Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16179 IMPLEMENTATION COMPLETION REPORT CHINA JIANGXI PROVINCIAL HIGHWAY PROJECT (CREDIT 1984-CHA) December 20. 1996 FILE; COPY] Infrastructure Operations Division China and Mongolia Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit= Yuan (Y) 1987 (appraisal) $1 = Y 3.72 1988 $1 =Y 3.72 1989 $1 = Y 3.76 1990 $1 = Y 4.78 1991 $1 = Y 5.32 1992 $1 = Y 5.53 1993 $1=Y5.76 1994 $1 = Y 8.60 1995 $1 = Y 8.50 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES I meter (m) = 3.28 feet (ft) I kilometer (km) 2 0.62 mile (mi) 1 square meter (m2) = 10.76 square feet (ft2) I square kilometer (km = 0.4 square miles (mi) I hectare (ha) = 0.01 km = 2.47 acr5s (ac) = 15 mu I mu = 666.7 m = 0.0667 ha I kilogram (kg) = 2.2046 pounds (lbs) I metric ton (mt) = 2,204 pounds (lbs) ABBREVIATIONS AND ACRONYMS 8FYP - Eighth Five-Year Plan 9FYP - Ninth Five-Year Plan ADT - Average Daily Traffic DF - Diversion Factor ERR - Economic Rate of Return HPDI - Highway Planning and Design Institute ICB - International Competitive Bidding ICR - Implementation Completion Report MOC - Ministry of Communications JPHAB - Jiangxi Provincial Highway Administration Bureau JPHCHAB - Jiangxi Provincial High-Class Highway Administration Bureau JPTD - Jiangxi Provincial Transport Department NBC Nanchang Bridge Complex NJH - Nanchang-Jiujiang Highway NPV - Net Present Value NURCB - Nanchang Urban Rural Construction Bureau PMS - Pavement Management System RDB - Road Data Bank SAR - Staff Appraisal Report TOR - Terms of Reference VOC - Vehicle Operating Cost VPD - Vehicle per Day Vice President (Acting) Marianne Haug, EAP Director Nicholas C. Hope, EA2 Division Chief Richard Scurfield, EA2IN Staff Member Otto Raggambi, Consultant, EA2IN FOR OFFICLAL USE ONLY * ~ ~ ~ ~ ~ ~ ~ ~ ~~~~W-1- CONTENTS PREFACE ..........................v EVALUATION SUMMARY ..................... , vii PART I: PROJECT IMPLEMENTATION ASSESSMENT ..1 A. Project Objectives and Description . . B. Achievement of Project Objectives . . 2 C. Implementation Record and Major Factors Affe,cting the Project ..18 D. Project Sustainability ..19 E. Bank Performance ..20 F. Borrower Performance ..24 G. Assessment of Outcome ..25 H. Future Operation ..27 I. Key Lessons Learned .27 PART II: STATISTICAL TABLES .30 Table 1: Summary of Assessments .30 Table 2: Related Bank Loans/Credits .31 Table 3: Project Timetable .32 Table 4: Credit Disbursements: Cumulative Estimated and Actual. 33 Table 5: Key Indicators for Project Implementation ....................................... 33 Table 6: Key Indicators for Project Operation ............................................,.34 Table 7: Studies included in Project ........................................... 34 Table 8a: Project Costs ........................................... 35 Table 8b: Project Cost .36 Table 8C: Project Financing ........................................... 37 Table 9: Economic Costs and Benefits ........................................... 37 Table 10: Status of Legal Covenants .38 Table 11: Compliance with Operational Manual Statements .38 Table 12: Bank Resources: Staff Inputs .39 Table 13: Bank Resources: Missions ................................ 39 ANNEX 1: ECONOMIC EVALUATION .41 ANNEX 2: BORROWER'S CONTRIBUTION TO THE ICR .65 ANNEX 3, PART 1: THE ICR MISSION'S AIDE MEIMOIRE (JPTD). 78 ANNEX 3, PART 2: THE ICR MISSION'S AIDE MEMOIRE (NURCB) .83 MAPS: 1. Transport Network-Jiangxi Province-I'BRD 20254R 2. Nanchang-Jiujiang Highway-IBRD 202 67R 3. Nanchang Bridge-IBRD 20282R This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. I I -v IMPLEMENTATION COMPLETIOPN REPORT CHINA JIANGXI PROVINCIAL HIGHWAY PROJECT (CREDIT 1984-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Jiangxi Provincial Highway Project in China, for which Credit 1984-CHA, for SDR 44.7 million ($61.0 million equivalent), was approved on February 7, 1989. The last disbursement was on December 13, 1995 and the credit was closed on December 31, 1995. The ICR was prepared by Messrs. Otto Raggambi (Consultant, Highway Engineer) and Han-Kang Yen (Research Analyst) in the Infrastructure Operations Division, China and Mongolia Department of the East Asia and Pacific Region of the World Bank, and reviewed by Messrs. Richard Scurfield, Chief, EA2IN and Yo Kimura, Project Advisor, EA2DR. The borrower's implementation evaluation summary for the project is annexed to the ICR. Preparation of this ICR began in April 1995, and an ICR mission visited Jiangxi Province in July 1995. Further consultation was held between provincial and Bank personnel regarding the preparation of the ICR in Nanchang in April 1996. The ICR is based on discussions held in the field, materials available in the project file and additional data provided by the project executing agencies. The agencies providLed the Bank with copies of their evaluation reports for the highway and bridge components. Also, both agencies are in the process of preparing manuals for defining the administrative, managerial and monitoring requirements for the operation of the civil works facilities of the project. t -vii - CHINA JIANGXI PROVINCIAL HIGHWAYe PROJECT (CREDIT 1984-CHA) EVALUATION SUMMARY Introduction 1. The Chinese economy, which started accelerating in the early 1980s, greatly increased road transport demand. To address the proble:m of road transport constraints, the Chinese Government decided to accord high priority to increasing road capacity on the heavily trafficked segments of the national and provincial road netwvorks. The Jiangxi Provincial Highway Project reflects this priority, comibined with the much-needed transfer of technology to provincial transport departments for design, construction and construction supervision of high-class highways, and a systematic approach to the planning and maintenance of the road network. Project Objectives 2. The project's primary objectives were to: (a) expand road transport capacity in the Province's key transport corridor between Nanchaag, the provincial capital, and Jiujiang, an important inland port city on the Chang River; (b) provide relief to two heavily congested bridges over the Gan River in Nanchang City by constructing a third bridge in the southeastern part of the City; (c) help the Province in carrying out surveys for road condition evaluation and preparing programs for investnment decisions for improving the condition of the network; and (d) train staff and procure equipment as means of acquiring technologies. 3. The objectives reflected the physical and developmental needs of the Province's highway subsector, the Central Government's development strategy, and the Bank assistance strategy for the subsector. Implementation Experience and Results 4. The project's key objectives, the construction of a new highway between Nanchang and Jiujiang and a major bridge in Nanchang City, were achieved, although at a higher cost than estimated. Also, according to the reevaluated economic rates of return (ERRs), they were completed with a lower but still acceptable overall yield. With the Nanchang-Jiujiang Highway (NJH), the higher-than-estimated cost of construction was compensated by higher-than-forecast traffic growth, a cornbination that yielded much the same ERR in the ICR as in the SAR estimate, i.e., about 30.0 percent. However, the higher cost and substantially lower-than-estimated traffiFc growth resulted in a much - viii - reduced but still satisfactory ERR for the Nanchang Bridge Complex (NBC)-16.6 percent versus 38.0 percent. 5. Some modifications were made to the scope of civil works, including realignment of a Connecting Road between the southern end of the NJH and the NBC, construction of additional interchanges along the route, and widening of the NJH to a four-lane divided highway, although it was originally designed as a two-lane highway. This latter modification was made by the Provincial Government, and the second two-lane carriageway was opened to traffic in early 1996, about three years later than the two-lane highway. The cost associated with the widening was locally financed. Based on an assessment made in the ICR, it would appear that the widening of the NJH was somewhat premature. Nevertheless, it is expected to bring about significant traffic operational improvements, particularly with respect to road safety. The road safety record of the two- lane highway was alarmingly poor, as reflected in the very high number of accidents during the first three years of its operation. The number of accidents is expected to be substantially reduced with the widening of the highway. 6. The execution of civil works suffered delays, both in terms of SAR schedules and the implementation periods stipulated in the contracts. This was caused by the lack of experience and resources of the contractors, adverse weather conditions and, in the case of the Nanchang Bridge, the difficulties encountered during the execution of an innovative but complex design for the main bridge structure. Despite these problems, the key objective of the project, to provide increased capacity in the heavily trafficked transport corridor between Nanchang and Jiujiang and across the Gan River in Nanchang City, was achieved. 7. The equipment acquired for the maintenance of the project's civil works was considered appropriate. The procurement of the equipment was somewhat delayed, but finally accomplished in accordance with the terms of the Development Credit Agreement. 8. The staff training program was implemented according to its original objective, but administered within the framework of a Ministry of Communications (MOC) coordinated training program. Although the cost of training remained within the estimated amount, only a relatively small number of Jiangxi Provincial Transport Department (JPTD) and Nanchang Urban and Rural Construction Bureau (NURCB) personnel participated in the program because of the high per-person cost of training. The program was designed whereby the training courses were held abroad, some combined with study tours. While it is difficult to measure the impact of the training, most of the courses were regarded as beneficial. Nevertheless, as already highlighted in the ICR for the Shaanxi Provincial Highway Project, planning, preparing and executing future training programs under Bank Group-financed highway projects will need to be prepared and executed more carefully to ensure that the programs become more effective and that a larger proportion of the staff will have the opportunity to participate in the programs. - ix - 9. The collection and processing of road condition data within the framework of the Pavement Management System (PMS) made satisfactory progress. The data output from the application of the PMS is now being used to guide (lecisions for the distribution of funds for routine and periodic maintenance of the road network. While the development of the PMS met the expectations envisaged at the time of project formulation, only minimal progress has been made on development of the Road Data Bank (RDB) program. This has also been a concern in some other provinces, despite the commitment of MOC to promote RDB development nationwide under the Eighth and Ninth Five-Year Plans [8FYP (1991-95) and 9FYP (1996-2000)]. Summary of Findings, Future Operations, and Key Lessons Learned 10. Notwithstanding the implementation difficulties, the quality deficiencies and the delays encountered in the execution of civil works, the project achieved its overall objectives. The ICR estimates of ERRs, although lower than expected at appraisal, confirm that the development objectives were achieved and the condition of the civil works facilities and the benefits emanating from the investments made, as detailed in Annex 1 of the ICR, are sustainable and are not expected to be exposed to future risks. 11. The civil works of the project, such as the NJH, the Connecting Road and the NBC, are maintainable at a satisfactory level with regular maintenance. Further, to help ensure that the infrastructure components of the project will operate efficiently, JPTD and NURCB are proceeding with the preparation of manuals for administrative, managerial and operational directives, which will also outline regular monitoring parameters for key performance indicators for the operation of the facilities. The PMS program for the highway network and the traffic monitoring system for the NBC are expected to be sustained with long-term benefits. Furthermore, the impact of technology transfer through acquisition of modern equipment and staff training should have a long-term impact on institutional development. 12. The following lessons learned are relevant to still ongoing and future Bank Group-financed highway projects in China: (a) The engineering design deficiencies identified during the implementation of this project, and also those noted in other Bank Group-financed highway projects, have prompted the Bank to involve design experts in reviewing key elements of engineering design during its preparatory phase, in consultation with local insl:itutions responsible for the preparation of design, a measure that helped improve the quality of design. (b) The contractor's experience and available resources were not appropriately assessed during prequalification, which resulted in implementation delays and poor workmanship. The deficiencies of the prequalification process have also been noted under other Bank Group-financed projects. Although some measures were taken in the early 1 990s to tighten prequalification procedures, introducing even stricter measures by the x - project executing agencies, the Central Government and the Bank are needed to rectify this deficiency. (c) Construction supervision must be strengthened by accelerating the buildup of local construction supervision entities so they can play a more effective role in construction supervision. The Bank Group's supervision efforts, particularly for projects with quality deficiencies, also need to be intensified. (d) One of the issues identified relates to the unrealistic timeframe set for the completion of highway civil works, which is not commensurate with the contractors' ability to meet deadlines without the risk of inferior workmanship. The project executing agencies, the Central Government and the Bank Group will need to be more alert to this issue. (e) Overly optimistic traffic forecasts and high yields were presented in the SAR as a result of inadequate analysis of urban development plans and relevant traffic distribution patterns. Such deficiencies have also been noted in connection with other Bank Group-financed highway projects. (f) The alarmingly high number of accidents on the project highway highlights the urgent need for evolving a comprehensive Road Safety Strategy for China. (g) The staff training program, which incurred relatively high person-month cost and had limited staff participation, highlighted the need for formulating more effective training programs under future Bank-financed highway projects. IMPLEMENTATION COMPLETION REPOWT CHINA JIANGXI PROVINCIAL HIGHWAY PROJECT (CREDIT 1984-CHA) PART I: PROJECT IMPLEMENTATIOpi ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. In the early 1980s, the shortage of capacity for all transport modes was recognized by the Chinese Government as one of the major impediments to accelerated development of the country's economy. For road transport development, high priority was accorded to providing adequate capacity in heavily congested corridors of the national and provincial road networks under the Seventh Five-Year Plan (1986-90) and subsequent Five-Year Plans. The Bank Group supported such government objectives, as reflected in the Bank Group's lending strategy for development of the hig]hway subsector. In addition to financing road improvement components aimed at easing capacity constraints, Bank Group-financed projects have been promoting policy initiatives and have helped expedite the transfer of advanced technologies through the provision of equipment and staff training programs. Moreover, Bank Group-financed projects have also supported the provincial transport departments through introducing mrethodologies for evaluating road conditions and applying comprehensive road maintenance management systems to facilitate the improvement and upgrading of the national and provinicial road networks. Between 1985 and 1996, the Bank Group approved the financing of another 15 highway projects as listed in Part II, Table 2 of this report. A PCR was issued for the first Highway Project in August 1992, and an ICR was issued for the Shaanxi Provincial Highway Project in June 1996. 2. The project's primary objective was to provide urgently needed road traffic capacity expansion in the important transport corridor between the provincial capital of Nanchang and the inland port of Jiujiang and across the Gan River in Nanchang City. The eventual capacity constraints of the existing Nanchang-Jiujiang arterial road (145 km) and the two existing bridges crossing the Gan River were already recognized in the mid-1970s. The studies carried out concluded that, due to topographic and land use characteristics along the alignments of the existing roacd between Nanchang and Jiujiang and the Nanchang City street network, corridor traffic capacity could be best increased by constructing a highway between Nanchang and Jiujiang, on a new alignment (112.8 km), and a third bridge over the Gan River in Nanchang City for vehicular as well as pedestrian and bicycle traffic. In addition to addressing the alleviation of capacity constraints in this key transport corridor, the project was formulated to include policy, -2 - institutional and technology transfer objectives by focusing on road network planning, pavement strengthening, road maintenance management and staff training needs. 