transport. Around - 7 - 57 percent of all passenger-km occurred by road while about 32 percent of passenger-km occurred by rail. 2.11 Safety. Road safety is a serious problem in Hubei Province, as elsewhere in China. Generally, the number of traffic accidents has increased less rapidly than the growth in traffic volume or vehicle registration. In Hubei, while the absolute number of accidents and injuries has declined since 1987, as has the fatality rate per 10,000 vehicles, the proportion of fatalities has been increasing, suggesting more serious accidents with higher frequency of death. In 1996, the statistics show 3,000 deaths were caused by traffic accidents in Hubei Province, with 200 deaths attributed just to the Hubei section of National Road (NR) 107. The magnitude of losses is likely to accelerate in the future if appropriate action is not taken. Further, despite recent declines (5 percent per year since 1987), the fatality rates for Hubei, like those for China as a whole, remain higher than rates in many developed and developing countries. 2.12 Since 1987, primary responsibility for road safety lies with the Traffic Police of the Public Security Bureau (PSB), including that for vehicle testing and inspection, driver training and licensing, propaganda on safety, enforcement of traffic laws, including imposition of fines, operation of traffic signals, highway patrols, and all aspects of accident reporting, investigation and research. However, HPCD retains responsibility for all matters concerning safe highway design and traffic signs and markings. HPCD would launch a road safety program under the proposed project, primarily dealing with matters within HPCD' s jurisdiction. C. HIGHWAY ADMINISTRATION, PLANNING AND FINANCING 2.13 Administration. HPCD administers most of the highway and waterway transport activities in the province, and is responsible to the provincial government for highway planning, budgeting, and financing. HPCD adheres to the general transport policy and technical guidelines issued by MOC. 2.14 The administration of the road network in the project province takes place at the levels of: (a) HiPCD, (b) the municipal and prefecture highway bureaus, and (c) the local highway units of the county highway bureaus. HPCD administers the provincial highways through the Highway Administration and the Expressway (high-grade highway) Administration Bureaus while the municipal and county transport bureaus administer local highways and village roads. The provincial bureaus are responsible for all highway matters, including construction and maintenance, and these bureaus receive professional and technical guidance from the Engineering Administration Department of MOC. 2.15 HPCD administers all nonhigh-grade highways in the province through the Highway Administration Bureau (HPHAB). This Bureau is responsible for the management of nonhigh-grade highway construction and maintenance. Local branches in each prefecture, city and county are responsible for the construction and maintenance of national, provincial, county and country highways. The Highway Transport - 8 - Administration Bureau (HPHTAB) is responsible for management of the entire highway transport sector. The Expressway Bureau (the High-Grade Highway Administration Bureau) (HPEB) is in charge of construction, routine and periodic maintenance, toll collection and overall management of the toll expressways in Hubei Province. The provincial, municipal and prefectural highway bureaus currently have a total staff of about 37,000, of which technical personnel comprise about 14 percent. 2.16 Planning. HPCD has overall responsibility for planning, construction, operation and maintenance of the provincial highway networks. The highway administration units at the prefecture, county and village levels have considerable autonomy in planning smaller investments, which are nonetheless subject to approval by HPCD. Each administrative group prepares investment plans for the highway network under its jurisdiction and submits these to the planning divisions of HPCD each year for the next year's plan. HPCD approves the yearly plans for each county or local authority concerned. Similarly, using inputs from the lower level administrative groups, HPCD prepares their five-year road development plans, reflecting national and provincial development policy guidelines and objectives for the planned period. The current 9FYP (1996-2000) for highway investment and maintenance in Hubei requires a total of Y 16.4 billion. 2.17 Financing. Funding for highway construction and maintenance comes from several sources, but by far the largest source is the road maintenance fee, which provided about 36 percent of all highway funding in Hubei during 8FYP. Highway funding sources and expenditures are summarized in Table 2.3. The Road Maintenance Fee is collected from all motor vehicles. The total amount collected from cars, vans and trucks is retained by HPCD, while the amount collected from tractors and other agricultural vehicles is managed by prefectures, cities and counties. Such vehicles as military and police cars, fire trucks, city buses and city garbage trucks are exempted from highway maintenance fees, also the party and government vehicles are partly exempted. 2.18 The Highway Key Construction Fund was established by the provincial governments for the construction of high-grade highways and bridges and is being collected from vehicles owned in the provinces and operated in highway passenger and freight transportation. The Highway Key Construction Fund is determined as 31 percent of the total Road Maintenance Fee income and exempted from all taxes. Revenues from the Highway Key Construction Fund increased from Y 300 million during the 7FYP to Y 1,500 million during the 8FYP. The balance of the revenues from road maintenance fees (69 percent) is generally distributed as follows: 15 percent to the Energy and Communications Fund (discontinued in 1995), 10 percent to the National Budget Adjustment Fund (discontinued in 1996), 2 percent to the Public Security Bureaus and 1.86 percent to the transport fees collection sector (2.1 percent since 1995). The road maintenance fee retained by HPCD increased from Y 1,700 million for the 7FYP to Y 2,800 million for the 8FYP. -9 - 2.19 Other sources of revenue for highways include: (a) subsidies from MOC; (b) funds from local governments at prefecture, city and county levels; (c) aid-poverty fumd; and (d) loans from foreign and local banks (for details on highway financing see Table 2.3). Subsidies from MOC and local governments also substantially increased from Y 400 million for the 7FYP to Y 1,700 million for the 8FYP. 2.20 The highway network expended between 1990 and 1997 from about 47,500 km to about 48,700 km. During the 8FYP (1991-95), expenditures required for highway construction, rehabilitation, and maintenance totaled Y 8,000 million. Of this total, construction of new highways and highway improvement amounted to Y 6,350 million during the 8FYP, or about 80 percent of total highway expenditures (Table 2.3). Figure 2.1 shows the distribution of highway revenues and expenditures for Hubei for the 8FYP. FIGU]RE 2.1: HUBEI HIGHWAY REVENUES AND EXPENDITURES, 8FYP REVENUES EXPENDITURES Dorrmestic Foreigns ManRoad Peri OOverhead and Loans Loans 3intenance mraintenance 8% National Aid- 1 % Fee Routina 4% Pbverty nD maintenance Subsidy 8% 2% dt~ Captal Highway Key Construction Construction Constr. Plan and Subsidy 19% hmrovement 22% 80% D. ENGINEERING, CONSTRUCTION, MAINTENANCE AND TRAINING 2.21 Engineering. Road and bridge projects are engineered by the planning and design institutes at the provincial, prefecture, and city levels. The provincial planning and design institutes are responsible for designing all major road and bridge projects in the provinces. These design institutes are, in general, competent and have on staff experienced personnel for carrying out highway design tasks. HCPDI designed the major part of the Jingzhu and Hurong Expressways under this project. 2.22 Construction. Small-scale roads and bridges in the provinces are constructed by the construction units of the highway department of each city or county. The Highway Administration Bureau of HPCD is responsible for the construction of large- and medium-size highways and bridges. The Expressway Bureau in Hubei is responsible for the construction of high-grade highways. Since SPC directed that all major civil works are to be awarded after competitive bidding, many of the larger construction divisions are being reorganized into financially independent contracting companies and have been awarded contracts either individually or as partners in joint ventures on previous Bank- financed highway projects. - 10- 2.23 Maintenance. Highway maintenance for all nonhigh-grade highways is carried out by county highway bureaus under the control of municipal authorities. Maintenance is generally well organized and carried out satisfactorily, mainly through labor-intensive operations. Expenditures for periodic and routine maintenance increased about 58 percent from the 7FYP to the 8FYP in real terms. However, as a result of a huge increase in new construction, maintenance funds decreased from about 36 percent during the 7FYP to about 20 percent during 8FYP (Table 2.3) in relative terms. E. HIGHWAY DEVELOPMENT PROGRAM 1996-2000 2.24 9FYP for Hubei Highway Sector. The 9FYP comprises a total expenditure volume of Y 16.4 billion (about $2.0 billion equivalent), of which Y 13.7 billion (84 percent) would be for new road construction and Y 2.7 billion (16 percent) for routine and periodic maintenance (Table 2.4). 2.25 The 9FYP financing volume when compared with the 8FYP highway expenditures increased by a factor of 2.1. The construction investments in absolute terms increased by a factor of 2.2 and the maintenance expenditures in absolute tenns increased by a factor of 1.8. While the relative share of maintenance decreased from 20 to 16 percent, the relative proportion of new construction increased from 80 to 84 percent. 2.26 Highway sector funding for the 9FYP is coming from the following seven principal sources: (a) Y 4.2 billion from Road Maintenance Fund; (b) Y 2.7 billion from the Highway Key Construction Fund; (c) Y 2.7 billion in subsidies from MOC and MOF; (d) Y 0.8 billion financed by prefectures and counties; (e) Y 0.1 billion from National Aid-Poverty Highway Subsidy; (f) Y 2.4 billion from domestic loans; and (g) Y 3.5 billion from World Bank loans and other foreign loans. 2.27 The proposed 9FYP (Table 2.5) contains as the principal investment completion of the 142 km Huangshi-Huanmei section of Hurong Expressway and 335 km of Jingzhu Expressway including a section of the outer ring road in Wuhan and the Wuhan Junshan Yangtze Bridge, costing Y 11.8 billion (about $1.4 billion equivalent), of which Y 10.2 billion will be invested during the 9FYP and Y 1.6 billion during the 1 OFYP. 2.28 Other important investments of the 9FYP comprise: (a) Y 2.3 billion for construction, upgrading and improvement of about 2,300 km of class 1 and class 2 national and provincial highways; (b) Y 1.6 billion for construction and upgrading of 43 major bridges; and (c) Y 0.42 billion for construction and upgrading of 2,720 km of rural access roads (72 projects) in poverty areas. 2.29 Counterpart Funding. The total project investment for NH3 amounts to Y 5.6 billion ($679 million), out of which the Bank will finance Y 2.1 billion ($250 million), - 11 - Y 1.1 billion ($130.1 million) will be a grant from MOC, and the remaining Y 2.4 billion ($293.5 million) will come from the 9FYP and constitute about 17 percent of the new construction expenditures for the 9FYP. The Province places the highest priority on this project. 2.30 Maintenance Funding. The total expenditures for the road maintenance in 9FYP are projected to total Y 2.7 billion, which amounts to 16 percent of total highway expenditures. The maintenance funding in the 9FYP is based on the average maintenance standard for China at about Y 10,000 per 1 km of road. The road maintenance fee (RMF) is the only source for road maintenance. Routine and periodic maintenance expenditures would increase by about 75 percent over the 8FYP level. - 12- 3. THE PROJECT A. ORIGINAL AND FORMULATION 3.1 China's 9FYP (1996-2000) emphasizes a reduction in transport bottlenecks, which are now being recognized as a growing constraint to rapid economic development. The diversification and structural transformnation of the economy, toward more light and agroindustry and more interprovincial trade, coupled with severe capacity constraints of the railways, are causing an accelerating demand for road transport. This national pattern also applies to the project in Hubei. The new Beijing-Zhuhai (Jingzhu) Expressway, linking the north and south of China, crosses the provinces of Hebei, Henan, Hubei, Hunan, and Guangdong over a distance of approximately 2,500 km. Once completed, it will connect Beijing with Guangdong's fast-growing Pearl River Delta and Hong Kong. The Shanghai-Chengdu Highway (Hurong) is also a main route linking the east to the west of China over a distance of approximately 2,000 km passing through Shanghai, Jiangsu, Anhui, Hubei and Sichuan. Both routes have the highest priority among the 12 national trunk routes in the NTHS. Both are designed as high-grade, high-performance facilities, at a minimum four-lane standard, fully access-controlled, and will be operated throughout as toll highways. Jingzhu and Hurong are scheduled for substantial completion by the year 2003. 3.2 The Bank is already heavily involved in the construction of substantial sections of Jingzhu expressway, between Beijing and Guangzhou (see IBRD map 28750). Under the still ongoing NH1 Project, two important sections have already been built in Hebei and Henan provinces. Under the NH2 Project, two priority sections of Jingzhu Expressway in northern Guangdong and southern Hunan are being undertaken. Under the NH3 Project, several important sections of Jingzhu and Hurong expressways in Hubei would be undertaken. Finally, the NH4 Project will cover two important expressway sections in Hunan and Hubei, as well as a major Wuhan Yangtze River Bridge under a proposed BOT arrangement. These four National Highway Projects constitute a well-thought-out and well-balanced series of investment operations that assist GOC and the concerned provinces in the timely completion of China's highest priority expressway corridor. B. OBJECTIVES AND RATIONALE FOR BANK INVOLVEMENT 3.3 Project Objectives. The proposed project would be the third in the series of NHI- NH2-NH3-NH4 projects of Jingzhu expressway in Guangdong, Hubei, Hunan, Henan, and Hebei provinces. It would build on its predecessors NH1 and NH2 and would precede NH4 by about one year. All four projects in the series would support an integrated approach to expressway corridor development, with each of the four operations - 13 - contributing selected priority sections that would gradually develop into a full corridor system. 3.4 The specific objectives of the NH3 project would be to: (a) relieve road transport congestion and improve the integration of interregional trade and commerce by assisting in the further development of the NTHS in the principal North-South and East-West transport corridors and allowing for early completion of a functional expressway network in Hubei province, thus enabling through traffic to bypass Wuhan City; (b) strengthen institutional capacity at HPCD and related institutions, through provision of training, technical assistance and equipment, in planning, design, construction, operation and maintenance of Hubei's highway network; (c) develop a policy dialogue in the areas of the commercialization and corporatization of provincial expressway companies and highway maintenance management; and (d) improve the safety of road transport. 3.5 Rationale for Bank Involvement. The Bank's program of support in the highway sector will continue to assist China in the foreseeable future in the financing, development and management of this priority expressway system. By helping GOC to plan and build the NTHS, of which Jingzhu and Hurong Expressways form a central element, the Bank supports this essential long-term solution to the serious transport problems facing China, removing bottlenecks, facilitating interprovincial traffic, and promoting long-distance and transit traffic. This in turn would help arrest a growing regionalism while furthering the liberalization, facilitation, and cost reduction of transport, key requirements for market-oriented reforms to succeed. Early completion of the Jingzhu and Hurong expressway corridors is vital to rapid future economic development of the affected regions including Hubei province and would help realize the full economic benefits from large-scale expressway development. 3.6 Since demand for new expressways in China is well beyond any similar requirement existing in the world today and certainly outstrips available public funding by a wide margin, Bank involvement in the construction of the new expressways in Hubei is a positive addition to the resources of China. However, these resources are insufficient to close the funding gap. By conservative estimates China requires $20-25 billion of capital from the private sector to meet its highway program goals over the next 10 years. Through sponsorship of model BOT prequalification and bidding document preparation and development of a competitive and transparent procurement procedure, the Bank was able to play an important formative role in the establishment of a BOT concession framework, conducive to the attraction of private financing for China's highway program. - 14- Further, as a result of the Junshan Yangtze bridge BOT project, for which the Bank funded a feasibility analysis and is prepared to support an international marketing effort by MOF, SPC, MOC and HPCD, China now has the opportunity to test the international market with a toll bridge project which is commercially viable. The experience that will be gained from this first BOT highway/bridge project will be very valuable to the ongoing development of China's ambitious toll expressway program. 3.7 Bank support is also justified by project assistance to institutional and policy development, which, besides the provision of training and equipment, would include studies on expressway commercialization and corporatization, and highway maintenance management. This would facilitate the introduction of market principles and mechanisms in highway operation, management and maintenance. Bank involvement is also expected to benefit the design and quality of construction of expressways as well as the improvement of road traffic safety. NH3 would also foster improved practices in the areas of environment and resettlement of project-affected people, thus supporting the Bank's country and sector assistance strategies. C. PROJECT MONITORING 3.8 Project impact would be monitored with respect to the project objectives (PO). The key indicators are as follows. PO (a): (i) reduced congestion levels on roads parallel to the proposed new expressways (traffic volume); (ii) increased average travel speeds on roads parallel to the proposed new expressways (km/hr); P0 (b): (i) enhanced institutional capacity of HPCD for specifically defined areas [technical assistance (TA) person-months]; PO (c): (i) improved policy framework for highway commercialization and maintenance (in each policy area establishment of action plan and its implementation); and PO (d): (i) reduced numbers of traffic accidents (number of fatalities and injuries on existing roads). In Annex 1, the following are delineated: (a) More specific description of performance indicators; (b) Baseline values; (c) Mid-term benchmarks; (d) Interim benchmark; and (e) Targets for each value. - 15 - Parameters, baselines and targeted values were developed by HPCD for review by the Bank and were confirmed at negotiations. 3.9 The achievement of project output would be tracked by monitoring indicators, listed below. Project output can be defined as immediate project targets and initial flows of services, such as physical quantity (percent of the length of road constructed); institutional strengthening (training achieved), and quality (safety initiatives, environmental requirements). The following monitoring indicators were set up for some of the key project components. There are time-bound monitorable targets that would be described either as actual physical outputs or as a percentage of components implemented. Monitoring Indicators: (a) Percentage of the length of the Beijing-Zhuhai (Jingzhu) expressway (out of 143 km) and two short sections of the Shanghai-Chengdu (Hurong) expressway (out of 54 kmi); (b) Percentage of the length of the interconnecting roads (out of 33 km); (c) progress made in the implementation of the training component for HPCD and its affiliated institutions (person-months); (d) number of black spots of the highway safety program completed (out of identified black spots); (e) progress made in purchasing equipment for HPCD and its affiliated institutions (as a percentage of its dollar value); and (f) progress made on the studies. The monitorable targets are shown in Annex 1. D. PROJECT COMPONENTS 3.10 The project would comprise the following components: (a) Construction of two sections of the Beijing-Zhuhai (Jingzhu) expressway (143 km) and two short sections of the Shanghai-Chengdu (Hurong) expressway (54 km total) (which would be connected by the Junshan Yangtze Bridge proposed to be built under a BOT scheme under the proposed NH4 Project). The works would include construction of administration, service and maintenance facilities as well as the supply and installation of electrical, electronic and mechanical (E&M) equipment for tolling, telecommunication, traffic monitoring, and lighting of interchanges, toll plazas and service areas; - 16- (b) An interconnecting road program (33 km) connecting the expressway sections to existing road infrastructure in the North-South (Jingzhu) and East-West (Hurong) corridors; (c) Construction supervision services for all expressway sections and their interconnecting roads; (d) Studies/technical assistance in (i) highway maintenance management, (ii) expressway commercialization and corporatization; and (iii) several road traffic safety components; (e) Staff training programs, covering all aspects of highway planning, design, construction, operation, finance and maintenance; and (f) Equipment for: (i) control of construction quality and monitoring of the environment; (ii) operation and maintenance of expressways after their completion; (iii) maintenance of the provincial road network; and (iv) bridge information system (BMS), pavement management system (PMS) and maintenance management system (MMS). E. CIVIL WORKS CONSTRUCTION AND SUPERVISION 3.11 Construction of Dawu-Yangtze River Crossing and Yangtze River Crossing- Shenshan Sections of Jingzhu Expressway. The sections Dawu-Yangtze River and Yangtze River-Shenshan are parts of the Jingzhu Expressway and 143.3 km long. Between Dawu and Xiaochang Xiaoche, that is 21.4 km, the expressway is planned for 2x2 lanes and designed according to MOC's standards for expressways in heavily hilly areas. The design speed is 100 km/h and the width of subgrade is 26 m. Between Xiaochang Xiaoche and Quanli, that is 107.9 km, the expressway is planned for 2x2 lanes and designed according to MOC's standards for expressways in flat and lightly hilly areas. The design speed is 120 km/h and the width of subgrade is 28 m. Between Quanli and the Yangtze river crossing as between the Yangtze river crossing and Shenshan, that is 14.0 km (19.0 km including the Yangtze river crossing section), the expressway is common for Jingzhu and Hurong and planned for 2x3 lanes. Expressway standards from MOC for flat and lightly hilly areas are applied. The design speed is 120 km/h and the width of subgrade is 35.5 m. 3.12 The Junshan Yangtze river bridge, which is the central part of the 19.0 km long Quanli-Shenshan expressway section, will be built as part of the proposed NH4 project (FY99). Accordingly, construction of the Quanli-Yangtze river and Shenshan-Yangtze river bridge access subsections will be undertaken under NH3 loan financing so as to coincide with the construction of the Junshan bridge. Assurances were obtained at negotiations that Hubei Province would, in connection with the two bridge access subsections: (a) prepare and furnish to the Bank, for its confidential use in making its evaluation and comments, the technical specifications, construction timetable, financing plan and procurement procedures in regard to the Yangtze bridge at Junshan; and (b) - 17 - coordinate closely the construction of the two adjacent sections of the Jingzhu Expressway with the construction of the said bridge. 