China - Third National Railway Project

Documentof The World Bank FOROFFICIALUSEONLY ReportNo: 33496-CN PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDLOAN INTHEAMOUNT OFUS$200MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FORA THIRDNATIONAL RAILWAY PROJECT December20,2006 Transport Sector Unit East Asia and Pacific Region This document has a restricteddistribution and may beusedby recipientsonly inthe performanceof their officialduties. Its contentsmaynot otherwisebe disclosedwithout World Bank authorization.  CURRENCYEQUIVALENTS (Exchange Rate Effective December 2005) Currency Unit = RMB (Yuan) RMB1 = US$0.12 US$1 = -8.1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CNAO China National Audit Office CR China Railways EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPB Environment Protection Bureau FCTIC Foreign Capital and Technical Import Center (of MOR) FIRR Financial Internal Rate of Return ICB International Competitive Bidding MOR Ministry of Railways MOF Ministry of Finance NBF Non-Bank financed NDRC National Development and Reform Commission NPV Net Present Value PMO Project Management Office RA Regional [Railway] Administration RAP Resettlement Action Plan S A Special Account SSDI Second Survey and Design Institute U S T D A United States Trade and Development Administration Vice President: James W. Adams, EAPVP CountryDirector: David R. Dollar, EACCF Sector Manager: Jitendra N.Bajpai, EASTR Task Team Leader: John Scales, EASTR  FOROFFICIAL USEONLY CHINA ThirdNationalRailway Project CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE .................................................................... 1 1. Country and sector issues .......................................................................................................... 1 2. Rationale for Bank involvement., .............................................................................................. 1 3. Higher level objectives to which the project contributes........................................................... 2 B . PROJECTDESCRIPTION .................................................................................................... 2 1. Lending instrument.................................................................................................................... 2 3. Project development objective and key indicators ................................................................... -2 4. Project components.................................................................................................................... 3 5. Lessons learned and reflected inthe project design .................................................................. 4 6. Alternatives considered and reasons for rejection..................................................................... 4 C . IMPLEMENTATION ............................................................................................................. 5 1. Institutional and implementation arrangements.,....................................................................... 5 2. Monitoring and evaluation o f outcomeshesults ........................................................................ 5 3. Sustainability ............................................................................................................................. 5 4. Critical risks and possible controversial aspects ....................................................................... 5 5 . Loan conditions and covenants . . .................................................................................................. 6 D . APPRAISAL SUMMARY ...................................................................................................... 7 1. Economic and financial analyses............................................................................................... 7 2. Technical ................................................................................................................................... 8 3. Fiduciary.................................................................................................................................... 8 4. Social ......................................................................................................................................... 9 5. Environment ............................................................................................................................ 10 6. Safeguardpolicies.................................................................................................................... . . 11 7. Policy Exceptions and Readiness ............................................................................................ 11 Annex 1:Countryand Sector Background ..................................................................................... 12 Annex 2: Major RelatedProjectsFinancedby the Bankand other Agencies ............................. 15 their official duties.ats contents may not be otherwise disclosed without World Bank authorization. restricted distribution and may be used by recipients only in the performance of I  Annex 3: ResultsFrameworkand Monitoring ................................................................................ 18 Annex 4: DetailedProjectDescription ............................................................................................. 20 Annex 5: ProjectCosts....................................................................................................................... 23 Annex 6: ImplementationArrangements ........................................................................................ 24 Annex 7: FinancialManagementandDisbursementArrangements ............................................ 25 Annex 8: ProcurementArrangements ............................................................................................. 30 Annex 9: Economic and FinancialAnalysis ..................................................................................... 38 Annex 10:SafeguardPolicy Issues ................................................................................................... 45 Annex 11:ProjectPreparationand Supervision ............................................................................. 58 Annex 12:Documentsinthe ProjectFile ......................................................................................... 59 Annex 13:Statement of Loans and Credits ..................................................................................... 60 Annex 14:Countryat a Glance ......................................................................................................... 65 M A P S IBRD34495 andIBRD34496 4  CHINA THIRDNATIONALRAILWAY PROJECT PROJECT APPRAISAL DOCUMENT EASTASIA AND PACIFIC EASTR Date: December20, 2006 Team Leader: John Carter Scales Country Director: David R. Dollar Sectors: Railways (100%) Sector ManagedDirector: Jitendra N.Bajpai Themes: Public expenditure, financial management andprocurement (P) Project ID: PO86515 Environmental screening category: Full Assessment Lending.Instrument: SDecific InvestmentLoan I Y For Loans/Credits/Others: Total Bank financing (US$m.): 200.00 BORROWER 965.60 0.00 965.60 INTERNATIONAL BANKFOR 0.00 200.00 200.00 RECONSTRUCTION AND DEVELOPMENT Total: 965.60 200.00 1,165.60 Borrower: PEOPLE'S REPUBLIC OF CHINA China Responsible Agency: MinistryofRailways, ForeignCapital &Technical ImportCenter 10 FuxingRoad Beijing China Tel: 86-10-51841895 Fax: 86-10-51841845  h u a l 32.00 50.00 50.00 50.00 18.00 hmulative 32.00 82.00 132.00 182.00 200.00 Does the project depart from the CAS incontent or other significant respects? Re$ PAD A.3 [ ]Yes [XINO Does the project require any exceptions from Bank policies? Re$ PAD D.7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [XINO I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Ref: PAD C.5 [ ]Yes [XINO .I Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D.7 [XIYes [ ] N o Project development objective Re$ PAD B.2, Technical Annex 3 To assist China inexpanding the capacity o f its railway systemto meet the growing demand for transport o f people and goods between Guizhou and Yunnan Provinces. Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 The Liupanshui-Zhanyi section o fthe Guiyang-Kunming linewill berealignedto allow higher speeds and a second track will be added. The whole section will bebuilthe-builtto standards that allow 160 ludhpassenger operations, 25-ton axle loads and 6.5m vertical clearance (to allow double-stacked container services). Inaddition, the capacity o fthe Ministry of Railways on railwayplanning, management and technology will be strengthened, through studies, technical assistance and training. Which safeguard policies are triggered, ifany? Re$ PAD D.6, Technical Annex 10 Environmental Assessment, Involuntary Resettlement, and Natural Habitats Significant, non-standard conditions, if any, for: Re$ PAD C.7 Boardpresentation: Loadcredit effectiveness: None Covenants applicable to project implementation: M O R shall (a) adopt and maintain a construction standard for 25-ton axleloads, satisfactory to the Bank, which shall apply to the design for the Liu-Zhan railway line; and (b) bynot later than December 31,2009, enter into agreements with power suppliers or relevant Provinces, satisfactory to the Bank, to ensure adequate electric power supply for the electric traction on the Liu-Zhan railway line.  A. STRATEGICCONTEXT AND RATIONALE 1. Countryandsector issues The railway sector is vital to the economic and social development o f China, its international trade, its continued economic growth, and its ability to extend the benefits of development to people living inthe moreremoteregions ofthe country. Chinais a vast country where people andgoods move over long distances, for which railways provide the most economic means of transport. Railways also are more energy efficient, environment friendly and consume less land space than highways of comparable capacity. The China rail network grew by nearly 25% between 1993 and 2003, while the turnover o fpassenger and freight traffic grew by over 50% and 30% respectively. However, inspite of these increases, the railway system has not been able to keep up with the growth indemand for transportation. The problems caused by lack of system capacity are compounded by the public service obligations undertaken by the railway on behalf of the Government. For several years the Ministry of Railways (MOR) has managed to balance these conflicting responsibilities and requirements, butthe pointhas now been reached where both rolling stock and infrastructure are hlly utilized as conventionally measured. It is clear that, ifthe railway is not to be a brake on the h t u r e economic growth of China, it rapidly needs to create additional capacity. In2003 MORpreparedthe `MidandLong-Term Railway Network Plan' to identifythese investment requirements to 2020. The State Council approved this plan inMarch2004. The large investment needed will require structural changes inthe rail industry to ensure the most efficient use of resources and the mobilizationof external bding to complement public sources. Inresponse to strategic goals set by the national leadership, the National Development and Reform Commission (NDRC) has decided the framework for such reform of the rail industry, among others, and set out the underlying policy principles in"State Development and Reform Commission: China'sKey Reforms in Seven Fields in 2004".I This document has identified three such principles to underpin the reformprocess inChina: ... separation o f Government administration o f the railways from enterprise management introduction of competition where suitable; and effective industry regulation It falls to MORto specify actions and timingthat will implement the principles set byNDRC. MOR has undertaken manyreforms over the past two decades and is committed to changes that will enable it to meet the challenge of b c t i o n i n g ina market economy amid growingcompetition from other modes. Reform will also help it access capital from the private sector, as it makes itselfmore investor-friendly. It has already taken several major steps to facilitate subsequent structural and organizational reforms, including separation o f non-core units, accounting separation ofpassenger transport business, concessioning of some 100 branch lines, establishment of regulations to permit foreign investment, and establishment of special-purpose subsidiaries. (See Annex 1.) 2. Rationalefor Bankinvolvement The principles cited above -- separation of regulatory hnctions from the enterprise, the introduction ofcompetition, and the regulatory system -- require MORto continue policy reform inthe upcoming years, though the timing and pace has yet to be announced. NDRChas requested the Bank's advice 1 XinhuaNet Beijing, April 14,2004; report on "Opinion on Implementingthe Guidelines of the Decisionof the Third Plenary Session of the 16`h Party CentralCommitteein Pushingthe 2004 Economic Reform". 