China - Zhejiang Provincial Highway Project

A'3V 7 /<&-WA Document of The World Bank FOR OFFICIAL USE ONLY MICROFICHE COPY Report No. 10335-CHA Report No. 10335-CHA Type: (SAR) RAGGAMBI, / X84039 / A7071/ EA2TP STAFF APPRAISAL REPORT CHINA ZHEJIANG PROVINCIAL HIGHWAY PROJECT MARCH 31, 1992 Transport Operations Division China and Mongolia Department East Asia and Pacific Region This document has a reshicted disuibutdon and maey be used by recipients only in Ihe per6ormance of their officiil duties. Its contents may not otherwise be disclosed witbout World Bank authoffmraon.  CURRENCY EQUIVALENTS (as of March 1992) Currency name - Renminbi Currency unit - Yuan (Y) - 100 Pen $1.00 - Y 5.48 $0.18 - Y 1.0 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) - 0.62 mile (mi) 1 square meter (m2) 2 10.76 square feet (sq ft) 1 square kilometer (km2) - 0.4 square miles (sq mi) 1 hectare (ha) - 0.01 (k2) - 2.47 acres (ac) - 15 mu 1 mu - 666.7 sq m - 0.0667 ha 1kilogram (kg) - 2.2046 pounds (lbs) 1 metric ton (m ton) - 2,204 pounds (lbs) PRINCIPAL ABBREVIATIONS AND ACRONYMS USED EA - Environmental Assessment EAP - Environmental Action Plan E.'uA - Economic Internal Rate of Return SFYP - Eighth Five-Year Plan (1991-95) FYRR - First Year Rate of Return GOVAI - Gross Output Value of Agriculture and Industry HPDI - Highway Planning and Design Institute HSRI - Highway Scientific Research Institute ICB - International Competitive Bidding JST - Joint Supervision Team for Hangzhou-Ningbo Highway LCB - Local Competitive Bidding mOC - Ministry of Communications MOF - Ministry of Finance NPV - Net Present Value pcu - Passenger Car Unit PMS - Pavement Management System PRC - People's Republic of China PTD - Provincial Transport Department RAP - Resettlement Action Plan RDB - Road Data Bank RDP - Road Development Program 7FYP - Seventh Five-Year Plan (1986-90) SPC - State Planning Commission TCU - Technical Coordinating Unit ZPEPB - Zhejiang Provincial Environmental Protection Bureau ZPEPEC - Zhejiang Provincial Expressway Project Executive Commission ZPEPRI - Zhejiang Provincial Environmental Protection Research Institute ZPG - Zhejiang Provincial People's Government ZPHAB - Zhejiang Provincial Highway Administration Bureau ZPTD - Zhejiang Provincial Transport Department ZPTDI - Zhejiang Provincial Transport Design Institute vpd - Vehicle per day  FOR OMCIAL USE ONLY ZHEJIANG PROVINCIAL TRANSPORT PROJECT Table of Contents Pate No. Loan and Project Susmary . . . . . . . . iv 1. THE TRANSPORT SECTOR . . . . . . . . . . . . . . . . A. Introduction . . . . . .1 Be Traffic1 C. Investment . . . . . . . . . . . . . . . . . 3 D. Transport Issues and Objectives . . . . . . . . . 3 E. Bank Group Participation in Transport Sector . . . . 5 P. The Highway Subsector ........... ... 7 II. ZHEJIANG PROVINCE TRANSPORT SECTOR . . . . . . . . . . . 13 A. Situation and Economy ................. 13 B. Transport Network ... ... . . . 13 C. Traffic Growth and Characteristics . . . . . . . . 14 D. The Vehicle Fleet . . . . . . . . . . . . . . . . . 14 E. The Trucking Industry . . . . . . . . . . . . . . . 15 F. Highway Administration ................ 15 G. Planning, Budgeting and Financing . . . . . . . . 15 H. Engineering, Construction and Maintenance . . . . . .,17 I. Highway Development ... ....... . 18 III. THE PROJECT . . . . . . . . . . . . * * * * * 19 A. Project Formulation and Preparation . . . . . . . . . . 19 B. Project Objectives and Rationale for Bank Involvement . 19 C. Project Scope . . . . . . . . . . . . . . . . . . . . 20 D. Environmental Assessment . . . . . . . . . . . . . 