3.13 Construction of Quanli-Yongan Section of Hurong Expressway. The section Quanli-Yongan (10.3 kin) is a part of the Hurong expressway. It connects in the west to the existing Hurong section Yongan-Yichang and in the east to the foreseen Jingzhu expressway. This section is planned for 2x2 lanes. Expressway standards from MOC in flat and lightly hilly areas are applied. The design speed is 100 km/h. 3.14 Construction of Shenshan-Baoxie Section of Hurong Expressway. The section Shenshan-Baoxie (43.5 km) is part of the Hurong expressway. It connects in the east to the foreseen Jingzhu expressway and in the west to the existing Hurong section Wuhan- Huangshi. This section is planned for 2x2 lanes. Expressway standards from MOC in flat and lightly hilly areas are applied. The design speed is 100 km/h. 3.15 The Jingzhu and Hurong Expressways would also include: (a) construction of 16 interchanges, (b) 5 service areas providing facilities for refueling and vehicle repair, restaurants, parking and resting, (c) 1 additional rest area providing facilities for refueling, parking and resting, (d) 5 facilities for expressway administration and maintenance, and (e) E&M installations for toll collection, traffic monitoring, telecommunications and lighting of all interchanges and annex areas. The preliminary designs have been completed by HCPDI for all civil works and the detailed engineering design for the expressway is nearing completion. MOC's Highway Research Institute in Beijing is designing the E&M works. Preliminary designs will be reviewed and approved by MOC. A detailed description of the technical characteristics of the Jingzhu and Hurong expressways is contained in the project files. The bidding documents would be completed before mid-1 998. Engineering designs are being reviewed by a team of French consultants under French Government trust-funding during January 1997-June 1998. 3.16 Interconnecting Roads Program (IRP). The opening of Jingzhu and Hurong Expressways would bring significant traffic increases to the existing road system. While some of these roads have recently been upgraded, HPCD plans to improve the remaining ones by 2001-02, the time of the planned opening of Jingzhu and Hurong Expressways. On the basis of a comprehensive review of all existing and planned roads that would interconnect with Jingzhu and Hurong Expressways at their 16 interchanges, an IRP comprising about 371 km of roads has been developed, among which three linking roads with a total length of 33 km would be financed under the project and the rest would be funded through Hubei's own highway resources and under the proposed NH4 project. This IRP is shown in Table 3.1. Among the interconnecting roads, the Dawu interconnecting road will connect the existing NR107 to the Jingzhu expressway until the expressway to the border with Henan Province will be completed. 3.17 Construction Supervision. Training programs in construction supervision for local staff would be completed prior to the mobilization of contractors. This training would be conducted by the international supervision consultant that will be selected. The first - 18- phase of the training program, prior to the beginning of construction, would include lecture courses and site visits while the second phase would comprise on-the-job training to take place during construction of Jingzhu and Hurong expressway sections. 3.18 The construction supervision organization for Jingzhu and Hurong would consist of a joint international/local core supervision team to be established around five foreign engineers (with a total of 206 person-months), with expertise in project/contract management, earth and pavement works, bridge construction and E&M works. The core team would also include 291 local supervision staff and would be located in Wuhan where it would be supported by a central laboratory to be staffed with 15 qualified local experts. For field supervision of 12 ICB civil works contracts, two resident engineer's offices (REOs) would be established in Xiaogan and Wuhan, staffed with 32 persons. A total of 216 local supervisors would be engaged corresponding to one person per km of expressway construction. Domestic supervising engineers would provide some 7,200 person-months. Supervision of civil works for Jingzhu and Hurong would be carried out by qualified local supervision teams acceptable to the Bank. These supervision arrangements were reviewed and confirmed during negotiations. Assurances were obtained at negotiations that HPCD would maintain construction supervision teams with qualified staff in adequate numbers to ensure that works are carried out in accordance with technical specifications and that strict quality controls are exercised on site. Construction quality would also be monitored through routine project supervision and monthly and quarterly progress reports. F. INSTITUTIONAL CAPACITY BUILDING 3.19 Highway Maintenance Management. To improve and modernize maintenance management in Hubei, HPCD would proceed with a highway maintenance management study. The overall objective would be to create an efficient maintenance organization, adjusted to modern management philosophy and using modern technology. The study would: (a) review the institutional arrangements, policies and procedures for highway maintenance, consistent with the economic reform process; (b) identify expenditures required to maintain the existing road network, taking budget constraints into consideration; and (c) formulate and prioritize a multiyear highway maintenance program for the later part of the 9FYP period. The outcome of the study would include recommendations on (a) organizational changes; (b) equipment needs; (c) training of personnel; (d) a model to estimate medium-term maintenance needs; (e) strengthening of Hubei's Bridge Maintenance System (BMS) and Pavement Management System (PMS); and (f) introduction of a Road Data Bank (RDB). The final terms of reference (TOR) prepared by HPCD were reviewed and confirmed at negotiations and are available in the project file. Assurances were obtained at negotiations that Hubei would: (a) undertake and, by June 30, 2000, complete the said study in accordance with terms of reference satisfactory to the Bank for its review and comments; (b) by December 31, 2000, finalize and furnish to the Bank recommendations taking into account comments made by the Bank; and (c) thereafter, take appropriate steps to implement the recommendations of the said study. - 19- 3.20 In addition, assurances were obtained at negotiations that HPCD would, by March 31 of each year commencing in 1999 and ending in 2003, furnish an annual highway condition report for the Bank's review and comments, which would. (a) show the length of each class of highway by condition (excellent, good, fair and bad) as of December 31 of the previous year; (b) show the completed physical works and actual expenditures o,f the previous year against the planned physical targets and budgeted funds of that year, for new construction, upgrading/improvement, rehabilitation, periodic maintenance, and routine maintenance; and (c) show the targets of the highway program for the current year, including new construction, upgrading/improvement, rehabilitation, periodic maintenance, and routine maintenance, in terms of planned physical works and planned expenditures. 3.21 Expressway Commercialization and Corporatization. This study would assist HPCD in developing modem thinking in how to finance and manage its new expressways and would analyze the longer-tern options available in financing, managing and organizing its high-grade highway corporation(s). It would help design a modem organization in compliance with international standards of financial management, would ensure that toll revenues are properly collected and managed and that expenditures (both for investment and for adequate maintenance) are well planned. Given the complexity and newness of this study approach, it would be conducted in two phases. Phase 1 would be covered under the NH3 Project while phase 2 would be undertaken during the NH4 Project. The Final TOR prepared by HPCD were reviewed and confirmed at negotiations and are available in the projectfile. Assurances were obtained at negotiations that Hubei would. (a) undertake and, by December 31, 2000, complete the said study in accordance with terms of reference satisfactory to the Bank for its review and comments; (b) by June 30, 2001, finalize and furnish to the Bank recommendations taking into account comments made by the Bank; and (c) thereafter, agree with the Bank on appropriate steps to be undertaken during implementation of the future NH4 project. 3.22 Road Safety. The road safety components to be undertaken would concentrate on institutional improvements, training, increased awareness of the safety problems, safety for road works, safety audit procedures, and the identification and implementation of physical measures. Some of these activities will be initiated under the NH3 project and continued under the NH4 project: (a) Hubei's Traffic Engineering Society (TES), during its annual meetings, vvould start incorporating road safety issues in its agenda. This would form a basis toward developing a road safety seminar that would become an annual event. The basic concept for the seminar would be to create a better understanding of road safety, and to learn lessons from other countries about road safety work. Domestic and international experts would be invited to attend the annual seminar; (b) HPCD would introduce standards regarding safety at road works issued by MOC, develop and carry out an implementation plan for improved safety - 20 - at road work sites. This would enable the organization of roadworks under conditions tolerable to road users and workers, and requiring solutions for, inter alia, comprehensive schemes for work zones and temporary traffic operations, technological innovations, and monitoring users behavior and traffic. The overall aim of this effort would be to test the guidelines issued by MOC. Different types of roadworks would be examined, from mobile and short-duration to long-duration roadworks. Equipment and accessories used for temporary signing, traffic guidance and the protection of workers would be examined. After one year, an evaluation shall be carried out aiming at further development of the guidelines; (c) HPCD would develop, through technical assistance, a safety audit schedule, consisting of a series of checklists and guidelines enabling systematic checking of highway engineering designs to ensure that they do not contribute to but help reduce accidents. A start was already made through various design improvements on the Jingzhu and Hurong Expressways, for example, on the shapes of its interchanges, the connections of annex areas to the expressway, or the locations of the maintenance centers; (d) HPCD would undertake through technical assistance the in-house development of a black-spot analysis and improvement system, comprising the identification of black spots; design, funding, implementation of remedial measures; and conducting before and after studies. Assurances were obtained at negotiations that Hubei would: (a) cause TES to incorporate road safety issues into the agenda of its annual meetings starting in 1999, and thereafter, organize an annual road safety seminar in Hubei starting 2000; (b) apply the MOC manual on safety at roadworks; (c) develop through technical assistance a safety audit schedule, and with own staff carry out a black-spot analysis and improvement plan, and by June 30, 2000, complete the said TA components in accordance with terms of reference satisfactory to the Bank, (d) by June 30, 2000, furnish the TA results to the Bank for review; and (e) thereafter, take appropriate steps to implement the recommendations of the said TA components, taking into account the comments thereon of the Bank 3.23 Training. The training program would mainly focus on highway planning and engineering design, construction and its supervision, maintenance and operations management, including, but not limited to quality control, budget planning, environmental issues, engineering economics, and road safety. The program would aim at training of personnel needed for the project to guarantee its smooth implementation and progress. It would also cover professional training on the part of personnel in the transport sector and professional training for trainers. A training program has been prepared, which will include the training of 47 people to be trained overseas for 72 - 21 - person-months while 206 people will be trained in China. Three foreign experts will be engaged for about 3 person-months in the domestic training program. Detailed documentation on the proposed training program is available in the project file. The proposed training program was confirmed during negotiations. Agreement was reached at negotiations that Hubei would, by June 30 of each year and commencing in 1999, furnish a rolling two-year training implementation program to the Bank and would carry out the training under the program acceptable to the Bank 3.24 Equipment. Equipment to be provided under the project has been identified by HPCD and reviewed by the Bank. Equipment lists including cost estimates are available in the project file. These lists include equipment items required for expressway operation and maintenance, strengthening of institutions and central laboratories, and environmental monitoring. Selected equipment items for BMS, RDB and PMS development as well as for the maintenance of the provincial highway network are also included. All equipment lists as proposed by HPCD including cost estimates were reviewed and confirmed during negotiations. G. ENVIRONMENTAL ASSESSMENT 3.25 An environmental impact assessment (EIA) for the Dawu-Shenshan section of the Jingzhu Expressway; the Zhushan-Yongan and Shenshan-Baoxie sections of the Hurong Expressway and the interconnecting roads was carried out by the Research Institute of Highways (RIOH) of MOC and two EIA reports (for the Expressways and the interconnecting roads), and an Environmental Action Plan (EAP) were submitted to the Bank during the preparation mission in May 1996. Thlese documents were reviewed by the Bank and discussed with HPCD during the May 1996 mission. Based on the Bank's comments, the revised EIAs and EAP for the Expressways and its interconnecting roads, and the Environmental Assessment (EA) Summary were submitted to the Bank in December 1996 for review. These documents were further reviewed and discussed with HPCD during the preappraisal mission in March 1997. The final EIA reports, EAP and EA Summary covering the Expressways and its interconnecting roads were submitted in April 1997 and found to be satisfactory to the Bank. 3.26 The EIA has ascertained that the proposed highways will not affect sensitive areas and, if appropriate actions are taken, the construction and the operation of the highways should have no adverse impact on the environment. The major environmental impacts during the construction of the highways will include noise, dust, alteration of hydrological regimes, soil erosion, interference with local people and traffic, impacts on the local ecology and on irrigation systems. Of these impacts, noise, dust, and soil erosion would be most serious. Traffic noise, vehicle exhaust emission, soil erosion, and water pollution from service areas were identified as major adverse impacts during the operation period. 3.27 The EAP specifies the appropriate mitigation measures, environmental monitoring plans, institutional arrangements for their implementation, environmental training, - 22 - monitoring equipment requirements, and budget needs for environmental protection. Major mitigation measures in the construction phase will include optimum planning of earthworks to reduce damage caused by borrow areas, appropriate design of overpasses/underpasses to minimize social disruptions and interference with local traffic, reconstruction of irrigation and drainage systems where appropriate, and use of water sprinklers to reduce dust. 3.28 The engineering design and technical specifications of the highways incorporate appropriate mitigation measures for environmental protection. In the operational phase, these will include construction of noise barriers to reduce traffic noise, strengthening of vehicle emission inspections to minimize air pollution problems, and afforestation to improve landscape and reduce air pollution. The summary of the EIAs and EAPs is presented in Annex 2, and copies of the EIAs and EAPs are available in the Project File and will also be made available through the Public Information Center (PIC). Assurances were obtained at negotiations from Hubei Province that: (a) the environmental protection measures stipulated in the EAPs with respect to the Expressways and its interconnecting roads would be carried out in a manner satisfactory to the Bank; and (b) Hubei Province would furnish to the Bank annual environmental monitoring reports for the Expressways during their construction phases and for each of the first three years following their construction completion. H. LAND ACQUISITION AND RESETTLEMENT 3.29 The Resettlement Action Plan (RAP) for the project was prepared by the Hubei Expressway Resettlement Office (HERO) of HPCD based on the following laws and regulations: (a) The Land Management Law of the People's Republic of China (Revised Draft), December 29, 1988; (b) Implementation Regulations for Land Management Law of the People's Republic of China (1991); (c) Notice Concerning the Standard of Land Occupation Tax in Highway Construction (published by MOF), January 1, 1991; and, (d) Provincial and municipal regulations as listed in Annex 3. 3.30 Objectives. The RAP establishes the basis for land acquisition and resettlement in the project and responds to the general Bank guidelines on involuntary resettlement. The basic objectives of the RAP are to: (a) minimize resettlement; (b) improve the standards of living of the Project-Affected Persons (PAPs) or at least to restore them; (c) consult with the affected communities on the project impact, entitlements, and rehabilitation measures; (d) compensate the villages for land and the PAPs for their lost assets at replacement value without depreciation; (e) provide land to the PAPs whose land is affected by readjusting the village land; (f) provide alternative jobs to the PAPs losing - 23 - agricultural land if the land endowment of affected villages do not permit readjustment; (g) ensure that PAPs whose jobs are affected through affected enterprises are provided with similar employment in new enterprises; (h) compensate the disrupted infrastructure; (i) establish the time schedule and the budget of the resettlement component of the project; (j) devise a mechanism for grievance and appeals; and (k) devise internal and independent monitoring. 3.31 The RAP meets the general standard of transport sector RAPs for China and the Bank Guidelines for Involuntary Resettlement. The RAP is reviewed in detail in Annex 3. Assurances were obtained at negotiations from Hubei Provincial Government that all land acquisition and resettlement activities with respect to the NH3 Project (including the Jingzhu sections, Hurong sections and their interconnecting roads) would be completed in accordance with the RAP in a manner satisfactory to the Bank. 3.32 Institutional Strengthening. The project addressed this issue by (a) introducing the unification and computerization of the data, and training the county-level resettlement staff in the management of the data. College-educated staff familiar with computers were employed for data management; (b) collaboration between the design institute and HERO was encouraged in the minimization of resettlement. The resettlement minimization process, which is regularly done at the feasibility studies level, was carried over to the preliminary and the final design stages; and (c) the generic RAP for highway projects was introduced, to the project during the planning process and part of it was successfully applied. 