1  regarding international experience on these issues. Simultaneously MOR (with State Council approval) is planningto increase the annual rate of investment inrailways by 50%, costing approximately US$12-15 billionper year, and seeks Bank financing and technical advice. However, NDRC, MORand the Bank all recognize that progress inimplementing the reforms will be drivenby internal political developments largely independent of the capital investment program. The three parties therefore agree that it is best to pursue the policy dialogue on a parallel but separate timetable from the implementationof individual investments, including this investmentproject. The Bank's continuing financial involvement with MOR sustains a close working relationship o f trust with the relevant government agencies, ensuring it a place at the table for policy discussion. Progress in implementation of the reforms willjustify the Bank's continued financial support for China's railways over the medium tern. 3. Higher-levelobjectives to which the projectcontributes The 2003 - 2005 China CountryAssistance Strategy stressed the Bank's support to China's making two historic transitions --froma rural, agricultural society to an urban, industrialized society, and from a centrally planned economy to a more globally integrated market-based economy. To this end its main goals were to: improve the business environment and help accelerate China's transition to a market economy; address the needs o f the poorer and disadvantaged people and regions (mainly central and western provinces); and facilitate a more environmentally sustainable development process. The Bank's Country Partnership Strategy for 2006-2010, agreed with the Government in2006, singles out resource conservation as one of the five priorities for the Bank's continuing support to China's economic development. Expansion of the railway's capacity ina major traffic corridor contributes to achievement of this goal. The proposedproject will: (a) move development westward to inlandprovinces. (b) upgrade infrastructure to serve the rapidly evolving needs ofthe economy. (c) attract the movement ofpeople and goods to an environmentally friendly mode of transport. B. PROJECT DESCRIPTION 1. Lendinginstrument The Project involves the construction of large-scale infrastructure; the loan funds will be disbursed against civil works and goods, procured mostly throughinternational competitive bidding. For this purpose a Specific Investment Loan is the most appropriate lending instrument. MORprefers a variable-spread loan because its cost is slightly lower than that of a fixed spread loan, and MOR sees h t u r e. it as unlikely that it would tap the flexibility providedby a fixed-spread loaninthe foreseeable 2. Projectdevelopment objective and key indicators The Project aims to assist China inexpanding the capacity of its railway system to meet the growing demand for transport of people and goods between Guizhou and Yunnan provinces. 2  3. Project components Part A: Liu-Zhan Railway Line Upgrading The electrified railway line betweenthe city o f Liupanshui inGuizhou Province and the city o f Zhanyi inYunnan Province will be upgraded to increase its capacity and allow for higher operating speeds o f trains, including realignment o f the existing track as needed and construction o f a second track throughout, to design standards that will allow operation o f double-stack container trains. Persons displaced inconnection with carrying out the above will be resettled. MORplansto develop a network o fmultimodalcorridors that will provide a reliable and efficient logistic system for inland areas. This will enable inlandprovinces to share inthe export boom -- either directly or as suppliers o f inputsto manufacturers near the coast. Shanghai-Kunming is one such corridor that will be adapted for double-stack container train operation. Like the Liu-Zhan section, the Zhe-Gan line (Hangzhou-Zhuzhou, another part o f the same corridor) i s being upgraded and electrified under the Bank-hded SecondNational Railway Project, with the vertical clearances needed for operation o f double-stack container trains. Major container terminals served by railway are planned for Shanghai and Kunming. The new line will broadly follow the existing corridor but, to enable the runningspeed to be increased, the alignment will be straightened. This will also reduce the route length. After considering several options, the alignment selected cuts the distance from 254 to 219 km and includes twin single-track extra-long tunnels o f about 20 kmbetween Liupanshuiand Banuokuai. Commercial speeds (i.e. the average speed from one end to the other, including stops and local speed restrictions) will be approximately doubled. Part B: Strengthening MOR'SPlanning, Management and Technology Capacity The capacity o f the Ministryo f Railways on railway planning, management and technology will be strengthened, through studies, technical assistance and training. Proposed studies and training include: (a) technical study on the reliability o f current collection and extra-high catenary design for high-speed rail lines, (b) researchand study onrail grindingmethods for improvingoperating efficiency, and (c) training. The total estimated Project cost is about RMB 9.4 billion (US$1.2 billion), broken down as shown below. MOR seeks Bank financing o f US$200 million, mainly toward the cost o f selected civil works and goods contracts. A more detailed cost table is to be found inAnnex 5. (All values are millions) Total Project (RMB) Total Project (US$) Bank-financed(US$) Capital Cost of Liu-Zhan line 8,972 1,108 178.5 Technical Assistance 8 1 1.o Contingencies 93 12 11.5 Interest during Construction 360 44 9.0 Total Project Cost 9,433 1,165 200.0 3  4. Lessonslearned and reflected in the project design The client and the Bank have drawn valuable lessons from preparing and implementing past railway projects and these lessons have been taken into account inthe preparation of this project. First, a project should not include components to which the client is not fully committed. This can lead to the restructuring of the project, as was the case with Railways VII. Second, including too many components ina project (as was the case inRailways VI and VII) affects implementation negatively, because boththe client and the Bank have limited resources for supervision and implementation. Third, when designing and implementing project components, the project office, railway staff in MORinBeijing, and railway staffinthe regional administrations needto work with each other closely to implement the project efficiently. Fourth,client commitment to Bankguidelines andprocedures is essential. Problems arose with regard to resettlement and environmental issues inRailways VI and VII. However, inrecent years the Chinese Government has internalized concern over environmental impacts and resettlement to a far greater degree, and domestic safeguards are converging to the standards required by the international financial institutions. Fifth,the progress ofChinaRailways(CR) towards improvingbusiness processes andpolicy reform has been steady and generally ina direction that the Bank supports. MORhas continued to shed non- core activities and recently separated from MOR its four design institutes, the Railway Communications Company, the materials supply company, and several hospitals and educational institutions. It also set up three special-purpose companies (wholly owned by MOR) that handle transportation o f containers, special cargoes and parcels. The Bank's support inimprovingthe management of China Railways and its business processes has been effective and should be continued. 5. Alternatives considered and reasons for rejection The main features of the project were decided by MOR and NDRC before they approached the Bank for its financing. The nature of the project offered only limited scope for consideration o f alternatives, mainly choosing the best alignment and setting the technical standards. The rugged terrain inthe central section offered a variety of possible alignments, trading off additional construction cost for extending tunnels, bridges and major cuts against savings indistance and operating speed, which would reduce train operating costs and travel time, as well as environmental impacts and resettlement. Tunnel and bridge clearances will be higher than MOR'Straditional standards inorder to allow double-stack container trains to operate. Adjacent sections have beenbuilt to the same clearance. The extra cost was evaluated against the alternative o f a tighter loading gauge over the hlltrip length that would not have allowed double-stack operations. The maximum design speed of 160km/hwas decided as part o f a broader network-wide assessment ofopportunities to speed uppassenger services onhigh-demand lines. 4  C. IMPLEMENTATION 1. Institutionalandimplementationarrangements The central Railway Ministry will be responsible for procuring all Bank-financed items, through an independent procurement agent (tendering company). The Liu-Zhan line passes through the territory of two regional railway administrations: Chengdu and Kunming. Project management offices in these Administrations will manage procurement of those contracts (works and goods) wholly financed by MOR. Among other contracts, they will, through competitive bidding, hire independent contractors to carry out the civil works and to install all equipment, including that financed by the Bank. The regional PMOSwill also be responsible for supervising the construction and installation. 2. Monitoringand evaluationof outcomes/results The MOR maintains sufficient data collection activities to allow satisfactory reporting and monitoring of the outcomes and results of the project. (See Annex 3.) The results o f this project will not be measurable untilit is complete. The reducedtrip times and lower freight costs due to introduction of double-stack container trains, for example, will be measurable only after operations begin on the new line. 3. Sustainability The physical sustainability of the proposed investments is sound. Experience from completed and on-going Bank-financed railway projects inChina confirms China Railways' commitment to the physical implementation of its projects. CR has the ability to buildand operate the assets and has provided timely and sufficient maintenance funding for existing infrastructure. Traffic volumes on CR are expected to continue to grow. Economic return (ER) calculations of completed railway projects inChina at the time of loan closing -- when the line financed by the loan has been inoperation for a year or two- frequently show higher values than at project appraisal. 4. Criticalrisksand possible controversial aspects The Bank's experience inthe transport sector inChina ingeneral is satisfactory and inthe railway sub-sector has been very satisfactory. The Bank team benefits from the participation o f international experts inrailway engineering, management and economic and financial evaluation. As a result, the Bank's ability to satisfactorily deliver this project is strong. Based upon the lessons learned from the prior Bank-financed railway projects, the macro-economic, financial, policy-related and political risks o f this project not meeting its development objectives are judged low to moderate. The project is expected to have the following risks: Moderate Financial Risk: The project's economic rate o f return is estimated by the Bank at 17%and the financial rate o f return at 5%. These estimates are based on the expectation that the easing o f the track bottleneck will attract much suppressed demand: 50% growth in freight and a near doublingin passenger traffic soon after opening of the upgraded line. Thereafter growth will be moderate, at between 4 and 5% per year, with passenger numbers growing somewhat faster than freight. The Bank considers these forecasts satisfactory. (See Annex 9.) Moderate Social, Environmental and Safetv Risk: The Project's civil works require acquisition o f land and structures. There are no ethnic minority autonomous administrative areas inthe project areas. However, members of ethnic minorities live inthe project areas, intermingled with the ethnic majority. The major environmental concern i s the proper management of construction spoils and soil 5  erosion inthe rugged terrain. Finally, with trains traveling at 160km/hr, safety measures will have to be adopted. MORengaged an experienced consulting institute to carry out a socio-economic survey o f the populationlikely to be affected by the project and prepare the resettlement action plan. They showed no exceptionalrisks inthis domain. Interms ofenvironmental safeguard policies, theproject is a Category A project inaccordance with the Bank's OP4.01, requiring a full environmental assessment (including EIA, EMP and EA Summary). Alternatives for the new alignment sections have been adequately evaluated with integratedconsideration ofthe environmental, social, technical and financial aspects. Public consultation and informationdisclosure have been duly addressed during EA preparation. The Ministry o f Railways has not yet issued a standard for a 25-ton design live load train. However, the designs o f new bridges o n the Liu-Zhan section are based on a 25-ton axle load and the existing bridges will be strengthened to carry this axle load. 5. Loan conditions and covenants 1. MORshall: (a) take, or cause to taken, all necessary actions to minimize to the extent possible any involuntary loss by persons of shelter, productive assets or access to productive assets or o f income or means of livelihood, temporarily or permanently; (b) carry out, or cause to be carried out, the EMP,the RAP andthe RAPArrangements, ina manner satisfactory to the Bank; and (c) furnish, or cause to be finished, any proposed revision to the EMP, the RAPSand the RAP Arrangements to the Bank for its prior approval. (d) adopt and maintain a construction standard for %ton axle loads satisfactory to the Bank, which shall apply to the Liu-Zhan railway line; and (e) by not later thanDecember 31,2009, enter into agreements with power suppliers or the relevant Provinces, satisfactory to the Bank, to ensure adequate electric power supply for the electric traction on the Liu-Zhan railway line. 2. Incarryingouttheproposedtechnical assistance, the MORshall, notlater thanFebruary 15 ineachyear, commencing February 15,2008, furnish to the Bank for comments the recommendations o f the studies carried out inthe preceding year; and not later than April 1each year, commencing April 1,2008, prepare action plans for implementation of the recommendations of the studies carried out inthe preceding year, taking into account the comments of the Bank on such recommendations, if any, and promptlythereafter, carry out each o f such action plans. 