3. The IDA credit for the Provincial Highway Project was approved by the Association in February 1989. The scope of the project was in line with investment priorities for road network development in Jiangxi Province, and was also consistent with the Central Government's policy and the Bank Group's assistance strategy for development of the road transport subsector in China. B. ACHIEVEMENT OF PROJECT OBJECTIVES 4. Although the objectives of the project were essentially achieved, the implementation of the project did not progress smoothly. There were implementation delays and quality deficiencies due, primarily, to the inadequate experience and resources of the contractors and, to some degree, to the limited experience of the executing agencies in administering the implementation of a large, technically demanding highway project. Furthermore, the differences between the level and distribution of traffic estimated at the time of project formulation and the actual buildup of traffic on the various segments of the project roads were substantial. Such differences, combined with a greater-than- expected increase in the cost of construction, adversely affected the estimated economic rates of return (ERRs). The reevaluated ERR for the NJH differed only marginally from that of the SAR estimate because the higher cost was compensated for by higher-than- forecast traffic volumes. However, the reestimated ERR for the NBC was substantially below SAR estimates due to the combined adverse effects of higher cost and lower-than- forecast traffic. Moreover, a major conceptual change was made to the scope of the civil works. This involved the duplication of the two-lane NJH soon after its opening to traffic in early 1993. This was well ahead of the timing envisaged for the widening at the time of the project's formulation. The duplication of the NJH had been initiated and executed by the Province using its own resources. 5. The project was implemented by two executing agencies. The Jiangxi Provincial Transport Department (JPTD) was responsible for the NJH component of the project, while the NBC was executed by the Nanchang Urban Rural Construction Bureau (NURCB) of the Nanchang Municipal Government. The IDA credit was shared about evenly between Jiangxi Province and Nanchang Municipality. The key implementation features of the project components are presented below. Nanchang-Jiujiang Highway (NJH) 6. The new 112.8-km highway was designed to Class I highway geometric standards with respect to horizontal and vertical alignments, but only as a Class II two-lane highway in terms of formation and pavement width. The new highway, which traverses hilly terrain on a substantial length of its alignment, is 57.5 km shorter than the existing arterial road. At the time of project appraisal, the existing arterial road was identified as a low-standard road in poor condition, built to Class III, and over some of its sections, to Class IV standard. Some segments of the arterial road had excessive grades and poor -3 - horizontal alignments. During the last few years, the geometry of some sections of the road were marginally improved. 7. Conceptual Changes. During the implementation of the project, some interrelated conceptual changes were made to the original scheme of the NJH and its connection to the NBC: (a) At the time of project appraisal, it was expected that the two-lane Class II highway, together with the existing arterial road, would provide adequate corridor capacity until 2010. However, Jiangxi Province decided to bring forward the timing for the widening of the NJH to a four-lane Class I access-controlled toll highway. The construction of the second carriageway started in 1994 and was opened to traffic in January 1996. The still outstanding works are scheduled for completion by the end of 1996. (b) Linked to the decision outlined above, the alignment and the standard for a Connecting Road between the NJH and the NBC were modified. Instead of connecting the NJH to the existing road at Jiaoqiao and providing a 6 km two-lane link from a point farther south on the existing road to the NBC as originally planned, the connection was made to the NBC by a 12 km four-lane divided highway on a direct alignment from the southern end-point of the NJH, at Jiaoqiao, to the northwestern end of the NBC (Map 2). (c) The NJH was extended at its northern end from Jiujiang (Shilibu) to the Chang River rail/road bridge by a 12.5 km four-lane highway, to improve interprovincial connection to Hubei Prov ince. 8. Engineering Design. The preliminary engineering and feasibility study for the highway was prepared under the guidance of JPTD by the Jiangxi Transport Planning, Survey and Design Institute with assistance from other provincial highway agencies and the Highway Planning and Design Institute (HPDI) of MOC. The design was carried out by the Second Highway Survey and Design Institute of MOC in Wuhan. The design was reviewed by a foreign consulting firm engaged under bilateral aid, which made recommendations for amending some elements of the design. I)espite a seemingly thorough preparation of the design and technical specifications, the provisions made for the treatment of shoulders, roadside drainage and slc,pe protection in an environment known for high incidence of heavy rainfalls and unstable geological conditions were inadequate. Although the deficiencies were identified and, to some extent, corrected during implementation, due to budgetary constraints and concern about delaying implementation, the measures taken only marginally mitigated the adverse effects of the design deficiencies. Consequently, the two-lane NJH, as built, is substandard in terms of shoulder and drainage treatments and slope protection. Shoulders are narrow and unsealed, roadside drainage channels were not lined over some critical sections of the -4 - alignment to protect against erosion adequately, and slope stabilization measures were less extensive than necessary in such an unstable geological environment. 9. Implementation and Supervision. The procurement of two civil works contracts for NJH was carried out following international competitive bidding (ICB) procedures. Both contracts were awarded to the same local/foreign joint venture. The principal local contractor was a contracting unit of one of the Central Government ministries. Although the arrangement between the local and foreign firm was termed a joint venture, it was a misnomer in the conventional sense, since the foreign firm did not provide capital or other resources. It was, basically, a technical cooperation agreement in which the foreign firm mobilized a team of experienced technicians and engineers to take responsibility for the execution of asphalt-paving works only; the local contractor provided the plant, equipment and other physical resources, along with preparation of the road formation for asphalt paving. The compensation of the foreign personnel was based on person-month fees, which, together with mobilization and accommodation expenses, represented only about 4.5 percent of the contract amount. 10. Originally, the construction of the NJH was scheduled to start in June 1989 and be completed in about 35 months, by mid-May 1992. While construction started with only a one-month delay under a 36-month contract, it was completed fully only in mid-1993, in about 48 months. However, the completion of the paving works allowed the opening of the highway in mid-January 1993. The main reason for the delay was the poor performance of the principal contractor, which eventually necessitated the mobilization of work units of the Jiangxi Provincial Highway Administration Bureau (JPHAB) to undertake the construction of about 80 km of subbase and base-course works, and the laying of the pavement surface course for about a 33 km section of the highway. Because the principal contractor had no resources to undertake these works, the mobilization of JPHAB work units became necessary to ensure that the paving of the highway would be completed by the end of 1992, and that the road would be opened to traffic in early 1993. This was a deadline that was firmly set by the Provincial Government. 11. The original design, between km 31 and km 35 of the NJH, specified an embankment height through a potential floodplain section based on a 25-year flood frequency. This scheme was subsequently reviewed by authorities responsible for flood control, and it was decided to raise the elevation of the highway along this section to meet a 100-year flood frequency criterion. The additional works were undertaken by a group of local contractors engaged following local procurement procedures. Since the section of the highway was built to four-lane width, IDA-financing was restricted to half of the expenditures involved, in line with the originally approved scope for the highway. 12. The IDA-financed section (6 km), the southern half of the 12-km Connecting Road, was executed partly under contracts awarded following local bidding procedures and partly as force account works. Construction works commenced only in early 1993, about 30 months later than originally scheduled, and were fully completed in October 1994, about 30 months behind the original schedule. However, the pavement of the road, -5 - without a wearing course, was completed much earlier, which allowed the opening of the road to traffic in January 1994. The delay was caused by a change in the scope of works, i.e., building the section as a four-lane divided highway instead of a two-lane road, and also a major interchange at Changling, which originally was not contemplated. The non- IDA-financed section of the Connecting Road (northern half) was built at about the same time as the IDA-financed section. The construction of this section was carried out slightly later than the southern section, i.e., between early 1993 and July 1995, in about 28 months. 13. As attested by the progress reports submitted by the executing agency, Bank Group supervision mission reports and other documents on file, the execution of civil works for the NJH and the Connecting Road did not proceed smoothly. There were recurrent problems with the principal contractor's poor performance, primarily due to lack of experience in carrying out highway projects of sirnilar magnitude and complexity. Also, the contractor lacked adequate financial resources and eq[uipment to make satisfactory progress, and frequently failed to meet the quality requirements stipulated in the technical specifications. Furthermore, the contractor was exceedingly slow in complying with repeated requests from the Jiangxi Province, MOC and the Bank Group to mobilize additional resources to improve his organization, management and the quality of works. The contractor's headquarters also failed to provide sufficient support to its on- site unit and thus could not guarantee the timely completion of the works in compliance with the terms of the contract. Moreover, there were frequent disputes between the foreign and local partners about their respective responsibilities under the joint-venture agreement that impacted adversely on both the progress and quality of works. 14. The construction of the highway was supervised primarily by provincial technical personnel, assisted by one, and for a short period by two, foreign supervising engineers. Because of the inexperience and poor performance of the contractors, particularly in the initial phase of the project, the supervision team had difficulty in ensuring effective control over the quality of the ongoing works. Having no experience in managing contracts based on internationally accepted conditionalities, the construction supervision had to rely on newly trained staff to gradually gain adequate experience in order to apply supervision procedures appropriately. The task of construction supervision was made increasingly difficult by the excessive number of subcontractors, who were inadequately guided by the principal contractor. However, with continued on-the-job training of supervision staff, the repeated efforts to strengthen and regroup the supervision units and enforce supervision procedures, the effectiveness of' the supervision organization gradually improved. 15. Nevertheless, the extent of remedial works, which became necessary during the first three years of the operation of the highway, is a sobering indication of the high risk involved in combining inexperienced contractors (engaged in the construction of high- class highways) with partially qualified supervision personnel (handiicapped by lack of experience in similar types of assignments). Furthermore, the token presence of foreign supervisors, in this case basically one foreign supervisor for more than 100 km of -6 - highway, was able to contribute only marginally to on-site quality control. Under the circumstances, even a relatively effective supervision team would have had difficulties in preempting the quality defects. The extent of corrective and remedial works, following the opening of the highway to traffic, has been substantial. The works included extensive resurfacing of the pavement, repairing and expanding roadside drainage facilities, and shoulder and slope protection provisions. Despite the quality deficiencies and the obvious traces of poor workmanship, the condition of the highway could be stabilized if: (a) critical remedial works are continued as deemed necessary; (b) routine and periodic maintenance works are carried out with the required frequency; and (c) emergency repair works, which will most likely emerge because of the climatic and geological conditions in the highway corridor, are undertaken as soon as deterioration is noted. 16. The decision of the Provincial Government to commence the widening of the NJH from a two-lane to a four-lane divided highway in 1994 was influenced by the alarmingly high number of accidents on the two-lane NJH. During the first 30 months of the highway's operation (January 1993-July 1995) there were 1,080 accidents, resulting in 156 fatalities and 522 personal injuries. The total number of accidents reached 1,325 by the end of 1995. There was a relatively high number of head-on collisions, which raises the risk of constructing high-speed, two-lane highways in China. The reason for the high number of accidents could primarily be the drivers' inexperience in driving at relatively high speeds on two-lane highways. However, the generally poor condition of the vehicle fleet could have been a contributing factor to a fair proportion of the accidents. 17. Environmental Protection. During the design and construction of the highway, attention was paid to environmental protection, including measures for roadside drainage and slope protection. However, due to the characteristics of the terrain and the soil along the highway, the roadside drainage systems are still deficient on several sections of the highway, and the risk of erosion and water pollution is still substantial. Wherever possible, the slopes of embankments and excavated areas have been protected by grass coverage and other vegetation. However, additional and, in some areas, repeated planting will be required before the slopes can be better stabilized and protected against erosion. Unfortunately, the property of some soils along the highway are such that the risk of erosion and slope failures cannot be entirely eliminated. The Jiangxi Provincial High- Class Highway Administration Bureau (JPHCHAB), which is responsible for the operation and maintenance of the highway, is fully aware of the deficiencies and the environmental risks involved, and a program has been prepared for carrying out the necessary improvements and maintenance works. The regular reporting of environmental protection and maintenance activities will be made according to the formats and frequencies stipulated in the administration, management and operation manual under preparation (para. 81). 18. Land Acquisition and Resettlement. Land acquisition, resettlement and compensation procedures agreed at negotiations have been substantially followed. However, the scale of the requirements have changed because of design changes and more accurate delineation of the right-of-way boundaries, which resulted in an increase in -7 - the area of land required by about 29 percent. There was also a significant increase in the number and area of affected houses and attached structures. Requirements for infrastructure relocation (power and telephone lines, roads, canals and wells) also increased over and above earlier estimates. The number of individuals affected by the highway construction more than doubled from about 2,792 to 5,938. The additional requirements, combined with the higher cost of compensation than originally envisaged, increased the overall cost of land acquisition and resettlement compensation from Y 21.2 million to Y 34.8 million. 