3.33 Adverse Impact of NH3 Project. The project will lead to permanent acquisition of 18,322 mu, and temporary acquisition of 2,722 mu of land. A total of 1,091 households and 152,278 m2 of private housing will be relocated. The total number of households affected by the project will be 4,464, with a total population of 20,569. The total number of enterprises and public organizations affected by the project will be 37, with an employment of 1,591 persons. Assurances were obtained at negotiations from HPCD that the monitoring of the effectiveness and socioeconomic impact of the resettlement activities with respect to the NH3 Project (including the Jingzhu sections, Hurong sections and their interconnecting roads) would be carried out in accordance with the RAP in a manner satisfactory to the Bank. I. COST ESTIMATES 3.34 The total project is estimated to cost Y 5.6 billion or $679 million equivalent, including land acquisition, and physical and price contingencies as summarized in the following table. The foreign exchange cost is estimated at $250 million, or about 38 percent of the total. Base costs were estimated in March 1998 prices and confirmed at negotiations. Physical contingencies are calculated at 10 percent of the base cost of civil and E&M works and construction supervision services. Price contingencies have been calculated for foreign costs, using international annual escalation factors of 2.5 percent in each of 1999, 2000, 2001, 2002, 2003 and 2004. Price contingencies for local costs are - 24 - based on local annual escalation factors of 6.5 percent in 1999, and 6.2 percent in each of 2000, 2001, 2002, 2003 and 2004. PROJECT COST SUMMARY ($1.00=Y 8.3, March 1998 prices) Y million $ million Foreign costs Local Foreign Total Local Foreign Total as % of total Civil and E&M Works Expressway 2,176.5 1,416.8 3,593.3 262.2 170.7 432.9 39 Annex areas & adm. builds. 140.4 60.2 200.5 16.9 7.3 24.2 30 E & M Express. 30.5 121.2 151.7 3.7 14.6 18.3 80 Interconnecting Roads 55.2 23.2 78.4 6.7 2.8 9.5 30 Total Works 2,402.6 1,621.4 4,024.0 289.5 195.4 484.8 43 Supervision 78.6 35.3 114.0 9.5 4.3 13.7 31 Equipment 8.2 40.0 48.2 1.0 4.8 5.8 83 Training and Studies 5.6 9.1 14.8 0.7 1.1 1.8 62 Total Base Cost 2,495.1 1,705.9 4,201.0 300.6 205.5 506.1 43 Physical Contingencies 248.1 165.7 413.8 29.9 20.0 49.9 42 Price Contingencies 517.7 203.5 721.2 62.4 24.5 86.9 30 Total Contingencies 765.8 369.2 1,135.0 92.3 44.5 136.7 35 Land Acquisition and Resettlement 299.6 0.0 299.6 36.1 0.0 36.1 0 Total Project Cost 3,560.5 2,075.1 5,635.6 429.0 250.0 679.0 39 3.35 The costs of civil works are based on work quantities calculated from preliminary engineering designs. The costs were computed on the basis of MOC's standard manuals for labor and equipment productivity, the related annually updated costs and the current market costs of materials, labor, and equipment. The unit rates were checked against the unit prices provided in recent bids for similar highway works executed under Bank financing in other provinces. 3.36 The estimated cost of equipment is based on prevailing prices and those quoted by manufacturers and suppliers and includes the cost of equipment delivered in other provinces under the Bank's ongoing highway projects, spare parts, and related training, if needed, to operate and maintain the equipment. The estimated cost of consulting services is also based on recent contracts for similar services under the Bank's ongoing highway projects. J. FINANCING 3.37 The Bank loan of $250 million would finance about 38 percent of the total project cost and 100 percent of the foreign exchange cost. The Central Government (MOC) would provide the equivalent of about $130 million (19 percent of the total), while the - 25 - Hubei provincial government would provide the equivalent of about $299 million (44 percent of the total) to meet the remaining costs of the project, including contingencies. MOC's funding would be restricted to the construction of the expressway sections. FINANCING PLAN ($ million) Government Provincial Central Bank Total Expressway Civil Works 132.1 130.1 170.7 432.9 E&M Expressway 3.7 14.6 18.3 Admin. and Maintenance. Buildings 16.9 7.3 24.2 Interconnecting Roads 6.7 2.8 9.5 Subtotal works 159.4 130.1 195.4 484.8 Supervision 9.5 4.3 13.7 Equipment 1.0 4.8 5.8 Training and TA/Studies 0.7 1.1 1.8 Contingencies 92.3 44.5 136.7 Land Acquisition and Resettlement 36.1 0.0 36.1 Total Project Cost 298.8 130.1 250.0 678.9 Percent of Total 44 19 37 100 3.38 The Bank loan would be at the standard interest rate for LIBOR-based US dollar single-currency loans. It would be lent to MOF for a maturity of 20 years, including 5 years of grace. The proceeds of the Bank loan would be onlent to Hubei Province at the same rate payable to the Bank by the Borrower with 0.75 percent per year commitment fee on the outstanding balance, beginning 60 days afer loan signing, less any waiver. Agreement was reached with the borrower at negotiations that it would onlend the proceeds of the loan to Hubei province on these terms. The Hubei provincial government would bear the foreign exchange risks on the loan. The Government of China and Hubei Province have selected LIBOR-based US dollar single currency loan terms for the project to: (a) facilitate management of the foreign exchange risk of their borrowing by more closely matching the currency of their liabilities with that of their net trade flows, about 75 percent of which are US dollar denominated; and (b) preserve the full maturity of the loan and the lower annuity payment in early years, compared to the fixed-rate option that would have resulted in a 15-year loan and higher level annual payments during the initial operational period. - 26 - K. IMPLEMENTATION 3.39 Implementing Agencies. The World Bank Finance Office of HPCD would be the executing agency for the Jingzhu and Hurong expressway sections and the interconnecting roads. HPCD would be the executing agency for the Highway Maintenance Management and the Expressway Commercialization and Corporatization studies and the Road Safety Program. The PIP is available in the Project File. The Hubei PIP was reviewed and confirmed during negotiations. 3.40 Expressways and Interconnecting Roads. Detailed designs and technical bid documents will be completed before mid-1998. Foreign experts from France are reviewing the designs between 1997 and mid-1998. Preparation of commercial bid documents is being carried out by China International Tendering Company (CITC). Prequalification documents were released to applicants at the end of 1997, and the prequalification process will be completed by Spring 1998. Acquisition of land and the resettlement process are expected to be completed by June 1999. Supply and installation of electrical, electronic, and mechanical systems for operation of Jingzhu and Hurong expressway sections is scheduled to commence around the end of 2001, and be completed by the end of 2003. The construction of service facilities along Jingzhu and Hurong would be a continuous process during the project implementation period. Jingzhu and Hurong are expected to be completed by 2003. 3.41 Construction Supervision. Construction supervision services for Jingzhu and Hurong would be carried out by joint local/foreign supervision teams headed by chief supervision engineers with headquarters located in Wuhan. There would be a resident engineer for each of the 12 contract sections, located in Xiaogan and Wuhan. About 291 local personnel would be permanently engaged in supervision during construction. Invitations to foreign shortlisted firms will be issued later in 1998, and the selection of consulting firms is expected to be completed by Autumn 1998. The consultants are expected to help set up the supervision organization prior to the commencement of civil works and to provide training within the province and abroad to selected local supervision staff. Most of the supervision training is expected to be completed by March 1999. Actual construction supervision of Jingzhu and Hurong is expected to start by September 1998. 3.42 Training. Formal selection procedures for candidates to be trained would be developed by HPCD. Those to be trained abroad would be given two to three months of intensive English language training, and each trainee would be required to submit a report on training received to his/her parent department or agency. Moreover, HPCD has indicated that training under the project would be related to the need of know-how within specific areas of each organization, career development and the professional growth of the selected staff. The comprehensive training programs would be open to all highway staff and would be administered by HPCD, in coordination with MOC. -27 - 3.43 Equipment. HPCD would be responsible for equipment procurement related to the central laboratories, environmental protection, and operation and maintenance of Jingzhu and Hurong expressway sections. Preparation of specifications and bid documents for equipment would be carried out by CITC. Equipment for the central laboratory and environmental protection would be procured during the first year of project implementation while that for Jingzhu and Hurong operation and maintenance would be procured in 2000 and 2001. HPCD would be responsible for the procurement of equipment related to maintenance of Hubei's highway network, and to RDB/PMS. 3.44 Operation and Maintenance of Jingzhu and Hurong Expressway Sections. Hubei Province intends to operate the Jingzhu and Hurong expressways as toll facilities consistent with their designs. HPCD would be responsible for operating and maintaining the Jingzhu and Hurong sections following their completion. To ensure that the toll rates would be appropriately structured and that toll levels would not lead to a substantial reduction in the benefits of highway investment, the rationale for setting the level of tolling would be determined based on the findings of the study to be undertaken by the project province, which would take into consideration latest experience with operation of toll roads in I:unan, Guangdong and the rest of China as well as similar studies undertaken under Bank-financed highway projects in China. Assurances were obtained at negotiations that Hubei would undertake, and by December 31, 2001, furnish to the Bank for its review and comments, analyses and recommendations for the structure of toll rates on the Jingzhu and Hurong sections, taking into consideration the results of the toll rate structures under Bank-financed highway projects in China and the recent experience with tolls on high-grade highways in Hunan, Guangdong and other parts of China 3.45 The project is scheduled to be completed by December 31, 2003, with the loan closing date stipulated as December 31, 2004. The implementation schedule for the project is presented in Annex 4. L. PROCUREMENT 3.46 A summary of procurement arrangements is shown below. Goods and works would be procured in accordance with the Bank's "Guidelines for Procurement Under IBRD Loans and IDA Credits," dated January 1995 and revised in January and August 1996 and Septernber 1997. The procurement arrangements for the project have taken into account the experience gained from previous Bank-financed highway projects in China. The procurement documentation, including that for prequalification of contractors, International Competitive Bidding (ICB) and National Competitive Bidding (NCB) for civil works, ICB3 for goods and consultant services has been standardized for Chinese conditions in cooperation between the Chinese Government and the Bank. Standard documents would be used for all relevant procurement processes under the project. Where such standards are not available industry practice will be followed. -28 - SUMMARY OF PROCUREMENT ARRANGEMENTS ($ million) Procurement Method ICB NCB Other /a NBF /b Total Cost Works Expressway Civil Works 549.89 549.89 (208.90) (208.90) Annex areas & admin. bldgs 30.69 30.69 (8.83) (8.83) Expressway E&M Works 23.22 23.22 (17.79) (17.79) Interconnecting roads 12.00 12.00 (2.30) (2.30) Construction Supervision 17.44 17.44 (5.18) (5.18) Equipment 4.00 3.38 7.38 (3.20) (2.68) (5.88) Consultants and Training c 2.26 2.26 (1.12) (1.12) Land Acquisition and 36.10 36.10 Resettlement (0.00) (0.00) Total 577.11 42.69 23.08 36.10 678.98 (229.89) (11.13) (8.98) (0.00) (250.00) /a Other includes international shopping and limited international bidding, and consultants and training. /b NBF: Not Bank-financed. /c Selection of consultants according to the Bank's guidelines. Notes: (1) Figures in parentheses represent the amounts financed by the Bank Group. (2) All figures are rounded and include estimated physical and price contingencies but exclude the cost of land acquisition and resettlement which is shown separately. 3.47 Works. In Hubei the civil works for Jingzhu and Hurong expressway sections would be divided into 12 contract sections, with an average contract size of $46 million equivalent. Electromechanical works would be handled as 1 contract amounting to about $23 million equivalent. Large contracts exceeding $10 million shall be advertised in accordance with the procedures applicable to large contracts. Interconnecting roads, administration and maintenance buildings, service areas and toll plazas would be carried out in several small contracts. 3.48 The 12 civil works contracts and 1 electromechanical works contract for Jingzhu and Hurong, with an estimated total cost of $573 million would be procured following ICB procedures. Contracts would be bid on a slice and package basis; qualified - 29 - contractors would be allowed to bid for more than one contract so as to attract international and large Chinese contractors. The I contract for electromechanical works would be bid later during the construction of Jingzhu and Hurong. All bidders for the 12 civil works contracts would be prequalified. Domestic contractors competing under ICB procedures would be eligible for a 7.5 percent price preference. Domestic bidders are expected to be competitive for all contracts under this project. 3.49 Other works, including interconnecting roads and small service facilities such as toll stations, maintenance depots, service and rest areas, and administrative buildings in Hubei would be awarded following NCB procedures acceptable to the Bank. These works would involve contracts estimated to cost less than $5 million per contract, up to an aggregate amoumt of about $43 million. Since these contracts are small in value and scattered along Jingzhu and Hurong and would be implemented over a four-year period, ICB would be neither justified nor practical, but international firms would not be precluded from bidding. 3.50 Equipment. Generally, all contracts for goods and equipment costing more than $250,000 equivalent would be awarded under ICB, in an aggregate amount not exceeding $4 million. However, for equipment where the number of suppliers is limited and contract values are small, limited international bidding would be followed in an aggregate amount not exceeding $1.5 million. All other items or groups of items covering minor maintenance equipment, equipment for RDB and PMS, laboratories, research and environmental protection purposes estimated to cost less than $250,000 per contract package, in an aggregate amount not exceeding $2.6 million, would be procured following shopping procedures on the basis of comparison of price quotations solicited from at least three suppliers from two countries eligible under the Bank Guidelines for Procurement. Domestic manufactures with local content more than 30 percent of ex- factory price competing under ICB would be eligible for a margin of preference in the comparison of bids of 15 percent for goods, or the prevailing custom duties, whichever is lower. 3.51 Consultants. All consultants required for construction supervision, staff training, technical assistance and studies would be selected and employed under terms and conditions acceptable to the Bank in accordance with Bank Guidelines on the "Selection and Employment of Consultants by World Bank Borrowers", dated January 1997 and revised September 1997. Selection of consultants for Construction Supervision, Highway Maintenance Management and Expressway Commercialization and Corporatization studies will be carried out through Quality and Cost Based Selection (QCBS). Local expertise available from the various provincial universities and institutes would be used as much as possible. 3.52 Advance Contracting. HPCD has requested advance contracting and retroactive financing in the following areas: - 30 - (a) Consultants for Construction Supervision of Jingzhu and Hurong. This would allow for training of local staff and start-up of construction supervision by the time contracts are signed with contractors. The amounts subject to retroactive financing are estimated at $1 million. (b) Laboratory Equipment for Joint Local/Foreign Supervision Teams. This would permit effective and timely construction supervision. The amounts subject to retroactive financing are estimated at $0.2 million. (c) Construction of Jingzhu and Hurong Expressway Sections. Early start of construction of the 2x2 lane, 130-km Dawu-Quanli section on Jingzhu Expressway and of the 2x2 lane, 54-km Quanli-Yongan and Shenshan- Baoxie sections on Hurong Expressway would help alleviate severe traffic bottlenecks and reduce traffic on the existing North-South and East-West corridors. The amount subject to retroactive financing is estimated at $23.8 million. 3.53 Agreement to the above three requests for advance contracting and retroactive fiznancing is recommended, subject to HPCD completing all Bank requirements, including those for procurement, environment, and resettlement. The total amount subject to retroactive financing is estimated at $25.0 million. All of this amount would apply to expenditures incurred after September 30, 1997. 3.54 Bank Review. Prior review procedures would be used for: (a) civil works contracts with an estimated cost of $2 million (Y 17 million) or more; (b) equipment with an estimated value of more than $250,000 per contract, and (c) consulting services with an estimated contract cost of more than $100,000 for firms and $50,000 for individuals. This represents about 83 percent and 78 percent of the estimated value of works and equipment contracts, respectively. For contracts below the above-mentioned limits, post- review procedures would be carried out during supervision missions on about one in four works and goods contracts in the first two years and on about one in ten contracts for the next four years of the project. M. DISBURSEMENTS 3.55 The proposed Bank loan of $250 million would be disbursed over a period of about six years, as shown on the following page. 3.56 To facilitate disbursements, a Special Account would be opened with an authorized allocation of $15 million, the estimated average expenditures for a four-month period. The account would be opened in US dollars in local banks acceptable to the Bank and would be managed by the Hubei Provincial Finance Bureau. Applications for replenishment of the Special Account would be submitted monthly or whenever the Special Account is drawn down to 50 percent of its initial deposit, whichever comes first. A schedule of estimated disbursements is given in Table 3.2, which takes into - 31 - consideration the project disbursement profile for transport projects in China and the potential risks of delay in project implementation. ESTIMATED DISBURSEMENTS Amount of the Category Loan Allocated Percent of Expenditures to be Financed ($ million) Civil works Expressways 192.9 45% of total expenditures Annex areas & admin. bldg. 7.6 30% of total expenditures Interconnecting roads 2.8 20% of total expenditures Electrical and meclhanical works E&M works 10.5 80% of total expenditures Construction supervision 4.4 100% of foreign expenditures Equipment 5.6 100% of foreign expenditures for directly imported equipment or 100% of local expendi- tures (ex-factory) for locally manufactured equipment and 75% of local expenditures for other items procured locally Consultants and Training Training 0.9 100% of foreign expenditures TA/Studies 0.2 100% of foreign expenditures Unallocated 25.0 Total 250.0 3.57 Disbursements would be made against authorized payment requests for work done under priced contracts for the civil works and for the delivery and installation of the equipment. Interim certification of civil works completed and estimated at unit rates in the contracts would be prepared by the contractors, reviewed by the supervision teams/ units and payments authorized by HPCD. Retroactive financing of up to $25 million would be applied to expenditures made after September 30, 1997, for consultants for construction supervision of Jingzhu and Hurong expressways, laboratory equipment for joint local/foreign supervision, and construction of Dawu-Quanli section on Jingzhu Expressway and Quanli-Yongan and Shenshan-Baoxie sections on Hurong Expressway. Disbursements for staff training in China or abroad would be made from the Special Account against the actual costs of travel, subsistence, and tuition or training fees. For expenditures relating to contracts for works of $2 million or less, training, force account, and contracts for goods, each valued at $250,000 or less, and contracts for services each valued at $100,000 equivalent or less for firms and $50,000 equivalent or less for individuals, reimbursement would be made on the basis of Statements of Expenditures (SOEs). Documentation supporting SOEs would be retained by the implementation agencies and made available for review by the Bank supervision missions. - 32 - N. AUDITING 3.58 The Foreign Investment Audit Bureau of the State Auditing Administration (SAA) would be responsible for auditing the project expenditures. Actual audits would be carried out for SAA by the Hubei Branch of SAA or the Hubei Provincial Audit Administration. Agreements were reached with Hubei Province during negotiations that the project accounts and the Special Account, including SOEs, would be audited annually by independent auditors acceptable to the Bank and that audit reports would be sent to the Bank for review within six months of the close of each fiscal year. In the case of the SOEs, the audit reports would contain a separate opinion by the auditors as to whether the SOEs submitted during the fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. The Bank Group currently accepts SAA audits for this purpose. 3.59 In light of OP/BP 10.02, Financial Management, adopted in August 1997, the Bank will be working closely with Borrowers and implementing entities to review and strengthen, wherever necessary, systems and procedures for financial accounting, control and reporting related to projects so as to ensure that accurate, timely and reliable information regarding project resources and expenditures would be available for project managing and monitoring purposes. More specifically, during the implementation of the proposed project, the Bank will assist Hubei in reviewing its financial management system in relation to the project. 