3. MORshall: (a) prepare and h i s h , within 45 days after the end o f the first half year after the loan becomes effective and at 6-monthlyintervals thereafter, twice-yearly financial monitoring reports that document the sources and uses of funds for the Project duringthe previous six months; describe physical progress inProject implementation; and record the status ofprocurement; (b) furnish to the Bank, onor about February 15 and August 15 ineach year, starting August 15, 2007 and untilcompletion of the Project, a report integrating the results o f its monitoring and 6  evaluation activities, on the progress achieved incarrying out the Project during the period preceding the date of each such report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of its objectives during the followingperiod; and (c) review with the Bank, by April 1 and October 1ineach year, starting October 1,2007 and untilcompletion o fthe Project, each o fthe above reports andthereafter take all measures required to ensure the efficient completion of the Project and the achievement of its objectives, based o n the conclusions and recommendations of each report and the Bank's views o n the matter. D. APPRAISALSUMMARY 1. Economic and financial analyses Economic evaluation The Liu-Zhan line is part of the main east-west railway artery linking Kunming and south-western China with the eastern coastal region centered inShanghai. It forms one o f the so-called `eight horizontals' and `eight verticals' that are planned as the backbone of the China railway network and which are the center of the railway construction program inthe Tenth Five-Year Plan. The corridor is 2,627 kmlong. The entire length except the project section has already been double- tracked or work is under way. The project section is heavily trafficked, and operates under difficult conditions through mountainous country. It is currently operating at nearly 90% capacity, the maximum level that can be practically maintained, and as a result the speed o f trains i s some 25% below that o f the network average, inspite of its being a key trunk line. In2004itcarried28 milliontons o ffreight and 5.4 millionpassengers. Kunmingis servedbythree trunkrailway lines, from the north(ChengddChongqing), northeast (Shanghai) and east (Nanning and Guangzhou). The Shanghai line, which serves central and eastern China, is the most important and handles 60% o f the passenger traffic and 40% o f the freight. The freight traffic is forecast to grow to 61 million tons by 2020 and 73 millionby 2030, while passenger traffic i s expected to grow to 16millionpersons by 2020 and 20 millionby 2030. The double-tracking and realignment of the Liu-Zhan line will increase the capacity o f the line four- fold, sufficient for at least the next 20-30 years. The benefits fall into three maincategories: net operating cost savings achieved by MOR from the faster travel times, shorter distance and heavier axle loads. These include bothrecurrent costs and savings inthe use of capital equipment. 0 user benefits associated with the savings intravel time. benefits to the additional traffic which can be conveyed by rail inthe `with-project' case. The estimated NPV, calculated over a 25-year period from project completion with a 12% discount rate, is about RMB 6.5 billion in2005 prices and the project has an EIRRo f 17 percent. The project is robust against a wide range of sensitivity tests. Countingonly rail operating cost savings and passenger time savings o n the base traffic (Le. excluding any benefits attributable to additional traffic) gives an EIRRof 5%. However, most other tests, such as halving the benefits attributed to additional traffic, halving traffic growth rates, and increasing investment cost by 30 7  percent, still give an EIRR of 12% or better. The project costs would have to increase by over 60% before the EIRRfell to 12%. Financialevaluation The FIRRis much lower: 5.0%, as most of the benefits will accrue to the users rather than the railway enterprise. Nonetheless, fares will be increased to reflect the higher level of service once the project is completed, so part o f the users' surplus will be capturedby the railway enterprise. The FIRRis comparable with MOR'Scurrent cost ofborrowing. 2. Technical Liu-Zhan line upgrading: The feasibility study proposes 100 bridges, as well as 50 new tunnels with a total length o f 78.3 km, the longest of them 20 km. Inall, about 51percent o fthe line will be over bridges or intunnels. (While highby international standards, this is not exceptional for MOR in such terrain). The ruling gradients will be 6 per thousand for single-locomotive operation and 13 per thousand for double-locomotive operation. Commercial speed for express passenger trains (i.e. the average speed from one end to the other, including stops and local speed restrictions) between Liupanshui and Zhanyi will be increased from 55 to 90 km/hand travel time reduced from 4 hours to 2.1 hours. The average speed o f freight trains will be raised from 23 to 41 km/h. These improvements should enable the railway to compete effectively with other transport modes. The gross load of freight trains will be raised to 4,000 tons, the same as will prevail on the adjoining lines. Longer locomotive runs are planned that would improve locomotive utilization and lower operating costs. An automatic block and multi-aspect signaling system will be installed to provide 6-minute headways between trains. This should provide sufficient capacity for handling the expected growth inpassenger and freight trains untilyear 2030 andbeyond. Several measures for energy conservation have been taken inthe design o f the project includingroute selection, locomotive selection and routing, buildinglocation and design, and the design o f electrical and water supply and drainage equipment. Safety will be enhanced by providing cab signaling and fencing of the railway tracks. Hot box detection equipment will also be installed. Structures for crossing the track will be provided at 54 locations, as well as numerous underpasses for people and animals. 3. Fiduciary A s noted elsewhere (Annexes 2,7 and 8) MORhas considerable experience over the past two decades of implementing investments financed partly by loans from the World Bank and Asian Development Bank. The arrangements for the proposedproject are essentially the same as those used on earlier projects, and are long established and well tested. A central Project Management Office (PMO) has been established under FCTIC. Separate PMOs also have been set up inthe two railway administration bureaus (Kunmingand Chengdu). All Bank-financed procurement anddisbursement ofour loanwill be handledbyFCTIC, while the two regional PMOs will manage non-Bank financed contracts, includingthose with civil works 8  contractors who will install the Bank-financed equipment. No Bank funds will be directed to the regional PMOS. Considering this substantial track record, the Bank assesses the risks associated with procurement as average. The procurement agent hired by FCTIC i s also experienced with World Bank projects. Staff o f the Bank's Beijing office will be providingsome training inprocurement through workshops, to make sure that the procurement agent is fblly up to date with the Bank's latest Guidelines and standard biddingdocuments. For details see Annex 8. Financial Manavement: The Bank has assessed the adequacy of the project's financial management system and concluded that it meets minimumBank requirements. According to the present schedule, implementation of the project will start at about the same time as the Second National Railway Project is completed. It will use the same financial management arrangements (e.g., internal control and reporting) as before, which were previously assessed and determined to be acceptable. Inthe Bank's opinion, the project will have inplace an adequate financial management system that can provide, with reasonable assurance, accurate and timely informationon the status of the project inthe reporting format agreed with the Bank. Staff o f the Bank's Beijing Office will update the PMO's financial management staffthrough a project launch workshop. For details see Annex 7. 4. Social Incarryingoutnineprevious WorldBankprojects, MORhas developed in-house capacityto implement, supervise and monitor both the EMP and the RAP. For EA preparation, MOR retained the SSDI, which was the EIA consultant for the last National Railway I1project, approved inJune 2004. The project will require landacquisition and relocation o f some houses. A team of experts from both the railway design institute and Southwest Jiaotong University has carried out the resettlement planning to satisfactory standards. The RAP is comprehensive and covers resettlement impacts to resettlement policies and compensation rates, livelihood development schemes, management arrangements, the implementation schedule, budget, and resettlement monitoring. (See Annex 1VI.) A socio-economic survey ofthe affected population concluded that: (i) are minoritypeoples there which account for more than 20 percent of the regional population inthe project area; (ii) ingeneral the minority people share the same socio-economic characteristics as other residents; (iii) the potential negative impacts can be minimized by implementing the RAP and some remedies related to improvement of the local road network. On the basis of this survey, the Bank has concluded that no separate Plan is needed to treat the resettlement of the minoritynationalities found inthe Project area. MORhas incorporatedinto the RAParrangements to ensure restoration o f local access for affected persons. Local traffic will be allowed to use the project construction roads once the construction work is complete, as well as local connection roads inthat part of Weining Countythat will be subjected to discontinuance of rail service and local station closing. The RAP specifies actions to be taken and includes a corresponding budget. 9  RAPdisclosure: The draft Chinese-languageRAP was disclosed inlocalnewspapersinGuizhou Province and Yunnan Province the week o f September 24-28,2005. The final English-language RAP, which includes these agreedmeasures, was submittedto the Bank on October 17. On November 3,2005 it was sent to InfoShop for public dissemination. 