25 This report is based on the findings of a June 1991 appraisal mission comprising Messrs. Otto Raggambi (Highway Engineer, Task Manager), Stephen Stares (Transport Specialist), Hatim Najj (Transport Specialist), David Butcher (Resettlement Specialist), William Lane (Environmental Specialist, Consultant), Doi Dogehang (Operations Officer), and Zhang Jianfei (Consultant) and a December 1991 poet-appraisal mission comprising Messrs. Raggambi, Stares, Hajj, Dai, Zhang and Ms. Ruwani Jayewerdent (Resettlement Specialist, Consultant) and Mr. Paul Dean (Equipment Specialist, Consultant). Peer Reviewers for the project were Ms. Carolle Carr (Economist), Messrs. Asif Paiz (Highways Advisor), Jacques Yenny (Transport Eonomist), and Nick Anderson (Project Officer). Ms. E. Rankin (Economist, Consultant) assisted in the preparation of t'sis report. The Division Chief is Mr. Daud Abmad and Department Diroctor is Mr. Shahid Javed Burki. This document has a restricted distribution and may be used by recipients only in the performance of their oflicial duties. It contents may not otherwise be disclosed without World Bank authorization.  - ii - Page No. E. Land Acqulsltion and Resettlement . . . . . . . . . . . 26 P. Cost Estimates . . . . . . . . . ... ... 27 G. Financing . . ........ . . . . . ........ 27 H. Implementation . . . . . . . . . . . . . . . . . . . . 29 I. Procurement . . . . . . . . . . . . . . . . . . . . . . 31 J. Disbursements . . . . . . . . . . . . . . . . . . . . . 33 K. Auditing . .......... . . . . . 34 L. Project Supervision, Reporting, Monitoring . . . . . 34 IV. ECONOMIC EVALUATION . .. ... *.. ........ .... 34 A. Main Benefits and Beneficiaries . . . . . . . . . . . . 35 B. Hangzhou-Ningbo Highway .. * ................... 35 C. Road Development Program . . . . . . . . . . . . . 38 D. Overall Evaluation and Risks . . . . . . . . . . . . . 40 V. AGREEMENT REACHED AND RECOMMENDATION . . . . . . . . . . . 41 TABLES 1.1 Freight Traffic Intensities in Selected Countries . . . . . 43 1.2 Road and Railway Network Density in Selected Countries . . 44 1.3 China: Freight Traffic . . . . . . . . . ; . . . . . . . 45 1.4 China: Passenger Traffic . .. . .......... . . . 46 1.5 China: Investment in the Transport Sector (Including Posts and Telecommunications) . . . . . . . . 47 1.6 China: Transport Investment vs. Economic Output . . . . . 48 1.7 China: Highway Design Standards . . . . . . . . . . . . . 49 1.8 China: Civilian Motor Vehicles . . . . . . . . . . . . . . 50 1.9 China: Highway Freight Transport . . . . . . . . . . . . . 51 2.1 Zhejiang: Economic Data, 1990 . . . . . . . . . . . . . . 52 2.2 Zhejiang: Demographic and Transport Network Data, 1990 . . 53 2.3 Zhejiang: Road Network, 1981-90 . 54 2.4 Zhejiang: Traffic, 1984-90 . . . . . . . . . . . . . . . 55 2.5 Zhejiang: Length of Highway by ADT, National Roads and Provincial Roads, 1990 . .. .... . ..... 56 2.6 Zhejiangt Vehicle Fleet, 1984-90 . . . . . . . . . . . . . 57 2.7 Zhejiang: Freight Handled by Public and Social Trucks, 1982-90 . . . . . . . . . . . . . . * 9 . 9 9 . 58 2.8 Zhejiang: Highway Finances, 1986-90 . . . . . . . . 59 2.9 Zhejiang: Fuel Prices . . . . a . . . . . * . . . . . . . 60 3.1 Staff Training Program . . . . . . . . . . . . . . . . 61 3.2 Equipment for Hangzhou-Ningbo Highway Component . . . . . . 62 3.3 Equipment for Hangzhou-Ningbo Highway Component . . . . . . 63 3.4 Equipment for Road Development Component . . . . . . . . 64 3.5 Implementation Schedule . . . . . . . . . . . . . . . . . . 65 3.6 Disbursement Schedule 6. . . . . . . . . . . . . . . . 6  - lii - Page No. 4.1 Socioeconomic Projections in the Hangzhou-Ningbo Corridor . 67 4.2 Recent Traffic Growth on the Existing Hangzhou-Ningbo Road 68 4.3 Projected Highway Traffic Volumes in the Hangzhou-Ningbo Corridor * * * * * * * ** * * * * *.