0. PROJECT SUPERVISION, MONITORING, AND REPORTING 3.60 Supervision. The project would be supervised through Bank missions whose frequency would be guided by the progress of the works. However, on the average, a mission at about nine-month intervals would be mounted; a Supervision Mission Plan is presented in Annex 5. In addition to field missions, staff input would be provided at headquarters for project-related activities comprising, inter alia, supervision reports, procurement documentation and contracts, staff training and equipment, and follow-up and review of the agreed studies. Moreover, the Bank would monitor progress of implementation of all project components through quarterly progress reports to be submitted to the Bank independently by HPCD on their respective project components. In addition, HPCD would submit to the Bank monthly reports on works progress for Jingzhu and Hurong. It is estimated that over the implementation period of the project, the total time expended on supervision would be in the order of 60 person-weeks. During negotiations, agreement was reached with Hubei on the formats of the monthly and quarterly progress reports. 3.61 Monitoring. During implementation, project performance, including the achievement of physical targets and attainment of other project objectives would be monitored by HPCD through the use of performance indicators, reports on the environment and land acquisition and resettlement, progress reports and auditing of project accounts. In addition, upon completion, the project will be reviewed in an - 33 - Implementation Completion Report. Annex 1 presents the outline monitoring plan for the project. The plan defines for each of the project components indices that will track annual progress in attaining targets during implementation and impact objectives after the project is completed. The plan specifies how, with what frequency and by whom, the data for the indicators will be collected. Assurances were obtained at negotiations that Hubei would, on the basis of performance indicators acceptable to the Bank, prepare andfurnish to the Bank by June 30 of each year commencing in 1999 and ending three years after completion of the project, an annual monitoring report, in a format acceptable to the Bank, covering all components of the project and assessing the extent to which different implementation and development impact objectives are being attained in the course of project execution and operation. 3.62 Reporting. Based on the monitoring activities described in Annex 1, HPCD will submit to the Bank an annual monitoring report. This report will be based on the following reports, which will be submitted to the Bank during the course of a given year: (a) A series of internal and external (independent) monitoring reports assessing the impact of land acquisition and resettlement on various segments of the local population, describing the income restoration strategies followed and the number of people rehabilitated (Annex 3); (b) Annual environmental monitoring reports during the construction phase and the first three years of the operation phase of the Jingzhu and Hurong expressways (Annex 2); (c) Annual audit reports for the project accounts and financial statements (para. 3.58); (d) Quarterly progress reports for all project activities (including highway safety) and up-to-date performance indicators (para. 3.60); (e) Reports, by an independent agency/expert, on the completion of the Hubei highway safety components within six months of the completion of these component; and (f) A Project Implementation Completion Report would be prepared and submitted to the Bank not later than six months after the loan closing date. - 34 - 4. ECONOMIC EVALUATION A. OVERVIEW 4.1 The economic evaluation focuses on: (a) the Dawu to Shenshan segment (148.4 km) of the Beijing-Zhuhai National Main Trunk Highway, which accounts for 81 percent of project cost; (b) east (44.5 kin) and west (9.9 km) Wuhan segments of Shanghai-Chengdu National Main Trunk Highway, which account for 17 percent of project cost; and (c) the Dawu, Huayuan and Xiaogan interconnecting roads, which account for 2 percent of project cost. The Dawu to Shenshan segment was subdivided into five expressway sections and the east and west segments of the Shanghai-Chengdu highway were treated as one expressway section each. All sections were analyzed independently and the project was analyzed in its entirety. Particular attention was given to the Quanli-Shenshan section of the Dawu to Shenshan segment where the Junshan Yangtze Bridge will be located. The following table presents each section by length and base construction costs plus physical contingencies. Segment Section Length Cost (km) (Y million) Dawu-Shenshan Dawu-Huayuan 47.6 921 Huayuan-Sancha 28.1 643 Sancha-Dabati 34.9 899 Dabati-Quanli 18.6 711 Quanli-Shenshan /a 19.2 1,661 East Shanghai-Chengdu Shenshan-Baoxie 44.5 816 West Shanghai-Chengdu Quanli-Yongan 9.9 208 Interconnecting Roads Dawu Road 9.1 45 Huayuan Road 11.5 46 Xiaogan Road 12.2 34 La Including the Junshan Yangtze Bridge. B. EVALUATION OF THE EXPRESSWAYS 4.2 Benefits and Beneficiaries. The project is an important part of the "Two Vertical Two Horizontal" Main Trunk Highways planned by MOC. Beijing-Zhuhai Expressway passes through Beijing, Hebei, Henan, Hubei, Hunan and Guangdong provinces while Shanghai-Chengdu Expressway passes through Shanghai, Jiangsu, Anhui, Hubei and - 35 - Sichuan provinces. Those provinces are fast-developing zones in the country and the completion of the project is of great significance both to the national economy and China's social development. The two provincial sections in Hubei of Beijing-Zhuhai Expressway and Shanghai-Chengdu Expressway pass through the province from north to south and from east to west, respectively. 4.3 The major quantifiable benefits of the project are the reduction on vehicle operating costs and time costs of road users. The expressways will have shorter lengths, improved surface conditions and riding comfort, and no traffic interference caused by pedestrians, bicycles and nonmotorized vehicles. Therefore, most of the long-distance traffic and some of the local traffic is expected to diverge from the existing roads to the expressways, thus reducing the vehicle operating and time costs for the expressway users. Since many users will take the expressways, there will also be a reduction on the current congestion levels on the existing roads. Thus, users who remain on the existing roads will also benefit in the fonn of time savings due to the resulting higher travel speeds on the existing roads. Other quantified project benefits are due to the traffic that is newly generated as a result of the lowering of transport costs and that previously did not exist on the existing roads or is existing with other transport modes such as rail, inland water and air transport. This traffic includes traffic resulting from increased industrial and agricultural production. Other project benefits not quantified in this study are the generated traffic on the existing roads due to the reduction of the current congestion levels, diversion of traffic from other modes of transport, and positive effects on the nonmotorized traffic that uses the existing roads. 4.4 The HDM Model. The project benefits described above were estimated using the 1995 version of the Highways Design and Maintenance Standards Model (HDM) developed by the World Bank as a result of 17 years of research and analysis carried out collaboratively by the World Bank and several major research institutions around the world. The HDM model is widely used to analyze the economic consequences of road projects. It predicts, for a user-defined set of vehicles and traffic levels, the vehicle operating costs and travel time costs on a given roadway as a function of the vehicle characteristics, roadway geometry, roadway surface condition (roughness), and congestion level. The model first computes the free-flow vehicle speeds as a function of the road and vehicle characteristics and, using these speeds, it computes the actual speeds as a function of the congestion level. The computed actual speeds are then used to estimate the physical quantities of resource consumption (for example: liters/km of fuel consumption or hours of delay) that are multiplied by unit costs to finally obtain the road user costs. 4.5 Data Collection. Data were collected on vehicle fleet characteristics, utilization and unit costs, which are given in Table 4. 1. The average number of passengers for buses is 40 and the average payload for medium trucks is 3 tons and for heavy trucks is 6 tons. The number of kilometers driven per year is 65,000 for buses, 50,000 for medium trucks and 75,000 for heavy trucks. The economic costs were derived from financial costs by deducting taxes and duties; and the value of time was estimated to be Y 2.0/hour, - 36 - calculated on the basis of annual income for the region, and assuming that 40 percent of passengers are traveling on work/business purposes and the value of nonworking time is 25 percent of the average income. 4.6 Data describing the existing road characteristics and their current traffic were also collected in the field. Table 4.2 shows the data collected for each expressway section. For the economic evaluation, the Dawu to Shenshan segment of the Beijing-Zhuhai vertical corridor was subdivided into five sections to take into account different traffic levels, design standards and construction costs. The Wuhan segments (Shenshan to Baoxie and Quanli to Yongan) of the Shanghai-Chengdu horizontal corridor were not subdivided into sections due to their relatively uniform condition. Thus, the number of expressway sections identified and evaluated for the entire project is seven. Each expressway section captures the traffic currently on a network of existing roads, which is represented in the analysis by a representative existing road based on the data collected in the field. With the exception of the Quanli-Shenshan expressway section, which is a common section to both vertical and horizontal corridors and where the Junshan Yangtze Bridge will be located, the expressway sections will be constructed to 2x2 lanes with an average construction cost of Y 25 million per km. The Quanli-Shenshan section will be constructed to 2x3 lanes with a construction cost of Y 21 million per km without including the Junshan Yangtze Bridge cost, and Y 87 million per km including the Junshan Yangtze Bridge cost (Y 1,367 million). All sections are being designed according to MOC's expressway standards with access restricted to normal motor traffic; agricultural tractor and nonmotorized traffic would be excluded. From Dawu to Dabati, the expressway runs parallel to National Highway 107, a class 2 highway that is taken as the main passage in the north-south direction, with average distance savings of 10 percent. From Dabati to Shenshan, the expressway bypasses Wuhan city traffic with average distance savings of 44 percent. From Quanli to Yongan, the expressway runs parallel to National Highway 318, a class 1 highway, with distance savings of 10 percent. From Shenshan to Baoxie, the expressway runs parallel to the southern ring of Wuhan City, a class 3 highway, with distance savings of 9 percent. 4.7 Projected Traffic. Comprehensive origin-destination (OD) surveys were conducted, covering 22 influence areas providing a good basis for estimating the diverted and the generated traffic. The survey revealed the following: (a) the current average daily traffic (ADT) is on average around 8,600 vehicles per day; (b) trucks constitute about 60 percent of ADT; (c) medium trucks represent about 26 percent of ADT and heavy trucks represent 9 percent of ADT; (d) current measured vehicle speeds during the most congested hour are about 40 km/hour on National Highway 107 and 30 km/hour in Wuhan City; (e) current measured vehicle speeds at night are about 55 km/hour on National Highway 107 and 40 km/hour in Wuhan City; (f) the expected speeds on the expressways are 80 km/hour; and (g) the traffic in the peak hour is about 7 percent of the average daily traffic. The following table presents for each section the motorized traffic on the existing roads in 1996 and the expected diverted and generated traffic on the expressways in 2002. - 37 - Section Existing Diverted Generated in 1996 in 2002 in 2002 Dawu-Huayuan 6,100 6,000 990 Huayuan-Sancha 6,400 7,000 1,000 Sancha-Dabati 7,800 7,400 1,050 Dabati-Quanli 12,150 7,500 860 Quanli-Shenshan 12,750 9,800 1,200 Shenshan-Baoxie 7,800 7,150 1,000 Quanli-Yongan 7,500 9,800 1,500 4.8 On the basis of the OD surveys, the diversion of traffic from the existing roads was estimated to be about 60 percent and the generated traffic to be about 8 percent of the current traffic. Based on the expected economic growth in the areas of influence, the traffic is projected to increase on average at the following annual rates: (a) for the period 1998-2002, 14 percent for cars and 13 percent for commercial vehicles; (b) for the period 2003-12, 10 percent for cars and commercial vehicles; and (c) for the period 2013-22, 6 percent for cars and commercial vehicles. 4.9 Methodology. For each expressway section, the unit road user costs, in Yuan per vehicle-km, were estimated using the HDM model for vehicles traveling on the expressway and the representative existing road based on the vehicle data shown in Table 4.1 and the road data shown in Table 4.2. A sample of these unit road user costs is given in Table 4.3. The road user costs are a function of the congestion level of a road. Therefore, they were computed for a series of traffic levels and a relationship between road user costs and traffic was established for each road. This relationship was then introduced into a customized economic evaluation model created on an Excel spreadsheet. 4.10 The Excel model estimates the benefits due to the diverted and generated traffic on the expressways and the remaining traffic on the existing roads. For the diverted traffic, the benefits were taken to be the reduction on total transport costs; and for the generated traffic, the benefits were taken to be one-half of the unit benefits of the diverted traffic assuming the traffic would have developed in proportion to the reduction in transport costs. The Excel model takes as inputs the unit road user costs given by HDM for the "with" and "without" project cases, the length of the expressways and the existing roads, the construction and maintenance costs, and the traffic assumptions; and gives as outputs the rate of return and the net present value, at a discount rate of 12 percent, of the proposed project. The expressways are assumed to be constructed in four years, opening to traffic in 2002, the economic life of the expressways was assumed to be 20 years, and the residual value to be 50 percent of the initial construction cost. Table 4.4 shows, as an example, the resulting outputs for the Dawu-Huayuan section. - 38 - 4.11 Results. The following table presents the resulting EIRR and NPV (at 12 percent discount rate in million Yuan) obtained for each expressway section and the entire project. The project EIRR is 26.2 percent and none of the sections evaluated obtained an EIRR below 12.0 percent. The sections with lower EIRRs are the Quanli-Yongan section, which has small distance savings and where the existing road is a class 1 highway, and the Dawu-Huayuan section, which has the lowest traffic of all sections. The sections with higher EIRRs are the Dabati-Quanli and Sancha-Dabati sections, which have distance savings of 44 and 14 percent, respectively, and high traffic. The Quanli-Shenshan section where the Junshan Yangtze Bridge will be located has a EIRR of 24.8 percent. Table 4.6 and Table 4.7 present a graphical representation of the basic data and the results per expressway section and for the entire project. Section EIRR (%) NPV (Y million) Dawu-Huayuan 21.7 1,520 Huayuan-Sancha 25.4 1,691 Sancha-Dabati 28.8 2,902 Dabati-Quanli 31.9 2,768 Quanli-Shenshan 24.8 3,147 Shenshan-Baoxie 27.8 2,374 Quanli-Yongan 18.4 178 Entire Project 26.2 14,580 4.12 Sensitivity Analysis. Table 4.5 presents the results of the sensitivity tests done for this study. In the first sensitivity case, construction costs are increased by 25 percent; in the second case, user benefits are reduced by 25 percent; and in the third case, construction costs are increased by 25 percent and user benefits are reduced by 25 percent. The results of the third case indicate that all sections are justified even if this pessimistic scenario occurs and the EIRR of the entire project will be 20.7 percent. The fourth sensitivity case eliminates the value of time and yields a small reduction on the resulting EIRRs. In this case, the entire project EIRR is 22.5 percent, which indicates the low value of time in China and the low percentage of cars and buses on the traffic composition. The fifth sensitivity case reduces the generated traffic by 25 percent and yields a negligible reduction on the resulting EIRRs. In this case, the entire project EIRR is 25.1 percent, which indicates the low percentage of generated traffic adopted in the analysis and the fact that the generated traffic receives only half the unit benefits of the diverted traffic. The sixth, seventh and eighth sensitivity cases reduce the diverted traffic, traffic growth rate and unit net benefits by 25 percent. In these cases, the entire project EIRR is reduced to 24.4, 18.6, and 23.0 percent, respectively, which shows that the estimated traffic growth is the major factor affecting the project EIRR. 4.13 Switching Values Analysis. Table 4.5 presents the results of the switching values analysis done for this study. The table shows that, for the entire project, construction - 39 - costs have to be multiplied by a factor of 4.56 to yield an EIRR of 12.0 percent and that net user benefits have to be multiplied by a factor of 0.23 to yield an EIRR of 12.0 percent. For each expressway section, the construction costs multiplier factor varies from 2.04 to 5.67 aind the net user benefits multiplier factor varies from 0.16 to 0.51. The analysis shows that there is a good allowance for possible construction costs increases or reduction of net benefits. One can state that to yield a project EIRR of 12.0 percent, construction costs would have to be multiplied by around 5 or net benefits divided by around 5. 4.14 Risk Analysis. A risk analysis was undertaken using the @RISK software that adds risk analysis capabilities to an Excel spreadsheet following the methodology that is explained briefly in Table 4.8. For this analysis, all the input estimates defined in the previous paragraphs were adopted and the uncertainty for the following inputs was defined using a triangle distribution: (a) construction costs, (b) existing traffic on existing roads, (c) diverted traffic, (d) generated traffic, (e) traffic growth rate, and (f) unit net benefits computed by the HDM model. Considering possible sampling errors associated with measured data, probability distributions associated with estimated parameters, model uncertainty, and uncertainties due to forecasting by judgment (e.g., optimistic and pessimistic scenarios of economic growth), it was defined that: (a) there is a higher probability that construction costs will be higher rather than lower than the estimated values, (b) there is a higher probability that diverted traffic, generated traffic, and traffic growth rates will be lower rather than higher than the estimated values, and (c) there is an equal probability that the existing traffic and the unit net benefits will be lower or higher than the estimated values. 4.15 For the construction costs, the most likely value was set to the estimated construction costs, the minimum possible value was set to be 90 percent of the estimated construction costs, and the maximum possible value was set to be 150 percent of the estimated construction costs. These assumptions indicate that there is a 17 percent probability that the construction costs will be lower than the estimated values, 83 percent probability that they will be higher than the estimated values, and 62 percent probability that they will be between 100 and 125 percent of the estimated values. For the diverted traffic, generated traffic and traffic growth rate inputs, the most likely values were set to the estimated values, the minimum possible values were set to be 50 percent of the estimated values, and the maximum possible values were set to be 110 percent of the estimated values. These assumptions indicate that there is a 83 percent probability that the actual values will be lower than the estimated values, 17 percent probability that they will be higher than the estimated values, and 62 percent probability that they will be between 100 and 75 percent of the estimated values. For the existing traffic and unit net benefits inputs, the most likely values were set to the estimated values, the minimum possible values were set to 80 percent of the estimated values, and the maximum possible values were set to 120 percent of the estimated values. These assumptions indicate that there is a 50 percent probability that the actual values will be lower or higher than the estimated values and 74 percent probability that they will be between 90 and 110 percent of the estimated values. Table 4.9 shows the frequency distributions adopted in the study. - 40 - 4.16 With this information, the @RISK software evaluated 400 what-if scenarios, varying the inputs described above accordingly to the defined input probability distributions, yielding an estimated EIRR for each what-if scenario. The resulting frequency histogram graph and cumulative frequency distribution graph is given in Table 4.10 for the Quanli-Shenshan section and in Table 4.11 for the entire project. These tables also present the resulting mean EIRR, the EIRR standard deviation, the probability (in percent) that the EIRR will be lower than 12.0 percent, and an assessment of a worst scenario, most likely scenario, and best scenario. In this study, the worst scenario EIRR is defined as one that has a 10 percent probability that the actual EIRR will be lower than it (10 percentile), the best case scenario EIRR is defined as one that has a 90 percent probability that the actual EIRR will be lower than it (90 percentile), and the most likely scenario is defined as one that has a 50 percent probability that the actual EIRR will be lower than it (50 percentile). The results obtained for all the expressway sections are given in Table 4.5 and summarized below. Section Mean EIRR EIRR STD Prob.