5. Environment MOR retained the SecondSurvey and Design Institute (SSDI) to preparethe environmental assessment. The first draft was prepared inJune 2005, and the final version was revisedfollowing Bank's comments and submittedin September. The EA was preparedinaccordance with the requirementsfor a Category A project as set out inthe Bank's policy. The major safeguardissuesassociatedwith the previous railway project (SecondNational Railway) were: (1) selection o f optimal alternative sections to avoid or minimize impacts on villages and communities along the alignment; (2) ecological impact o f construction activities andproper disposal o f spoils; (3) increasednoise impact at sensitive sites such as schools, hospitals, and households near the rail line; (4) adequatepublic consultation; and (5) integration o fthe proposed environmental mitigationmeasuresinto the Environmental Management Plan. The environmental impacts likelyto occur duringthe construction ofthe proposedproject include: construction noise, potential increaseinsoil erosion, and generation o f dust duringconstruction and transport o fmaterials, interference with the local community and traffic, waste water and solid waste from construction and camp sites, impacts on localhydro-geological regimes due to tunnel construction, and impacts on the local ecology and irrigation system, safety and health o f labor workers. Ecologicalprotectionat borrow sites and safe disposal o f spoils will require close attention and supervision duringconstruction. The traffic noise and vibration, waste water and solid waste from train stations and service areas, and social severance are the potential adverse impacts during the operation period. Detailedimpact andmitigation measuresare properly addressedinthe EL4and summarized inAnnex 10. A stand-alone environmental managementplanhasbeenprepared for the project. It specifies the appropriate environmental management and supervision set-up, mitigationmeasures, environmental monitoringplans, trainingplans and budget allocation necessaryto implementthe mitigation measuresand strengthen the borrower's capacity. Thekeyproject stakeholders arethe MOR andits regional administrations inChengdu andKunming, the localpeople who may lose landand livelihoods, villagers and communities that maybe displaced, divided, or impacted because of the alignment passing through or near their villages; and hospitals, schools, and individual householdsthat may be affected bythe construction and operation o fthe proposed railway line. Two rounds o fpublic consultation havebeen carried out with the affected people and communities, local governments and environmental experts, and the relevant information and documents were provided at the public meetings. A total o f 1,825 people have been consulted, and the environmental assessment reports were placed inpublic libraries along the line in September2005. The disclosure was announcedinlocalnewspapersthe week of September 24-28, 2005. 10  Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats(OPBP 4.04) [XI [I Pest Management(OP 4.09) [I [XI Cultural Property(OPN 11.03, beingrevisedas OP 4.11) [I [I InvoluntaryResettlement (OP/BP 4.12) [XI [I IndigenousPeoples (OD 4.20, being revisedas OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety ofDams(OPBP 4.37) [I [XI ProjectsinDisputedAreas (OP/BP/GP 7.60) [I [XI Projectson InternationalWaterways(OP/BP/GP 7.50) [I [XI 7. Policy Exceptions and Readiness No exceptions to policy are proposed. 11  Annex 1: Country and Sector Background CHINA: Third National Railway Project The Role of the Bank inthe Reform and Development of China Railways For the last 10-15 years, the Chinese railway industry has beenpursuing two key objectives. One is to reformthe industry to become more responsive to the market economy. The second is to achieve an order o f magnitude change inthe capacity and quality of infrastructure and services ina system that is already the busiest, by a wide margin, of any inthe world; and which is still facing rapidly growing demand. Pursuingthese two goals at the same time adds upto perhaps the most daunting rail industry challenge facing any government inthe world. The case for the reform of the China Railway system from its historical structure as a vertically and horizontally integrated, and wholly state-owned monopoly, has been widely accepted for a number of years. The Government has adopted a step-by-step approach to industry reforms, concentrating o n reforms within (or grafted o n to) existing institutions rather than breaking up China Rail itself, These reforms have included: 0 Non-core businesses: Separation of non-core activities as enterprises (construction, manufacture, telecom, design, education and social activities) and staff reductions fiom 3.4 million in 1992 to 2.2 millionin2004, a period duringwhich traffic increased by 58 percent. Manyofthese enterprises now provide services to China Railways ona competitively tendered basis. 0 New industryparticipants: Fromthe mid-1990sthe Ministry of Railwayshas supported the establishment of 29 newjoint-venture railways that are owned by national and provincial governments andprivate investors. (About two-thirds of these railways are understoodto be independently profitable.) The Government is seeking to expand this approach, with greater private participation, to new high-speed dedicated passenger lines that would free up freight capacity o n existing lines. 0 Commercialization: Implementation in 1999 o fthe Asset Operation Liability System has made managers of regional railway administrations accountable for return on capital, output, profitability and safety. It also gives incentives ifagreed performance levels are exceeded. China Rail's operating labor productivity (excluding non-core business) has doubled since 1992 and it has earned profits since 1998, despite controlled tariffs, and is a major net contributor of taxes to the budget ($1.5 billionin2004). 0 Management restructuring: In2004 MORtook out a whole layer of management by eliminating the 44 sub-regional administrations. Management was consolidated at the level ofthe 18 regional administrations and some 60,000 staffpositions were removed. This change brought together management responsibility and accountability at the regional level. Italso facilitated and encouraged higher utilizationoflocomotives and crews, which had normally been changed at sub-regional boundaries. There has also been some separation o f management of low-density lines with emphasis o n reducing losses. 0 Passenger services: Since 1992, MORhas made passenger fares more flexible, introducing higher fares for fast and premium services and a surcharge for peak season. Also passenger business has been separated on an accounting basis. 12  0 Freight services: In2003 specialist companies were formed to operate container services, mail and parcels, and special freight. MORhas been negotiating with international freight forwarding companies with a view to joint financing with the container company to develop and operate 18 new regional container hubs. 0 Information technology: Inthe mid-1990s MOR introduced a new world-class Traffic Management Information System with World Bank finance and the Bank is now financing a specification of the next generation upgrade o f the system. 0 Train operations: China Rail has begun upgrading specific routes to make them capable o f carrying double-stack containers. It is buildingto higher axle loads on a trial basis for heavy haul freight. CR managers hope to obtain substantial efficiency gains from these initiatives. All ofthese steps are consistent with advice or recommendations made bythe World Bank, buttheir adoption has been to the credit of the Ministry of Railways and China Rail managers. The pace of implementation has been determined by China. The Bank has also advocated a policy that would separate the policy and regulatory functions of the Ministry from the commercial functions of China Rail. The Government has not yet taken this step. This reluctance is due to: (a) concern about a possible diminutiono f the role of public interest inrailway management decisions at a time when railway capacity and coverage are being seen as an increasing constraint on development; (b) concern that rail service mightbe disrupted duringinstitutional change at a time when its capacity is already stretched; and (c) higher priority given to system expansion and upgrading: since 1990the network has been expanded by 15,000 km and a further 27,000 km are planned by 2020. However, the issue is currently still the subject o f dialogue between the MOR, NDRC and the Bank. Alternative models were highlighted by the Bank ina paper on the subject in2005 (see below). Ultimate responsibility for such institutional restructuring (as opposed to internal reforms) lies with NDRCrather than MOR, butthis measure is unlikely to proceeduntila wider consensus is reached. The Bank's first railway project with China was completed in 1990. Inthe following 15 years its involvement has helped shape the debate of China's railway policy makers regarding reform. The ICR for the Sixth Railway Project reported substantial progress inrailway reform. The ICR for the Seventh Railway Project recorded that MORhad, as before, executed major civil works quickly and effectively. But a sense of ownership had been lacking for some other components recommendedby the Bank, including some TA topics. The project was restructured after three years to adapt it more closely to MOR'Spriorities. The next two projects (First and Second National Railways) continued to engage MORina dialogue and provide support by way of international experience and technical assistance relatedto reform, policy, and operational enhancements. Throughits 15-year history of support the Bank has been influential inestablishing the direction of the transformation. Today, the Bank's relationship with the Ministry of Railways is as strong as it ever has been. This has allowed the Bank to offer MOR independent advice based on international experience on railway policy options and issues and to support management with specific items of technical assistance that have improvedbusiness performance. At the same time it has made a 13  modest but effective contribution to project financing for China Railway's infrastructure development program. In2004,whilepreparingthe SecondNationalRailwayProject, theBank, MOR,andNDRClaunched a dual-track approach that reflected the differing responsibilities o fNDRC and MOR and the different modes of engagement necessary. Support for sector-wide reform was separated from project development and lending. NDRCis responsible for recommending the major structural steps such as the separation of ministerial policy and regulatory b c t i o n s from railway commercial enterprises, and major tariff reform. MOR is taking the lead inseeking news sources of finance for the proposed major investmentprogram to 2020. The two issues are related. Accordingly, the Bank now maintains a policy and reform dialog at the higher level of MOR and NDRC, while the project lending work continues at project implementing level. This approach appears to be working well. InJune 2005, at the request o fNDRC, MOR and MOF, the Bankprepareda presentation arguing that MOR would need to seek substantial non-traditional bding inthe nextten years to kllymeet the investment requirements for the medium- and long- term plan approved by the State Council (summarized below). It also demonstrated why some of the potential sources of finance were less likely to be secured without structural reforms. InSeptember 2005 MORheldatwo-day "China RailwayInvestment andFinancingReformForum". Senior officials of MOR, NDRC and other parts of the government and the party all stressed the need for sourcing private investment for railways inChina inorder to create muchneeded additional rail transport capacity. It was the near unanimous view that to succeed, MORwould need to separate the industry regulatory fimctions from administration o f any particular railway enterprise, allow greater tariff flexibility, and create a more investor-friendly environment. Followingup onthis initiative, the Bank in2006 gave MOR a note on how railways inthe developed world cope with multiple operators ina single railway system. It focused o n the arrangements used for allocating responsibilities and settling payments among the operators to cover three situations encountered insuch systems: (a) passengers buy tickets for trips that runover the networks of more than one company; (b) an operating company runs its trains over the track o f another company; and (c) a company makes use of the wagons of another company that have entered its network. The note was timely, given the Government's decision to rely onjoint ventures to finance and operate the proposed network of high-speed dedicated passenger lines. This loanprovides a platform of continued high-level engagement between the Bank, MORand NDRC,while simultaneously supportingoperational development o fthe Chinese railwaynetwork throughChina Railway. The dual-track approach allows us to speak with contextual authority, to be received with respect, and to deliver results along both tracks that inevitably involve different institutions, different personalities, different skills and a different pace o f activity. Given the sheer size and the breadth o f the Ministry o f Railways, the Bank has been able to leverage its efforts ina way that may helps improve the way transport is delivered to every province and to the hundreds of millions of individuals who rely on the Chinese railway system for their personal and commercial transport needs. 