*.*. . . . . . . . . 69 4.4 Estimated Economic Cost - Hangzhou-Ningbo Highway . . . . . 70 4.5 Average Economic Vehicle Operating Costs by Vehicle . . . . 71 4.6 Economic Evaluation Without Tolling - Hangzhou-Ningbo Highway 72 4.7 Economic Evaluation With Tolling - Hangzhou-Ningbo Highway 73 4.8 Economic Evaluation Sensitivity Test With Tolling - Hangzhou-Ningbo Hlighvay ..................... 74 4.9 Evaluation Summary and Sensitivity - Hangzhou-Ningbo Highway 75 ANNEXES 1. Road Development Program m. ................... . 76 2. Environmental Assessment and Action Plan Summary for the Hangzhou-Ningbo Highway .. . ....... ................. . 102 3. Resettlement Action Plan Summary for the Hangzhou-Ningbo Highway 114 4. Supervision Mission Plan . . . . . . . . . . . . . . . * . . . . 120 5. Documents Available in the Project File . . . . . . . . . . . . 123 CHARTS 1. Organization of the Zhejiang Provincial Transport Department and the Highway Administration Bureau 2. Organization of the Zhejiang Provincial Highway Administration 3. Organization of the Hangzhou-Ningbo Highway Administration MAPS 1. IBRD 23353 2. IBRD 23484  - iv - CHINA ZHEJIANG PROVINCIAL HIGHWAY PROJECT Loan and Proiect Summary Borrowers: People's Republic of China Beneficiary: Zhejiang Province Amount: $220 million equivalent Terms: 20 years, including 5 years of grace, at the Bank's standard variable interest rate Onlendina Terms: 20 years, including 5 years of grace, at 6 percent per annum with 0.75 percent per annum commitment fee on the unwithdrawn balance. Zhejiang Province would bear the foreign exchange risk. Project Obiectives: The project has the following specific objectives: (a) to relieve traffic congestion which is restraining economic growth in the Hang7hou-Ningbo Highway corridor, and provide a high standard road transport link in sup- port of agricultural and industrial development; (b) to provide support for a Road Development Program prima:ily in the economically less developed southern regions of the Province; (c) to further develop institutional capa- bilities for transport planning and determination of investment priorities; and (d) to promote the transfer of highway construction and maintenance technology through training and provision of modern equipment. Project Description: The project includes: (a) construction of a 138 km section of the four-lane divided, access controlled Hangzhou-Ningbo Highway on a new alignment; (b) con- struction and improvement of about 33 sections of provincial and county roads (970 km); (c) consultant services for construction aupervision of the Hangzhou- Ningbo Highway; (d) staff training; and (e) purchase of equipment for road laboratories, environmental protec- tion, road research, a road data bank, a pavement man- agement system, road maintenance and highway operation. Proiect Benefits: Primary benefits from the Hangzhou-Ningbo Highway will be in the form of road user cost savings resulting from improved vehicle operating costs and time savings due to reduced length of the new highway. Other benefits will stem from reduced congestion on the existing road and accelerated industrial and agricultural growth based on improved transport facilities. Benefits from the Road  Development Pro&ram will come from the provision of improved all-weather access for motorized vehicles to presently isolated rural areas. Additional benefits will accrue from maintenance cost savings on the improved provincial/county road network. Risks: Because of the difficult subsoil conditions along the alignment of the Hangzhou-Ningbo Highway, the major risk is delay in the completion of the