<12% Dawu-Huayuan 15.0 3.6 12.6 Huayuan-Sancha 19.6 3.7 3.8 Sancha-Dabati 22.9 3.7 0.7 Dabati-Quanli 25.5 3.8 0.0 Quanli-Shenshan 19.7 3.0 1.4 Shenshan-Baoxie 21.7 3.8 0.0 Quanli-Yongan 13.0 3.1 38.2 Entire Project 20.5 3.4 1.3 Section Worst Most Likely Best Scenario EIRR Scenario EIRR Scenario EIRR Dawu-Huayuan 11.6 15.2 20.6 Huayuan-Sancha 14.8 19.9 24.4 Sancha-Dabati 18.2 22.9 27.6 Dabati-Quanli 20.3 25.4 30.3 Quanli-Shenshan 15.6 19.7 23.4 Shenshan-Baoxie 16.9 21.7 26.6 Quanli-Yongan 9.1 12.9 17.2 Entire Project 16.2 20.6 25.0 4.17 The risk analysis shows that all sections and the entire project have an EIRR greater than 12.0 percent for the most likely scenario and best scenario. The entire project EIRR is 25.0 percent for the best scenario and 20.6 percent for the most likely scenario. For the worst scenario, the Quanli-Yongan section, which has 9.9 km and comprises 3 -41 - percent of the project cost , has 9.1 percent EIRR, and the entire project has 16.2 percent EIRR. 4.18 Conclusion. The single-point estimation and sensitivity analysis indicate that the EIRRs are greater than 12.0 percent for all sections and for the entire project. The risk analysis indicates that the most likely EIRRs are also greater that 12.0 percent for all sections and for the entire project and that the probability that the entire project EIRR will be lower than 12.0 percent is 1.3 percent. Therefore, the project is economically justified. C. DELAYED YANGTZE BRIDGE CONSTRUCTION 4.19 A scenario under which the Junshan Yangtze Bridge would be delayed for a longer period, i.e., only the traffic that does not use the bridge would materialize on the expressways, was evaluated. Under this scenario, it was estimated that, if the bridge is not built, 38.5 percent of the estimated traffic would materialize on the Dabati-Quanli section, 25.0 percent on the Shenshan-Baoxie section and 60.0 percent on the Quanli- Yongan section yielding an EIRR of 23.2 percent for the entire project and EIRRs greater than 12.0 percent for all sections. The following tables present the economic results. Junshan Yangtze Bridge Delay Section EIRR(%) NPV (Y million) Dawu-Huayuan 21.7 1,520 Huayuan-Sancha 25.4 1,691 Sancha-Dabati 28.8 2,902 Dabati-Quanli 21.7 832 Quanli-Shenshan NA NA Shenshan-Baoxie 16.4 365 Quanli-Yongan 16.5 118 Entire Project 23.2 7,428 Entire Project Mean EIRR 17.5% Entire Project EIRR Standard Deviation 3.2% Probability EIRR < 12% 4.0% Entire Project Worst Scenario EIRR 13.7% Entire Project Most Likely Scenario EIRR 17.5% Entire Project Best Scenario EIRRv 21.2% - 42 - D. EVALUATION OF OTHER ROADS 4.20 Interconnecting Roads. In order to make this project link rationally with other roads in the area, at least three interconnecting roads, which are Dawu, Huayuan and Xiaogan, are planned to be constructed as part of this project. The Dawu link road (9.1 km) will be a class 2 highway and runs from the Dawu interchange to National Highway 107. The Huayuan link road (11.5 km) will be a class 2 highway and runs from Huayuan interchange to nearby Huayuan City and National Highway 107. The Xiaogan link road (12.2 km) will be a class 2 highway and runs from Sancha interchange to nearby Xiaogan city. The construction costs are Y 45, Y 46, and Y 34 million for the Dawu, Huayuan and Xiaogan link roads, respectively, and the traffic in 2000 is estimated to be 3,200, 2,700, and 6,300 vehicles per day, respectively. 4.21 Results. The following table presents the resulting EIRR and NPV (at 12 percent discount rate in million Yuan) obtained for each interconnecting road. The risk analysis, similar to the expressway sections, indicates that the most likely EIRRs are 15.4, 15.0 and 15.1 percent for the Dawu, Huayuan and Xiaogan link roads, respectively. Therefore, the interconnecting links are economically justified. Section EIRR (%) NPV (Y million) Dawu Link Road 20.0 29 Huayuan Link Road 19.6 26 Xiaogan Link Road 22.1 59 E. OVERALL PROJECT ECONOMIC EVALUATION 4.22 The overall project, which includes the expressway sections and the interconnecting roads but does not include the Junshan Yangtze River Bridge section, yields a net present value of Y 7,541 million and an economic rate of return of 23.2 percent. The sensitivity analysis and risk analysis indicate that the project is economically well-justified with the most likely economic rate of return of 17.5 percent. 4.23 In case the Junshan Yangtze River Bridge section is completed in time, the overall project including the expressway sections with the bridge and the interconnecting roads yields a net present value of Y 14,694 million and an economic rate of return of 26.2 percent. The sensitivity analysis and risk analysis indicate that, also in this case, the project is economically well-justified with the most likely economic rate of return of 20.6 percent. - 43 - 5. AGREEMENTS REACHED AND RECOMMENDATION 5.1 Agreement was reached with the Borrower (the People's Republic of China) at negotiations that it would onlend the proceeds of the loan to Hubei Province on the same terms as those of the Bank loan to it: 20 years, including 5 years of grace, at the same rate payable to the Bank by the Borrower, with 0.75 percent per year commitment fee on the outstanding balance, beginning 60 days after signing, less any waiver (para. 3.38). 5.2 During negotiations, assurances were obtained that: (a) Hubei Province would, in connection with the two bridge access subsections: (i) prepare and furnish to the Bank, for its confidential use in making its evaluation and comments, the technical specifications, construction timetable, financing plan and procurement procedures in regard to the Yangtze bridge at Junshan; and (ii) coordinate closely the construction of the two adjacent sections of the Jingzhu Expressway with the construction of the said bridge (para. 3.12). (b) Hubei Province would employ and maintain construction supervision teams on Beijing-Zhuhai (Jingzhu) and Shanghai-Chengdu (Hurong) expressways, as applicable, with qualified staff in adequate numbers to ensure that all works are carried out in accordance with technical specifications and that strict quality controls are exercised on all sites. Construction quality would also be monitored through routine project supervision and monthly and quarterly progress reports (para. 3.18); (c) Hubei Province would (i) by June 30, 2000, carry out and complete the study on the management of highway maintenance in accordance with TOR satisfactory to the Bank and furnish a draft final report thereof to the Bank for its review and comments; (ii) by December 31, 2000, finalize and furnish the final report of said study, taking into account comments made by the Bank, to the Bank not later than six months following receipt of comments made by the Bank on said draft final report; and (iii) thereafter, take all appropriate steps to implement the recommendations set out in said final report (para. 3.19); (d) Hubei Province would, by March 31 of each year commencing in 1999 and ending in 2003, frnish an annual highway condition report for the Bank's review and comments for the previous year, which would: (i) show the length of each class of highway by condition (excellent, good, fair and bad) as of December 31 of the previous year; (ii) show the completed physical works and actual expenditures of the previous year against the - 44 - planned physical targets and budgeted funds of that year, for new construction, upgrading/improvement, rehabilitation, periodic mainte- nance, and routine maintenance; and (iii) show the targets of the highway program for the following year, including new construction, upgrading/ improvement, rehabilitation, periodic maintenance, and routine maintenance, in terms of planned physical works and planned expenditures (para. 3.20); (e) Hubei Province would (i) by December 31, 2000, carry out and complete the study on the commercialization of expressways in accordance with TOR satisfactory to the Bank and furnish a draft final report thereof to the Bank for its review and comments; (ii) by June 30, 2001, finalize and furnish the final report of said study, taking into account comments made by the Bank, to the Bank not later than six months following receipt of comments made by the Bank on said draft final report; and (iii) thereafter, take all appropriate steps to implement the recommendations set out in said final report (para. 3.21); (f) Hubei Province would (i) cause TES to incorporate road safety issues into the agenda of its annual meetings, starting in 1999, and organize an annual road safety seminar in Hubei starting 2000; (ii) develop through technical assistance a safety audit schedule, and with own staff carry out a black- spot analysis and improvement plan, and by June 30, 2000, complete the said TA components in accordance with terms of reference satisfactory to the Bank, (iii) by June 30, 2000, furnish the TA results to the Bank for review; and (iv) thereafter, take appropriate steps to implement the recommendations of the said TA components, taking into account the comments thereon of the the Bank.(para. 3.22); (g) Hubei Province would, by June 30 of each year and commencing in 1999, furnish a rolling two-year training implementation program to the Bank for approval and would carry out the training under the approved program (para. 3.23); (h) the environmental protection measures stipulated in the EAP with respect to the expressways and its interconnecting roads would be carried out in a manner satisfactory to the Bank; and Hubei Province would furnish to the Bank annual environmental monitoring reports for the expressways during their construction phases and for each of the first three years following their construction completion.(para. 3.28); (i) all land acquisition and resettlement activities with respect to the NH3 Project (including the Jingzhu sections, Hurong sections and their interconnecting roads) would be completed in accordance with the RAP in a manner satisfactory to the Bank (para. 3.31); - 45 - (j) the monitoring of the effectiveness and socioeconomic impact of the resettlement activities with respect to the NH3 Project (including the Jingzhu sections, Hurong sections and and their interconnecting roads) would be carried out in accordance with the RAP in a manner satisfactory to the Bank.(para. 3.33); (k) Hubei Province would undertake, and by December 31, 2001, furnish to the Bank for its review and comments, analyses and recommendations for the structure of toll rates on the Jingzhu and Hurong expressways, taking into consideration the results of the toll rate structures under Bank- financed highway projects in China and the recent experience with tolls on high-grade highways in Hunan, Guangdong and other parts of China (para. 3.44); (1) the project account and the Special Account, including SOE, would be audited annually by independent auditors acceptable to the Bank and that audit reports would be sent to the Bank for review within six months of the close of each fiscal year (para. 3.58); and (m) Hubei Province would, on the basis of performance indicators acceptable to the Bank, prepare and furnish to the Bank a quarterly report, and by June 30 of each year commencing in 1999 and ending three years after completion of the project, an annual monitoring report, in a format acceptable to the Bank, covering all components of the project and assessing the extent to which different implementation and development impact objectives are being attained in the course of project execution and operation (para. 3.61). 5.3 Subject to the foregoing, the proposed project would be suitable for a US Dollar Single Currency Bank Loan of $250 million to the People's Republic of China. The loan would be for a term of 20 years, including a grace period of 5 years, at the Bank's standard variable interest rate for LIBOR-based US dollar denominated single currency loans. - 46 - TABLE 2.1: CLASSIFICATION OF ROAD NETWORK IN HUBEI (kin) 1981 1985 1997 Paved % Paved % Paved % Total Paved of Total Total Paved of Total Total Paved of Total Expressway Class 1 641 641 100 Class 2 76 76 100 191 191 100 4,967 4,967 100 Class 3 4,161 4,161 100 4,310 4,310 100 5,063 5,063 100 Class 4 15,552 15,552 100 15,849 15,849 100 20,239 20,239 100 Unclassified 25,110 14,446 58 24836 14,384 58 17,818 10,225 57 Total 44,899 34,235 76 45,186 34,734 77 48,728 41,135 84 Source: Hubei Provincial Highway Administration Bureau. -47 - TABLE 2.2: HUBEI: COMPARISON OF FREIGHT AND PASSENGER VOLUME BY MODE, 1980 AND 1995 A. Freight Traffic 1985 1990 1995 Compound Transport Proportion Proportion Proportion annual mode Tons of total Tons of total Tons of total growth rate, ('000) traffic (%) ('000) traffic (%) ('000) traffic (°/O) 1980-95 (%) Road 22,136 72.9 25,697 73.8 28,849 74.6 2.7 Rail 3,659 12.1 3,931 11.3 3,986 10.3 0.9 Waterway 4,466 14.7 4,904 14.1 5,462 14.1 2.0 Air 0.3 0.0 0.1 0.0 3 0.0 25.9 Pipeline 85 0.3 289 0.8 353 0.9 15.3 Total 30,346 100.0 34,821 100.0 38,653 100.0 2.4 B. Passenger Traffic 1985 1990 1995 Compound Transport Proportion Proportion Proportion annual mode Passengers of total Passengers of total Passengers of total growth rate, ('000) traffic (%) ('000) traffic (%) ('000) traffic (%) 1980-95 (%) Road 28,114 82.1 36,484 87.5 48,282 91.2 5.6 Rail 3,353 9.8 2,107 5.1 2,300 4.3 -3.7 Water 2,753 8.0 3,099 7.4 2,163 4.1 -2.4 Air 14.2 0.0 16.3 0.0 215 0.4 31.2 Total 34,234 100.0 41,706 100.0 52,960 100.0 4.5 - 48 - TABLE 2.3: HUBEI HIGHWAY REVENUES AND EXPENDITURES, 1986-95 (Y million) 7FYP Total 8FYP Total 1986 1987 1988 1989 1990 - 1991 1992 1993 1994 1995 REVENUES Road maintenance fee 344 402 456 531 529 2,262 546 587 757 782 759 3,431 Transfer to Energy and 56 64 71 92 86 369 86 86 86 72 17 347 Communication Fund Transfertopublicsecurity - 12 13 14 14 53 14 16 17 18 18 83 Transfertofeecollectionsector 8 5 10 18 16 57 16 20 28 39 44 147 Remaining road maintenance fee 280 321 362 407 413 1,783 430 465 626 653 680 2,854 Highway Key Construction Plan 26 53 59 67 113 318 179 200 319 378 427 1,503 Capital construction (subsidy) Central government (MOC) 38 49 54 73 61 275 116 283 292 226 203 1,120 Local government 21 23 29 20 25 118 79 75 157 145 150 606 National aid-poverty road subsidy 42 24 - 3 12 81 17 7 21 52 53 150 Domestic Loan - 35 35 33 103 73 74 380 445 481 1,453 Foreign Loans - - - - 30 37 20 43 73 203 Total 407 470 539 605 657 2,678 924 1,141 1,815 1,942 2,067 7,889 EXPENDITURES Construction and Improvement Expressway 42 71 74 99 185 471 411 604 713 819 742 3,289 Other National and Provincial Roads and Bridges 139 162 244 280 216 1,041 232 249 748 700 775 2,704 Aid-Poverty Roads 70 52 24 16 28 190 28 23 61 105 140 357 Routine maintenance 92 122 128 132 142 616 171 182 202 226 282 1,063 Periodic maintenance 64 63 69 78 86 360 82 83 91 92 128 476 Total 407 470 539 605 657 2,678 924 1,141 1,815 1,942 2,067 7,889 Source: Hubei Provincial Communication Department. - 49 - TABLE 2.4: HUBEI: HIGHWAY REVENUES AND EXPENDITURES, 1986-2000 (Y million) Compound annual 7FYP 8FYP 9FYP growth rate, 1986-90 1991-95 1996-2000 1986-2000 (%) REVENUES Road Maintenance Fee 2,262 3,431 4,490 5.0 Transfer to Energy and Communication Fund 369 347 Transfer to public security 53 83 102 4.8 Transfer to fee collection sector 57 147 200 9.4 Remaining road maintenance fee 1,783 2,854 4,188 6.3 Highway Key Construction Plan 318 1,503 2,695 16.5 Capital construction (subsidy) Central government (MOC) 275 1,120 2,700 17.7 Local government 118 606 800 14.6 National Aid-Poverty Highway Subsidy 81 150 120 2.8 Domestic Loans 103 1,453 2,361 25.1 Foreign Loans - 203 3,510 37.3 Total 2,678 7,889 16,374 13.8 EXPENDITURES Construction and limprovement: Expressway 471 3,289 10,240 24.6 Other National and Provincial Roads and Bridges 1,041 2,704 3,037 7.9 Aid-Poverty Roads 190 357 420 5.8 Routine maintenance 616 1,063 1,696 7.5 Periodic maintenance 360 476 981 7.4 Total 2,678 7,889 16,374 13.8 Source: Hubei Provincial Communication Department. - 50 - TABLE 2.5: HIGHWAY CONSTRUCTION PLAN DURING 9FYP IN HUBEI Express- Construction Standard & Mileage Construc- Estimated Project way Class Class Class Class tion Cost Financing (Y million) (kim) 1 2 3 4 Bridge Period (Y million) 8FYP 9FYP IOFYP A. Huangshi-Huanmei section ofHurong 142 96-98 2,230 2,230 trunk highway B. Hubei section of Jingzhu trunk highway 335 97-2002 9,639 8,010 1,629 1. North section of Hubei Province 229 97-2000 5,680 5,680 2. South section of Hubei Province 103 98-2002 2,929 1,300 1,629 3. Wuban Junshan Yangtze bridge 3 2,010/1 97-2000 1,030 1,030 C. National and provincial Class I and Class 2 highway 70 2.230 95-2000 2,479 179 2,300 D. Independent bridge 11,554143 95-2000 259 99 160 E. Aid-poverty roads (72 projects) 2,720 96-2000 420 420 Total 477 70 2,230 2,720 13,564/44 15,027 278 13,120 1,629 TABLE 3.1: INTERCONNECTING ROADS-EXISTING CONDITIONS Existing Road -Intercon ectin road Interchange Name Class Name Class Length Financed Date of Date of If under NH3 If not included in remarks name under NH3 start of completion cost estimates NH3 cost estimates _awu Songbu- 3 Dawu-Xinduwu 2 yes/no the works of works (Y million) (Y million) works__Y_million)__Y_million) Dawu Songbu- 3 Dawu-Xinduwu 2 9.1 yes 1999 2001 40.61 - to be financed under NHIII Interchange Yingshan (NRI07) I_I Dawu- 4 Dawu-Xuanhua 3 53.6 no 1996 2001 - 42.21 financed by local govemment Xuanhua construction Songbu- 3 Dawu-Hong'an 2 69 no 1999 2001 131.76 to be financed under NHIV Yinshan__ _ _ _ _ _ _ _ _ __ _ _ _ Dawu-Jiepai 4 Dawu Citygate-Dawu 2 2 no 1996 1998 2.16 financed by local govemment, under Intemconnecting Road construction Dawu-Jiepai 4 Dawu Interconnecting 4 33.5 no - - - parallel with future jingzhu, no Road-Jiepai improvement planned Xiaohoe Dawu- 3 Dawu-Xiaohe 3 27.5 no - - - parallel with NHIII no improvement Interchange Huayan planned Dawu- 3 Xiahoe-Huayuan 2 13.0 no 2005 2007 39.79 existing road meets traffic demand in Huavan the near future Huayan Wangjiawan- 4 Huayuan Interchange 2 11.5 yes 1999 2001 41.93 to be financed under NHIII Interchange Yangdian Huayuan (NRI07) Wangjiawan- 3-4 Huayuan Interchange 2 3.0 no 2005 2006 - 9.08 existing road meets traffic demand in Yangdian Zhouxian town the near future _ Chanchuan Huangpi- 3 Xiaogan-Yangdian 2 24.0 no 1996 2000 66.23 financed by local govemment, under Interchange Xiaogan __construction Huangpi- 3 Yangdian Huangpi 2 24.0 no 2005 2007 - 69.92 existing road meets trffic demand in the Xiaogan near future Sancha Xiaogan- 2-3 Sancha-Xiaogan 2 12.2 yes 1999 2001 30.99 - to be financed under NHIII Interchange Tianhe (NR107) (Sancha- Xiaogan) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Xiaogan- 3 Sancha-Tianhe 2 25.0 no 1995 1999 68.99 financed by local govemment, under Tianhe construction (Sancha- __________ Tianhe) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Dabadi NRI07 I Dabadi-Hankou 1 16.0 no _ completed, good road condition Interchange NRI07 I Dabadi-Xiaogan 1 37.0 no I I completed, good road condition Hebaohu- 2 Hebaohu (NR107)- 2 20.0 no completed, good road condition Shavang _ Hanchuan _ Existing Road Interco road Interchange Name Class Name Class Length Financed Date of Date of If under NH3 If not included in remarks name under NH3 start of completion cost estimates NH3 cost estimates yes/no the works of works (Y million) (Y million) Caidian Shilipu- 3 Caidian-Shilipu 2 16.0 no 1996 1998 _ 48.77 financed by local govemment, under Interchange Yong'an construction (Caidian- Shilipu) Shilipu- 2 Caidian-Yong'an 2 20.0 no - . _ completed, good road condition Yong'an (Caidian- Y ong'an) I__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Caidian- 3 Caidian-Hanchuan 2 30.6 no 1995 1998 137.53 financed by local government, under Hanchuan construction (included a Han river ____________ ___________ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~bridge) Quanli NR31 8 2 Quanli-Shilipu 1 18.0 no 1995 1997 55.64 financed by local govemment, under Interchange __ _ _ _ _ _ _ _ _ _____ _ _ _ _______construction NR318 2 Quanli-Yong'an 1 11.0 no 1995 1997 27.89 financed by local govemment, under ______I_ _construction Yong'an NR318 2 Yong'an-Chenggong 2 22.0 no _ - - - completed, good road condition Interchange Wuhan- Expr. Yong'an-Yichang Expr. 280.0 no - - - completed, good road condition Yichang I_I Zhangwan Xiaojialing- 3 Zhangwan-Shamao 2 10.1 no 1994 1999 25.82 7.3 KM completed, 2.8KM financed by v Interchange Shuihongkou I_local government under construction t' South Ring 3 Tanshuao-Junshan 3 20.3 no - - - - parallel with NHIII, no improvements _________ _______________ ~~~~~~~planned Jinkou Wuchang- 3 Wutaizha-Jinkou 3 26.0 no - - - - road is on the dyke of Yangtze river, no Interchange Puqi _ permit to be improved Wuchang- 2-3 Jinkou-Panjiawan 2-3 38.0 no - - - - parallel with NHIV no improvements Pugi _ planned South Ring 3 Tanshuao-Junshan 3 20.3 no - - - - financed by local govemment, under construction Shenshan _ _- - - - connecting Jingzhu and Hurong Interchange _ Zehgdian NR107 2 Zhengdian-Wuchang 2 26.0 no - - - - completed, good road condition Interchange NR107 2 Zhengdian- 2 36.0 no - - - - completed, good road condition Heshenggiao South Ring 2 Zhengdian-Zhifang 2 6.0 no - - - - completed, good road condition Zhifang Zhifang- 1 Zhifang-Wuchang 1 20.0 no - - - - completed, good road condition Interchange Wuchang (Nanhu) . Zhifang- 2 Zhifang-Wuchang 2 17.0 no - - - - completed, good road condition Zhengiiagiao (Zhengiiagiao Zhifang- 2 Zhifang-Henshengqiao 2 33.3 no - - - - completed, good road condition HesIengIiao South Ring 3 Zhifang-Wulijie 2 10.0 no 1996 1999 - 27.80 financed by local govemment, under ________________ construction Existing Road Interconnecting road Interchange Name Class Name Class Length Financed Date of Date of If under NH3 If not included in remarks name under NH3 start of completion cost estimates NH3 cost estimates _ _ v~~~~~~~~~~~~~~~es/no the works ofwrs ( illion) (Y million) Fenghuangsha South Ring 4 Fenghuangshan- 2 11.6 no 2000 2002 _ 26.96 to be financed by local government n Interchange Wuliiie South Ring 4 Fenghuangshan- 2 11.6 no 2000 2002 10.6 to be financed by local government Baoxie Wuhan- Exp/I Baoxie-Wuchang Exp/[ 13/6 no - - - completed, good road condition Interhange Huangshi Wuhan- Expr. Boaxie-Huangshi Expr. 57.0 no - completed, good road condition Huangshi _ . Total 113.53 827.29 - 54 - TABLE 3.2: ESTIMATED DISBURSEMENT SCHEDULE ($ million) Disbursement profile of Bank FY Semester Cumulative Cumulative transport projects & Semester ($ million) ($ million) (%) in China (%) FY99 December 31, 1998 15 15 6 6 June30, 1999 10 25 10 11 FY2000 December31, 1999 25 50 20 16 June 30, 2000 25 75 30 26 FY2001 December 31, 2000 25 100 40 38 June 30, 2001 35 135 54 48 FY2002 December 31, 2001 30 165 66 60 June 30, 2000 25 190 76 69 FY2003 December 31, 2002 25 215 86 78 June 30, 2003 