14  Annex 2: Major Related Projects Financed by the Bank and other Agencies CHINA: Third NationalRailway Project ~~ Sector Issue Projects Latest Supervision Ratings World Bank-financed (Completed unless shown otherwise) ation 1. Address railway capacity Railways I-incl. items 1,2 bottlenecks through construction, Railways 11-incl. items 1,2 double-tracking, electrification, Railways 111-incl. items 1,2 andthe introduction ofmodem technology Inner Mongolia Railway Project- incl. items 1,2 2. Technical assistancehraining, Railways IV-incl. items 1,2 transfer o f new technology concepts to improve efficiency o f Railways V-incl. items 1,2 railway operations and railways' Railways VI-incl. Items 1,2,3 financial condition Railways VII-incl. items 1, 2, 3 3. Institutional strengthening and National Railways -4ncl. items 1, 3 training inrailway reform issues (closing) and introduction o f tools needed SecondNationalRailways -inc. items for making decisions in a socialist 1,2 and 3 (on-going) market economy Other development agencies Project Status Asian DevelopmentBank Guang-Mei-Shan Railway Completed Hefei-Jiujiang Railway Completed (since 1992) Jing-Jiu RailwayTechnical Enhancement Completed Dazhou-WanzhouRailway Completed Shenmu-Yanan Railway Completed Guizhou-Shuibai Railway On-going Hefei-Xi'an Railway On-going Ganzhou-Longyan Railway On-going Yichang-Wanzhou Railway On-going Dali-Lijiang Railway On-going Zhengzhou-Xi'an Railway Launched JapanBank for International Baoji-Zhongwei Railway ZompletedC Cooperation Hengshui-Shangqiu Railway ompletedco (since 1991) Nanning-Kunming Railway mpleted Zhang-Quan Railway (Fujian Province) Completed Shouxian-Huanghuagang Railway Completed Xi'an-Ankang Railway Completed Guiyang-Loudi Railway (double-tracking) On-going Agence Francaise de Developmt Luoyang-Zhangjiajie Railway electrification On-going 15  Annex 2b: Recent andPlannedTechnical Assistance under World BankProjects and Other Agencies Project Topic Objectiveand Status Seventh Railway Legal Review the Chinese railway legal framework and identify areas that Railway Framework pose problems inthe context o f market economy and WTO environment. Study international experience and recommend changes to railway legal framework in China. Completed2003 Improving Study (i)China Railway's labor productivityin the context o f Railway international experience; and (ii)impact o f laying off workers on Productivity railways; and suggest policies and options for improving labor productivity. Completed 2003 Subsidies for An analysis ofrailway services presently subsidized byMOR and Public Service recommendations for reducing PSOburden on railway management. Obligations (PSO) Completed 2003 Study tour on A study tour for senior MOR officials to obtain an overview of Traffic existing and plannedcomputer-based operating management Management Info information systems employed by leading railways inNorth America System andEurope. Completed 2003 Railway Update the Railway Investment Study (RIS) software and data base Investment and evaluate railway investment projects. Based on international Planning System, experience, suggest suitable financing methods for funding Phase3 investments on MOR. (RIS-3) Completed 2004 PassengerTickets Develop a strategic approach for developing a passenger ticket and and Freight freight waybill information system to evaluate service improvement Waybills opportunities, measure transportation efficiency and monitor Collection and customer service performance. Analysis System Comdeted 2005 Environmental Training inmanagement o f environmental issues arising inrailway Management constructionprojects Training Completed 2005 National Freight Pricing, A workshop on experience inthe USA on freight pricing and inter- Railway Regulation & company sharing o f revenues. Project Intercompany Completed2002 Settlement Mechanisms 16  Railway This consulting service is to design informationsystems for two o f Information China Railways' key managerial functions: dispatching and train Technology operations, incorporatingadvanced methods (e.g. improving Strategic dispatchingcapability, deployment of locomotives andfreight cars Development Plan for increased efficiency). On-going Second Policy Framework Survey and review current policies and practices for resettlement and National for Resettlement environment for railway projects inboth China and foreign countries, Railway and Environmental and prepare draft paper that lays down norms and procedures for Project Protection handling environmental and resettlement-related work and assign responsibilities to specific agencies. Planned Ministry Feasibility Study Strategic assessment o f inter-modal rail transport potential, o f for Railway Inter- identification o f requirements o f a state-of-the-art inter-modal rail Railways modalContainer transport system and an implementation plan. (USTDA Transport Completed 2004 funding) 17  Annex 3: Results F r ~ ~ ~and o rok n ~ t o ~ ~ ~ ~ ~ ~ CI1INA: Third National Railway Project Project ~ e v e l o ~Objective ~ e ~ t The Project aims to assist Chinain ex pa^^^^^ the capacity ofits raifway system to meet the ~ r o w i ~ ~ d ~ ~ aford~ n ~ofpeople and~goods between~G~~~~~~ a ~ o and Y~~ ~ nprovinces. a n gcrs in2020 urhichwould o by road, at it higher cost, or not a PDO Project Outcome Use of ProjectOutcome Indicators Informstion Base-line Target Project:Development values vnIues Indicators''I First fullyea] 2004 of operation (4)  Notes: (') All indicators are measured on the line between thejunction stations o fLiupanshui (origin) andZhanyi (destination). (') The commercial speed from origin to destination is the average speed including intermediate stops for operational purposes. (3) Averaged over the year. (4) Target values are basedupon 2010 projections. 19  Annex 4: DetailedProject Description CHINA: Third NationalRailwayProject This project aims to provide a major increase incapacity to the Liupanshui-Zhanyi section o f the Guiyang-Kunming railway line, improvingthe service quality ofpassenger as well freight transport byhalving the transit times and enabling operationofdouble-stack container trains for the first time. This line is part of the Shanghai-Zhuzhou-Huaihua-Kunmingrailway corridor (2,627 km) that is one ofthe key east-west trunk routes insouthern China and, inthe longterm, would form part ofthe proposed Trans-Asia corridor linking China through Myanmar to Bangladesh and India. The eastern part of this corridor, Hangzhou to Zhuzhou (the Zhe-Gan line), is already electrified and upgraded with Bank assistance under the Second National Railway Project. This will allow passenger trains to runat upto 200km/handmakepossible the operation ofdouble-stack container trains. The Liu-Zhan line (Liupanshui-Zhanyi, 254 km) is at the western end of the Shanghai-Kunming corridor and crosses the watershed between the Yangtze and Zhu (Pearl) rivers. Although Liupanshui and Zhanyi are at similar elevations (1,800-1,900 meters), the line crosses three intermediate summits at between 2,000 and 2,100 meters, as well as passing through 102tunnels with an aggregate length of about 44 kmandover 181bridges having a total length o f 12.9 km. It was built as a single track in 1966 and electrified in 1988 and has relatively sharp curves of radius ranging from 300 to 800m. Itremains single-track apart from 10 kmat the western end and 24 km at the eastern end. Its capacity is currently constrained by the single track and long tunnels (which limit opportunities for trains to cross), and by demanding alignment and intermittent steep grades, which keep speeds low. In2004the Liu-Zhan line carried28 milliontons offreight and 5.4 millionpassengers, equivalentto 21pairs of freight trains and 10pairs o fpassenger trains per day. It is working close to capacity (88% based on MOR standards) and cannot cater for the forecast traffic, as the western China economy continues to grow. The freight traffic is forecast to grow to 61 million tons by 2020 and 73 millionby 2030, while passenger traffic is expected to grow to 16millionpersons by 2020 and 20 millionby2030. The rates of growthunderlying these forecasts are moderate: an average o f 4.1% per year inthe decade 2010-2020 for freight and 4.7% for passengers. They are below the expected rate of growth o fprovincial GDP inGuizhou and Yunnan, and reflect an expected gradual loss of market share to road transport, as the planned expressway between the two cities comes into operation and other parts of the regional roadnetwork are built out. (More is said on the traffic forecasts inAnnex 9.) To expand its capacity to transport freight andpassengers to and from Yunnan, MORplans to: (i) realign the track to allow higher speeds, (ii) the remaining single-track section between double Liupanshui and Zhanyi, and (iii) remodel the Liupanshui terminal area. It will be builtto standards that allow 160km/hpassenger operations; and 25-ton axle loads and 6.5mvertical clearance, as well as the corresponding movingdimensions, to allow double-stacked container services. The new line will broadly follow the existing corridor but, to enable the runningspeed to be increased, the alignment will be straightened. After considering several options, the alignment selected reduces the distance from 254 to 219 km and includes twin single-track extra-long tunnels o f about 20 kmbetween Liupanshui and Banuokuai. The feasibility report and preliminaryproject design (including the recommended alignment) are under review byNDRC. 20  Length of section before and after the Project (km) From To Before After Liupanshui Zhanyi 224 187 Lanba Qujing 254 219 Itis achallenging engineering project. The terrain throughwhich the linepassesis difficult and construction involves a large number o ftunnels and bridges. Soil conditions are generally difficult and, as tunnel clearancesneed to be increased for double-stacked containers, several new and much longer tunnels will be constructed which will reduce the route lengthsignificantly and remove some o fthe sectionsthat cause low speeds. The feasibility study proposes 100bridgeso f a total lengtho f 33.9 km. They are designed for a flood frequency o f 1/100 (1/300 inthe case o fvery longbridges). There will be 50 new tunnels with a total lengthof78.3 km, the longest o fthem 20 km. Thus, about 51percent o f the line will be over bridges or intunnels. (While highby international standards, this i s not exceptional for MOR insuch terrain). The ruling gradients will be 6 per thousand for single- loco operation and 13 per thousand for double-locomotive operation. The minimumcurve radius will generally be 2,000m and 1,600m indifficult sections. Receiving and departure tracks will continue to be 85Om long, the network-wide standard. Betweenthejunction stations Liupanshui and Zhanyi commercial speed for passengertrains (i.e. the average speed from one end to the other, including stops and local speed restrictions) will be increased from 55 to 90 km/hand travel time reduced from 4 hours to 2.1 hours. The average speed o f freight trains will be raised from 23.4 to 41 km/hand travel time reduced from 10hours to 4.5 hours -thanks not only to the higher speedbut also the elimination o fthe need to wait insidings for on-coming traffic to pass. (Some waiting will still be necessaryto allow faster passengertrains going inthe same direction to overtake.) For the single-track Liu-Zhan line it was necessaryto have short distancesbetweenstations. Many stations do not have significant commercial importance and are usedmainly for trains to cross. With the doublingoftracks, some ofthe crossing stations canbe closed. The realignment ofthe track will cause 14 stations to be closed, but only four new stations will be neededto serve local traffic, bringing the total down to 21 stations. The gross loadof freight trains will be raisedfrom 3,800 tons to 4,000 tons, the same as will prevail on adjoininglines. This will enable uninterrupted operation o f freight trains over long distances without the needto adjust loads en route. SS3B type locomotives (six-axle, 4,320 kW) will be used to haul freight trains, while SS7E type six-axle locomotives (4,800 kW)will haulpassengertrains, which will have a gross load o fbetween 800 and 1,100tons. Longer locomotive runs are planned that would improve locomotiveutilization and cut operating costs. The mainline track will belaidwith 60 kg/m, quenchedrail andtype I1elastic rail fastenings on type I11concrete crossties (sleepers) (1,680 per km). This will meet the requirements of25-ton axle loads. All main line track will bejoint-less (continuous welded). Intunnels longer than 5 kmtrack, elastic bearing blocks will be adopted. Electric traction will runthroughout. The catenary (25kV, single phase, 50 hertz) will have a height o f 6.5m to permit double-stack container train operation. Eighttraction sub-stations will be set up. Their capacity will range between 20 and 40 MVA. The estimated energy consumption andpeak load in2015 are 466 millionkWhper annum and 27,930 kW respectively. Electric power will be supplied by Guizhou and Yunnanprovincepower companies from 220 or 110kV sub-stations. 