highway and the qual- ity of construction. Since the implementing authority for the highway is a first-time executing agency for a Bank project, there is also a risk in implementing the project in a timely manner. However, the preparation of the project was assisted by the Bank's experience in previous Chinese highway projects, and by the more active involvement of the Ministry of Communications; this enhanced role of the Ministry is expected to con- tinue into fajtiure projects. To minimize the risks, the project was designed wv-h t z.e -stance of foreign experts, prequalification of contractors was made par- ticularly stringent, and supervision arrangements were carefully formulated to ensure regular monitoring and effective quality control.  - vi - Proiect Coats: Local Foreijn Total ---------- ($ million) ---------- A. Works 1. HanSzhc --'ingbo Highway Civi :ks 172.21 140.90 313.11 Supply t Installation (E&M) 2.06 4.82 6.88 2. Road DeveLopment Program 45.65 30.43 76.09 Subtotal 219.92 176.15 396.07 B. Supervision of Construction 1. Hangzhou-Ningbo Highway 4.80 3.00 7.80 2. Road Development Program 1.24 0.00 1.24 Subtotal 6.04 3.00 9.04 C. EguiDment for 1. Hangzhou-Ningbo Highway Laboratory, Equipment, Research 0.15 1.34 1.49 Maintenance and Operation 0.68 6.08 6.75 2. Roads Development Program RDB/PMS, Survey, Laboratory 0.09 0.77 0.86 Provincial Road Maintenance 0.46 4.16 4.62 Subtotal 1.37 12.35 13.72 D. Staff Training In China and Abroad 0.25 0.99 1.24 Subtotal 0.25 0.99 1.24 Base Cost 227.59 192.49 420.08 Physical Contingencies /a 22.47 17.91 40.39 Price Contingencies 45.01 21.04 66.05 Subtotal 295.07 231.44 526.52 Land Acquisition and Resettlement Cost 32.34 0.00 32.34 Total Proiect Cost Lb 327.41 231.44 558.85 la Ten percent of Items A and B(1). /b Including identifiable taxes and duties of about Y 96.7 million ($18.0 million equivalent). Taxes and duties would not be financed from the proceeds of the loan.  - vii - Finaninat Plan: LoPAl Foreitn Total --- ($ million) -------- Provincial Government 242.91 14.74 257.65 Central Government 81.20 - 81.20 IBRD 3.30 216.70 220.00 T,tal Financjn_ Required 327.41 231.44 558.85 Estimated Disbursements: Bank Group FY 1993 199X 1995 1996 1997 1998 ------------- ($ million) ----------------- Annual 39 27 34 46 50 24 Cumulative 39 66 100 146 196 220 Economic Rate of Returns 20 percent  CHINA ZHEJIANG PROVINCIAL HIGHWAY PROJECT I. THE TRANSPORT SECTOR A. Introduction 1.1 The transport system in China is characterized by intensive freight traffic in relation to economic output, heavily suppressed demand, high utili- zation of assets, a strong emphasis on railways, and distortions in tariffs and costs. Freight traffic intensity in China, measured in ton-kilometers per dollar of GNP, is even higher than in the (former) Soviet Union, and is much higher than in India, Brazil or the United States (Table 1.1). The major rea- sons behind China's high freight traffic intensity are a relatively large heavy industry sector, reliance on coal as the major source of energy, and a large volume of other bulk products. In adlition, energy efficiency in China is relatively low, and there is still little preprocessing of raw materials before shipping. On the other hand, the density of China's transport network, measured both on the basis of geographic area and population, is among the lowest in the world (Figure 1 and Table 1.2). Figure 1: INTERNATIONAL COMPARISON OF LAND TRANSPORT NETWORKS Inwnauonal Comparisons of Railway Networks nmaidoonal Compaisws of Road Neworks 10.000 Ispa USA USSR tlaO Bnmz Chin. I J4 USA U5R Loa Imal Cb i To* Woo (km) pet .dto poptaon Tuk tina (km) pm 10 ,q km k laud Rd 5th (km) pw O Rat.kt