25 240 96 90 FY2004 December 31, 2004 10 250 100 100 - 55 - TABLE 4.1: VEHICLE FLEET CHARACTERISTICS Small Light Medium Heavy Articulated Cars Buses Buses Trucks Trucks Trucks Trucks Gross vehicle weight of fully loaded average vehicle (tons): 1.20 2.40 13.00 7.00 11.50 25.00 40.00 Payload of fully loaded average vehicle (tons): 0.40 0.80 3.00 1.56 4.80 9.60 15.00 Load Gross vehicle weight of average vehicle (tons): 1.04 2.08 11.80 6.38 9.58 21.16 34.00 Factor Payload of average vehicle (tons): 0.24 0.48 1.80 0.94 2.88 5.76 9.00 0.6 Number of passengers (#): 3 8 40 0 0 0 0 Service life (years): 10 10 10 12 12 9 9 Kilometers driven per year (km): 30,000 65,000 65,000 50,000 50,000 75,000 75,000 Hours driven per year (hours): 1,000 2,000 2,000 1,500 1,500 2,000 2,000 Economic Costs New vehicle price (Yuan): 200,000 120,000 96,000 68,800 136,000 184,000 304,000 One new tire price (Yuan): 560 400 1,040 400 1,040 1,200 1,200 Maintenance labor cost for vehicle repairs (Yuan/hour): 1.9 1.9 2.5 1.9 1.9 2.5 2.5 Driverwages(Yuan/hour): 2.8 2.8 3.1 2.8 2.8 2.9 3.1 Time costs (Yuan/hour): 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Gas/Petrol price (Yuan/liter): 2.1 Diesel price (Yuan/liter): 2.0 Lubricants price (Yuan/liter): 11.5 Income Income Working Nonworking Yuan/ Yuan/ % traveling time time Year Hour work/business value value Yuanihr 7,600 3.7 40% 100% 25% 2.0 Real (without inflation) interest charge on the purchase of a new vehicle: 10 Typical Vehicle Composition Articulated Tmrcks 8% Cars Heavy Trucks 22% 10% _gf- Small Buses 9%A MadumTrucks Buses Ught Trucks 12% - 56 - TABLE 4.2: EXPRESSWAY SECTIONS DATA Dawu- Huayuan- Sancha- Dabati- Quanli- Shenshan- Quanli- Expressway section name: Huayuan Sancha Dabati Quanli Shenshan Baoxie Yongan Expressway financial construction cost (Y million): 920.5 642.6 898.8 710.9 1,660.8 815.8 207.5 Expressway economic construction cost (Y million): 771.6 538.7 753.4 595.9 1,392.2 683.8 174.0 Expressway length (km): 47.6 28.1 34.9 18.6 19.2 44.5 9.9 Expressway width (m): 26.0 26.0 26.0 26.0 33.5 26.0 26.0 Expressway average gradients (%): 2.0 1.0 0.0 0.0 0.0 0.0 0.0 Expressway average roughness (IRI): 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Existing representative road length (km): 51.4 30.3 40.5 33.0 34.4 49.0 11.0 Existing representative road width (m): 14.0 14.0 22.0 22.0 22.0 14.0 26.0 Existing representative road average gradients (%): 2.0 1.0 0.0 0.0 0.0 0.0 0.0 Existing representative road average roughness (IR1): 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Motorized traffic on existing roads in 1998 (ADT): 6,100 6,400 7,799 12,150 12,750 7,800 7,500 Motorized traffic on existing roads in 2002 (ADT): 9,400 10,100 12,600 20,400 21,400 13,100 12,500 Diverted motorized traffic on expressway in 2002 (ADT) (diverted from 6,000 7,000 7,400 7,500 9,800 7,150 9,800 existing roads at opening of the expressway: Generated motorized traffic on expressway in 2002 (ADT): 990 1,000 1,050 860 1,200 1,000 1,500 (generated due to reduction on transport costs) Percent ofcars: 18 22 23 23 25 22 21 Percent of small buses: 7 9 9 9 10 8 8 Percent of medium buses: 9 9 12 12 10 8 8 Percentoflighttrucks(grossweight3.0to6.5t): 15 12 16 16 10 22 13 Percent of medium trucks (gross weight 5.0 to 16.0 t): 25 30 24 24 34 26 28 Percent of heavy trucks (gross weight 6.0 to 22.0 t): 11 10 6 6 4 9 12 Percent of articulated trucks (gross weight 13.0 to 45.0 t): 15 8 10 10 7 5 9 Growth rate for cars for period 1998-2002 (%): 13 13 13 13 15 15 15 Growth rate for cars for period 2003-2007 (%): 12 13 11 11 9 9 9 Growth rate for cars for period 2008-2012 (%): 12 13 11 11 9 9 9 Growth rate for cars for period 2013-2022 (%): 6 6 6 6 6 6 6 Growth rate for commercial vehicles for period 1998-2002 (%/): 11 12 13 13 13 13 13 Growth rate for commercial vehicles for period 2003-2007 (%/6): 10 12 10 10 8 8 8 Growth rate for commercial vehicles for period 2008-2012 (%): 10 12 10 10 8 8 8 Growth rate for commercial vehicles for period 2013-2022 (%/): 6 6 6 6 6 6 6 Cars speeds on existing roads on most congested hour (km/hr): 40 35 40 40 18 30 50 Cars speeds on existing roads at night (kmnhr): 45 50 50 50 30 40 60 Med. trucks speeds on existing roads on most congested hour (km/hr): 45 40 45 45 15 25 45 Med. trucks speeds on existing roads at night Ion/hr): 60 55 55 55 25 35 55 Predicted passenger cars speeds on new expressway (km/hr): 79 77 76 76 72 77 78 Predicted medium trucks speeds on new expressway (km/hr): 74 72 71 71 67 72 73 Construction cost per kmn (Y million): 19 23 26 38 87 IS 21 Distance savings (%/.): 7 7 14 44 44 9 10 Diverted traffic as percent of normal traffic, in 2002 (%): 64 69 59 37 46 55 78 Generated traffic as percent of normal traffic, in 2002 (%/o): It 10 8 4 6 8 12 - 57 - TABLE 4.3: TYPICAL ROAD USER COSTS Small Light Medium Heavy Articulated Cars Buses Buses Trucks Trucks Trucks Trucks Typical Road User Costs (Vehicle Operating and Time Costs) Yuan per vehicle-kilometer New Expressway 1.50 0.94 2.13 0.63 1.24 1.89 2.55 Existing Class 2 Road (1,250 ADT) 1.80 1.18 2.48 0.76 1.40 2.10 2.88 Existing Class 2 Road (5,000 ADT) 1.82 1.20 2.53 0.76 1.40 2.11 2.89 Existing Class 2 Road (10,000 ADT) 1.87 1.24 2.67 0.78 1.42 2.11 2.93 Existing Class 2 Road (20,000 ADT) 2.25 1.56 3.58 0.97 1.74 2.42 3.38 Existing Class 2 Road (30,000 ADT) 3.90 3.29 9.48 1.63 2.85 3.49 4.93 Existing Road 10.00 9.00-- Car .c 8.00-- ---Bus 0.0 , 7.00- X / - -- - -- Light 6 6.00- Truck ?.5.00- ----Medium Truck o -4 00Heavy 3.00 Truck 2.00> Truck f; . . ~~..._. ... .......Bu o 0- - - -- - - - Small Bus 0.00 I 5000 10000 15000 20000 25000 30000 Average Daily Traffic (ADT) Typical Road User Costs Composition Vehicle Operating Costs Fuel and Lubricants 0.23 0.21 0.59 0.27 0.55 0.84 0.96 Tires 0.05 0.06 0.12 0.09 0.11 0.21 0.27 Maintenance Labor and Parts 0.66 0.37 0.13 0.21 0.40 0.63 1.04 Crew 0.05 0.06 0.06 0.06 0.06 0.07 0.07 Depreciation and Interest 0.74 0.22 0.18 0.15 0.30 0.37 0.58 Time Costs Passenger Time 0.14 0.32 1.59 0.00 0.00 0.00 0.00 Total 1.87 1.24 2.67 0.78 1.42 2.11 2.93 TABLE 4.4: EXCEL ECONOMIC EVALUATION MODEL SAMPLE Daily Traffic (ADT) Financial Net Economic Benefits (M Yuan) Sensitivity Analysis New Expressway Existing Road Constr. Constr. Maint. New Expressway Existing Total 25 % Incr. 25% Decr. Combined Di- Gen- With Without Costs Costs Costs Diverted Generated Road Construct. User (a) & (b) Year verted erated Project Project (M Yuan) Traffic Traffic Traffic Costs (a) Benefits (b) Economic Evaluation 1998 6,100 6,100 200.4 -154.3 0 0 0 0 -154 -193 -154 -193 and 1999 6,796 6,796 300.6 -231.5 0 0 0 0 -231 -289 -231 -289 Sensitivity 2000 7,572 7,572 300.6 -231.5 0 0 0 0 -231 -289 -231 -289 Analysis 2001 8,437 8,437 200.4 -154.3 0 0 0 0 -154 -193 -154 -193 2002 6,000 990 3,402 9,402 0.0 -11.9 26 2 0 17 17 9 9 2003 6,618 1,092 3,756 10,374 0.0 -11.9 33 3 0 24 24 15 15 2004 7,301 1,205 4,146 11,447 0.0 -11.9 43 4 4 39 39 26 26 2005 8,054 1,329 4,578 12,632 0.0 -11.9 58 5 12 62 62 44 44 2006 8,886 1,466 5,055 13,941 0.0 -11.9 78 6 23 96 96 69 69 2007 9,804 1,618 5,582 15,387 0.0 -11.9 107 9 38 143 143 104 104 2008 10,818 1,785 6,165 16,983 0.0 -11.9 147 12 60 208 208 153 153 2009 11,938 1,970 6,809 18,746 0.0 -11.9 202 17 89 296 296 219 219 2010 13,174 2,174 7,520 20,694 0.0 -11.9 275 23 128 413 413 307 307 2011 14,539 2,399 8,307 22,846 0.0 -11.9 370 31 178 567 567 423 423 2012 15,395 2,540 8,797 24,192 0.0 -11.9 438 36 214 676 676 504 504 2013 16,301 2,690 9,316 25,617 0.0 -11.9 516 43 253 800 800 597 597 2014 17,260 2,848 9,866 27,126 0.0 -11.9 604 50 298 940 940 702 702 2015 18,276 3,016 10,448 28,724 0.0 -11.9 703 58 348 1,097 1,097 820 820 2016 19,352 3,193 11,064 30,416 0.0 -142.8 814 67 403 1,140 1,140 820 820 2017 20,491 3,381 11,717 32,208 0.0 -11.9 934 77 461 1,460 1,460 1,092 1,092 2018 21,697 3,580 12,409 34,106 0.0 -11.9 1,064 88 522 1,661 1,661 1,243 1,243 2019 22,974 3,791 13,141 36,116 0.0 -11.9 1,199 99 583 1,869 1,869 1,399 1,399 2020 24,327 4,014 13,917 38,244 0.0 -11.9 1,336 110 641 2,075 2,075 1,553 1,553 2021 25,759 4,250 14,738 40,497 385.8 -11.9 1,466 121 691 2,652 2,748 2,083 2,179 Total (M Yuan) 1,002.1 Total per km (M Yuan) 21.1 Internal Rate of Retum (%/o) 21.7% 19.8% 19.1% 17.3% Net Present Value at 12% Discount 1,523 1,366 965 809 - 59- TABLE 4.5: ECONOMic EVALUATION RESULTS Sensitivity Analysis (in 0%) Economic Internal Rates of Case I Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Return (EIRR) 25% Incr. 25% Decr. Value of 25% Deer. 25% Deer. 25% Decr. 25% Decr. Expressway Section/ Base Construct. User Combined Time Generated Diverted Traffic Unit User Road Link Case Costs Benefits (1) & (2) =0 Traffic Traffic Growth Benefits Dawu - Huayuan Section 21.7 19.7 19.1 17.2 19.0 21.6 20.8 13.1 19.1 Huayuan - Sancha Section 25.4 23.3 22.5 20.5 22.1 25.3 24.5 16.6 22.5 Sancha - Dabati Section 28.8 26.2 25.4 23.0 24.3 28.7 27.2 20.6 25.4 Dabati-Quanli Section 31.9 28.9 28.1 25.4 27.4 31.8 29.2 24.2 28.1 Quanli - Shenshan Section 24.8 22.3 21.6 19.3 21.0 24.7 22.6 18.6 21.6 Shenshan - Baoxie Section 27.8 25.2 24.4 22.0 24.0 27.7 26.3 19.3 24.4 Quanli-YonganSection 18.4 16.5 15.8 14.1 16.5 18.3 17.5 11.2 15.8 DawuLinkRoad 20.0 17.4 16.6 14.3 25.3 20.0 16.2 17.5 16.6 Huayuan LinkRoad 19.6 17.0 16.1 13.8 25.4 19.6 15.5 17A 16.1 Xiaogan Link Road 22.1 20.3 19.7 18.1 20.9 22.1 19.7 14.5 19.7 Entire Project 26.2 23.7 23.0 20.7 22.5 26.1 25.0 18.6 23.0 Switching Values Analysis Risk Analysis (in %/D) Construction Net User Percentile Costs Multiplier Benefits Multi- Standard Probability 10% Worst 50%Likely 90%/ Best Factor to plier Factor to Mean Deviation that EIRR Scenario Scenario Scenario Yield 12% Yield 12% EIRR EIRR < 12% EIRR EIRR EIRR Dawu - Huayuan Section 3.42 0.32 16.0 3.6 12.6 11.6 16.2 20.6 Huayuan - Sancha Section 4.81 0.22 19.6 3.7 3.8 14.8 19.9 24.4 Sancha - Dabati Section 5.73 0.19 22.9 3.7 0.7 18.2 22.9 27.6 Dabati - Quanli Section 6.67 0.16 25.5 3.8 0.0 20.3 25.4 30.3 Quanli - Shenshan Section 3.77 0.27 19.7 3.0 1.4 15.6 19.7 23.4 Shenshan - Baoxie Section 5.27 0.21 21.7 3.8 1.0 16.S 21.7 26.6 Quanli - Yongan Section 2.23 OA7 13.0 3.1 38.2 9.1 12.9 17.2 Dawu Link Road 2.15 0.48 15.4 2.6 9.6 12.1 15.4 18.8 Huayuan Link Road 2.04 0.51 15.0 2.6 12.0 11.7 15.0 18.2 Xiaogan Link Road 4.11 0.27 15.9 4A 17.8 10.2 16.1 21.4 Entire Project 4.56 0.23 20.5 3.4 1.3 16.2 20.6 25.0 - 60 - TABLE 4.6: EXPRESSWAY SECTIONS DATA Average Construction Costs (Y million per km) 0 10 20 30 40 50 60 70 60 90 Dawu-Huayuan = Huayuan - Sancha w n Sancha - Dabati Dabati - Quanli Quanli-Shenshan 77- ,.77 v. - -& -, 7 Shenshan - Baoxie E Quanli - Yongan Entire Project Distance Savings (%) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Dawu - Huayuan Huayuan - Sancha Sancha - Dabati Dabati-Quanli w ; Quanli - Shenshan Shenshan - Baoxie Quanli - Yongan Entire Project Diverted Traffic as % of Normal Traffic (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% Dawu - Huayuan Huayuan-Sancha Sanr a - Dabati U _ _ G I Dabati - Quanli Quanli - Shenshan 717M -7?7E7T5 B Me Shenshan - Baoxie Quanli - Yongan _ Entire Project = -61 - TABLE 4.7: EXPRESSWAY SECTIONS RESULTS Generated Traffic as % of Normal Traffic (%) 0% 2% 4% 6% 8%/ 10% 12% Dawu - Huayuan . Huayuan - Sancha Sancha - Dabati Dabati - Quanli Quanli - Shenshan Shenshan - Baoxie Quanli - Yongan Entire Project Net Present Value at 12% (Y million) 0 2000 4000 6000 8000 10000 12000 14000 16000 Dawu - Huayuan |_ Huayuan - Sancha Sancha - Dabati Dabati - Quanli Quanli - Shenshan Shenshan - Baoxie r Quanli - Yongan Entire Project _ Economic Internal Rate of Return (%) 0% 5% 10% 15% 20% 25% 30% 35% Dawu - Huayuan Huayuan - Sancha Sancha - Dabati Dabati - Quanli Quanli - Shenshan Shenshan - Baoxie Quanli - Yongan Entire Project - 62 - TABLE 4.8: RISK ANALYSIS METHODOLOGY Standard spreadsheet models analyses combine single "point" estimates of the model's input variables to predict a single result. Estimates of the input variables are used because the actual values are not known with certainty. For example: Revenues= 100 Costs = 90 ==> Profits = 10 In reality, however, things don't always turn out as planned because too conservative or optimistic estimates may have been adopted. The combined errors in each input variable estimate could lead to real- life result that is different from the estimated result. With risk analysis, one can explicitly include the uncertainty present in the estimates to generate results that show all possible outcomes. For example, consider a simple case where there is uncertainty in both input variables: Revenues = 100 or 120 Costs = 90 or 80 Possible Profits = > 100-90 = 10 100-80 = 20 120-90 = 30 120-80 = 20 In a risk analysis, one includes the estimate of an input variable and some measure of the likelihood of occurrence for that variable. The risk analysis will then use this information to analyze every possible outcome, executing hundreds of what-if scenarios adopting in each case random inputs accordingly to the input probability distribution. For example, consider this more complex case: Revenues Estimated most likely value = 100 (triangle distribution) Estimated minimum possible value = 90 Estimated maximum possible value 130 Costs Estimated mean value = 90 (normal distribution) Estimated standard deviation = 20 Results: Scenario I Revenues = 105.9 Costs = 116.8 Profits = -10.9 Scenario 2 Revenues = 119.5 Costs = 87.2 Profits = 32.3 Scenario 300 Revenues = 103.4 Costs = 86.6 Profits = 16.8 In this case, the results are presented as probability distributions and statistics that give the decisionmaker a complete picture of all possible outcomes. For example, for the case above we have the following results: Mean Profits = 16.7 Standard Deviation of Profits = 22.4 Probability that profits will be lower than zero = 24.1 percent Profits - 63 - TABLE 4.9: RISK ANALYSIS INPUT MULTIPLIERS Construction Costs C I ~n IL o o 0 00 0 0 0 0 0 0 o 0 0 0 0~ - - - - Multiplier Factor Existing Traffic Unit Net Benefits U- IntO (0 CD a> O~ 0 ° N e~ 't ° o O O O 0 - _ _ _ - - Multiplier Factor Diverted Traffic Generated Traffic Traffic Growth 6 IL. °~ Z3 D O0) _Ml N F a co Multiplier Factor - 64 - TABLE 4.10: RISK ANALYSIS RESULTS: QUANLI-SHENSHAN SECTION Quanli - Shenshan Expressway Section Mean = 19.7% 11.5 Std. Deviation = 3.0% o Probalility EIRR < 12% = 1.4% M I... U-~~~~~~~~~~~~~~~~~~~~~~~~~~~~- LO ol - cM L O a, -) cE L r- e CO tw o0 ~~~~N 04 CI 04 N ce) CV m Economic Internal Rate of Return (%) Quanli - Shenshan Expressway Section 100% Best Scenario 90%e 70% ,0c 60% U. ~= 0 Most LikelVyScenario - 40%- 5.!2 30% 20% 10% Worst Scenario 0% I r - o M-c 10 r- a0 r-, CO LO r-- a) '- Cn LO Economic Internal Rate of Return (%) - 65 - TCABLE 4.11: RISK ANALYSIS RESULTS: ENTIRE PROJECT Entire Project Mean = 20.5% Ir- Std. Deviation = 3.4% Probalility EIRR < 12% 1.3% A U 9101 CU- to N 0) a- CS to aN 0) S- cS to 0) a- Cme t - 'N CS' C'J( N N ( CQ CS) e ) Economic Internal Rate of Return (%) Entire Project 9 0% S0c 60%- Most Likey Scenario o0$ '§ 50% --- -- ....... ......... 40% - .r0 30% E 20% o 10% ~Worst Scenai 0% II to N 0) N- CM)t N 0) o-c~ o N )-C)It LOonomic Itn Rat of Retrn (% ) Economic Internal Rate of Return(% - 67 - ANNEX I ANNEX 1: PROJECT MONITORING INDICATORS A. PERFORMANCE AND MONITORING INDICATORS FOR KEY PROJECT COMPONENTS 1. The effectiveness of project implementation, in terms of alleviating infrastructure bottlenecks in Hubei at which the project is targeted, will be measured by reference to a number of monitoring indicators. The specific project objectives and the associated monitoring indicators are listed in Table 1. Each indicator will require a baseline level against which the effectiveness of the project in achieving the design objectives can be measured. The base data would be 1998, and HPCD should take the following action to obtain the necessary baseline data and develop the necessary methodologies for monitoring. The parameters, baseline and targeted values shown in the table are tentatively estirnated by the project team; the baseline data/ methodologies were reviewed and discussed with HPCD during appraisal and were finalized during negotiations. 2. The achievement of project output will be monitored by monitoring indicators. The current monitorable targets are set as shown in Table 2. -68- ANNEX 1 TABLE 1: DEVELOPMENT INDICATORS 2003 Benchmark Project Monitoring 2000 (1st year of 2005 Objectives Indicators 1998 Baseline Benchmark operation) Benchmark Development Reduced traffic Traffic volume of road congestion on roads Section A-B = 6,100 7,600 3,400 4,600 infrastructure parallel to the Section B-C = 6,400 8,000 3,100 4,400 proposed road Section C-D = 7,800 9,900 5,300 7,100 Section D-E = 12,100 15,700 12,900 16,400 Section E-F = 12,800 16,500 11,600 14,800 Section F-G = 7,800 10,100 5,900 7,600 Section G-H = 7,500 9,700 2,800 3,500 Increased average Travel speed (km/hr) travel speed on Section A-B = 50 45 55 55 roads parallel to the Section B-C = 50 45 55 55 proposed road Section C-D = 45 40 50 50 Section D-E = 35 30 40 40 Section E-F = 35 30 40 40 Section F-G = 45 40 50 50 Section G-H = 60 55 65 65 Increase Reduced number of Number of accidents Number of Number of Number of highway safety traffic accidents with fatalities per accidents accidents accidents involving fatalities: number of vehicles: with fatalities with fatalities with fatalities 40/10,000 vehicles per number per number per number of vehicles: of vehicles: of vehicles: 35/10,000 35/10,000 25/10,000 vehicles vehicles vehicles Notes: (1) A-B: Dawu-Huayuan; B-C: Huayuan-Sancha; C-D: Sancha-Dabati; D-E: Dabati-Quanli; E-F: Quanli- Shenshan; F-G: Shenshan-Baoxie; G-H: Quanli-Yongan. (2) Traffic measurement unit: medium-size truck/bus. -69 - ANNEX I TABLE 2: IMPLEMENTATION INDICATORS FOR KEY PROJECT COMPONENTS Key Monitoring Indicators 1997 1998 1999 2000 2001 2002 2003 2005 ICR Year % of civil works completed of -- 30 25 55 75 95 100 100 Jingzhu % of civil works completed of -- 30 60 90 100 -- 100 Hurong % of civil works completed of -- -- -- 20 60 100 -- 100 interconnecting roads Number of person-months of completed training Domestic 57 125 16 8 -- -- -- 206 Overseas 2 29 26 13 -- -- -- 70 Highway safety: a -- -- -- -- -- -- -- -- % of Equipment purchased -- 3 45 80 100 -- -- 100 Highway Maintenance Study 06/30/b 12/31L/ 06/30Ld Expressway Commercialization 06/30/b 12/31/c 06/3OLd and Corporatization Study Road Safety Study 06/30/b 12/3 1L 06/30Ld /a Number of black spots to be improved would be agreed between the WB and HPCD during implementation of the project. /b Establishment of Leading Group and Agreement on TOR. /c Draft Final Report. /d Final Report. B. MONITORING INDICATORS FOR ENVIRONMENT Construction Period 3. Environmental Supervision. Environmental protection measures specified in the Environmental Action Plans (EAPs) and integrated in the bid documents will be supervised by environmental supervisors. The results will be included in the engineering supervision reports and reported periodically to the environmental protection staff at the district level. The results of environmental supervision will be annually reported to the World Bank through the annual report to the World Bank. The monitoring items will include: (a) brief description on environmental protection measures supervised/ inspected during the reporting period; and (b) brief description of problems related to environmental protection measures and their reasons and possible solutions. -70 - ANNEX 1 4. Environmental Monitoring. Environmental monitoring items, methods, frequencies, monitoring sites, etc. are specified in the EAP (see Annex 2). During the construction of the highway, all monitoring will be carried out by the Environmental Protection Office of HPCD. Following the hand-over of the project, environmental monitoring during the operational phase will be carried out by the local environmental protection agencies under contract with the Provincial Motorway Administration Bureau. The results will be reported to the environmental protection staff at the district level and annually to the World Bank through the annual report to the World Bank. Construction Phase Air quality: TSP, bitumen smoke, dust Monitoring Noise/vibration Water Quality: BOD, COD, suspended solids (SS), oil Operational Phase Air quality: NO,, CO, HC, TSP and dust Monitoring Noise/vibration Water quality: BOD, SS, oil, temperature, pH, and DO C. MONITORING OF LAND ACQUISITION AND RESETTLEMENT 5. The monitoring and evaluation of the Resettlement Action Plans (RAP) agreed between the Bank and the Borrower will be carried out both internally and externally (Annex 3). Internal monitoring will be carried out by the Planning Department and the Land Acquisition and Resettlement Department of ROs of HPCD. An internal monitoring report will be submitted to the Bank every six months, with the first one that was due on May 31, 1997, and the last one on the completion of the land acquisition and resettlement activities. The Academies of Social Sciences of Hubei will conduct the external monitoring of resettlement and will submit a monitoring report every six months, with the first one to be submitted by June 30, 1998, and the last one at the completion of the project (December 31, 2003). 