21  Automatic block signaling will be installed to provide 6-minute headways between trains. This will provide sufficient capacity for handlingexpected growth inpassenger and freight trains until2030 and beyond. Jointless frequency modulated track circuits o f UMseries will be employed. Four- aspect color light signals will be installed. Existingoptic fiber communication cable will be used. Additional optic fiber cable will be laid between Liupanshui- Qiewu - Qujingto take care o f areas that are too far away from the existing cable due to change inthe track alignment. Works for water supply, sewage, buildings, air-conditioning and fire fighting will be carried out. The total buildingarea to be builtwill be 51,630 m2.New land requisitionwill be 10,140 mu(6.75 millionm2)and another 10,250 mu(6.83 millionm2)will be acquired for temporary use. Several measures for energy conservation have been taken inthe design o f the project, including route selection, locomotive selection and routing, buildinglocation and design, and design o f electrical and water supply/drainage equipment. Safety will be enhanced by providing cab signaling and fencing o f the railway tracks. Hot box detection equipment will also be installed. Bridges for crossing the track will be provided at 54 locations, as well as 12underpasses large enough for motor vehicles and numerous smaller underpasses intended for pedestrians and animals. The Bank loan will finance procurement o f equipment for overhead catenary, traction substations, power supply for electrification, signaling and communication equipment; it will also finance selected civil works contracts. MOR will self-finance all the locomotives and passenger and freight rolling stock required to provide additional capacity on this line. Technical Assistance The capacity o f the Ministryo f Railways inrailway planning, management and technology will be strengthened, through studies, technical assistance and training. Proposed studies include: (a) technical studyon the reliability o f current collection and extra-high catenary design for high-speed rail lines; and (b) researchand study onrail grindingmethods for improving operating efficiency. MORwill retainflexibility inthe use o f loanfunds to award other contracts for studies, training and studytours onparticular topics, to be agreedupon inthe course o fproject implementation. 22  Annex 5: Project Costs CHINA: Third NationalRailway Project Bank Disburse- Project Cost by Local Financed Total ment Component US$million US$ million US$million Rate 1. Liu-Zhan line 929.2 178.5 1,107.7 - Civil Worh 737.3 99.3 836.6 40%' - Goods 130.4 79.2 209.6 100% - Resettlement 61.4 0 61.4 2. Technical assistance 0 1.o 1.o 100% Total Baseline Cost 929.2 179.5 1,108.7 Physical Contingencies 0.0 3.5 3.5 Price Contingencies 0.0 8.0 8.0 Total Project Costs 929.2 191.0 1,120.2 Interest duringconstruction 35.4 9.0 44.4 100% Total Financing Required 964.6 200.0 1,164.6 Identifiable taxes and duties are US$36.6 millionand the total project cost, net o f taxes, i s US$ 1,128 million. Therefore, the share ofproject cost net of taxes is 97%. 23  Annex 6: ImplementationArrangements CHINA: ThirdNationalRailway Project The organizational set-up for implementingthe project is explained inAnnex 7 (Financial Management). Procurement arrangementsare set out inAnnex 8. Arrangements for implementingthe environmental managementplan are set out inAnnex 1O(a) (Environmental Assessment), Section H. Arrangements for implementingthe resettlement action planare summarized inAnnex 1O(b) (RAP Summary). Reporting MOR will monitor and evaluate the progress o f the project on a six-monthly basis. MOR will prepare, by February 15 and August 15 ineachyear, commencing August 15,2007, and until completion o f the Project, a comprehensive Project ProgressReport integrating the results o fthe monitoring and evaluation activities, onthe progress achieved inthe carrying out o f the Project duringtheperiodpreceding the date ofeachreport and setting out the measuresrecommendedto ensure the efficient carrying out o fthe Project andthe achievement o f its objectives during the period following. Shortly after receipt o f eachproject progress report the Bank will review, together with MOR, the progress o fthe project. 24  Annex 7: FinancialManagementand DisbursementArrangements CHINA: Third NationalRailwayProject Summary 1. The Bank has assessed the adequacy of the financial management system proposed for the project. The assessment, based on guidelines issued by the Financial Management Sector Board on October 15,2003, concluded that the project meets minimumBank financial management requirements, as stipulated inBP/OP 10.02. This follows shortly uponthe Second National Railway project and will be using the same financial management arrangements (e.g., internal control and reporting) as before, which were previously assessed and determined to be acceptable. Inthe Bank's opinion, the project will have inplace an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status o f the project inthe reporting format required by the Bank. 2. The loanproceeds will flow from the Bank into the project Special Account to be set up at and managedby MOR'SForeign Capital and Technology Import Center (FCTIC) and finally to contractors or suppliers. The loan agreement will be signed between the Bank and the People's Republic of China through its Ministry of Finance (MOF) and an on-lending agreement for the Bank loan will be signed between MOF and MOR. The loan will be disbursed based o n the traditional techniques and will not be usingreport-based disbursements, inaccordance with the general agreement between the Bank and MOF. Counterpart finds will be arranged by MOR. 3. No outstanding audits or audit issues exist with any ofthe implementing agencies involved in the proposedproject. The Bank team, however, will continue to be attentive to financial management matters duringproject supervision. FinancialManagementand ReportingArrangements 4. Implementingentity: Similar to previous Bank railway projects, MORhas set up a central PMOunder FCTIC to manage all the procurement and Bank loandisbursements activities. Two local PMOSare being separately established within the Chengdu and KunmingRailway Administrations to handle counterpart finds and supervise project construction. No Bank proceeds + will be directed to them: CentralPMO . 1 PMO inChengdu PMO inKunming I I 25  Strengths and Weaknesses 5. Strengths: China's railway ministry is highly centralized. For the project, all procurement and loan disbursement functions will be centrally handled by FCTIC, while the related local PMOs will only be responsible for the project construction and no Bank b d s will be directed to them. This simple arrangement will improve implementation efficiency and reduce risks of misuse o f project funds. FCTIC has managed several Bank projects and is familiar with the Bank's requirement and procedures. 6. Weaknesses: The following significant weaknesses have been identified: Significant weaknesses Resolution 1. Some financial staff are new to FCTIC shouldprovide strong assistance and training Bank's project and are short o f program. relevant experience. 2. FCTIC's knowledge on Bank FCTIC's financial staff will better familiarize themselves project financial management with the Bank's requirement on project financial requirements and disbursement management and disbursement policies prior to and during polices needs to be updated. the project launch workshop. Requiredprocedures will be documented in the financial management manual. 7. Fundsflow: One special account will be set up and managed by FCTIC for disbursement o f the loan proceeds to contractors and suppliers. Counterpart funds will be arranged by MOR and appropriated to the local PMOs inaccordance with domestic procedures. 8, Staffing: Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform is one of the factors critical to successful implementation of project's financial management. Based o n discussions, observation and review of the educational background and work experience of the staff identified for financial and accounting positions inthe implementing agencies, the task team note that the staffs are qualified and appropriate to the work they are expected to assume. 9. To strengthen financial management capacity and achieve consistent quality of accounting work, FCTIC has prepared a project financial management manual, that provides detailed guidelines on financial management, internal controls, accountingprocedures, fund and asset management and withdrawal application procedures. The Bank team considers the manual acceptable. It will be distributed to all the financial staff before implementation starts. 10. A s some financial staff are new to the Bank's project, FCTIC will provide a well-designed and focused training program inproject financial management prior to project launch to all financial and accounting staff to ensure a goodunderstanding of the following: 0 Bank's financial management policy and disbursement procedures 0 Fundassetkontract management 0 Format and content of project financial statements 0 Audit requirement 26  11. Accounting policies and procedures: The administration, accounting andreportingo fthe project will be set up inaccordance with the Circular #13: "Accounting Regulations for World Bank- Financed Projects" issued inJanuary 2000 by MOF. The circular provides in-depth instructions on accounting treatment ofproject activities and covers the following: 0 Chart of account Detailed accounting instructions for each project account 0 Standard set of project financial statements 0 Instructions on the preparation o f project financial statements 12. The Bank and MOFhave agreed o n the standard set o f project financial statements mentioned above. It applies to all Bank projects appraised after July 1, 1998 and includes the following: Balance Sheet Statement of Sources and Uses of Funds by Project Component Statement of Implementation o f Loan Agreement 0 Statement of Special Account 13. Eachof the three PMOs will manage, monitor and maintainits respective project accounting records. Original supporting documents for project activities will be retainedby the originating implementing agencies. 14. Internalaudit: AlthoughMORhas its own internal audit department, it does not perform audit procedures on its subsidiaries on an annual basis. Additionally, we have not and will not assess the competency of the internal audit department due to the costhenefit o f doing such work. A s such, reliance will not be placed on work performed by them. 15. Reportingand monitoringof financialstatements: EachPMO will prepare its ownproject financial statements, which will then be consolidated by FCTIC. The project consolidated financial statements will be sent by FCTIC to the Bank for review and comment on a regular basis. 16. Inlinewiththe FinancialMonitoringReport guidelines, the un-auditedproject consolidated financial statements will be submitted as part of each Report to the Bank on a semi-annual basis (by August 15 and February 15 ofthe following year), and will include the four statements listed inpara. 11above. 17. Informationsystems: The computerized financial management informationsystem, "Railway Information Management System (version 4.0)", developed by MOR, will be used by the PMOs for this project. This system has been used indomestic reporting for several years. Through further development and upgrading, the project transactions could also be integrated into this system. The task team will closely monitor the processing o f its accounting work, especially inthe initial stage to ensure complete andaccurate financial informationcan be provided ina timely way. 18. Supervision plan: A detailed supervision plan for this project will be included as part o fthe China Audit Strategy document which is currently inprocess. This document will take into consideration of the size ofproject and the risks identified. 27  Audit Arrangements 19. The Bank requires that project financial statements be audited inaccordance with standards acceptable to the Bank. Inline with other Bank-financed projects inChina, the project will be audited inaccordance with International Standards o n Auditing and the Government Auditing Standards ofthe People's Republic of China (1997 edition). The Audit Service Center of China National Audit Office for Foreign Loans and Assistance Projects has been identified as auditors for the project. 20. The annual audit report of project consolidated financial statements will be due to the Bank within 6 months after the end of each calendar year. Inaddition, for sustainability purposes, the annual audit report o n MOR's financial position and operation results will be due to the Bank within 6 months after the end of each calendar year. Since MOR's financial statements have been submitted to the Bank based on the Bank's requirement for the first and Second National Railway projects, it also could be used for this new project. Audit report requirements are summarized as follows: I Component ISubmitted by 1 Duedate I Project financial statements FCTIC June 30 Financial statements of MOR FCTIC June 30 Disbursement Arrangements 21. The loan will be disbursed using traditional techniques and will not be usingreport-based disbursements, inaccordance with the agreement between the Bank and MOF. Bank loanproceeds will be disbursed against eligible expenditures as inthe following table. Amount Of the Category LoanAllocated Percentageof Expenditures (in$ million) to be financed (1) Civil Works 99.313 40% (2) Goods 79.187 100% (3) Consultants' services 1.000 100% (4) Interest during construction 9.000 100% (5) Unallocated 11SO0 Total 200.000 22. Disbursement methods such as replenishment, direct payment and special commitment are available for the project. The SOE limits will be set up inline with procurement post-review threshold, as follows: (i) all contracts for civil works estimated to cost the equivalent of $5 million or less; (ii) contracts for goods estimated to cost the equivalent o f $300,000 or less; (iii) all consultant contract estimated to cost $100,000 (firm)/$50,000 (individual) or less. 23. One Special Account (SA) will be established inFCTIC. The authorized allocation of S A is proposed to not exceed $20 million, equivalent to about 4 monthsof eligible expenses reimbursable via the special account. The Bank funds would be disbursed to the special account set up at FCTIC, and thence to suppliers and contractors. 