19. The land acquisition and resettlement compensation for the Connecting Road amounted to Y 9.0 million. Although there are no estirnates on record for comparison, this relatively high cost is understandable since the road traverses partially residential and industrial development areas. Furthermore, the location of two interchanges and provisions for grade separations at the points the Connecting Road intersects local roads required the acquisition of substantial areas of partially developed land. 20. The Bank's Resettlement Review Mission visited Jiangxi in November/December 1994, and confirmed that, in general, the compensation process was executed satisfactorily, although some township and village administrations were withholding a portion of the compensation payments for the financing of public works. Moreover, there were indications that some of the people affected may not have been able to restore their standard of living immediately following the dislocation. However, such occurrences have not been frequent, and Bank Group staff were assured that the individual grievances had been followed up by the entities responsible for compensation matters. Also, because of evidence of accelerated economic activity in the NqJH corridor, according to the information provided by the executing agency, job opportunities and income levels have been increasing. 21. Construction Cost. The civil works cost of the two-lane NJH at the time of project appraisal was estimated at Y 169.83 million, including physical and price contingencies. Although the contract award amount was only Y 144.7 million, the final cost of the construction came to Y 432.62 million, representing a cost increase of about 155 percent over the appraisal estimate and about a 200 percent increase over the initial contract amount, at current prices. The cost increase is a combined result of the increases in physical quantities and the cost of additional works undertaken due to work variation orders and price escalation, in a proportion of about 64 percent and 36 percent, respectively. 22. The cost of the 6 km, two-lane Connecting Road at the time of project appraisal was estimated at Y 20.49 million, including physical and price contingencies. The aggregate value of the two local civil works contracts amrounted to Y 50.92 million. The Bank Group also approved the undertaking of civil works by force account, based on priced Bills of Quantities totaling Y 13.78 million, related to paving works of the 6 km IDA-financed highway section, bringing the total contract amount for works to Y 64.7 million. The final cost of civil works for the 12 km Cormecting Road became Y 228.45 -8 - million, comprising Y 90.47 million for the IDA-approved contracts (about a 40 percent increase over the contracted amount), and Y 137.98 million for the works undertaken by JPHAB. This includes Y 27.85 million for the construction of buildings for toll operation, administration and maintenance facilities. The relatively high cost of Y 19 million per kilometer can be explained by the requirement for building two interchanges (one at Changling and one at Shalljia) and several other structures necessary to provide grade separation for local and through traffic, particularly near the new residential and industrial area, Changbei Development (Map 2). The construction of the Connecting Road was financed primarily by Jiangxi Province, although Nanchang Municipality also contributed Y 10.0 million. The IDA contribution to the construction of the Connecting Road was about $4.5 million equivalent, representing about 20 percent of the total cost of civil works for the Connecting Road, at a disbursement percentage of 50 percent. 23. The civil works cost of widening the two-lane NJH to a four-lane divided highway was expected to be Y 508.9 million or about 80 percent higher than the construction of the two-lane portion of the NJH, at current prices. In addition to the widening of the NJH, Jiangxi Province also proceeded with the extension of the NJH from Jiujiang to the Chang River Bridge at the Hubei provincial boundary. This involved the construction of a 12.5 km four-lane divided highway between Jiujiang (Shilibu) at a cost of Y 217.8 million, which was fully financed by the Province. 24. Economic Evaluation. An updated economic evaluation for the NJH is presented in Annex 1. Because of the major changes in the originally envisaged scope of the NJH, the economic reevaluation was carried out not only for the two-lane NJH, as a comparison to the evaluation presented in the SAR (Case I), but also for the four-lane divided-highway version, which has been in operation since January 1996 (Case II). An economic evaluation was also made as if the widening of the two-lane NJH had been justifiable only in the year 2003 (Case III). Furthermore, an economic evaluation was made for the 12 km four-lane Connecting Road as well. No economic evaluation was presented in the SAR for the originally planned 6 km road linking the NJH with the NBC. 25. The ICR estimate of the ERR for the NJH (Case I) is 30.2 percent, compared to the SAR estimate of 30.1 percent. Although the ERR estimates under the ICR evaluation and those presented in the SAR are much the same, it should be noted that: (a) the economic cost of investment for the highway, at constant December 1995 prices, has almost doubled; (b) the cost increase, in terms of ERR comparison, has been compensated by about 50 percent higher corridor traffic than forecast, except for the first section of the highway, for which the SAR forecast was inexplicably high; (c) traffic diversion from the existing arterial road to the new highway has, so far, corresponded closely to SAR estimates, which resulted in an about 50 percent higher traffic volume on the new highway than originally forecast; and (d) in estimating benefits, the ICR has taken into account the effect of capacity constraints of the two-lane highway beyond 2005. -9 - 26. For the four-lane NJH (Case II), the ERR estimrate is 23.4 percent, based on the additional Y 504.98 million investment made during 1994-96, at constant December 1995 prices. Based on ICR assumptions, a lower ERR for th[e four-lane NJH (Case II) versus the two-lane NJH seems to indicate that, despite a higher-than-expected traffic growth, the investment in the widening was premature. An ICR analysis indicated that close-to- optimum timing for providing the second carriageway would be in 2003, by which time the traffic volume would reach 6,000-7,000 vehicles per day (vpd), the threshold of capacity constraint for a two-lane highway. The estimated ERR for such a scenario (Case III) is 29.3 percent (Table 5C of Annex 1), which is very close to the ERR percentage for the two-lane NJH (Case I) of 30.2 percent (Table 5A of Annex 1). 27. The ICR's estimate of ERR for the Connecting Road, based on the economic cost of investment of Y 253.55 million and the traffic census data since its opening to traffic, is only 4.3 percent. The reasons for such a low rate are: (a) the cost of construction has been high, primary because of the requirement to construct two interchanges and several structures through a residential/industrial development area; and (b) only about half of the traffic of the NJH has been diverting to the Connecting Road, while the other half has been using the existing arterial road and street networks and the two old bridges in Nanchang City. 28. Since the Connecting Road is an integral part of the corridor improvement scheme, the economic costs and benefits of the Connecting Road hLave been combined with that of the NJH. This has resulted in an ERR of 25.0 percent, only slightly less than the ERR estimate for the NJH Case I. Notwithstanding this, the question arises whether, in light of the about-even split of traffic at the southern end of the NJH and an almost 53 percent less traffic usage of the NBC as forecast (para. 22 of Annex 1), the Connecting Road could have been initially built only as a two-lane highway. However, such a consideration ignores the potential for accelerated buildup of traffic generated by the residential/industrial development area along the corridor of the Connecting Road, which has not been taken into account in the analysis. 29. Regarding the question of the appropriate timing for duplication of the highway, it can be concluded that the rate of traffic growth between 1986 and 1995, and the number of vehicles that diverted to the new highway were higher than estimated at project appraisal. The higher-than-expected rate of growth can be attributed ito the designation of the Nanchang-Jiujiang corridor in 1992 as a Special Economic Zone. It appears that this decision contributed to the accelerated economic development in the corridor and, consequently, to a higher-than-expected traffic growth. The ICR estimate of an annual average traffic growth rate in the range of 8.3 to 8.6 percent for the 1993-2015 period (including actual traffic for 1993-95) could be a somewhat conservative assumption if the economy of the corridor grows at an even faster rate in the future than during recent years. 30. In the SAR, the highway investment cost used to arrive at the ERR was based exclusively on an estimated cost of civil works. To maintain comparability of the - 10- economic evaluations between the SAR and ICR, the ICR economic evaluation of Case I is based on the actual cost of civil works, amounting to Y 500.81 million (in constant December 1995 prices). A more common evaluation methodology is to include in the highway investment cost well-identified cost items, such as the cost of land acquisition and resettlement, construction supervision and the cost of design. When such additional costs, which represent about 15 percent of the civil works cost, are also taken into consideration in the economic evaluation, the ICR's ERR of 30.2 percent for Case I would drop to about 29.7 percent, which was not considered to be a significant variation. Therefore, sensitivity analysis was not extended to Case II and Case III scenarios because of additional investment costs over and above the cost of civil works. Nanchang Bridge Complex 31. The construction of a new bridge over the Gan River had been under consideration since the mid-1970s in anticipation of eventual traffic congestion on the two substandard Bayi and Ganjiang bridges. They served urban as well as interprovincial traffic to the neighboring provinces of Zhejiang, Fujian, Guangdong, Hunan, Hubei and Anhui. The NBC, located on the southeastern side of the City is about 9 km long and comprises the main 2,000 m bridge, including approach structures, a 130 m long bridge over the Fuhi River, and approach roads and other associated structures (Map 3). 32. Engineering Design. The feasibility study and preliminary engineering for the bridge complex were undertaken by the Nanchang Municipal Planning and Design Institute, while the detailed engineering for the bridge was prepared by the Shanghai Municipal Design Institute. Foreign experts were involved in the review of the design and the preparation of the tender documents. The concept for the design of the main bridge was innovative but complex. Designed as a continuous, prestressed, concrete- girder structure with a double-deck, it provides for six traffic lanes on the upper deck and pedestrian and bicycle passages on the two lower decks, cantilevered under the main deck on each side of the bridge. 33. Implementation and Supervision. Two contracts for the major works were awarded following ICB procedures at Y 132.7 million, and three contracts for minor road works were awarded following local bidding procedures at Y 42.4 million. A further contract for the construction of the Simamiao Interchange, located at South Yuanjiang Road, the contracting of which was not contemplated at project appraisal, was awarded at Y 33.0 million following domestic contracting arrangements. Although the design change was endorsed by MOC and the Bank Group in recognition of its merits, the contract for the construction of the interchange was financed entirely from the Nanchang Municipality's own resources. 34. The construction of the main bridge was expected to commence in October 1989 and be completed in 36 months. Although the bridge was opened for traffic in October 1994, the bridge works were completed fully only in January 1995, with a delay of 21 months. This does not include a roughly six-month delay in the commencement of works after the contract was awarded due to some disputes betveen NURCEB and the contractor regarding the delay in handing over the site and mobilization payment. The slow progress was due mainly to the complexity of the task, which required some design changes during implementation to accommodate a revised methodology for the construction of the upper structure of the main bridge. Also, major flooding of the Gan River in 1993 compounded the delay. Other contracts also suffered from delays largely due to design changes, adverse subsoil and weather conclitions and the poor performance of some of the contractors. 35. Although the contractor for the main bridge had extensive bridge construction experience, the overall organization and programming of works was deficient. Also, as reflected in the quarterly progress reports and the Bank Group supervision mission reports, the quality of construction was a recurrent concern. There were frequent references made to the lack of the main bridge contractor's own internal quality control system, which took quite some time to formulate, but its effectiveness in assuring quality did not live up to expectations. The quality problems contributed to the slower-than- expected progress of works. 36. For supervision of the NBC works, a supervision unit was established under the direction of NURCB, with a total of about 70 technical and administration personnel. The unit was assisted by an experienced foreign structural engineer who was engaged for the project in an advisory capacity. Despite the commendable efforlt of the supervision unit, the limits of the effectiveness of supervision were noticeable. T he main reason for this was that most of the supervision personnel lacked experience in working with contract conditionalities required under ICB procedures. 37. Prior to the final takeover of the works from the contractors, the quality of works were assessed. For the main bridge, the poorest-rated work items included the deck system (concrete deck, curbs, railings, paving of the pedestrian/bicycle passage at the lower deck of the bridge), although no risk was detected concerning the structural safety of the bridge. The quality of bitumen pavements of the western approach roads was also rated as deficient. Although extensive remedial works were carried out by the contractors on all contracts during the defect liability periods, the appearance of some elements of the NBC still have traces of less-than-desirable workmanship. Notwithstanding the difficulties encountered and the quality deficiencies identified during implementation, the completion of the NBC is a commendable achievement and speaks highly of the ability and technical competence of the personnel involved from all participating units: the contractors, supervision unit and the executing agency. The supervision unit made conscious efforts to identify and reject works that did not meet technical specifications, and it is to their credit that no critical deficiencies have been detected since the NBC opened to traffic. 38. Environmental Protection. Whatever disturbances were made to the environment in the Nanchang Bridge corridor during construction, NIJRCB took steps to mitigate the detrimental impacts of such disturbances. Moreover, during the latter phase - 12 - of execution, extensive landscaping and green belts were provided along the river banks in the vicinity of the main bridge, and the adjacent areas were given a facelift with environmental and aesthetic considerations. At the eastern bridge head, 11 hectares of land area were reserved for public use, which has been programmed for stage-by-stage development. Similar landscaping schemes are being established on the two sides of the Fuhe Bridge, in the Simamiao Interchange area and at the western bridgehead. Noise levels on the Nanchang City street network have been lowered as a result of traffic diversion to the new Nanchang Bridge. 39. Land Acquisition and Resettlement. The land acquisition, resettlement and compensation procedures agreed at negotiations were substantially followed. However, design changes necessitated the expansion of the scope of land acquisition and resettlement, which resulted in a higher-than-budgeted cost. The initial estimate of Y 6.1 million for land acquisition and resettlement compensation increased about sevenfold to Y 42.1 million. The area of land required increased fourfold; from about 268 mu to 1,190 mu, and the number of individuals affected by the construction of the NBC increased from 3,560 to 6,141. The observations made on the resettlement issues regarding the NJH in para. 20 are equally pertinent to the NBC component. 40. Construction Cost. The SAR estimate for the NBC was Y 166.5 million, including physical and price contingencies, compared to aggregate contract amounts of Y 208.1 million. The actual cost of construction amounted to Y 302.09 million, representing a cost increase of about 81 percent over SAR estimates and about 67 percent over the contract amounts. The cost increase is a combined result of the increases in physical quantities and the cost of additional works undertaken through variation orders, and price adjustments due to price escalation, in a proportion of about 60 percent and 40 percent, respectively. The above amount includes the construction of the Simamiao Interchange at Y 46.8 million. However, the Nanchang Municipality also financed work items not taken into consideration at project appraisal, at an aggregated amount of Y 22.45 million. These items were necessary for improving the operation and sustainability of the NBC. They included lighting, traffic and navigational signaling, toll facilities, essential river training, landscaping, and pedestrian and bicycle accesses ramps to the main bridge. Thus, the total cost of works for the NBC in the ICR was taken as Y 324.53 million in current prices, corresponding to Y 379.03 million in economic cost at constant December 1995 prices. 