6. The main indicators of land acquisition and resettlement monitoring have been identified. They are: (a) Timely payment of compensation to affected entities of various categories; (b) Progress of construction of new houses and quality of construction, also distance from old houses; (c) Progress in land redistribution; (d) The type of productive use to which compensation amounts have been put by the local (township and village) governments; (e) Restoration of production/business activities of affected enterprises. Payment of all types of compensation to affected enterprises and workers; -71- ANNEX 1 (f) 'Propose linkage of resettlement activities with the project implementation schedule (resettlement to be completed at least one month before start of construction); (g) Restoration of civic infrastructure at the new sites; (h) Levels of satisfaction of the affected persons; (i) lncome levels and standards of living after resettlement. D. MONITORING PLAN FOR INSTITUTIONAL STRENGTHENING Implementation Indicators Impact I dicators Remarks and Elements Process Completion Short-term Long-term Comments Strengthened INDICATOR: INDICATOR: INDICATOR: INDICATOR: Baseline Performance in Institutional Capacity Number of Organization Establishment of new Staff trained are sharing Improvement of per- sector functions are spe- Structural Changes units and staff training new knowledge and formance in specific cified in Development Intensive institutional exercising new skills functions and activities Needs Profiles that are strengthening programs Management System Proposal on system to Implementation and System in operation kept on file in Project Development be used testing of system Execution Office. Intensive institutional Managing system is a strengthening programs SOURCE: SOURCE: SOURCE: SOURCE: part of the new manage- at the Support and * Organizational * Mid-term Develop- * Reports of workshops Implementation Com- ment philosophy Research units Structure Report ment Report held by retuming pletion Review * TORs for Study * Project Implemen- trainees * Assessment of Additional baseline data Intensive institutional Maintenance tation Completion * Supervision inter- institutional perform- are included in TORs strengthening programs * TORs for Study Report views and their reports ance in Activities iden- for Study and TORs for at the Schools and Expressways on trainees performance tified at start of project Investigation/Study. Training institutions as requiring Training Both of these are INDICATOR INDICATOR INDICATOR and other institutional included as part of Equipment procured Equipment procured in Equipment used suc- strengthening measures annual submission of a within time and budget operation cessfully for purposes 2-year rolling Training allowed intended Plan. SOURCE: SOURCE: SOURCE: * Annual * Equipment Status * Reported use of Procurement Plan reports eqcuipment Training INDICATOR: INDICATOR: Training INDICATOR: Trainees INDICATOR: Critical Performance on critical Training In Hubei # of Trainees selected programs completed in assigned to jobs where Function and activities functions and activities and sent for timely timely manner (as per new skills are effec- (for which training was assessed tbrough inter- Training in Other China training in China and periodic Plans provided tively utilized identified as key factor) views with Supervisors abroad: by HPCD) demonstrate improved of Units that requested Short-Term Training performance training: e.g. type of Abroad analyses undertaken; SOURCE: SOURCE: SOURCE: SOURCE: successful completion Investigation Study *Annual Training * Mid-term Report * Reports from Assessment of of certain tasks,; opera- Tour Report * Implementation interviews of former institutional tion of certain kind of * Annual Training Completion Report trainees perfonrance (as above) equipment, etc.. (infor- Plan * Reports from mation included as part former trainees' of Training Needs Pro- supervisors files. Interviews are conducted as part of assessment of institu- tional perfonmance for Function (activities) identified at start of project as requiring Training and other institutional strengthen- ing measures. - 72 - ANNEX2 ANNEX 2: ENVIRONMENTAL ASSESSMENT AND ACTION PLAN SUMMARY 1. Background. An environmental impact assessment (EIA) for the Dawu-Shenshan section of the Jingzhu Expressway; the Zhushan-Yongan and Shenshan-Baoxie sections of the Hurong Expressway and the interconnecting roads was carried out by the Research Institute of Highways (RIOH) of MOC. Two EIA reports (one for the Expressway and one for the interconnecting roads), and an Environmental Action Plan (EAP) were prepared as per the policy and administrative requirements for environmental assessment of development projects in China and the Bank's Operational Directive 4.01 on Environmental Assessment. The development and review of these documents involved inputs from various units in the province, the environmental protection bureaus, research institutions and the affected groups along the highways. These documents were reviewed by the Bank and discussed with HPCD during the preparation mission in May 1996. Based on the Bank's comments, the revised EIAs and EAPs for the Expressways and its interconnecting roads, and the Environmental Assessment (EA) Summary were submitted to the Bank in December 1996 for review. These documents were further reviewed and discussed with HPCD during the preappraisal mission in March 1997. The final EIA reports, EAPs and the joint EA Summary covering the Expressways and their interconnecting roads were submitted to the Bank in April 1997 and found to be satisfactory. Copies of the environmental reports are available in the project files. 2. Brief Project Description. The main civil components of NH3 consist of the construction of a four-lane expressway between Dawu and Shenshan (144 km, part of the Jingzhu Expressway); the Quanli-Yongan (10 km) and Shenshan-Baoxie (44 km) sections of the Hurong Expressway; and three, two-lane interconnecting roads. Other components include institutional strengthening, training programs, highway safety and construction supervision. 3. Baseline Environmental Description. The proposed alignment of NH3 lies in the eastern part of the Hubei province and in the middle reaches of the Yangtze River. The terrain is higher in the north (Dawu county) than in the south (Wuhan). While most of the road traverses areas with good soil and geological conditions, about 22.7 km of the road sections pass over soft soil, requiring stabilization and import of subgrade and pavement materials from a long distance. Soil erosion is a serious problem in the upper reaches of the highway (Dawu county-5,500 ton/km2/year) compared to the lower reaches in areas of Caidian, East-West Lake where it averages about 1,000 ton/km 2/year. 4. The area along the proposed highway is characterized by a tropical continental monsoon type of climate with high rainfall (1,100-1,450 mm) and an annual average temperature of 15-17°C. Flooding is a serious problem in the hilly areas. The area is abundant in surface water resources of good quality, which form a major source of water - 73 - ANNEX2 for industrial and agricultural production. Groundwater is used as the major source of drinking water. 5. The area along the route is relatively well developed. The original vegetation has been gradually replaced by the present state of scattered secondary forest and nonindigenous vegetation, mainly mason pines, and Chinese firs. The main agriculture crops include rice, wheat, barley, cotton, canola, peanuts and tobacco. No rare or endangered anirnals or plant species were found within the 500-m zone on either side of the proposed roads. Lead concentrations in soil samples ranged between 14.1 and 97.4 mg/kg, significantly lower than the 300 mg/kg value recommended by the Ministry of Agriculture as the criterion for basic soil. 6. The areas along the Expressways are rich in tourism resources including scenic spots and historical sites such as the Double-Peak mountains, the tomb of Dongyong (a Chinese fairytale character), Jiuzong and Yellow Grass Mountains, Cemetery of Revolutionary Martyrs, etc. A cultural relics survey along the proposed highway.and the alternative alignments revealed two ancient cultural ruins (Zhuge City ruins and Buddhist Monk Tomb) along the proposed alignment and five ruins along the alternative alignments. 7. Atmospheric monitoring data of the past years and air quality monitoring at 30 sites along the proposed alignment indicate that TSP (except for a few locations), NO, and CO concentrations meet the Class II standards. The connecting roads were also monitored and found to be acceptable. Daytime and nighttime noise levels at 26 sites along the alignment were found to be below the noise standard. 8. Potential Environmental Impacts and Their Mitigation Measures. The major potential environmental impacts of the proposed expressways and their connecting roads and their mitigation measures are incorporated in their respective EAPs. The EAPs stipulate how the environmental impacts identified in the EIA will be dealt with in the design, construction and operation phases, and what institutional arrangements have been made for the implementation of the EAPs during the three distinct phases. The key elements of the EAPs are summarized below. Design Phase 9. A number of alternative alignments for various sections of the highways were considered in the project design phase of the Jingzhu and the Hurong Expressways. The final alignments were selected to minimize land acquisition and resettlement costs, potential environmental impacts of the project on farmlands, residences, schools, cultural relics, irrigation and flood control, geographical and geological conditions, etc. The design includes approximately 350 passageways and underpasses to facilitate the crossing of the expressways by local people, animals and vehicles. To reduce soil erosion, side slopes will be grassed and disturbed areas will be reclaimed. Additional measures such as subgrade drairnage systems are integrated in the project design, and temporary and permanent drainage systems will be constructed to minimize soil erosion and alteration of hydrological regimes. Extreme care has been taken to minimize flooding. Particular - 74 - ANNEX2 attention was paid to balance cuts and fills, to locate borrow areas in wasteland, to minimize the use of arable land, and to minimize dust and noise problems. 10. During the initial operating phase (year 2002), noise levels at several sensitive locations will exceed the noise standards used in the initial phase. In later years, as the traffic increases, the noise levels will significantly exceed the standards at many more sensitive sites. To mitigate the short- and medium-term noise problems, a combination of measures such as resettlement and installation of noise barriers will be undertaken. In the long term (2020), noise monitoring will be continued and appropriate mitigation measures will be taken when the noise monitoring results significantly exceed the standards. Construction of schools and hospitals will not be allowed within 200 m on either sides of the proposed highways and construction of other buildings, within 50 m of the highways will be prohibited. Up to the year 2020, CO concentration at all sites is expected to meet the Class II air quality standards. In the medium to long term, NO, concentration at 15 to 140 m from the road center will exceed the maximum standards while the daily average NO, concentrations will exceed the standards. The long-term air pollution problems caused by vehicle exhaust gases will be dealt with by improving vehicle emission controls. 11. During the cultural relics survey, two ancient ruins-Zhuge City ruins and a Buddhist Monk tomb-were discovered. The Zhuge City ruins were avoided by alignment optimization. Plans for further excavation and salvage operations of the Buddhist monk tomb will be developed and integrated in the NH3 Project. All the salvage activities will be carried out before the start of construction of the highway. 12. Additional design measures include provisions for adequate drainage, wastewater treatment facilities at the service areas, strengthening of crash barriers at pollution sensitive locations, and adequate bridge and culvert design to minimize flooding. Construction Phase 13. To minimize dust during construction, road surfaces, excavation areas, material stockpiles, storage areas, and construction sites will be sprayed with water specially near towns and villages, water supply sources and near sensitive locations. Asphalt and lime stone mixing plants will be equipped with dust collectors and will be located at least 500 m from residential areas on the leeward side. Additional precautions will include covering of haul trucks and material storage piles, control of exhaust gas, etc. Construction activities within 200 m from residences will be suspended between 10:00 p.m. and 6:00 a.m., except under exceptional circumstances when a prior written approval of the local government and the environmental protection bureau will be required. 14. Where possible, borrow areas will be restricted to nonforest and nonarable lands, and topsoil will be saved and returned to the land. Spoil disposal sites will be carefully selected to minimize disruption to the farmlands. Damage to irrigation systems will be minimized by construction of temporary channels and conduits and measures will be taken to prevent direct discharge of polluted waters and silt from construction activities -75 - ANNEX2 into rivers and irrigation channels. Construction camp wastes and sewage will be collected and treated and disposed of in an environmentally sound manner. Trees and grass will be planted on side slopes, and along the roadside, particularly on sections with high fills and deep cuts. 15. During construction, effective safety and warning measures will be adopted to reduce accidents. This will include minimization of traffic jams, provision of efficient lighting equipment and safety signs, restriction on blasting time and implementation of stringent controls at quarries, development of a materials transport plan, etc. Operation Phalse 16. During the operation phase, emphasis will be placed on better vehicle maintenance and management to promote safety and to minimize vehicle emissions. Low-speed, badly maintained old vehicles will be barred from using the expressway and a minimum 60 km/hr speed limit will be enforced. Periodic campaigns will be undertaken to educate drivers about the unnecessary use of horns, reduction in night time speed, safe transport of hazardous materials, etc. To avoid future noise and air pollution problems, construction of residential buildings and schools/hospitals will be prohibited within 50 m and 200 m, respectively from the center of the highways. 17. Environmental Monitoring. During the construction and operation of the Jingzhu and the Hurong Expressways, and its connecting roads, environmental monitoring will be carried out to verify the actual impacts on the environment, identify unexpected environmental problems at an early stage, and to adjust environmental protection measures as appropriate. The Environmental Protection Office (EPO) of HPCD will be responsible for all environmental monitoring of the Expressways and its connecting roads during the construction phase. During the operating phase, all environrmental monitoring will be carried out by the local EPBs under contract with the Provincial Motorway Administration Bureaus. 18. The major items to be monitored during the construction and operation phases will include air quality, noise and water quality. A number of noise level meters, computers to process environmental data, laboratory equipment, etc. will be procured under the project. The detailed monitoring plan is presented in the EAP. 19. Institutional Arrangements. The EPO in HPCD will be responsible for the overall environmental protection and management of the highways. The six staff in the EPO will be assisted by four environmental staff in the Engineering Supervision Station who will be responsible for the environmental aspects of the project during the construction phase. Environmental monitoring during the construction and the operation phases will be carried out by the local EPBs through contract with the Provincial Motorways Administration Bureaus. Environmental training will be undertaken to provide adequate training for environmental staff at all levels. The detailed staffing and training plan is presented in the EAP. - 76 - ANNEX3 ANNEX 3: REVIEW OF THE RESETTLEMENT ACTION PLAN A. BACKGROUND 1. This Annex presents the Land Acquisition and Resettlement aspects associated with the National Highways III (NH3) project. It is based on the Resettlement Action Plan (RAP) prepared by the Hubei Expressway Resettlement Office (HERO) of the Hubei Province Communications Department (HPCD) in cooperation with the Resettlement Offices (ROs) of affected cities and counties, as well as Institutes associated with the project. B. DIMENSIONS OF RESETTLEMENT 2. Project Impact. The NH3 project (including the Jingzhu section and Hurong section) will affect 178 villages in 39 towns, 6 counties and 2 cities. The impact of the project is summarized in Table 1. TABLE 1: PROJECT IMPACT Effect Unit Jingzhu Hurong Total Section Section Permanent land acquisition: Total mu 13,764 4,558 18,322 Land under agricultural/economic use mu 12,285 4,176 16,461 Residence base mu 189 60 249 Others mu 1,290 322 1,612 Temporary land occupation: Total mu 2,610 112 2,722 Arable mu 2 231 90 2,321 2 Affected structures: Total area m Private residence m~~~2 186,729 Private residence m 118,036 34,243 152,279 Enterprises m2 : . : .:: 26,078 Public buildings ni 28.7 Affected persons no. 16,241 4,328 20,569 Households no. 3,403 1,061 4,464 PAPs affected by: Land acquisition only no. 11,818 3,449 15,267 House relocation only no. 1,336 28 1,364 Both house and land no. 2,822 819 3,641 Temporary land acquisition no. 265 82 347 Economically Active PAPs no. 5,734 1,068 6,802 Persons to be resettled into enterprise jobs no. 494 38 532 - 77- ANNEX3 3. Resettlement Action Plans. The HERO of HPCD prepared a RAP for the project based on the Laws and Regulations of China and Hubei Province as well as the Bank's Operational Directive 4.30 on Involuntary Resettlement. C. POLICY AND STRATEGIES FOR RESETTLEMENT 4. Legal Framework and Resettlement Policy. In addition to the national laws and regulations mentioned in the main text, the following local regulations govern land acquisition and resettlement in Hubei Province: * Hubei Province Land Management and Enforcement Measures (September 3, 1987) * Notice on the Management Fees of Land Acquisition. Financial Department of the Hubei Province (March 15, 1995) o Notice Concerning the Resettlement of Surplus Labor after Land Acquisition and Transferring the Registration of the Surplus Laborers from Agricultural to Nonagricultural Registration. The Planning Committee, Labor Department and the Land Administration Bureau of Hubei Province (September 1991) 5. Resettlement Compensation. The average annual output value for land was set at the highest level of all the acquired land. The compensation multiplier is adjusted according to the productivity of the affected land (6 for irrigated land and 5 for dry land). The multiplier for resettlement grant is set at 3, the highest multiplier in the Land Law. 6. Land Redistribution. Preference will be given to land-based resettlement by readjusting the village land among the laborers in the village, to the extent that the average land per person in the village does not fall below the threshold of 0.4 mu. Whenever the average falls below the threshold, the surplus labor will be resettled in enterprise jobs. After the readjustment of land, the HERO, local governments, City ROs (CIROs) and County ROs (COROs) will take rehabilitation measures to increase the productivity of agricultural land according to plans prepared at the village level. 7. House Relocation. Compensation for affected buildings will be paid at replacement cost (without depreciation). PAPs will be relocated in original villages, near their original house. Construction of new housing will be completed before the destruction of the affected structures. Vulnerable groups and those who need assistance, such as the old, sick and the handicapped, will be assisted by the local authorities while they reconstruct their houses. 8. Affected Public Buildings and Enterprises. Affected enterprises will be rebuilt and will reemploy all the original workers. Construction of new facilities will be completed before old structures are demolished so that production losses are minimized. Compensation of lost output, work stoppage allowance and production stoppage allowance will be incorporated into the compensation rates for the facilities. - 78 - ANNEX3 9. Transfer of PAPs from Agriculture to Enterprise Jobs. Some 532 economically active laborers (or 1,360 PAPs including all family members) will be transferred from agricultural to enterprise jobs due to lirnitations of availability of agricultural land. The waiting period will not be more than three months. During the waiting period, PAPs' income will not be lower than their income from agricultural employment. PAPs will sign employment agreements with the enterprises, which will ensure a minimum employment for three years. HERO will be responsible for the employment of the surplus labor during the life of the project. 10. Job Creation. To provide jobs for the eligible PAPs, 35 enterprises were chosen along the route that are willing to employ the 532 laborers. Currently, these enterprises employ between 21 and 750 workers each. After resettlement, they will be employing between 5 and 86 additional PAPs each. Over the last three years, the rate of growth of output in these enterprises was between 15 and 29 percent, and the rate of growth of output has surpassed the employment growth. This record provides a favorable indication on their future performance. PAPs' income will increase as a consequence of enterprise employment. Work environment in these enterprises has been screened to ensure that it will not cause employment-related health problems. 11. Infrastructure. Affected infrastructure will be rehabilitated either by the project, or compensation will be paid, at replacement cost, to the owners of infrastructure. Improvement of the standards of affected infrastructure will be ensured through consultation with the PAPs during the rehabilitation of the infrastructure. D. INSTITUTIONS 12. Institutional Responsibility. Leading groups at the project, city and county levels have been established with the responsibility of coordinating and implementing resettlement. Actual implementation of resettlement will be the responsibility of CIROs and COROs. These offices have been equipped with the necessary staff and equipment. The responsibility of the ROs at all levels are to distribute compensation, guarantee the implementation of the RAP, and assist the PAPs to improve their standards of living. 