28  24. FCTIC will be directly responsible for the management, monitoring, maintenance and reconciliation of the project's SA activities. Supporting documents required for Bank disbursements will be prepared by FCTICbefore sending to the Bank for hrther disbursement processing. The flow ofthe withdrawal application will be as follows: Contractors or Approve by World suppliers FCTIC Bank Action Plan 25. FCTIC has agreed to take the following actions before the start ofproject implementation: 0 Financial management training for all relevant project staff 0 Financial management manual finalized and issued to related financial staff 29  Annex 8: ProcurementArrangements CHINA: Third NationalRailway Project Procurement for the proposed project will be carried out inaccordance with the World Bank's "Guidelines: Procurement under IBRDLoans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated inthe LoanAgreement. The various items under different expenditure categories are described ingeneral below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Ministry of Railways(MOR) and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as requiredto reflect the actual project implementation needs and improvements ininstitutional capacity. Procurementof Works: Loanfunds will be appliedto civil works contracts for constructionof bridges and tunnels estimated to cost about $248 million (30% o f the total value o f civil works). i)InternationalCompetitiveBidding(ICB).Contractsestimatedtocost$15millionequivalentor more will be awarded under ICB procedures. Bidders will be prequalified. Bank's Standard Prequalification Documents and BiddingDocuments will be used. ii)NationalCompetitiveBidding(NCB)).Contractsestimatedtocostlessthan$15million equivalent may be awarded under NCB procedures acceptable to the Bank. Works contracts each estimated to cost less than $2 millionmay be advertised only ina provincial newspaper. The Bank-approved Chinese Model BiddingDocuments for Procurement of Works (dated M a y 1997, prepared by the Ministry o f Finance) will be adopted. Procurementof Goods: Loanfunds will be appliedto goods contracts includingtrack materials, equipment for electrification, communication and signaling systems, environment and operation safety, estimated to cost about $79 million(38% o f the total value o f goods contracts). i)InternationalCompetitiveBidding(ICB).Allcontractsforgoodscosting$300,000equivalentor more will be awarded through ICBprocedures specified inthe Procurement Guidelines. ii)NationalCompetitiveBidding(NCB).Contractsforgoodscostinglessthan$300,000equivalent may be awarded through NCB procedures acceptable to the Bank. Selectionof Consultants:A total of $1 millionworth ofconsultant services will be required for technical assistance. MOR wishes to retain flexibility regarding the use of loan funds under this component. Contracts, each estimated to cost $200,000 equivalent or more, will be awarded on the basis o f Quality- and Cost-Based Selection (QCBS); assignments incircumstances which meet the requirements of paragraph 3.2 of the Consultant Guidelines (Quality-Based Selection -QBS) may be procured inaccordance with the provisions o fparagraphs 3.3 and 3.4 of the Consultant Guidelines; contracts estimated to cost less than $200,000 equivalent, may be awarded o n the basis of Selection Based o n Consultants' Qualifications (CQS); assignments incircumstances which meet the requirements o fparagraph 3.10 o f the Consultant Guidelines for Single-Source Selection, may, with the Bank's prior agreement, be procured inaccordance with the provisions ofparagraph 3.9 through 3.13 of the Consultant Guidelines; procedure o f Selection of Individual Consultants (IC) will be followed for assignments which meet the requirement ofparagraph 5.1 & 5.3 of the Consultant 30  Guidelines. Short lists of consultants for services estimated to cost less than $300,000 equivalent per contract may be composed entirely of national consultants inaccordance with the provisions of paragraph2.7 of the Consultant Guidelines. B. Assessment of the Agency's Capacityto ImplementProcurement Procurement activities will be carried out by MOR'SForeign Capital and Technical Import Center (FCTIC) with assistance by a tendering company and the SSDI. InAugust 2005 the Bank assessed their capacity to implement procurement actions for the project. It reviewed the organizational arrangements and staffing plan for carrying out the procurement. The action plan agreed to address identified weaknesses includes: (a) Waivers for Bank-financed national competitive biddingwill be included inthe loan agreement. (b) Procurement training for all implementing agencies will be organizedbefore the start of project implementation. (c) A qualified procurement agent will be hired and special attention paid to the experience and competence of the key staff assigned to the project. The overall project risk for procurement is average. C. ProcurementPlan MORdeveloped a procurement plan for the whole project implementationperiodwhich provides the basis for the contract packaging and procurement methods. At negotiations the Procurement Plan dated November 28,2006 was discussed and agreed between FCTIC and the Bank and will be available from FCTIC's office at No.10, FuxingRoad, Beijing, China 100844. They will also be available inthe project's database and inthe Bank's external website. The Procurement Plan will be updated inagreement with the Bank annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. D. Frequencyof ProcurementSupervision Inaddition to the prior review supervision to be carriedout from Bank offices, the capacity assessment of the Implementing Agencies has recommended six- to eight-monthly supervision missions to have procurement discussions and carry out post reviews. The sampling ratio for post review will be one out of four contracts. 31  E. ProcurementThresholds ProcurementMethod Threshold PriorReviewThreshold Goods ICB ->US$300,000 All contracts each estimated to cost US$300,000 or more NCB <US$300,000 All contracts are subject to post review I Works ICB - >US$15,000,000 IAllcontracts each estimated to cost US$5,000,000 or more NCB Consulting QCBS - >us$200,000 All contracts each estimated to cost US$lOO,OOO services or more QBS Consultant Guidelines. CQS ~us$200,000 sss Assignments meeting All contracts regardless oftheir values the requirements of Paragraphs 3.10-3-12 ofthe Consultant Guidelines IC Assignments meeting All assignments each estimated to cost the requirements of US$50,000 or more per contract Paragraphs. 5.1 and 5.3 of the Consultant Guidelines 32  0 0 2 - 0 0 m c1 s * VI  T TT T 2$2 E L c - 2 - c d m 3 9 m m g  $2 E:: W w m 4 3 9 3 d  3 v, - m 0 B z 0 m P  T e > - 0 s 0 m  Annex 9: EconomicandFinancialAnalysis CHINA: Third NationalRailway Project EconomicAnalysis of Liu-ZhanLineUpgrading A. Introduction This annex presents the results o f the economic evaluation of the double-tracking and realignment o f the railway line between Liupanshui and Zhanyi (the Liu-Zhan line). This is expected to yield a net present value at 12% of RME3 7 billion and to achieve an economic rate of return of 17percent. B. PresentTrafficand Capacity The Liu-Zhan line forms part of the major east-west railway artery linking Kunmingand south- western China with the eastern coastal region centered inShanghai. It forms one o f the so-called `eight horizontals' and `eight verticals' planned as the backbone o f the China railway network and which are the core of the railway construction program inthe Eleventh Five-Year Plan. The Shanghai-Kunming corridor starts from Shanghai, runs via Hangzhou, Nanchang, Zhuzhou, Huaihua, and Guiyang, and ends at Kunming. It connects regions immediately to the south of the Yangtze River with central and western regions, and at the same time connects east China, central and southern China with southwest China. It is a very busy railway line. The corridor is 2,627 kmlong. It is already double-tracked all the way from Shanghai to Liupanshui, and between Zhanyi and Kunminga second track is nearing completion. The rest of the line is electrified except for the Zhuzhou-Guiyang section. It consists of various lines that were constructed indifferent periods with different technical criteria. Generally speaking, the commercial speed is slow and capacity is a major constraint. In2002, the maximum traffic density on the Shanghai- Hangzhou line was 18.7 milliontons of freight and 16.6millionpersons respectively; for Hangzhou- Zhuzhou line, they were 38.0 milliontons and 20.3 million persons respectively; for the Zhuzhou- Guiyang and Guiyang-Kunming lines, they were 26.4 milliontons and 10.7 million persons respectively. At present, capacity utilization for many sections has reached 90%, with some even up to 100%. The two ends of the corridor can economically complement each other to some extent. The eastern part is located inan active and well developed area, but with relatively few natural resources, while the western part is economically under-developed but has abundant mineral, human and tourism resources. A s the national economy develops and the western development strategy is implemented, bothfreight andpassenger traffic along the corridor are expected to increase. The forecast density on the section in2010 is 41 milliontons o f freight and 10millionpassengers; and in2020,61 million tons and 16 millionpassengers, well beyond the current capacity. The overall objective for this corridor is that by 2020 an electrified line will be built, of which the Shanghai-Zhuzhou section will be four-tracked, with freight and passenger traffic separated; and the Zhuzhou-Kunming section will be double-tracked with mixed traffic. Already by 2007 the double tracking for Zhuzhou-Liupanshui section will be completed; Shanghai-Hangzhou and Hangzhou- Zhuzhou sections will be electrified; and Liupanshui-Zhanyi and Kunming-Zhanyi will be double- tracked. 38  C. Traffic Forecasts The Liu-Zhan line currently handles mainly freight movements. Measured interms o f convertedton- kms (where one passenger-km is considered equal to one ton-km), about 85% of the traffic consists of freight. However, inthe longer term passenger traffic is expected to grow faster; by 2025 passengers will represent over 20% of the traffic (Table 9.1). Freight Passengers Year Pairs of trains Tons carried Pairs of trains Passengers (Per day)(1) (million (Per day) carried tondyear) (milliodyear) 2004 (actual) 21 (0) 28 10 5.4 2010 31 (3) 41 18 10 2020 50 (10) 61 29 16 2030 60 (12) 73 37 20 Growth rate: 2004- -- 10 6.6% -- 11.0% Growth rate: 2010- -- 20 4.1% __ 4.7% Growth rate: 2020- -- 30 1.8% -- 2.3% The faster growth inpassenger transport over the Liu-Zhan line is consistent with recent national trends. After more than two decades o f intermittent gain and decline, the volume o f inter-city passenger traffic being handled by CR has grown substantially. Between 1996 and 2004, railway passenger traffic (as measured inpassenger-km) has increased at an average annual compound rate o f nearly 6.2%. This remains slightly slower than GDP and growth inpassenger travel by air and road (thoughfaster than almost every other railway inthe world). As a result, the railway share o ftotal traffic (all modes), now about 36%, is expected to decline slowly. Inorder to compete withbothair transportandthe expressway system, MORplansto significantly reduce travel times by raising maximum train speeds over the core network, including the Liu-Zhan line. The maximum speed over the realigned Liu-Zhanroute will be 160km/hand the travel time over the section should be reduced from 4 hours to 125 minutes, making the line more attractive to passengers, who will soon also have the option o f using the expressway from Guiyang to Kunming that is now nearing completion. Over time, the combined impact of greater volumes and faster speeds on the capacity of the Liu-Zhan line will be substantial. The current capacity of the line is about 39 train pairs per day but this will increase four-fold to 165 train-pairs/day o n completion of the proposed realignment and duplication. Set against this is the anticipated demand considered here interms of factored train pairs - a measure