41. Economic Evaluation. As detailed in Annex 1, the ICR estimate of the ERR for the NBC is 16.6 percent compared to the SAR's estimate of 38 percent. The main reasons for the about 56 percent lower ERR are as follows: (a) the actual traffic on the new bridge in 1995 was only 53 percent of the SAR forecast because: (i) the corridor traffic, i.e., the sum of the traffic crossing the Gan River using all three bridges, was only about 62 percent of the forecast traffic, and (ii) the share of traffic of the new bridge was only about 58 percent of the corridor traffic compared to the SAR's estimate of 68 percent; (b) the economic cost of investment exceeded the SAR estimate by about 95 percent in constant 1995 prices; and (c) the ICR estimate of the traffic growth rate from - 13 - 1996 onward has been lower compared to SAR estimates because of the traffic distribution pattern that evolved following the opening of the bridge. 42. The significantly lower-than-expected traffic on the NBC could be attributed to the following: (a) since the bridge is located in the southeastern corner of Nanchang City, it appears that most of the local traffic, despite congested traffic conditions, prefers using the two old bridges, which evidently provide shorter origin-to-destination routes to the greater part of the city; (b) the buildup of through traffic, which supposedly would have bypassed Nanchang City, has been considerably slower than it was expected at appraisal; and (c) the tolling of the new bridge is likely to present a greater-than-expected deterrent to road users. In the absence of a comprehensive traffic origin and destination survey, it can be assumed that the actual growth rates of recent years and the distribution of traffic will not change substantially in the foreseeable future. This is so mainly because Nanchang Municipality has recently commenced the construction of a new Bayi Bridge in the city center to increase overall corridor capacity across the Gan River to ease the bottleneck effect of the present Bayi Bridge. Consequently, the ICR's traffic growth forecast for the new Nanchang Bridge has been lowered to 4.5 percent per year compared to the SAR's estimate of 8.7 percent from 1995 onward. 43. Overall E1RR for Civil Works. The ICR's estimate for the overall ERR on the investment made in the two-lane NJH (Case I), the Comnecting Road and the NBC was 22.6 percent. This compares to the SAR estimate of 30.1 percent for the highway and 38.0 for the NBC, according to the original scheme. The SAR did not provide an ERR estimate for the Connecting Road and a combined ERR estimate for the NJH and the NBC. Equipment Procurement 44. Provisions were made under the project for the purchase of the following groups of equipment at an estimated overall cost of $2.23 million, including physical and price contingencies: For JPTD: (a) road maintenance equipment, comprising graders, bulldozers, asphalt and cement concrete mixers, pavers, traffic counters, trucks, etc., $1.32 million; (b) road condition measuring equipment and instruments for RDB and PMS programs, $0.53 million; For NURCB: (c) inspection and maintenance equipment for the Nanchang Bridge, $0.16 million (local financing only); and (d) traffic management information system, $0.22 million. 45. The final cost of equipment amounted to $7.83 million. It was distributed as $6.60 million, $0.57 million, $0.38 million and $0.28 million with respect to (a), (b), (c), and (d) above. IDA financing covered about $2.9 mi:llion (about 37 percent) of the acquisition cost. - 14 - 46. Seventeen units of maintenance equipment were procured through international and local shopping as stipulated in the Development Credit Agreement, for an aggregate amount of $4.90 million. Seven of these units were IDA-financed for $2.32 million, while the remaining four units, at $2.57 million, were financed from the Province's own resources. The cost of locally procured road maintenance equipment (11 units) and trucks (35 units), which were not budgeted at the time of appraisal, was financed by Jiangxi Province at Y 9.85 million ($1.70 million equivalent). 47. Under item (b) of para. 44, three units of road condition survey equipment were procured only in the fourth quarter of 1995 with considerable delay, and these units have not yet been put to full use. Computer hardware and software for the PMS program were obtained using JPTD's own resources. 48. Four units of equipment were procured for the maintenance of the Nanchang Bridge, at a total cost of $380,000 equivalent under NURCB's own financing. The cost of the equipment for the Nanchang Bridge traffic monitoring system ($280,000) (para. 78) was 66 percent IDA-financed. 49. The equipment procured is regarded as appropriate in type, quality and number to meet the anticipated routine and periodic maintenance needs of the NJH and the NBC. The units of the road condition survey equipment procured are important requirements for the application of the PMS. Staff Training Program 50. The objectives of the staff training program were to: (a) improve the proficiency of engineers and other staff by sending selected personnel abroad to attend academic and practical training courses, as well as relevant international conferences; (b) strengthen the capacity of highway institutes and technical schools of JPTD by providing equipment, training aids and books; and (c) invite foreign experts to help upgrade the schools' curricula. JPTD's project budget for staff training was about $800,000 for 85 person- months of training abroad, and for local training by two foreign experts over a two-month period for an unspecified number of trainees. NURCB's staff training budget was about $135,000 for 24 person-months of training abroad and for 45 person-months for local training. 51. Soon after the startup of the project, it was recognized that organizing training courses on various topics for a relatively small group of trainees from just one provincial transport department was neither practical nor economic. At IDA's initiative, and after consultation with MOC and transport departments of other provinces, an understanding was reached in late 1989 that most of the staff training programs under ongoing Bank Group- financed highway projects would be coordinated by MOC. Accordingly, MOC has prepared and administered training programs, the cost of which was shared by the provinces receiving Bank Group assistance for highway projects being implemented more or less concurrently with the Jiangxi Provincial Highway Project. However, it was also agreed that - 15 - some training programs could also be arranged independently by any of the provincial transport departments for their own staff. 52. Training for JPTD personnel included 15 courses and study tours abroad. This involved 58 trainees, for a total of 68.6 person-months, at $508,000. All courses were coordinated by MOC. The courses covered: (a) RDB and PMS fundamentals and operations as practiced abroad; (b) project preparation and economic evaluation methodologies; (c) advanced highway geometric and pavement design techniques, including computer applications; (d) road and bridge maintenance equipment types and their operational characteristics; (e) traffic engineering fundamentals; (f) project management, including financial aspects; (g) contract administration and construction supervision; and (h) organization and management aspects of high-class highways. These areas of training were well chosen, and provided JPTD staff with both irmmediate and long- term benefits. The above-listed program does not include about 60 person-months of training abroad in construction supervision and contract management of local personnel assigned to the construction supervision units. Such training was carried out by the foreign consulting finn contracted to provide supervision services. The cost was covered under the consultant services contract. 53. The training for NURCB staff included three training courses abroad in financial management, project management and traffic engineering. They involved four staff members for 3 person-months at a cost of about $40,000. This corresponded to only about one third of the originally envisaged training program for NURCB staff under the project. Largely due to the slowing down of the MOC coordinated program during 1994 and 1995, NURCB missed the opportunity to fully utilize the buclget assigned for staff training. However, NURCB has benefited from staff training provided abroad under bilateral aid in 1989 (19 trainees, 18.6 person-months). Local training was also provided to about 40 personnel of the contractors, totaling 24 person-months, under bilateral aid in the same year. Moreover, 64 technical personnel of JPTD, with a total of 64 person-months, participated in a variety of locally financed training courses, seminars, technical conferences and study tours during 1989-94. 54. The MOC-coordinated approach to staff training was expected to be more economical than organizing training separately for each province. Although the actual cost of about $7,434 per person-month is lower than the estimated cost of training abroad (for about $9,400 per trainee for JPTD staff), it is still considered to be too high for involving only 58 trainees. While it was accepted at the time of project preparation that training abroad will be the dominant element of the program at a relatively high cost, it is now questionable whether this approach has indeed been appropriate to meet technology transfer needs for a transport department with a large technical staff in need of training in a variety of disciplines, and with an urgent need for improving road transport infrastructure for all classes of roads in a province where the condition of the road network was regarded to be below national average. A less ambitious and costly tra:ining progranm abroad, balanced with courses/seminars organized through local institutions with selective involvement of foreign experts in areas where local expertise may have been in short supply, could have - 16- been a better alternative to providing an opportunity for training more staff. Such an approach could have resulted in greater benefits to the institution. While the high cost of training is a concern, warranting the exploration of alternative ways to conduct training courses financed under similar future highway projects, the program provided exposure to advanced technologies being applied in the countries visited and has been a beneficial and suitable avenue for technology transfer. Programs for Road Planning, Pavement Strengthening and Maintenance 55. When the project was prepared, it was assumed that the initial programs for data collection in the Province (to improve methods of road planning and practices of strengthening and maintaining pavements) would be part of a study, the objectives of which included: (a) establishing a road data base compatible with national guidelines that would include an inventory of permanent features and current conditions of existing paved roads; (b) beginning regular monitoring of the current conditions of paved roads; (c) identifying pavement overlay and strengthening needs and resource requirements for about 4,500 km of paved roads; and (d) conducting a pilot program for planning and managing maintenance operations. The study was expected to take 15 months and involve about 80 person-months of local and foreign personnel input (see the terms of reference in SAR Annex 2). 56. However, the study was not carried out as planned because it was superseded by Government policies that instituted a nationwide approach to road planning, pavement strengthening and maintenance. A group was set up under MOC, headed by its Director of Highway Administration, to guide and coordinate the programs. MOC had already begun to plan a nationwide RDB program in 1985 in each province and autonomous region of the country. The idea was to use the data to improve highway planning and project formulation, as well as for statistical purposes. The RDB framework was developed in MOC's Highway Planning and Design Institute (HPDI) in the late 1980s and the development of the Chinese PMS began in MOC's Highway Scientific Research Institute (HSRI) in the late 1980s as well. 57. By the early 1990s, reasonably good progress had been made with both the RDB and the PMS programs. Therefore, MOC and the Bank Group agreed that it would be more efficient and consistent to develop local capability for both of these systems, rather than approach them separately in each of the provinces with external assistance. To introduce the PMS, 15 provinces/municipalities were selected, which included Jiangxi Province and the following nine provinces that had Bank Group-financed highway projects scheduled for implementation during the Eighth Five-Year-Plan (8FYP) and 9FYP periods: Hebei, Shandong, Jiangsu, Guangdong, Shaanxi, Zhejiang, Sichuan, Xinjiang and Henan. The Bank Group supported MOC's endeavor, and the highway projects helped finance the acquisition of equipment, including computer hardware and software, instruments for land-based land surveys and geographic information systems. -17- Road Data Bank Development and Application 58. The development of the RDB and PMS programs in Jiangxi Province started in 1991 with the establishment of a Leading Group with seven senior personnel and a Working Group with a staff of seven, including personnel from JPHAB, the Nanchang- Jiujiang Highway Project Office and the Research Office of JPTD. In addition, 11 implementation teams were created at district levels. The activities to date have been limited to basic data collection on national and provincial highways including historical information on construction, location and general informattion on culverts and bridges, pavement structures, roadside facilities, design speed and classified traffic counts. However, the RDB software developed by HPDI of MOC has not as yet been introduced to the Province. The setting up of the RDB program has not started because the Province is still awaiting firner directives from MOC regarding the transfer of the appropriate software package to be used. It is expected that with the successfully completed pilot RDB development program in Shaanxi Province, there will be more incentives to pursue the establishment of the RDB in Jiangxi as well as in other provinces. However, MOC's leadership and guidance are essential for this to happen. Pavement Management System Development and Application 59. The Chinese PMS system, which was formulated by HSRI, was introduced first to two prefectures in 1992. The system was extended to five additional municipalities/ prefectures in 1993, and to the remaining municipalities/prefectures in 1994, covering an overall paved network of about 5,000 km. Road condition data, including pavement deflection, roughness and surface distress parameters are collected by 95 maintenance divisions in the 11 prefectures/municipalities. Each prefecture/municipality prepares yearly road maintenance programs, based on the output data from the PMS. JPHAB compiles the information, which is then used to assist in deciding the distribution of maintenance funds according to identified priorities. Considering that the national/provincial network under the jurisdiction of JPHAB include about 700 km of concrete paved roads and about 9,500 km of gravel surfaced roads, JPHAB has taken steps to expand the capability of the PMS to handle the analysis of these types of road surfaces as well. It would be beneficial if MOC, through HSRI, could provide technical input to such an effort, which could have nationwide application. 60. The contribution of the project to PMS development has been the acquisition of advanced equipment for road condition data collection. This will replace the more conventional, less accurate and more time-consuming methods used thus far. However, the project's main impact has been, as far as the PMS is concerned, that it provided a stimulus for adopting this new methodology to help the management of the national and provincial road network. The satisfactory progress made so far benefited from the firm support of the senior personnel of JPTD and JPHAB, and the dedication of the personnel involved in the operation of the PMS program. - 18- 61. While the setting up of the PMS has been expeditious, and its expansion to cover the paved national and provincial road network has been achieved, the progress on development of the RDB has been minimal. The main reason for the slow progress made on the development of the RDB in Jiangxi Province, and in some other provinces, has been that MOC was reluctant to urge the provinces to proceed more expeditiously with the setting up of the RDB systems until there was sufficient evidence that the system formulated by HPDI was appropriate and functional. These aspects were tested through a pilot program in Baoji Prefecture in Shaanxi Province, demonstrating that the system could be made operational. However, it was also recognized that the setting up and sustained upkeep of an RDB is costly, and some provinces felt that the investment may not yield sufficient benefits to justify its expeditious development. It seems that it will take considerably more effort and time than was originally envisaged for RDB to become operational and usable as an overall planning tool not only in Jiangxi, but also in several other provinces of China. 