13. Staffing of the ROs. HERO has eight staff members including the director. Two CIROs have a total of 10 staff members, six COROs have a total of 30 staff members and 39 Township Resettlement Offices (TROs) have a total of 156 staff members. The monitoring database that the Village Administration Committees (VACs) and TROs will utilize is also available at the CIRO, CORO and HERO level in electronic form. Monitoring results will flow to COROs, where the information will be processed in electronic form and transmitted to HERO to complete the monitoring cycle. E. SCHEDULING 14. Implementation Schedule. The HERO was established in July 1995 and the first draft of the RAP was competed in January 1996. The census survey, consultation with PAPs, establishment of local ROs and consultation on compensation rates and - 79 - ANNEX3 rehabilitation packages have already taken place. The schedule for the remaining activities associated with the implementation of the RAP is presented in Table 2. TABLE 2: IMPLEMENTATION SCHEDULE Activity Date Executing Unit Baseline Survey (Standards of Living Survey-SLS) Apr-May 1997 Independent Monitoring Organization (IMO) Signing of resettlement agreement Apr-May 1998 HERO, CIROs, COROs Allocation of funds to CIROs & COROs May-Jun 1998 HERO Payment of Compensation Jun-Jul 1998 CIROs, COROs, TROs, VACs Preparation for House Construction Jun-Jul 1998 TROs, PAPs, VACs Completion of Land-Use Procedure Jun-Jul 1998 TROs House Construction and House Relocation Jun-Sep 1998 TROs, PAPs Constr. & Relocation of Public Buildings & Infrastructure Jul-Oct 1998 HPCD, Power and Telecom Bureau, TROs PAPs to be Relocated into Enterprises Sep-Oct 1998 Enterprises Removal of Vacated Buildings Aug-Oct 1998 TROs Land Readjustment Sep-Oct 1998 TROs, HERO Supervise Resettleiment and Approval Oct 1998 HERO Commencement oi Civil Works Dec 1998 HPCD Independent Monitoring Throughout IMO SLS after Resettlement Aug 2003 IMO F. Budget 15. Resettlement Budget. The budget for the project is presented in Table 3. Physical and price contingencies as well as the administrative cost have been included in the budget. TABLE 3: RESETTLEMENT BUDGET (Y million) Cost item Jingzhu Section Hurong Section Total Land compensation 81.74 24.66 106.40 Land occupation tax 16.03 5.23 21.26 Temporary land occupation 5.03 0.22 5.25 Resettlement subsidy 35.56 8.65 44.21 Private house and asset compensation including 31.11 9.20 40.31 moving and transition allowance Public buildings compensation 5.43 1.23 6.66 Infrastructure compensation 8.19 7.70 15.89 Administrative costs (4%) 7.32 2.28 9.60 Monitoring and RAP preparation 1.83 0.57 2.40 Contingencies: Physical 18.31 5.69 24.00 *Price 18.31 5.69 24.00 Total 228.86 71.12 299.98 - 80 - ANNEX3 G. GRIEVANCE, PARTICIPATION AND CONSULTATION 16. Grievance Process. PAPs with grievances on resettlement and rehabilitation shall submit their complaint to the village resettlement offices and TROs. If the results are not satisfactory to the PAPs, the complaint can be submitted to the COROs, CIROs and the HERO in stages and within the time limits as specified in the RAP. If the issue cannot be resolved by the project authorities, then the grievance will be brought to the People's Court in accordance with the Civil Procedure Act. 17. Participation and Consultation. PAPs have been consulted on the impact of the project and resettlement measures since the beginning of RAP preparation through surveys, public meetings, etc. The PAPs are informed about the project and already know the location of their new houseplots. Consultation will continue during the implementation. H. MONITORING AND REPORTING 18. Internal Monitoring. The HERO is responsible for internal monitoring of resettlement. All levels of ROs will coordinate their monitoring activities. During implementation, TROs and COROs will record their resettlement and rehabilitation activities at the individual and household level into their databases and transmit the information to the HERO. 19. Independent Monitoring. The implementation of the RAP will be monitored by IMO to evaluate its progress and the compliance of the implementing organizations with the principles of the RAP. In addition, IMO will conduct surveys to monitor the standard of living of the PAPs to ascertain that remedial action will be taken if the living standards fall below preproject levels. IMO will also be responsible for monitoring (a) coordination between the schedule of resettlement and civil works; (b) grievance issues; (c) job creation; (d) rehabilitation of infrastructure; and (e) satisfaction of the PAPs. 20. Reporting. Local ROs will report on the progress continuously to the HERO. IMO will report to the HERO twice a year during implementation and annually (on December 31 of each year) thereafter. The HERO will report to the Bank semiannually during the implementation and annually thereafter (on January 31 of each year). -81- ANNEX4 ANNEX 4: IMPLEMENTATION SCHEDULE This annex presents the implementation schedule for the various components of the project. Table 1 summarizes the overall implementation schedule for the project as a whole. Table 2 shows the detailed implementation schedule for the National Highways III project. This schedule shows the estimated time requirements for construction activities, as well as for preconstruction activities, such as preparation of bid documents, the prequalification process, the bidding process, evaluation of bids, negotiations, and signing of contracts. 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 ID Task Name Duration '98 '99 '00 '01 '02 '03 04 '05 '06 '07 _L'08 1 CIVIL WORKS 1495d _ _ _ _ - 2 Contract Section for ICB 1235d . 3 Prequalification documents (PQ) available for sale Id 4 Last date to submit PQ documents ld h 5 PQ documents evaluation report & MOC review 86d 6 Bank review and no objection to PQ documents evaluation rep 23d 7 Review documents by MOC 21d 8 Review documents by the Bank 22d 9 Sell bidding documents to prequalified contractors ld 10 Conference before bidding and site investigation 2d . 11 Last date to receive bid documents 1 d 12 Bid evaluation report and review by MOC 32d 00 13 Bank review evaluation report and no objection 22d 14 Notify successful bidder Id 15 Negotiate and sign contracts ld 16 Construction period 920d 17 18 Contract Section for ICB (Contracts 9 and 10) 1234d 19 Prequalification documents (PQ) available for sale ld 20 Last date to submit PQ documents ld 21 PQ documents evaluation report & MOC review 86d Task Summary Rolled Up Progress Project: ProresAolld_p_as Date: 4/8/98 Progress Rolled UpTask Milestone * Rolled Up Milestone 0 Page 1 1998 1999 2000 1 2001 [ 2002 | 2003 |2004 2005 2006 2007 [2008 ID Task Name Duration '98 | '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 22 Bank review and no objection to PQ documents evaluation rep 23d . I 23 Review documents by MOC 21 d 24 Review documents by the Bank 22d 25 Sell bidding documents to prequalified contractors l d 26 Conference before bidding and site investigation 2d 27 Last date to receive bid documents Id 28 Bid evaluation report and review by MOC 32d 29 Bank review evaluation report and no objection 22d 30 Notify successful bidder ld 31 Negotiate and sign contracts ld 32 Construction period 919d *ii m ii 33 00 34 . 35 36 Annex Areas (NCB) 804d 37 Complete bidding documents ld 38 Sell bidding documents Id 39 Conference before bidding and site investigation 3d 40 Last date to receive bid documents Id 41 Bid evaluation report and review by MOC 1d 42 Negotiate and sign contracts 1d . Z ._ _ _ _ _ __ _ _ z Task Summary Rolled Up Progress Project: Date: 4/8/98 Progress Rolled Up Task Milestone Rolled Up Milestone O Page 2 1998 199912000] 2001] 2002 2003 2004 2005 L2006 200712008 ID Task Name Duration '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 43 Construction period 501 d 44 45 Interconnecting Roads 804d . . _ 46 Bidding documents available for sale ld 47 Last date to submit bid documents 1 d 48 Bid documents evaluation report & MOC review 65d 49 Sell bidding documents ld 50 Conference before bidding and site investigation 3d . 51 Last date to receive bid documents 1 d 52 Bid evaluation report and review by MOC 85d 53 Negotiate and sign contracts 22d 54 Construction period 521d - 554- 56 2. E&M WORKS CONTRACTS (ICB) 871d . . 57 Complete bidding documents ld 58 Review documents by the Bank 24d 59 Sell bidding documents Id 60 Conference before bidding and site investigation 3d . 61 Last date to receive bid documents ld 62 Bid evaluation report and review by MOC ld 63 Bank review evaluation report and no objection ld . Task Summary + Rolled Up Progress Project: _ _ _ _ _ _ _ _ Date: 4/8/98 Progress Rolled Up Task Milestone Rolled Up Milestone 0 Page 3 -85 - ANNEX4 COW ....................................................0................................................... . .................................. ...................................................................... I- 0cm N 00 CD ~~~~~~~~~~~~~~~~~~~~~0 C,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 0 0l 10 p~~~~~~~~~~~~~~~~~~~~~ C14~~~~~~~~~~~~~~~~~~~~~~ U ..... ...... ................................................. ................................... C%l- ................0...................................... .......... .I L.... ......... ................. C 0DV N - 00 00~~~~~~~~~~~~~~~~~~~~~~~~~~~ N -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0- Co~~~~~~~~~~~~~~~~~~~~~~~~~~~2 0 V V V V V~~~~~~~~~~~~~~ > V C co V V V V 0~~~ II. CU 0~ 0 0 - i m co CL .C2CD ~~~~0~~ C 2~ toE 0 t: 7- V -r C Cu 0 0 LU 16 -a >C 0 = n o 2 0 E S 0 0 en C~~~~~~~ -j 0 0 E~~~~0 V . c ~ ~ ~ ~ ~ o 0.0 C 0 0 C 0> Lm 0 0 co *0 0 o La Z C 0 0 0 E I- o -002 V .0C C E) ~~ = > 0 m 0 E m .c co0 V ~0. 0 .00 .L,V 0 02 V 0 C > C 0~~~~~~~~~~ - V 8 - . 0. B - 0 V 0 C MaC 0 0 2, C *- 0a 0 - t IM r_ r_ ~ ~ ~ ~ ~ ~ V ~ 0 be en 0 2 . 0 0 2 0 0 0 0 0 0 0 0 a.t 00 C U) M a. C) U Cu 0 C C 0 E x co Z.~~~~ cS ~~~~~~ .!~~~~ ~~~. o w w Z 0 C.) 0 ~~~~~~~~~~~~~~~~~ co-J 0 C-i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C co~~~~~~~~~~~~~~- 1998 11999 | 2000 J 2001 | 2002 | 2003 2004 | 2005 2006 J 2007 | 2008 ID Task Name Duration '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 85 HPCD negotiates and awards contract Id 86 Consultants mobilize ld 87 Execution of Study 326d 88 89 5. Highway Maintenance Management Study 631d 90 TOR, short list and LOI reviewed and approved by the Bank ld 91 Letter issued to consultants ld 92 Consultants prepare and submit proposals ld 93 HPCD evaluates Consultant's proposals ld 94 Bank approves evaluation report ld 95 HPCD negotiates and awards contract ld 96 Consultants mobilize I d 00 97 Execution of Study 521 d 98 99 6. Road Safety Program 522d 100 Bank approves TOR, short list and LOI 1d 101 Mobilize consultant/ Study group 1d 102 Final proposal, review by Bank and no objection 1d 103 Execution of Study 392d | Task __ Summary Rolled Up Progress Project: Progress RolPed 5 Date: 4/8/98 Pors oldU ak_ Milestone *Rolled Up Milestone o Page 5 - 87 - ANNEX4 TABLE 2: IMPLEMENTATION PROGRAM OF NATIONAL HIGHWAYS III PROJECT 1. Civil Works Contract Section for ICB Prequalification documents (PQ) available for sale Oct 5, 1997 Last date to submit PQ documents Dec 1, 1997 PQ documents evaluation report & MOC review Dec 1, 1997 - Mar 31, 1998 Bank review and no-objection to PQ documents evaluation report Apr I - May 1, 1998 Review bid documents by the Bank Jun 1, 1998 - Jul 1, 1998 Sell bidding documents to prequalified contractors Jul 1, 1998 Conference before bidding and site investigation Aug 14-16, 1998 Last date to receive bid documents Sep 1, 1998 Bid evaluation report and review by MOC Sep I - Oct 15, 1998 Bank review bid evaluation report and no-objection Oct 15 - Nov 15, 1998 Notify successful bidder Nov 15, 1998 Negotiate and sign contracts with contractors Nov 30, 1998 Start construction Dec 20, 1998 Complete construction Jun 30, 2002 (Note: Contracts 9 and 10 will be one year later than the above-mentioned schedule.) Annex Area (NCB) Complete bidding documents Jun 30, 1999 Sell bidding documents Jul 1, 1999 Conference before bidding and site investigation Sep 1-3, 1999 Last date to receive bid documents Sep 30, 1999 Complete bids evaluation report & MOC review Jan 31, 2000 Negotiate and sign contracts with contractors Mar 31, 2000 Start construction May 1,2000 Complete construction Apr 30, 2002 Interconnecting Roads (NCB) Prequalification documents (PQ) available for sale Jun 1, 1999 Last date to submit PQ documents Jul 31, 1999 PQ documents evaluation report & MOC review Aug 1 - Oct 31, 1999 Sell bidding documents Nov 1, 1999 Conference before bidding and site investigation Dec 1-3, 1999 Last date to receive bid documents Dec 31, 1999 Complete bid evaluation report and review by MOC Jan I - Apr 30, 2000 Negotiate and sign contracts with contractors May 1-31, 2000 Start construction Jun 30, 2000 Complete construction Jun 30,2002 2. E&M Works Contract (ICB) Complete bidding documents & National E&M Products Import & Export --- Management Office review Feb 28, 2000 Bank review and no-objection to bidding documents Mar 31, 2000 Sell bidding documents Apr 1,2000 Conference before bidding and site investigation Jun 1-3, 2000 Last time to receive bid documents Jun 30,2000 Bid evaluation report and govermment review Sep 30, 2000 Bank review bid evaluation report and no-objection Oct 31, 2000 Negotiate and sign contracts with contractors Jan 1, 2001 - 88 - ANNEX4 Agreement takes effect Jan 1, 2001 Complete construction Jun 30, 2003 3. Construction Supervision Review and no-objection of Bank to terms of reference (TOR), letter of invitation (LOI) and shortlist of consultants Apr 30, 1998 Issue invitations to consultants May 1, 1998 Conference before bidding and site investigation May 20-21, 1998 Last date to receive proposals Jun 1, 1998 Complete proposal evaluation report and MOC review Jun 30, 1998 Bank review proposals evaluation report and no-objection Jul 31, 1998 Negotiate with consultant and sign contract Aug 31, 1998 Consultant to prepare training material Sep 1-30, 1998 Train local personnel in China Oct I -Nov 30, 1998 Train local personnel abroad Nov 1-30, 1998 Start supervision of construction Dec 20, 1998 Complete supervision of construction Jun 30, 2003 4. Expressway Commercialization and Corporatization Study Review and no-objection of Bank to TOR, LOI and shortlist of consultants Dec 31, 1998 Issue invitations to consultants Jan 1, 1999 Last date to receive proposals Feb 28, 1999 Complete proposal evaluation report Apr 30, 1999 Bank review proposal evaluation report and no-objection May 31, 1999 Negotiate with consultant and sign contract Jul 31, 1999 Start study Sep 1, 1999 Complete study Oct 1, 1999 - Dec 31, 2000 5. Hubei Province Highway Maintenance Study Review and no-objection of Bank to TOR, LOI and shortlist of consultants Jul 31, 1998 Issue invitations to consultants Aug 1, 1998 Last date to receive proposals Aug 31, 1998 Complete proposal evaluation report Sep 30, 1998 Bank review proposal evaluation report and no-objection Oct 31, 1998 Negotiate with consultant and sign contract Nov 30, 1998 Start study Jan 1, 1999 Complete study Jan 1, 1999 - Dec 31, 2000 6. Road Safety Activities List of Chinese experts, shortlist of foreign consultants and LOI available for Bank review Dec 31, 1998 Mobilize consultant/study group Jan 1, 1999 Final proposal and work program review by Bank and no-objection Jun 30, 1999 Execute study Jul 1, 1999 - Dec 31, 2000 -89 - ANNEX5 ANNEX 5: SUPERVISION MISSION PLAN Timing Main Activities Skills Requirement Staff-weeks 10/98 Project Launch Highway engineering 4.0 The review of all key procedures for Bank Executing Procurement Agency interactions, such as procurement, disbursement, Disbursement environment and resettlement, implementation schedule, Environment and progress reporting requirements. Review progress on Resettlement preparation of studies. 02/99 General Supervision Highway engineering 3.0 * Review of overall progress for each component, identi- Procurement fication of pending issues, and agreement on follow-up Training actions; . Agreement on resettlement monitoring arrangements; * Review of proposals for equipment for maintenance of highway network and institutional strengthening; and . Review of proposals for training programs. 10/99 Major Supervision Highway engineering 4.0 In-depth review of implementation status with particular Procurement emphasis on: Environment * Contractors' performance; Transport economics * Effectiveness of supervision; Highway capacity * Adequacy of environmental protection measures; - Review of proposal for equipment procurement for the operation and maintenance of the highway network and the expressway; * Review of bidding documents for E&M supply and installation contract for the expressway; and * Review of progress on a highway maintenance management study,a high-grade highway commercialization and corporatization study, and an expressway safety study 06/00 General Supervision Highway engineering 3.0 * Review of overall progress for each component, Procurement identification of pending issues and agreement on Training follow-up actions; * Review of progress for procurement of equipment for operation and maintenance of the expressway; . Review of progress on studies; and * Review of progress on training programs. - 90 - ANNEX5 Timing Main Activities Skills Requirement Staff-weeks 02/01 Major Supervision Highway engineering 4.0 In-depth review of implementation status with particular Environment emphasis on: Resettlement . Contractors' performance; Transport economics . Effectiveness of supervision; Traffic engineering * Adequacy of environmental protection measures; . Staff training programs; and * Review of progress on implementation of studies and their recommendations. 10/01 General Supervision Highway engineering 3.0 Review of overall progress for each component, identifi- Training cation of pending issues and agreement on follow-up actions, with emphasis on training and studies. 06/02 Major Supervision Highway engineering 4.0 In-depth review of implementation status with particular Environment emphasis on: Capacity study • Contractors' performance; Tolling . Effectiveness of supervision; * Adequacy of environmental protection measures; * Staff training programs; * Review of progress on implementation of recommen- dations of studies; and * Review of results of toll studies and discuss operation and maintenance of tolling agencies. 02/03 General Supervision Highway engineering 3.0 Review of overall progress for each component, identifi- Training cation of pending issues and agreement on follow-up Tolling actions. 10/03 General Supervision Highway engineering 2.0 Review of overall progress for each component, identifi- cation of pending issues and agreement on follow-up actions. Agreement on actions for preparation of Project Implementation Completion Report. 06/04 PICR Mission Highway engineering 4.0 A consolidated review of project implementation. Transport economics Environment Resettlement Training Total 34.0 -91- ANNEX6 ANNEX 6: SELECTED DOCUMENTS IN THE PROJECT FILE ECONOMIC AND ENGINEERING STUDIES 1. Feasibility Study Report of NH3 Project in Hubei Province, August 1996. 2. Annex Area Scheme Report of NH3 Project in Hubei Province, December 1996. 3. Electrical and Mechanical Engineering Design Report, September 1997. 4. Prequalification Document of Hubei NH3 Project, October 1997. 5. Letter of Invitation and TOR for Construction Supervision Consulting Service, January 1998. 6. Technical Characteristics of the Expressway Section, January 1997. 7. Project Implementation Plan (updated version), March 1998. EQUIPMENT 1. List of Equipment for NH3 Project (updated version), February 1998. ENVIRONMENTAL DOCUMENTS 1. Environmental Impact Assessment Report of NH3 Project in Hubei Province, March 1997. 2. Environmental Impact Assessment Report of Interconnecting Roads of NH3 Project in Hubei Province, March 1997. 3. Environmental Action Plan of NH3 Project in Hubei Province (updated version), February 1998. 4. Environmental Assessment Summary of NH3 Project in Hubei Province (updated version), March 1998. RESETTLEMENT DOCUMENT 1. Resettlement Action Plan (updated version), March 1998. - 92 - ANNEX6 TECHNICAL ASSISTANCE/TRAINING/STUDIES 1. Terms of Reference for Expressway Commercialization and Corporatization Study, January 1998. 2. Terms of Reference for Highway Maintenance Study, February 1998. 3. Proposal on a Pilot Safety Program for Han-Yi Expressway in Hubei Province, February 1998. 4. Program for Development of Safety Audit Procedures for Road Design and Planning in Hubei Province, February 1998. 5. Program on How to Create Understanding of the Importance of Improved Road Safety, February 1998. 6. Training Program, February 1998. 7. Institutional Development Plan, February 1998. d, 1 i2- 1 112 iS 11411, 114 01 -d- nn w o dO Or h. 16 ,,)d -kG,IH ia, THIRD NATIONAL 32 ~ lorny IIP HIGHWAY PROJECT 0 20 40 0 - 1~~~~~~~~~~~~ ~~HIGHWAY PROJECTS: C See detail below ~~~~~~~~~~~~~~~~~~~~~~~~IBRD FINANCING @1 U ~~~~~~~~~~~INTERCHANGES ROT BRIDGE 31, Yi,,k..q ~~~~~~~~~~~~~~~~~~~~~.EXISTING EXPRESSWAY, ADB FINANCEG ahan 9" A ~~~~~~~~LOCAL FINANCING BRIDGE UNDER CONSTRUCTION -- 4 ~~~~~~~~~~~~~~~~~FUTURE ogling A ~~~~~~~~~~~~~~~~~~~~~RIVERS MAIN ROADS I ~~~~~~~~~~~~~RAILROADS -30 I4 SELECTEG CITIES AND TOWNS o.anning N > ® ~~~~~~PROVINCE CAPITALS 0 / oqi * ~~~~~~~~~~~~~~~~~NATIONAL CAPITAL IINSETI 0 ' - ~~~~~~~~~~~~~~~WUHAN CITY BOUNDARY [LilibLp. G ~~~~~~~~~~~~~~~~~~~~~~~~PROVINCE BOUNDARIES ---INTERNATIONAL BOUNDARIES (INSETI Li.yong ->' r S Heron Proon- Dao-, 30 w,D ooe 20, 208osroin oe oo rnn -- I 0 5 ~~~~~~~~~~Nation1 Higonnoy, Ill, Dawo H-,on *135Lw --1nl pno1n-l wonh World Ror, fItr-nig 5 Notional Higowoys Ill. H-,ron Wool, 14.5ow - f 'n~~~~~~~~~~ onnonl~~~~~~--I pnoject with Worl Bono fioncimg if ') ~ ~ ~ ~ ~~ ~ ~ ~ ~~~~3 5 1,0 15 No.nlIihosI rn ol ~~~~ ,, T~~~~~~~~~~~~ItOMETERS 5hm, -,-ot pnoecr with WorldI Bor.,roouc-m ( oo~~~~~~~~~~~~~~~No-High,-y0n II Yon Izo Rionoonig ¾ Ohm~~~~~~~~~~~~~~5. _ _o pn-oroith'BOTfin....rg Nat ona H ghwoyo III, H-rog Loor 40.5 k,wI t '1 _~~~~~~~~~~~~~~~~~~~~~~~~~~~~ .. tp..t,t W,dB1 -. 0-- / F--~~~~~~~~~~~~~~~~~~~~~~~~~.i . ihwy V .,f i u, .d, K x,,x ~~~~~~~~ 4) ~~~~~~ ¾oodRono~~~N.i. InHonoy~IV, H,,b,i lhordor, Ch-o,,oro SANCHA I oowo eNd orgtar. 45ok,r, ADB firon.. 51~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~, HAN* UHAN rIAtrKGL OJYLE RING J cwoon P .rc J,ho tim E I~H'o * F- OHENGOIAN Sos~E I~~~~~~~~~~I IBRD 28750 RUSSIAN FEDERATION 55 KAZAKHSTAN . . .~~~ K -. - . .., ., ~~~~~~~~~~~~~~~~HIL-IDLNG!(ANG UZBEKISTAN .-- ARBIN ..<' N IN . . 2~~~M 0 G LI N.,~~~~~~~~~~~~ ~~~~~~ . / ~~~~~~~~~~~~CHAF,GC-L '.KYRGYZ *..r. R~EPUBLIC . S. 4 *7 'O~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ EM. -½ ~~~~~~ C N ..L~~~~~~~~~~~~.. - / ~~~~~~~~PEOPLE'S /09 - ooe-? REP- OF ES -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~ ~ ~~% KOREA', N OTIANJIPI Too,,~ ~ RP. O -....o-e-, o YINICHJOA II! .TeoKOREA 0< N G A CA * HENGZOOI9N-NGS X Z 4 N G S~~~~J-#ANI I'-NEN - N 18R0 28749 30' -- - ~~~~~~~~~~~~~~~~~~~~~~~SHANGIHA( N., ~~~~~LHASA 55CHENGDU14 C,o \.,~~~ ~~0A - - ~~SHFJ/ANGISe - / ~~~~~~~~~~H UNA NANCHNNO 6 CHINA I ~~~~~~~~~~~~~~~~~~~~~~~CHANGSASI CHINA ~ ~ ~~~~~~~~~UIHUJiANO-XI THIRD NATIONAL HIGHWAY PROJECT HOU. H-N MAJOR HIGHWAYS SELECTED TOWNS .- .. ! A, AIWAN - COMPLETED ® PROVINCE CAPITALS UN1 NA N NGXI . G 9C)NC UNDER CONSTRUCTION NATIONAL CAPITAL C GUANDGAHOU - PLANNED ERRORS 2005-.- PROVINCE BOJNDARIES .VNANNING PLANNED AFTER 200)5 - ITERNAT ONAL BOUNDARIES L *I HONG; KONG 20' I VIETNAMMA O,PR ,,E .2D e, EDO 200 390 400 500 hMLES jQ I LAO PEOPLE'S ?Io 200 400 600 800 KELOMETERS 'J GEM, REP THAILANG HAINAN PHILIPPINES APRIL / 999