62. On the other hand, the PMS has more transparent objectives and the outputs from the system are more readily perceived as beneficial to reaching rational technical and budgetary decisions. However, despite the good progress made in Jiangxi province, more effort, budgetary support and overall acceptance of the PMS output for planning and budgeting purposes will be needed to operate the PMS more effectively. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 63. No extraneous major factors affected the implementation of the project. However, because of inflation and design changes, the original cost estimate of the project increased by about 132 percent in local currency terms and by about 59 percent in US dollar terms (Part II-Tables 8A and 8B). The percentage difference reflects the effect of the devaluation of the local currency during 1987-95. The implementation delays were substantial for some of the project components but less so overall. The SAR indicated the completion of the project by the end of 1994 and the closing date of the credit as December 31, 1995. This implied the recognition of an above-average risk of an overall delay in implementation. The project as a whole was substantially completed by the end of 1994, as reflected by the level of disbursements at that time. However, the disbursement pattern highlights the slower-than-expected progress of works during FY91-93 (Part Il-Table 4). The credit was fully disbursed on December 13, 1995. 64. The major factor that adversely affected the implementation of the project was the poor performance of the contractors, both in terns of implementation delays and the quality of works. These problems were more dominant and transparent on the NJH than on the NBC component. Documentation on file reveals that the poor progress and quality of works on the NJH were a recurrent issue. Even the pressure exerted in a coordinated manner on the contractor's units on-site and at its headquarters by Jiangxi Province, the Central Government and the Bank Group brought about only limited improvement in the contractor's performance. Having little prospects for satisfactory improvement in the contractor's ability to complete the contracted works by the deadline set, the Province - 19 - was prompted in mid-1992 to mobilize JPHAB force account units to take over the completion of paving works over a substantial length of the highway. This included the asphalt works on the 33 km northern-end section of the N.H. Poor cooperation between the local contractor and the foreign partners responsible for asphalt works also interfered with the orderly execution of the works. This was one of the reasons for the decision to involve provincial road construction units in the execution of the paving works. Unfortunately, the lack of experience of JPHAB constiuction units in high-standard pavement works, along with the pressure to get the paving works finished in a hurry, led to premature deterioration of the pavement over several sections of the highway, which resulted in substantial remedial works soon after the January 1993 opening of the highway to traffic. 65. Although the delay in completing the NBC was even longer than that for the NJH (para. 34), there had been some mitigating circumstances for these delays, including the complexity of design, adjusting the design to facilitate the erection of the superstructure, and the flooding of the Gan River, which set back the progress of works beyond the control of the contractors. There were also quality defects, but these had a good chance to be detected by supervision and corrected during implementation. Also, during the inspection prior to the takeover of works from the contractors, deficiencies were identified and corrections were executed within the defects liability period. The extent of remedial works during the operation phase of the NBC were not excessive. D. PROJECT SUSTAINABILITYV 66. Despite the inadequacies of design and the risk of the quality deficiencies emerging as a consequence of poor workmanship during construction, if routine and periodic maintenance works are carried out in a systematic and timely manner, and prompt remedial actions are taken in the case of emergencies, which are likely to occur in the future due to the generally unfavorable weather and geological conditions in the NJH corridor, the project's civil works components should be sustainable. H[owever, because of the elements of risk mentioned above, it is likely that a higher-than-usual proportion of the toll revenues will be necessary to cover the maintenance expenditures of the civil works. 67. The equipment fleet acquired under the project should provide adequate long-term service since operators have been trained, sufficient stock of essential spares has been purchased and maintenance facilities have been made available along the NJH, and in the vicinity of the NBC, for the regular maintenance of the units. 68. The Province has shown interest in the development of the PMS program, and regards its operation as an important tool for road maintenance and road improvement decisions. The program is expected to be maintained, input data regularly collected, and output information used more extensively in the future to distribute road maintenance funds according to well-documented priorities of roacd network maintenance and improvement needs. - 20 - 69. The information from the staff training program, despite the involvement of a relatively small proportion of staff, is expected to be disseminated throughout both organizations to reach the majority of personnel and have a longer-term impact on improving administration, management methods and highway-specific technology in JPTD and NURCD. E. BANK PERFORMANCE 70. The project was consistent with the sectoral investment priority of Jiangxi Province and the Nanchang Municipality, the development objectives of the Central Government and the country assistance strategy of the Bank Group. The identification of the components, preparation, appraisal and supervision of the project were satisfactory. However, partly through hindsight, the following weaknesses have been noted: (a) The Bank Group could have been more alert to the risk involved in the preparation of the engineering design for the project highway (para. 8). However, since Bank Group resources are normally limited to undertaking the examination of design packages in depth, the design documentation for the NJH, which was completed by local design institutes, were reviewed by foreign experts under bilateral aid. This was in line with the practice for the first five Bank Group-financed highway projects, including that in Jiangxi Province. However, there had been a strong reluctance by the executing agencies to introduce design changes once the documentation had been completed. For highway projects prepared for Bank Group financing in FY92 and thereafter, the Bank Group used Consultant Trust Funds to involve consultants in the preparation phase of engineering design to work jointly with local design institutes. Such an approach was aimed at improving the quality of design documentation through consultant participation in the design process, rather than getting an already completed design package reviewed. Recently, the Bank Group achieved the same objective through including in project preparation mission teams a highway design specialist to scrutinize the engineering design. (b) The poor performance of the contractors, particularly for NJH (para. 13), raises the question of the Bank Group's responsibility regarding contract awards, since full compliance with Bank Group procedures on the selection of contractors should assure that the contractors recommended for contract award have the necessary experience and resources to undertake the contract. However, Bank Group staff are normally constrained in obtaining reliable information about the experience and qualification of the contractors. One of these is the executing agencies' firm assurances that such assessments had been made to the satisfaction of the executing agencies. Since the first step to assess the capabilities of contractors should be in the prequalification phase, as from FY92, the -21 - Bank Group, following consultation with MOC, made the prequalification process more stringent by insisting that the criteria for prequalification be based on past performance records of a particular unit of the major construction enterprises, rather than the past practice of prequalifying major "umbrella" enterprises with a number of construction units with unknown experience and resources. Some improvements were noted in the outcome of the prequalification process for projects initiated after FY92. However, there is a further need to tighten the prequalification requirements and introduce measures to establish the credentials of the contractors more conclusively at prequalification, and also prior to contract award. (c) The possibility of terminating the contract for the NJH, in light of the unsatisfactory performance of the contractor, was raised by Bank Group staff repeatedly but it was not pursued since it could not be established conclusively that terminating the contract and rebidding would have been necessarily an advantageous alternative. It would have introduced additional delay due to the time needed for rebidding. Furthermore, the lack of experienced contractors in China tc undertake the construction of high-class highways offered no assurances that another contractor's performance in terms of progress and quality would have been a better alternative than making continued efforts to get the contract finished with the contractor already on site. (d) It was recognized at an early stage of implementation that the Borrower and the Bank Group had to deal with a problem project, and the Bank Group staff involvement was intensified accordingly. During the critical period of implementation between May 1989 and October 1992, there were five Bank supervision missions in the field and there was frequent written communication between the executing agencies and the Bank Group on implementation issues. The Bank Group supervision missions were comprehensive and staff provided constructive advice and guidance for dealing with the problems identified. During the visi-ts to construction sites, the quality deficiencies noted were brought to thc attention of the contractors, supervision and executing agencies with firm requests for taking well-defined and appropriate remedial actions. These suggestions were generally well received and helped sharpen the focus on some of the deficiencies noted by the missions. But the measures taken by the executing agencies were not necessarily ef-Fective enough to bring about adequate improvements. (e) The implementation of the project was rated unsatisfactory over a period of about 24 months, because of poor management and unsatisfactory performance of the contractors in terms of progress and quality. This was primarily due to the problems associated with the implementation of the - 22 - NJH, and, to a lesser extent, concerning the execution of the NBC. The Bank Group's concerns about the project were raised at high levels in the Provincial and Central Governments. Also, at the initiative of the Bank Group, high-level meetings were held in Beijing involving the officials at headquarters of the NJH contractor, to address the critical problems facing the implementation of the NJH component of the project. Such efforts helped in mitigating the situation, but were far from resolving the problems. The circumstances described in the preceding highlight the dilemma faced by Bank Group staff in dealing with projects under which the insufficient experience of contractors and supervision and the executing agencies' administrative constraints limited the ability of staff to control project implementation effectively. The extent of the responsibility of the Bank Group for project implementation in such circumstances, particularly in the context of "project ownership," becomes a complex issue. (f) The Bank Group showed flexibility in dealing with the design changes, which seemed to be rational and justifiable so as to avoid interrupting and delaying the execution of works. Some of the changes added to the cost of the project, such as widening and extending the Connecting Road and building the Changling Interchange, which involved a limited amount of IDA financing. However, there were investment decisions made by the Province, without prior consultation with the Bank Group. These had a bearing on the overall concept of the project's scope, such as the duplication of the NJH, notwithstanding the fact that the relevant works were entirely financed by the Province. (g) Actual traffic volumes compared with the forecast at the time of project preparation, so far, have shown substantial divergences, which led to conceptual changes in the scope of the project, and also impacted ERR estimates. At project appraisal, the Bank Group's assessment indicated that the new two-lane NJH and the existing arterial road should provide adequate capacity in the Nanchang-Jiujiang corridor until 2010. However, the actual traffic on the new two-lane NJH in 1995 was about 50 percent higher than the assumption presented in the SAR, creating a scenario that indicated an earlier-than-expected need for the duplication of the highway from two lanes to four lanes. The Province decided to move on this matter quickly and began the widening of the highway in early 1994. The second carriageway of the NJH was opened to traffic in early 1996, about 14 years earlier than would have been needed according to an assessment made at project appraisal. According to ICR assumptions, the opening of the second carriageway of the NJH could have waited until 2003. The only mitigating factor in favor of bringing forward the duplication was the excessively high number of accidents on the two-lane highway (para. 16). While it appears that the Bank Group's assessment that a second - 23 - carriageway for the NJH would only be reqluired in 2010 was based on an underestimation of traffic growth, it should be noted that forecasting traffic in the Chinese environment is difficult because the rate and location of development is irregular. There is normally only limited information available on future land use and associated traffic-generating parameters that could be taken into account at the time of traffic forecasting. Furthermore, in 1992 the Central Govennment declared the Nanchang- Jiujiang corridor to be a Special Economic Zone, which raised the prospect of higher economic growth and higher-than-expected traffic growth in the NJH corridor. Such developments could not be foreseen in 1987 when the scope of the project was formulated. (h) The significantly lower ERR estimate in the ICR (16.6 percent versus 38 percent in the SAR) for the NBC could be viewed more critically in the context of the SAR's assumption for future traffic using the new Nanchang Bridge. Even with the benefit of hindsight, a close to 54 percent overestimate of traffic for 1995 across the new bridge lacked sufficient understanding of a plausible traffic distribution in the larger Nanchang City area in relation to the expanse of the Nanchang City and the location of the two older bridges and the new Nanchang Bridge. Although the revised ERR of 16.6 percent, which reflects not only the lower-than-expected traffic levels but also the substantial cost increases involved, still represents a viable investment, the large margin of discrepancy in the estimated ERRs can be regarded as a conceptual oversight in forecasting traffic distribution in the Nanchang City area. This discrepancy could even worsen in future years because the Nanchang Municipality's decision to replace the Bayi Bridge lowers the prospect for an increase in traffic diversion. Thus, it is unlikely that the share of corridor traffic of the Nanchang Bridge will increase in the foreseeable future. (i) The limited progress made on the introduction of the RDB program to the Province could have been more firmly handled by the Bank Group. However, the leading role of MOC in this matter was c]learly understood. The Bank Group routinely raised this issue with MOC in the context of broader policy and strategy discussions. MOC confirmed to the Bank Group its intent to pursue the development ,f RDB nationwide. However, it appears that some of the provinces are more receptive and more prepared to proceed with the program than others, cLepending on the resources available, and the level of perception of the program's overall benefits. - 24 - F. BORROWER PERFORMANCE 71. JPTD of Jiangxi Province and NURCB of Nanchang Municipality were first-time executing agencies for Bank Group-financed projects. This fact was a notable element in the way the project was administered, particularly in the early phases of implementation. The two agencies were not well prepared for the administrative requirements associated with Bank-Group borrowing and for the management of major contracts based on ICB conditionalities. It seemed that JPTD was short of personnel at high- and mid-levels, which placed a heavy burden on the capable but relatively few officials who had to cope with a heavy workload. A broader distribution of responsibility may have been constrained by the scarcity of sufficiently qualified and experienced staff to administer the project. This constraint turned out to be more critical than initially perceived because of the poor performance of the contractors and the involvement of numerous work units of JPHAB as subcontractors in the implementation of the NJH. These units were poorly guided in their tasks by the principal contractor. As the implementation proceeded, there were some improvements in administering the project, although much the same personnel had responsibility for the management of the additional civil works contracts implemented under the Province's own financing along with the original project components, such as the northern 6 km section of the Connecting Road, the widening of the NJH from two lanes to four lanes and the further extension of the NJH from Jiujiang to Chang River Bridge at the Anhui provincial boundary. 72. JPTD's major mistake was the acceptance of the local/foreign joint venture to undertake the construction of the NJH without first establishing the local contractor's experience, ability and resource availability to carry out the works. The reason for this relates to the deficiency in the prequalification process at that time. The practice had been to prequalify major "umbrella" enterprises without identifying the capability of the particular construction unit that eventually was assigned to execute the contract. By the time JPTD recognized that the unit assigned was unqualified to execute the contract satisfactorily, it was difficult and too late to take the drastic action of terminating the contract. Although JPTD made great efforts to bring the contractor up-to-strength, the headquarters of the "umbrella" enterprise made a less-than-prudent contribution to back up its work unit in the field. 73. Despite shortfalls in overall coordination and management, the exposure offered by the IDA-financed project was beneficial to JPTD in gaining experience in the organization, management and execution of a high-class highway project. The project provided the opportunity to gain managerial skill and technical know-how for the execution of similar projects in the Province. Because of the relatively confined work area, the administrative task was less demanding, and the administrative constraints were not as transparent in NURCB's organization as in JPTD. Also, in relative terms, there was a larger group of technical personnel involved in the management and execution of the NBC than of the NJH. - 25 - 74. A reference was made in para. 15 to the relatively premature deterioration of some elements of civil works of the NJH soon after the highway was opened to traffic. One of the reasons for the quality deficiencies relates to the lack of balanced judgment of the provincial governments about the advantages and disadvantages of accepting some delay in implementation in situations in which insistence on rneeting implementation target dates would, in all probability, lead to serious quality deficiencies. It is not uncommon that the provincial governments insist on the completion of the works by a given deadline, contractual or otherwise determined, when such deadlines are not being based on realistic work programs, ignore the capability an(d resources available to the contractors and extraneous circumstances, such as seasonal climatic conditions. In such situations, the risk become too high to expect that the works could be completed satisfactorily and in compliance with the technical specifications. Particularly during the last critical phases of implementation, it is common to see 'inferior quality of works done, often involving pavement works, which are likely to lead eventually to excessive rehabilitation and maintenance expenditures, burdening provincial budgets or toll revenues. The acceleration of works in the interest of meeting unrealistic deadlines also reduces the effectiveness of the construction supervision units. Under such circumstances, the vigilance of the supervision is impaired because the issue of quality becomes secondary to meeting deadlines. The above observation is nolt confined to this project but has also been noted in several other completed and still ongoing Bank Group- financed highway projects. G. ASSESSMENT OF OUTCOME 75. Despite the serious difficulties encountered during the implementation of civil works, the implementation of the project can be regarded as satisfactory, primarily because the developmental objectives of the project have been achieved and are expected to be sustainable. The stream of benefits is expected to be maintained, although at a somewhat lower level than originally forecast, particularly for the NBC component. Some of the components suffered implementation delays that exceeded SAR expectations but were within the broader timeframe envisaged at project appraisal (para. 63). The NJH component was completed in mid-1993, with about a year delay, while the NBC was delayed substantially, from mid-1992 to mid-1994; about the same delay as that of the completion of the Connecting Road. 76. The local contractor's performance on the NJH was unsatisfactory. To assess the performance of the foreign partner is difficult because the progress for asphalt works was heavily dependent on the preparatory work for which the local contractor was responsible according to the joint-venture agreement. The poor performance of the local contractor for the NJH resulted primarily from limited experience with high-class highway construction and unfamiliarity with international contract conditionalities. The contractor's limited resources, lack of managerial experience and its headquarters' unwillingness or inability to provide greater support also hLd a detrimental effect on the contractor's overall performance. While the contractor for the main Nanchang Bridge incurred even longer implementation delays, the complexily of the bridge structure and - 26 - its demanding technology for the erection of the superstructure allow for taking a less critical stance regarding delays and quality problems. Overall, both the NJH and NBC works will provide satisfactory service but not without some emerging problems that will require early detection and prompt remedial actions. 77. The less-than-desirable performance of the contractors increased the burden and responsibility of the construction supervision teams, which were coping with their tasks with difficulty. At best, the performances of the teams were only marginally effective, particularly in the initial phases of the implementation. There were gradual improvements thereafter, and the teams learned to cope with their tasks better and with greater confidence. However, during the final phases of the implementation, the completion of the works became the primary objective and that had an adverse impact on quality, and its effective control by the supervision units. The presence of a foreign supervisor/advisor had been useful but, like on several other Bank Group-financed projects, the number of foreign supervisors was insufficient in relation to the magnitude and complexity of the works. Thus, foreign consultants have been confining their involvement mainly to formulation of procedures, endorsement of major variation orders, advising solutions in key technical matters and training-oriented activities. These functions are important but the limited number of experienced foreign supervising engineers in a joint local/foreign supervision team unavoidably constrains the foreign consultants' involvement and responsibility for on-site quality control, which require daily presence. This important function rests predominantly with the local supervision staff whose experience and effectiveness are limited. 78. The outcome on sectoral development under the project, in the context of the RDB and PMS programs, was mixed. While the development and application of PMS outputs for achieving an improved mechanism for the distribution of road funds for the maintenance and improvement of the road network was satisfactory, the RDB development did not take off as expected, and its development is likely to remain slow. The establishment of a traffic surveillance and monitoring system for the Nanchang Bridge was regarded as useful, particularly in light of the plan to integrate such a system with the overall traffic monitoring system designed for the major arterial street system of Nanchang City. 79. The level of technology transfer through training was not easy to measure due to a lack of well-defined baseline parameters. The training program, although for a price, provided a satisfactory level of exposure to new concepts and incentives for adopting new approaches. However, the program involved fewer trainees than it could have had with a better mix of training abroad and locally organized courses/seminars, involving local institutions and a well-balanced participation of local and foreign experts. The technology transfer through modern equipment for the operation and maintenance of the highway should achieve its objectives and ensure that the new facilities will be efficiently operated and adequately maintained. - 27 - 80. Overall, the project was implemented within the terms of the Development Credit Agreement and in substantial compliance with Bank Group procedures. IDA financing was not extended to any component of the project without obtaining prior clearance from the Bank Group. H. FUTURE OPERATION 81. The Jiangxi Provincial High-Class Highway Administration Bureau (JPHCHAB) is responsible for the operation and maintenance of the NJH. A manual for the administration, management and operations of the NJH is under preparation. JPHCHAB intends to carry out an economic and a financial evaluation every three years, using the following monitoring parameters: traffic volumes, traffic accident records, toll rates, toll revenues, maintenance and repair expenditures, reestimated ERRs, net benefits, net present values and the status of credit repayment. Regarding the PMS, JPHAB intends to make an even better use of the system by attempting to optimize the benefits through a more critical allocation of maintenance funds based on PMS output data. The Province will make further efforts to build up its RDB, for which MOC's more active support will be needed. The Province's primary objective will be to collect and maiintain information on the recently built and improved highways. 82. A Traffic Monitoring System has already been established for obtaining continuous records of traffic movements on the Nanchang Bridge. It will be fully integrated into the Nanchang City's traffic surveillance system. NURCB intends to prepare a manual for administration management and operations for the Nanchang Bridge Complex similar to that of the manual being prepared by JPHCHAB. I. KEY LESSONS LEARNED 83. The key lessons learned, which also take into consideration the Bank Group's experience on still ongoing but substantially completed prcjects, are presented as follows. They highlight critical issues that will require urgent attention and actions in the interest of improving the implementation of ongoing and future hig,hway projects in China. (a) The quality of highway civil works cornstruction in China has been uneven, and the implementation of the civil works under this project is indicative of the high risk of encountering quality deficiencies on highway construction works. The shortage of experienced contractors and, in general, the contractors' lack of adequate resources seemn to be the major reasons for eventual quality defects. Although there has been some tightening of the prequalification criteria under Bank, Group-financed highway projects approved in FY92 and thereafter, there is an urgent need for a stricter insistence on establishing thal prequalification requirements are met in order to prevent the prequalification of ill-prepared construction enterprise for high-class highway contracts. To achieve sufficient improvement in this area in the future, the provincial transport departments involved should be required to document to the Bank Group - 28 - conclusively that the prequalified contractors have the technical and managerial experience, manpower, equipment and financial resources to carry out the construction of the project highway to the required technical standards. Such documentation should be endorsed by MOC. (b) As indicated above, the quality problem is closely related to the shortage of experienced contractors in China to carry out civil works in compliance with technical specifications for high-class highways under stringent contracting requirements. There should be, therefore, an urgent follow-up on the recommendations of the recently completed Japanese Grant-funded Highway Construction Industry Study and Survey, which identified some of the key impediments to the efficient operation of the highway construction industry in China. The Central Government and the Bank Group will need to work together intensively, and fornulate a strategy and an action plan for addressing the multifaceted issues constraining the development of a more capable highway construction industry. (c) There is a tendency to stipulate contract periods that are not commensurate with the size and complexity of the contracts, and the capacity and resources of the contractors. Furthermore, the target dates commonly set for the opening of the newly built highways to traffic disregard the technical realities of the status of works in relation to the contractors' ability and resources to meet such targets. Such a practice is detrimental to the quality of works, and increases the risks of premature deterioration of the condition of the highway, higher-than-normal maintenance expenditures and higher cost to the road user because of poor pavement conditions and reduced road safety. The Central and Provincial Governments should recognize that arbitrarily set targets for completion of highway construction works are counterproductive. The Bank Group should also be more alert and circumspect in clearing contract documents with unreasonably short construction periods. (d) The Bank Group should be more alert to ensure that Bank Group financing does not cover seriously defective phases of works. To mitigate such risks, further efforts should be made to strengthen highway construction supervision capability and efficiency nationwide. There should be a strategy for the establishment of local consultant entities for construction supervision services as a matter of high priority, aiming for the creation of a competent and independent construction supervision consultant industry in China. Such an industry could initially provide supervision services in joint ventures with foreign consulting firms, and eventually on its own. An initiative along these lines has already been made under the Second Henan Provincial Highway Project, which should be monitored, and if found satisfactory, be followed up expeditiously by the Central Government and the Bank Group. In addition, the Bank Group should - 29 - mount frequent and intensive technical supervision missions for projects with implementation and quality problems. These could take the form of well-timed thematic technical audits involving foreign and local experts and senior Central Government personnel. (e) The major discrepancy between forecast and de-facto traffic levels on the Nanchang Bridge and the Connecting Road could be related to the inadequate analysis of land use and probable traffic patterns in the larger Nanchang City area during the preparation of the feasibility study for the project's civil works. Similar deficiencies have been noted in connection with the Shaanxi Provincial Highway Project (ICR Report No. 15700, May 15, 1996) and on several ongoing 'Bank Group-financed highway projects that include highways with alignments encroaching on urban or suburban areas. The lack of more stringent analysis of key parameters in the feasibility study phase could lead to poorly formulated investment decisions or costly design changes to accommodate urban growth. The issue of inadequate information on land use planLning, uncritically formulated traffic forecasting and lack of coordination between provincial and municipal authorities during project preparation warrant nationwide attention, as well as the Bank Group's greater attention to these matters during the preparation of highway projects. (f) The excessively high rate of accidents on the new NJH highlights the importance of formulating a comprehensive road safety policy and strategy for China. The Bank Group should continue its initiatives and intensify its efforts to engage the Central Governnment in China in dialogues leading to the formulation of a comprehensive Road Safety Strategy for China. (g) Considering the relatively high person-months cost and the small number of staff participation noted under the project's staff training program, the planning, preparation and execution of future training programs under Bank financed highway projects will need to be prepared and executed more carefully to ensure that the programs become more effective and a larger portion of the staff will have the opportunity to participate in the programs. It is, therefore, highly desirable that the Ministry of Finance, MOC and the Bank address this issue, pe:rhaps by appointing a technical training institute in China to coordinale highway subsector training programs nationwide. - 30 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS Achievement of Objectives Substantial Partial Negligible Not Applicable Macroeconomic policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender issues x Other social objectives x Environmental objectives x Public sector management x Private sector development x Project Sustainability Likely Unlikely Uncertain x Bank Performance Highly Satisfactory Satisfactory Deficient Identification x Preparation assistance x Appraisal x Supervision x Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation x Implementation x Covenant compliance x Operation (if applicable) x Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory Highly Unsatisfactory x -31 - TABLE 2: RELATED BANK LOANS/CREDITS Year of Loan Title Purpose Approval Status Preceding Operations Highway Provincial road network expansion/ FY85 Completed Ln 2539-/Cr 1954-CHA improvement Following Operations Beijing-Tianjin-Tanggu Expressway See footnote /1 FY87 Completed Ln 281 1/Cr 1792-CHA Sichuan Provincial Highway See footnote /I FY88 Ongoing Ln2951/Cr 1917-CHA Shaanxi Provincial Highway See footnote /1 FY88 Completed Ln 2952-CHA Shandong Provincial Highway See footnote /1 FY89 Ongoing Ln 3073/Cr 2025-CHA Jiangsu Provincial Transport See footnote /1 FY91 Completed Ln 3316/Cr 2226-CHA Zhejiang Provincial Highway See footnote / FY92 Ongoing Ln 347 1-CHA Henan Provincial Highway See footnote /L FY93 Ongoing Ln 353 1-CHA Guangdong Provincial Highway See footnote /1 FY93 Ongoing Ln 3530-CHA Fujian Provincial Highway See footnote /1 FY94 Ongoing Ln 3681-CHA Hebei/Henan National Highway See footnote /1 FY94 Ongoing Ln 3748-CHA Xinjiang Highway I See footnote /1 FY95 Ongoing Ln 3787-CHA Shanghai-Zhejiang Highway See footnote /1 FY96 Ongoing Ln 3929-CHA Second Shaanxi Provincial See footnote /1 FY96 Ongoing Highway Ln 3986-CHA Second Henan Provincial Highway See footnote /1 FY96 Ongoing Ln 4027-CHA /1 These highway projects, typically, have had the following components: (a) construction of a major highway; (b) improvement of provincial roads; (c) procurement of road maintenance equipment; and (d) institutional development components, such as RDB and PMS programs, staff training and selected subsector-oriented studies. -32 - TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification N/A 03/87 Initial Executive Project Summary N/A 11/87 Preparation 07/87 07/87 Preappraisal N/A 10/87 Appraisal 10/87 01/88 Negotiations 02/88 12/88 Board Presentation 04/88 02/07/89 Signing 02/89 03/16/89 Effectiveness 05/89 05/31/89 Project Completion 12/31/94 12/31/94 (substantially) Credit Closing 12/31/95 12/31/95 - 33 - TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL ($ million) FY89 FY90 FY91 ]FY92 FY93 FY94 FY95 FY96 Appraisal estimate 0.00 5.00 27.00 43.00 49.00 55.00 61.00 61.00 Actual 0.00 8.18 17.00 25.94 42.19 56.82 61.37 62.11 Adjusted appraisal estimate/a 0.00 5.09 27.49 43.78 49.89 56.00 62.11 62.11 Actual as % of adjusted 0.0 160.7 61.8 59.3 84.6 101.5 98.8 100.0 estimate Date of final disbursement December 13, 1995 La Appraisal estimate adjusted for SDRI$ exchange rate variation. TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Estimated Actual Start Complete Start Complete 1. Construction of Nanchang-Jiujiang Highway Jun-89 May-92 Jul-89 Jun-93 2. Construction of Nanchang Bridge and Approaches Oct-89 Jun-92 May-90 Jan-95 3. Construction of Connecting Road Jun-90 Jun-92 Oct-92 Dec-94 4. Consulting Services for Supervision (a) for items I & 3 Jan-89 May-92 May-89 Dec-92 (b) for item 2 Jan-89 Jun-92 May-89 Dec-93 5. Equipment for PMS and RDB Jul-91 May-92 Jul-95 Dec-95 6. Traffic Monitoring System for Nanchang Bridge Feb-89 Sep-90 Jul-95 Dec-95 7. Staff Training Feb-89 continuous Jun-91 May-95 - 34 - TABLE 6: KEY INDICATORS FOR PROJECT OPERATION Length (km) Traffic (1995 ADT) Estimated Actual Estimated Actual Nanchang-Jiujiang Highway Jiaoqiao-Aicheng Section 39.20 38.98 5,811 4,522 Aicheng-De'an Section 27.00 24.54 2,160 3,294 De'an-Tongyuan Section 22.00 27.09 2,137 3,271 Tongyuan-Jiujiang Section 24.60 22.21 2,575 3,220 Total 112.80 112.82 Nanchang Bridge Section I - East Approach 1.32 1.32 23,371 12,421 Section II - East Approach 2.10 2.10 23,371 12,421 Section III - Main Bridge Complex 2.78 2.78 23,371 12,421 Section IV- West Approach 1.09 1.09 23,371 12,421 Section V- West Approach 1.69 1.69 23,371 12,421 Total 8.98 8.98 Connecting Road Southern (Bank-Financed) 6.00 6.00 N/A 5,392 Northern (Province's own resources) 0.00 6.00 N/A 5,392 Total 6.00 12.00 Grand Total 127.78 133.80 TABLE 7: STUDIES INCLUDED IN PROJECT A Jiangxi Highway Data Bank Preparation, Pavement Evaluation and Strengthening Program and Maintenance Management Study was included in the Project (Terms of Reference, Annex 2 of the SAR). However, as elaborated in paras. 55-57 of Part I of the ICR, the study has not been executed as envisaged, although the objectives of the study have been partially achieved through the development and application of the PMS, and to a much lesser extent the RDB program, by JPTD with the assistance of MOC. The programs were supported by the Bank through the acquisition of equipment for road condition survey. - 35 - TABLE 8A: PROJECT COS1TS (Y million) Appraisal estimate Actual/latest Item Local Foreign Total Local Foreign Total Nanchang-Jiujiang Highway (NJH) Nanchang-Jiujiang Highway 67.91 83.00 150.91 194.68 237.94 432.62 Connecting Road 6 km 10.00 10.00 20.00 45.24 45.23 90.47 Consultant services for supervision 2.46 2.46 6.14 2.46 8.60 Equipment for road maintenance 0.00 4.40 4.40 9.85 28.15 38.00 Equipment and expertise for RDB&PMS 0.00 2.60 2.60 0.00 4.72 4.72 Staff Training 0.00 1.80 1.80 0.00 2.08 2.08 Base Cost 77.91 104.26 182.17 255.91 320.58 576.49 Physical contingencies (10%) 7.80 10.42 18.22 0.00 0.00 0.00 Price contingencies 10.02 13.48 23.50 0.00 0.00 0.00 Subtotal 17.82 23.90 41.72 255.91 320.58 576.49 Land acquisition cost 21.17 0.00 21.17 34.78 0.00 34.78 Total NJH Cost 116.90 128.16 245.06 277.08 320.58 611.27 Nanchang Bridge Complex (NBC) Nanchang Bridge and approaches 51.70 88.01 139.71 120.08 204.45 324.53 Consultant services for supervision 7.02 2.00 2.00 7.02 3.17 10.19 Equipmentformaintenance 0.51 0.00 0.51 0.15 1.93 2.08 Equipment for traffic management 0.00 0.74 0.74 0.80 1.60 2.40 Staff Training 0.00 0.48 0.48 0.00 0.20 0.20 Base Cost 59.23 91.23 143.44 128.05 211.35 339.40 Physical contingencies (10%) 5.23 9.12 14.35 0.00 0.00 0.00 Price contingencies 6.73 11.78 18.51 0.00 0.00 0.00 Subtotal 71.19 112.13 176.30 128.05 211.35 339.40 Land acquisition cost 6.10 0.00 6.10 0.00 40.45 40.45 Total NBC Cost 70.27 112.13 182.40 128.05; 251.80 379.85 TOTAL PROJECT COST 187.14 240.29 427.46 128.05 292.25 991.12 - 36 - TABLE 8B: PROJECT COST ($ million) Appraisal estimate Actual/latest Item Local Foreign Total Local Foreign Total Nanchang-Jiujiang Highway (NJH) Nanchang-Jiujiang Highway 18.36 22.43 40.79 32.92 40.23 73.15 Connecting Road 6 km 2.71 2.71 5.42 7.39 7.39 14.78 Consultant services for supervision 0.00 0.66 0.66 1.12 0.50 1.62 Equipment for road maintenance 0.00 1.20 1.20 1.70 4.90 6.60 Equipment and expertise for RDB&PMS 0.00 0.48 0.48 0.00 0.57 0.57 Staff Training 0.00 0.72 0.72 0.00 0.51 0.51 Base Cost 21.07 28.20 49.27 43.13 54.10 97.23 Physical contingencies (10%) 2.11 2.82 4.93 0.00 0.00 0.00 Price contingencies 1.16 1.49 2.65 0.00 0.00 0.00 Subtotal 3.27 4.31 7.58 43.13 54.10 97.23 Land acquisition cost 5.72 0.00 5.72 7.40 0.00 7.40 Total NJH Cost 30.06 32.51 62.57 50.53 54.10 104.63 Nanchang Bridge Complex (NBC) Nanchang Bridge and approaches 13.97 23.80 37.77 21.32 36.29 57.61 Consultant services for supervision 0.00 0.54 0.54 1.30 0.85 2.15 Equipment for maintenance 0.14 0.00 0.14 0.03 0.35 0.38 Equipment for traffic management 0.00 0.20 0.20 0.09 0.19 0.28 Staff Training 0.00 0.12 0.12 0.00 0.04 0.04 Base Cost 14.11 24.66 38.77 22.74 37.72 60.46 Physical contingencies (10%) 1.40 2.47 3.87 0.00 0.00 0.00 Price contingencies 0.78 1.36 2.14 0.00 0.00 0.00 Subtotal 16.29 28.49 44.78 22.74 37.72 60.46 Land acquisition cost 1.65 0.00 1.65 8.60 0.00 8.60 Total NBC Cost 17.94 28.49 46.43 31.34 37.72 69.06 TOTAL PROJECT COST 48.00 61.00 109.00 81.86 91.83 173.69 -37 - TABLE 8C: PROJECT FINANCING ($ million) Source Appraisal estimate Actual/latest estimate IDA 61.0 62.11 Central Government 24.2 36.50 Jiangxi Province 7.4 4.94 Nanchang Municipal Government 9.9 36.60 Jiangxi Provincial Transport 6.5 33.54 Department 109.0 173.69 TABLE 9: ECONOMIC COSTS AND 13ENEFITS Costs /a Elenefits /b NPV /c ERR (%) SAR Nanchang-Jiujiang Highway 242.46 55.66 n.a. 30.1 Nanchang Bridge Complex 194.45 72.95 n.a. 38.0 Total 436.91 128.61 n.a. n.a. ICR Nanchang-Jiujiang Highway (Case I) /d 500.81 97.21 927.10 30.2 Nanchang Bridge Complex 379.03 58.15 106.10 16.6 Connecting Road 12 km 253.55 9.95 -139.40 4.3 Total 1,133.39 165.31 934.0 22.6 Nanchang-Jiujiang Highway (Case II) /e 1,005.79 178.38 926.40 23.4 Nanchang -Jiujiang Highway (Case III) If 1,005.79 432.64 1,105.60 29.8 /a December 1995 prices Lb First year benefits (December 1995 prices) Lc Discount rate = 12% /d Two-lane NJH, opening in 1993. /e Four-lane NJH, opening in 1996. Lf Four-lane NJH, assumed opening in 2003. - 38 - TABLE 10: STATUS OF LEGAL COVENANTS Cove- Original Revised Agree- nant fulfillment fulfillment ment Section type Status date date Description of covenant Comments Credit 2.02(b) I C N/A N/A Opens Special Account and operates it according to Schedule 4 of the Development Credit Agreement 3.01(a) 5 C N/A N/A Commitment to project objectives and meeting obligations by Beneficiary under the Project Agreement 3.01(b) 3 C N/A N/A Satisfactory onlending arrangement to Beneficiary 3.02 5 C N/A N/A Compliance with Schedule 3 of the Development Credit Agreement 3.03 5 C N/A N/A Meeting requirements of General Conditions, Sections 9.03-9.08 4.01 1 C N/A N/A Maintaining adequate financial recording and auditing reporting requirement Project 2.01 5 C N/A N/A Commitment to project objectives and meeting obligations by Beneficiary under the Project Agreement 2.02 5 C N/A N/A Compliance with Schedule 3 of Development Credit Agreement 2.03 5 C N/A N/A Meeting requirements of General Conditions, Sections 9.03-9.08 2.04(a) 9 C N/A N/A Exchange of views with the Bank 2.04(b) 9 C N/A N/A Information on interference with project implementation 2.05 12 C N/A N/A Carry out staff training plans as agreed 2.06 7 C N/A N/A Carry out resettlement actions as agreed Covenant Class: Status: I = Accounts/audits 8 = Indigenous people C = covenant complied with 2 = Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay generation from beneficiaries 10 = Project implementation not 3 = Flow and utilization of project covered by categories 1-9 funds 11 = Sectoral or cross-sectoral 4 = Counterpart funding budgetary or other resources 5 =Management aspects of the allocation project or executing agency 12 = Sectoral or cross-sectoral policy/ 6 = Environmental covenants regulatory/institutional action 7 = Involuntary resettlement 13 = Other TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS There was no significant lack of compliance with an applicable Bank Operational Manual Statement (OD or OP/BP) -39 - TABLE 12: BANK RESOURCES: STAFF INPUTS (staff weeks) FY 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Total Preappraisal 7.8 19.0 - - - - - - - - - 26.8 Appraisal - 6.7 11.7 - - - - - - - - 18.4 Negotiations - - 7.6 - - - - - - - - 7.6 Supervision - - 2.8 8.0 7.2 6.8 9.9 3.8 5.3 5.2 - 43.8 Completion - - - - - - - - - 7.7 6.0 13.6 Total /a 7.8 25.7 22.1 8.0 7.2 6.8 9.9 3.8 5.3 12.9 6.0 110.3 /a As of July 31, 1996. TABLE 13: BANK RESOURCES: MISSIONS Performance rating Specializedl Imple- Devel- Stage of project cycle Month/ No. of Days staff skills mentation opment Type of year persons in field represented ta status /b objectives problems Identification 03/87 3 6 EN,EC,TE Preparation 07/87 3 6 EC,TS,RA Preappraisal 10/87 3 4 EN,EN,TE Appraisal 01/88 2 5 EN,TE Negotiation 12/88 4 - EN,TE,LC,DO Board approval 02/89 - Signing 03/89 Effective 05/89 - - Supervision 1 05/89 2 3 EN,EN I I Supervision 2 11/90 1 6 EN 3 1 Supervision 3 06/91 2 6 EN,TP 3 1 Supervision 4 06/92 3 7 EN,EN(cons), 3 1 Lc Op.0 Supervision 5 10/92 3 5 EN,CIS,Op.O 2 1 Supervision 6 04/94 1 5 EN 2 1 Supervision 7 and Completion 1 07/95 1 4 EN S S Completion 2 04/96 1 5 RA La EN: Engineer, EC: Economist; TE: Transport Economist; TS: Transport Specialist; LC: Legal Counsel; DO: Disbursement Officer; RA: Research Analyst; CIS: Construction Industry Specialist; Op.O: Operation Officer (RMC). Lb 1: Highly satisfactory; 2: Satisfactory; 3: Unsatisfactory; S: Satisfactory. /c Typical problems included: poor performance of contractors, the executing agencies' lack of effective management, excessive quality defects. I -41- ANNEX 1 ANNEX 1: ECONOMIC EVALUATION Preface 1. In the Staff Appraisal Report (SAR) for the Jiangxi Provincial Highway Project (Report No. 7430-CHA), the economic evaluation was presented for the construction of: (a) a two-lane highway between Nanchang and Jiujiang; and (b) a new major bridge and approach roads in the southeastern part of Nanchang City. 2. The economic analysis presented in the ICR is based on updated data on traffic, vehicle operating cost (VOC), economic cost and r oad user benefits and revised assumptions regarding future traffic growth rates. The methodology used in the economic analysis for this ICR is similar to that used in the SAR and is summarized as follows: (a) capital investment and maintenance costs have been revised to reflect constant December 1995 prices and are included in the cost stream; (b) the benefit stream, also reflect December 1995 prices, and consists of savings in VOC, reduced traffic congestion on the existing road, and cost savings on account of accident reduction; (c) a project life of 20 years has been assumed and the capital investment period for all roads is from 1989 to 1994 or 1996 depending on the alternatives considered; and (d) full benefits started to accrue on the Nanchang-Jiujiang Highway in 1993 and on the Nanchang Bridge in 1994. NANCHANG-JIUJIANG HIGHWAY (NJH)-Two LANE (CASE I) 3. As in the SAR, the NJH was divided into four sections for economic evaluation. (a) Section 1: from Jiaoqiao (north of Nanchang City) to Aicheng (38.98 km); (b) Section 2: from Aicheng to De'an (24.54 km); (c) Section 3: from De'an to Tongyuan (27.09 km); and (d) Section 4: fromn Tongyuan to Jiujiang (22.21 km). Cost and benefit analysis were carried out separately for each section as well as the highway as a whole. - 42 - ANNEX 1 Corridor Traffic 4. The 1995 corridor traffic and its distribution between the arterial road and NJH is presented in the following table, indicating SAR forecast and actual traffic census data. NUMBER OF MOTORIZED VEHICLES PER DAY (ADT) FOR 1995 The Arterial Road The New Highway Total Corridor Diversion Factor (DF) (1) (2) (3)=(1)+(2) (4(2)/(3) SAR Section 1 6,922 5,811 12,733 45.6% Section 2 925 2,160 3,085 70.0% Section 3 534 2,137 2,671 80.0% Section 4 644 2,575 3,220 80.0% Actual Section 1 1,721 4,522 6,243 72.4% Section 2 1,215 3,294 4,509 73.1% Section 3 993 3,271 4,264 76.7% Section 4 1,451 3,656 5,107 71.6% (Actual/SAR) Ratios Section 1 24.9% 77.8% 49.0% - Section 2 131.4% 152.5% 146.2% - Section 3 186.0% 153.1% 159.6% - Section 4 225.3% 142.0% 158.7% - Sources: Jiangxi Provincial High-Class Highway Administration Bureau and Bank staff. 5. As shown above, the 1995 corridor traffic (i.e., the sum of traffic on the parallel sections of the existing arterial road and the new highway), except for Section 1, was much higher than the SAR estimates. The distribution of the corridor traffic between the existing arterial road and NJH, on Sections 2, 3, and 4 were not substantially different from that expected at project appraisal in percentage terms. However, on Section 1 the percentage of traffic diverted was about 27 percent higher than the SAR estimate, based on the SAR forecast and actual volumes of traffic. The Diversion Factor (DF) indicates that in 1995, about 75 percent of the corridor traffic preferred to use the NJH. Although, DF, on the average, differed only slightly from SAR prediction, with the significantly higher corridor traffic growth than forecast, the volume of traffic in 1995 was more than 50 percent higher on the NJH than forecast, except on Section 1 for which the SAR forecast was inexplicable high. Traffic Projection 6. Normally, the buildup of traffic on a new highway, particularly when it operates as a toll facility, is gradual. Compared with toll highways opened for traffic recently in -43 - ANNEX 1 China, the traffic diversion factor in the early years of opening has been higher on the NJH than on the others. This is likely to be a consequence of the difference of 58.5 km in the length between NJH and the arterial road (171.3 km versus 112.8 km). Because of the high rate of traffic growth in the recent years on most sections of the highway, the ICR estimate for the long-term traffic growth rate (1993-2015) for the NJH is in the range of 8.2 percent and 8.6 percent. 7. The traffic projections by sections are summarized as follows: TRAFFIC FORECAST COMPARISON (ADT) Section 1 Section 2 Section 3 Section 4 Jiaoqiao- Aicheng- De'an- Tongyuan- Aicheng De'an Tongyuan Jiujiang SAR 1993 4,693 1,748 1,725 2,088 1994 5,221 1,943 1,919 2,318 1995 5,811 2,160 2,137 2,575 2000 9,983 3,692 3,679 4,390 2010 22,867 8,525 8,602 9,963 2015 34,841 13,042 13,234 15,140 Average growth p.a. 1993-2015 9.6% 9.6% 9.6% 9.6% ICR 1993 3,239 2,190 2,267 2,432 1994 4,016 2,879 2,903 3,114 1995 4,522 3,294 3,271 3,656 2000 7,118 5,186 5,149 5,756 2010 14,329 10,442 10,367 11,585 2015 18,288 13,327 13,232 14,786 Average growth p.a. 1993-2015 8.2% 8.6% 8.3% 8.6% Note: All figures are rounded. 8. The projected traffic for the four sections of the NJH for year 1993-2015, by vehicle type, is detailed in Table IA of this Annex. For years 1993-1995, actual traffic data have been used. For subsequent years, the following growth rates have been assumed: (a) normal traffic is estimated to increase by 9.5 percent between 1995 and 2000, thereafter, the growth rate has been reduced by 1.5 percent for each five-year -44 - ANNEX 1 period to 5 percent in 2015, and (b) the generated traffic in the ICR was assumed to be 10 percent of normal traffic. 9. By comparison, in the SAR the normal traffic growth rate for the NJH was 11.4 percent between 1995 and 2000; 8.6 percent between 2000 and 2005; 8.7 percent between 2005 and 2010; and 8.8 percent between 2010 and 2015. The generated traffic growth rate was assumed to be 10 to 20 percent of the normal traffic. In the SAR, it was assumed that railway passengers would be inclined to divert to the new highway. However, the railway passenger diversion assumption has been eliminated since there has been no sufficient reason to assume that bus fares would be attractive enough to bring about the diversion of rail passengers. Economic Costs 10. The economic cost reflects the financial cost of civil works (Table 2), adjusted for shadow prices (Table 3). The overall effect of the differences in shadow prices and in financial costs between the SAR and ICR estimates of the economic costs of the NJH, the economic cost in the ICR ( in constant December 1995 prices) is 106.6 percent higher than the SAR estimate. ECONOMIC COST COMPARISON (CASE I) (Y million) SAR SAR ICR ICR/SAR (Jan 1988) (Dec 1995) (Dec 1995) (in%) Jiaoqiao-Aicheng 66.20 84.22 202.19 +140.1% Aicheng-De'an 45.60 58.01 90.37 +55.8% De'an-Tongyuan 37.20 47.33 110.01 +132.4% Tongyuan-Jiujiang 41.58 52.90 98.24 +85.7% Total 190.58 242.46 500.81 +106.6% Economic Benefits 11. The economic analysis includes the benefits derived from: (a) VOC savings on the new highway for normal and generated traffic, (b) relieved congestion on the existing road, and (c) saving in accident costs. The updated VOC per km for the various types of vehicles is presented in Table 4. 12. Based on the actual redistribution of corridor traffic after the opening of the NJH for traffic, it is estimated that about 75 percent of the vehicles would travel on the new highway. Consequently, congestion on the existing arterial road is expected to be -45 - ANNEX I resulting in 15 percent saving of the VOC between 1993 and 1995. Thereafter, because of the gradual buildup of traffic on the existing arterial road, the savings would be reduced by 1 percent for each of remaining five-year periods to 11 percent by 2015. 13. In 1990, there were, on the average, 1.47 accidents per km per year on the existing arterial road. After the opening of the new highway for traffic, in 1993, the average number of accidents on the arterial road was reduced lto 1.10 per km per year. For estimating road accident cost savings, it was assumed thai: the reduction in the number of accidents, resulting from the construction of the new highway, would be 0.4 accident per km per year at a cost of Y 10,000 for each accident. Economic Evaluation and Sensitivity Analysis (Case I) 14. Cost and benefit streams, economic rate of return (ERR) and net present value (NPV) for the highway are presented in Table 5A and for the four individual sections of NJH in Table 5a-5d. The overall ERR on the highway investment is estimated to be 30.2 percent versus the SAR estimate of 30.1 percent. Sensitivity Analysis information for SAR and ICR is presented the following table. Section I Section 2 Section 3 Section 4 Jiaoqiao- Aicheng- De'an- Tongyuan- Total Aicheng De'an Tongyuan Jiujiang Highway SAR Bestestimate of rate of return 33.6% 31.4% 30.0% 21.9% 30.1% NPV (12%, million Yuan) n.a. n.a. n.a. n.a. n.a. 20% increase in costs and best estimate of benefits 30.6% 28.4% 27.2% 19.9% 27.5% NPV (12%, million Yuan) n.a. n.a. n.a. n.a. n.a. 20% decrease in benefits and best estimate of costs 29.9% 27.4% 26.6% 19.4% 26.7% NPV (12%, million Yuan) n.a. n.a. n.a. n.a. n.a. 20% increase in costs and 20% decrease in benefits 27.2% 25.6% 24.9% 17.6% 24.2% (%) NPV (12%, million Yuan) n.a. n.a. n.a. n.a. n.a. ICR Best estimate of rate of return 39.3 34.8 18.8 14.4 30.2 NPV(12%,millionYuan) 620.0 222.6 64.9 19.6 927.1 20% decrease in benefits and best estimate of costs 33.9 29.9 15.7 11.7 25.8 NPV (12%, million Yuan) 459.9 161.9 32.3 (1.9) 652.2 NANCHANG-JIUJIANG HIGHWAY (NJH)-FoUR-LANE (CASE II) 15. The implementation of the two-lane NJH was still proceeding when Jiangxi Province decided to widen the NJH from two lanes to a four-lane divided highway, financed from the Province's own resources. The construction of the widening started in 1994 and is expected to be fully completed by the end of 1996. However, the second carriageway was already opened for traffic in early 1996. The estimated economic cost of the investment is about Y 505.00 million (in constant December 1995 prices) (Table 2). The four-lane NJH is expected to further reduce VOC in terms of less fuel consumption, increased travel speed and reduced congestion. The ERR for the four-lane -46 - ANNEX I highway is estimated to be 23.4 percent. (Table SB). Moreover, there is a potential for a higher rate of generated traffic than assumed because NJH has been operating as a four- lane divided highway from early 1996, and therefore, traffic and ERR estimates for the ICR could turn out to be somewhat conservative. 16. Nevertheless, a lower ERR for the four-lane alternative (Case II) versus the two- lane version of the NJH indicated that despite a higher-than-expected traffic growth, the investment in the widening of the NJH may have been premature. An additional analysis has indicated that a close to optimum timing for providing the second carriageway would have been in year 2003, by which time, according to ICR assumptions, the traffic volume would be in the range of 6,000-7,000 vpd, a threshold of capacity constraint for a two- lane highway. The estimated ERR for such scenario (Case III) is 29.8 percent (Table 5C), which is very close to the ERR percentage for the two-lane NJH (Case I) of 30.2 percent (Table 5A). CONNECTING ROAD 17. Originally, the southern point of the NJH was supposed to be joined to the existing arterial road at Jiaoqiao, and from a point south on the arterial road, a 6-km connecting road was planned to link up with the Nanchang Bridge Complex (NBC). The economic cost of the connecting road was estimated at Y 24.22 million (or Y 30.81 million in December 1995 prices) but an economic evaluation for this 6-km link was not presented in the SAR. This earlier concept for the Connecting Road had been reconsidered by the Province and JPTD submitted to the Bank a feasibility study for a revised scheme in 1992, according to which the southern end of the NJH was to be connected to the NBC with a 12-km four-lane Class 1 highway on a more direct alignment. The feasibility study's proposal was reviewed by the Bank in December 1992 and was found to be viable with an ERR of 14.7 percent at an economic cost of Y 204.5 million, which included the cost of the construction of the Changling Interchange. Because the need for an additional interchange at Shalljia and several other structures to provide grade separation for local and through traffic, the economic cost of the Connecting Road increased by about 24 percent to Y 253.55 million (Table 2). 18. The feasibility study's traffic forecast of an average 8,500 vpd for 1995 have not materialized. As indicated in Table lb, the 1995 traffic reached the level of only about 5,400 vph on the average, about 37 percent below the expected level, which represents only about 50 percent of the traffic of the NJH at its southern end. This indicates that about half of the NJH traffic is diverting to the existing arterial road as its main access route to the Nanchang City area. 19. The actual and forecast traffic for the Connecting Road is shown in Table IB, indicating an estimated average annual growth rate of about 7.1 percent (1995-2015). Because of the substantially lower traffic level and the higher financial cost than forecast, the ERR estimate for the Connecting Road is only 4.3 percent (Table 6). Since the Connecting Road is the extension of the NJH and its main purpose is to provide a direct -47 - ANNEX 1 link to the NBC, it could be treated as an integral part of the overall corridor improvement. The combined ERR or the two-lane NJEI (Case I) and the Connecting Road is estimated at 25.0 percent. NANCHANG BRIDGE COMPLEX (NBC) Background 20. Until the completion of the NBC, the Nanchang City and the national and provincial road networks traversing the City had been served by two bridges across the Gan River: (a) the Ganjiang Bridge, built in 1963 primarily as a railway bridge, is located on the north side of the city. It also accommodates road traffic but only cars and small-size trucks. Its pavement has been in poor condition and its capacity is severely limited, and the average speed of traffic across the bridge is only about 10 km per hour; and (b) the Bayi Bridge, built in 1937 to a low standard, is located on the northwestern side of the city. Despite its geometric and structural limitations, the bridge still carries a high proportion of the east-west traffic across the Gan River. Without the new Nanchang Bridge, which is located in southeast Nanchang City, land transport across the Gan River would have been severely constrained. Traffic Demand 21. After the opening of the NBC the distribution of the traffic among the three bridges has been as shown in the following table compared to SAR estirnates. TRAFFIC DISTRIBUTION ACROSS THE GAN RIVER (ADT) IN 1995 Bayi Ganjiang Nanchang Bridge (New) Diversion Factor (DF) Bridge Bridge From From Grand Bayi Ganjiang Overall (Old) (Old) Bayi Ganjiang Total Total Bridge Bridge Average (1) (2) (3) (4) (5)= (6)= (7)= (8)= (9) 3+4 1+2+5 3/(1+3) 41(2+4) ICR (actual) 6,686 2,114 9,437 2,984 12,421 21,221 58.5% 58.5% 58.5% SAR(estimate) 9,176 1,584 17.038 6,333 23,371 34,131 65.0% 80.0% 68.4% ICR/SAR 72.9% 133.4% 55.4% 47.1% 53.1% 62.2% - - - Sources: City Construction Bureau of Nanchang and the Bank staff. Traffic on the New Nanchang Bridge 22. Compared with the SAR, the traffic demand across the Gan River in 1995 was only 62.2 percent of the SAR forecast. Traffic diversion to the new bridge has also been lower than expected; 58.5 versus 68.4 percent. Combined effect of these factors is that the traffic on the new Nanchang Bridge is only 53.1 percent of the SAR forecast (12,421 versus 23,371 AADT). The lower-than-expected traffic on the Nanchang Bridge could be attributable to the following: (a) despite the poor conditions of the two older bridges, still - 48 - ANNEX I more than 40 percent of the corridor traffic uses these bridges, which most likely provide shorter origin and destination routes for the central part of Nanchang City; (b) the buildup of through traffic that would bypass the City or traffic which would have more convenient entry to the southeast part of the City from the new bridge, still has not taken place; (c) the tolling of the new bridge likely presented a greater-than-expected deterrent to road users. 23. In the absence of a comprehensive traffic origin and destination survey, it could be assumed that the actual growth rates of the recent years and the distribution of traffic will not change substantially in the foreseeable future, particularly, since Nanchang Municipality has recently commenced construction of a new Bayi Bridge in the city center to increase overall corridor capacity across the Gan River, which will eliminate the bottleneck effect of the present Bayi Bridge. Traffic Projection 24. Consequently, a conservative approach was taken for the ICR's traffic projection for the NBC because overall traffic demand across the Gan River has been much lower than expected, and it is unlikely that present DF would increase more than marginally in the foreseeable future. Therefore, the long-term traffic growth rate (1995-2015) for the new NBC was assumed to be in the range of 4.5 percent versus 8.8 percent assumed in the SAR. Traffic volumes and traffic growth rates for each of the three bridges are shown in Table I B, and summarized below: TRAFFIC FORECAST FOR THE THREE BRIDGES (ADT) Bayi Ganjiang Nanchang Total Bridge Bridge Bridge Traffic SAR 1995 9,176 1,584 23,371 34,131 2000 14,887 2,589 37,994 55,470 2010 32,328 5,755 83,040 121,123 2015 47,931 8,599 123,390 179,920 Average growth p.a. 1995-2015 8.6% 8.8% 8.7% 8.7% ICR 1995 6,686 2,114 12,421 21,221 2000 9,272 2,360 15,819 27,451 2010 16,302 3,662 24,568 44,532 2015 20,690 4,455 29,890 55,035 Average growth p.a. 1995-2015 5.8% 3.8% 4.5% 4.9% Note: All figures are rounded. -49 - ANNEX 1 Economic Costs 25. All costs necessary for the completion of the civil works have been taken into account in the economic evaluation. All inputs and outputs have been evaluated in constant December 1995 economic prices (Table 2). Financial costs have been converted to economic costs by shadow pricing using a factor of 0.98, which is the overall conversion factor used for civil works. 26. In the ICR, the overall effect of shadowed economic costs for the NBC (in constant December 1995 prices) was 16.8 percent higher than the current costs (Table 2) and 94.9 percent higher than the SAR estimate. PROJECT ECONOMIC COST COMPALRISON (Y million) SAR SAR ICR ICR/SAR (Jan 1988) (Dec 1995) (Dec 1995) (in %) Nanchang Bridge 156.00 194.45 379.03 +94.9% Complex Economic Benefits 27. Based on the actual traffic volumes, it was estimated that about 58.5 percent of traffic from the two existing bridges would divert to the new bridge. Less traffic on the two existing and the inner city street network would reduce the congestion and VOC of the vehicles. It was assumed that 15 percent of the VOC would be saved between 1993 and 1995. Thereafter, because of the gradual buildup of traffic on the two existing bridges and the street network, the savings would be reduced by 1 percent for each of the remaining five-year periods to 11 percent by 2015. 28. In 1993, before the completion of the new bridge, the total number of accidents for the two old bridges were more than 10 accidents per year. In 1995, after the opening of the new bridge for traffic, the total number of accidents for the two old bridges was reduced to two accidents per year. For estimating road accident cost savings, it was assumed that the reduction in the number of accidents, resulting from the construction of the new bridge, would be nine accidents per year at a cost of Y 10,000 for each accident. Economic Evaluation and Sensitivity Analysis 29. Table 5D presents the ERR, NPV, first-year return and sensitivity calculations for the NBC. The ERR of the new bridge is estimated 16.6 percent versus the SAR estimate - 50 - ANNEX 1 of 38 percent. Compared with the SAR, the sensitivity of the ERR and NPV of the project to variations in costs and benefits are summarized as follows: SAR ICR Best estimate of rate of return 38.0% 16.6% NPV (12%, Y million) n.a. 106.1 20% decrease in benefits and best estimate of costs 33.6% 13.8% NPV (12%, Y million) n.a. 28.5 THE OVERALL ECONOMIC RATE OF RETURN 30. The overall ERR for investment in the civil works components of the project, including the two-lane NJH (Case I), the Connecting Road and the NBC is 22.6 percent and NPV (at 12 percent) is Y 934 million. In the SAR, an overall ERR and NPV for the same components were not presented. Bridge Highway Total Best estimate of rate of return (%) ICR 16.6 25.0/a 22.6 SAR 38.0 30.1 n.a. NPV (12%, Y million, December 1995 prices) ICR 106.1 827.9 934.0 SAR n.a. n.a. n.a. /a Including the Connecting Road. Table I A: Nanchang-Jiujiang Highway Traffic Summary (ADT) Width (DD) /_LI N. ot o lane Geodkrlert (1k. I.%) 12 Road clss Road 6 ud4loe Ag. peed k..oer) > I Ii III IV I II Ill IV I II Ill IV I It IIl IV I 11 III IV I It III IV Old rood: Oroad7.00 7.50 6.00 6.00 3 2 2 F F It U It it 11 It rd n Fair For Far ok as1 5 33 5 31 0 b 7.75 7.75 6.75 6.75 13.0% 8.0% 8.0% 8.0% (Paved) (Paved) (Po.ed) (Paved) New road: o 9.0 9.0 9,0 9.0 2 2 2 2 F F If hl I I I I Good ood Good Cood 70 70 70 70 b 10.5 10.5 10.5 10.5 2.0% 3.5% 3.1% 4.0% (Paved) (Po .d) (Paved) (Paved) Z -S ..II Car - ----- Medloa. B.- --L.oge ou-- ---S..l Trudk-- --Medlom Truck- --LArge Trock-- -Trclor-Traer--- To-- Rood Wilbot- Wilboul Wlihoot WUhlol Wll.ott Without Without Wiltout kegtb (hok) pr,ject Wdbl Proje)t project Will Prj,ect project Will Project prolect Wllb Projelt project Wilh ProJect project Wlth Project project Wll Project project Wltb ProJect Old New Old New Old Old New Old Old New Old Old New Old Old New Old Old Now Old OW New Old Old New Old > rood rood road rood rood rood rood rd rood road road road rood rood rood rood rod road rood road rood rood rood rood road road > SectIon 1: .Ilooqloo Akl.oerg 1993 75.00 35.98 993 710 283 757 561 196 254 182 112 742 426 316 1.261 970 291 4119 256 233 170 134 36 4.706 3,239 1,467 t 1994 1.423 994 429 969 713 256 310 203 107 871 597 274 1,385 1,103 2U2 497 269 225 157 137 20 5.612 4,016 1.596 C_ 1995 1,717 171,42 573 1.,I115 93 315 3214 223 151 917 655 232 1,454 I.212 272 525 303 222 135 154 4 6.2,43 4.522 1,721 1~ > 20G0 2.6 04 1.76 126
World Bank Group · Implementation Completion and Results Report
China - Jiangxi Provincial Highway Project
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World Bank Group
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Implementation Completion and Results Report
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China
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World Bank