that provides a roughindicationof the impact o n capacity of different types ofpassenger and freight operations. The demandcapacity implications of going forward with the project compared with a "without project" scenario canbe quantified. Using 90percent as the pointwhen traffic is turned away due to lack of track capacity, inthe "without project" case capacity will be reached in2005. In the "with project" scenario, the line will be able to handle the projected demand for at least the next twenty-five years and probably for some years longer, ifCR increases net tons per train by taking advantage of the higher axle loads possible by then. 39  D. ProjectInvestment The estimated cost of the project, excluding price contingencies, is RMB 9.0 billionat 2005 prices, ofwhich RMB 1.5 billion (17%) is inforeign exchange. For the purposes of economic analysis, all inputcosts are assumedto be adjusted to market prices andno shadow price factors have beenused. N e w rolling stock needed to handle the extra traffic has been treated as an equivalent annual cost and included inthe operating costs for the "with project" case. Similarly no specific cost has been included for any additional investment required to provide additional traction power supplies, as this is included within the price paid by MOR for traction electricity. E. Benefits The benefits o f double-tracking and realigning the Liu-Zhan line fall into three main categories: 0 net operating cost savings achieved by MOR from the faster travel times, shorter distance and higher axle-load. These include bothrecurrent costs and savings inthe use o f capital equipment user benefits associated with the savings intravel time 0 benefits to the additional traffic which can be conveyed by rail inthe `with-project' case. Operatingcost savings.2 The doublingofthe track will enable trains to move without the frequent stops and delays for crossing that are currently experienced. The improved alignment will also cut operating costs by significantly reducing the distance covered as well as eliminating much of the curvature. Against this there will be increased infrastructure maintenance costs through the increase intrack-km. The ability to load to higher axle-loads and to double-stack containers will also, over time, generate operating cost savings for freight. By the end of the evaluation period, it is expected that 50% of freight traffic will be carried at the higher axle-loads, at a 5 % saving inunit transport costs. Althoughthis savingwill be experienced for the wholejourney undertaken, for evaluation purposes only benefits accruing over the 220 kmproject section have been included. Time savings. The upgradingwill save express passengers about two hours. This has been valued using the weighted average income per head o f the provinces the passengers are traveling to and from. Business and non-business travelers are valued at 100%and 30% ofthis average income (based on estimates derived for countries at a similar stage o f development) and the businesshon- business mix was assumed at 30:70. This gave an average value o f time savings o f RME3 4.75 per hour (59 U S cents), increased at 7 percent annually to 2015 and thereafter at 5 per cent, inline with the expected growth inaverage income per head. Benefitsto additionaltraffic. The increase incapacity will allow a significant volume ofboth freight and passenger traffic to be carried by rail which would otherwise have to go by alternative rail routes, by road or by air (inthe case o fpassengers) or would not have traveled at all. An estimated 70% of the additional traffic, taken as the shorter-distance traffic on the corridor, is assumed to travel byroad inthe absence ofthe line and is expected to gainthe full benefit o fthe difference inroad and Data values and calculations are inthe Project File. 40  rail costs along the ~orridor.~ remaining 30% o f the additional traffic, which has been assumed The would not travel inthe absence of the additional rail capacity, has been allowed benefits calculated at 50% of the benefits to the base additional traffic, as providedby the `rule-of-a half. As with the unit cost savings for freight from higher axle-loads, these benefits could be calculated over the whole length of the journey from origin to destination, as this section is the limiting section along the corridor. However, to be conservative, they are calculated for the project section only. Onthe above basis, the distribution ofbenefits is as shown inTable 9.2 Table9.2 Analysis of ProjectBenefits (RMBbillion, 2005 prices, discounted at 12%to 2010) Rail Diverted Share o f operating Time suppressed Total benefits costs savings traffic Freight 2.4 10.8 13.2 77% Passenger 0.4 1.a 1.a 3.9 23% Total benefits 2.8 1.a 12.6 17.2 100% Construction -10.7 I NPV 6.5 I I I I ~~ Share of all benefits I 16% I 11%I 73% I 100% I E. EconomicRateof Returnand SensitivityAnalysis The benefits are calculated for the 25-year period following project completion, from 2011to 2035 and the estimated EIRR derived andNPV calculated (using a discount rate o f 12percent). The estimated NPV is about RMB 6.5 billionin2005 prices with an EIRRof 17percent. This is slightly higher than the design institute's estimate because o f minor differences in methodology and some parameters. The sensitivity o f these results was tested against changes insix base case assumptions: includingrail operating cost savings only includingrail operating cost savings and passenger time savings only halving the benefits attributed to additional traffic halving traffic growth rates from 2010 onwards reducing the 2010 traffic levels to 75% o f those forecast an increase ininvestment costs of 30 percent; This traffic is also travelling beyondthe corridor but the additional benefits o f rail compared to road for the remainder o f their journey are conservatively assumed to be balanced by the benefits o f door-to-door transport compared to the accesslegress and quality benefits o f road transport. 41  The results of these tests are given inTable 9.3. Table 9.3 Sensitivity of ProjectEvaluation Financial Analysis of the Liu-Zhan Line A. Background MORwill be responsible for implementing the project and will mobilize all the financing and repay all borrowed funds. The financial analysis focuses o n two subjects: first the financial soundness of the project itself, and second, MOR'Sfinancial viability and debt servicing capacity. MORis the sole owner ofthe Liu-Zhanline. The project will be financed using internal funds and loans obtained from domestic banks (China Construction Bank) and from the World Bank, amounting to RMB 9.6 billion intotal, including 10% contingency. Ofthis about RMB 4.8 billion (50 percent) represents equity f h d s from MOR, about RMB3.2 billion (33 percent) will be obtained from CDB, and the remaining RMI3 1.6billion (17 percent) will be funded by the proposed Bank loan. The Chengdu and Kunmingregional railway administrations (RAs) will be responsible for operating the sections of the line intheir respective geographic jurisdictions. Revenues from operations will be forwarded to MORby the RAs; and MOR, inturn, will compensate the R A s for costs incurred, allocate a profit or loss to the R A s throughthe railway settlement system, and pay interest and principal o n bothdomestic and foreign loans. B. CashInflows The largest share of cash inflows is attributable to the incremental revenue obtained. Following the upgrade, unit revenues are assumed at RMB 0.083 per ton-km (for freight) and RMB 0.165 per passenger-km, compared to the current level of RMB 0.13 (1.6 US cents) per pass-km. Incremental revenue from other sources (parcels etc) is estimated at 5 percent o f the sum of incremental freight and passenger revenues. This will be partially offset by the associated operating costs, although there will be operating cost savings for the base traffic. C. Cash Oufflows The initial category of cash outflows is the project investment outlays at RMB 9.0 billion, with a credit of RMB 4.4 billionfor the residual value o f the investment at the end of the evaluationperiod. Recurrent cash outflows cover working capital, net non-operating costs and miscellaneous taxes. 42  D. FinancialRate of Return and Sensitivity Analyses Net cash flows from the project section inisolationare calculated for 2006-2035 to derive the financialNPV o f RMB -1.4 billion(usinga cost o fcapital o f 6 percent, similar to MOR's current borrowing rate) and an FIRRo f 5 percent. However, this project will also enable full advantageto betaken ofthe surplus capacity that exists on the sections on either side and, when this is taken into account, the FIRRincreasesto 10per cent and the financialNPV to RMB 6.9 billion. E. MOR'sFinancialViability Table 9.4 shows MOR cashflow over the last five years to 2004. The average total sources o f funds were approximately RMB 108billion($13 billion), providedby internally generatedfunds o f RMB 63 billion ($7.8 billion) contributing 58 percent, with loans and other sources making up the remaining42 percent. Total applications averagedRMB 102billionover the period, consisting of capital investment(RMB 60 billion or 59 percent), equipment replacement (RMB 10billionor 10%) and debt service (RMB 31 billion or 30%). The self-financing ratio, ameasureofMOR'S ability to fund its capital needs, hasreducedover the period, falling from 0.53 in2000 to 0.37 in2004. The debt service ratio, indicatingMOR's capacity to cover borrowings from domestic sources, has declined but remained satisfactory, ranging from 2.2 in2000 to 1.7 in2004. InJanuary 2004, MOR's "Mid-and Long-Range Plan" for railwaydevelopment received "in principle" approval bythe State Council. This foresees capital expenditures over a 16-year period (2004-2020) o fmore than RMB 1.6 trillion (US$200 billion) or an annual average of about RMB 100billion(US$ 13 billion), about 50 percent more than inrecent years. The options available to MORto finance this programwere analyzedinarecent World Bank policy note (June 2005). Internally generatedfunds. IfMOR i s to derivemore inthe way ofbottom-line profitability, the railways will have to record a significant reduction intheir operating ratio (operating expensesdividedby operating revenues). Excluding the Construction Surcharge revenues (thusyieldingabetter measureoffinancialefficiencies), the operating ratio hasremained virtually unchanged at 0.90 over the last five years. Obviously, the improvement will require more freight andpassengerrevenue per traffic unit, or a less rapid increaseinunit operating expenses, or a combination o fthe two. Borrowed funds. MOR could increaseits level o f local borrowings ifdomestic development banks remainwilling to lend. However, any significant increaseininterest costs will work at cross purposeswith improvements inthe operating ratio indicated above. Private sources. Ultimately, MOR may find it necessaryto attract more inthe way o fprivate capital. Conceptually, this approach could take a number o fdifferent forms - investmentin specialized rolling stock, operation o fdedicated commodity, container, or passengertrains, evenparticularized equity opportunities. Resort to the private capital markets has a precedent inthe Guangshen[Guangzhou to Shenzhen] Railway Corporation's successfullistingonboth the Hong KongandNew York stock exchanges. 43  While there i s little doubt regarding MOR'Sfinancial viability, it i s apparent that meeting the needs ofthe Mid- and Long-Term Planposes a significant challenge. Table 9-4: MOR Sources and ApplicationsStatement,1998-2004(RMBbillions) 2000 2001 2002 2003 2004 Five-year average 1 % Sources of funds Profit after tax 5.1 3.1 3.0 1.6 3.8 3.3 3% Construction h n d after tax 37.2 38.8 38.2 39.7 43.2 39.4 36% Depreciation 16.0 19.9 22.3 21.4 23.6 20.6 19% Loans 28.9 26.0 29.9 41.9 37.6 32.9 30% Others 10.2 11.9 11.4 15.3 12.1 12.2 11% Total 97.5 99.7 104.7 119.8 120.2 108.4 100% Applications of funds Capital investment 54.3 60.5 63.2 57.2 64.5 59.9 59% Debt service 26.0 22.4 30.2 34.6 41.6 31.0 30% Transfer to government 1.2 1.2 1.2 1.1 1.2 1.2 I% Equipmentreplacement 6.7 8.5 10.7 10.2 14.4 10.1 10% Total 88.2 92.6 105.3 103.1 121.7 102.2 100% Net cash flow 9.3 7.1 -0.6 16.8 -1.5 6.2 Self-financing ratio 0.53 0.57 0.45 0.42 0.37 0.46 Debt service ratio 2.2 2.8 2.1 1.8 1.7 2.0 44  Annex 10: SafeguardPolicyIssues CHINA: Third NationalRailwayProject EnvironmentalAssessment A. ProjectBackground The proposed Liupanshui-Zhanyi railway section ispart o fthe line from Shanghaito Kunming,one o fthe eight east-westmain lines that together with eight north-south main lines make upthe strategic network o f China's railway system. The engineering feasibility study for its upgrading was completed inJune 2005. Inparallel, MORhired the SSDI to prepare the environmental assessment. The first draft was delivered inJune 2005 andcommentedonbythe Bank; the final version was then submittedinSeptember 2005. The assessment was made inaccordancewith the requirement for a Category A project as definedinOP4.01, and found acceptable to the Bank. The Environmental ImpactAssessment (EIA)passedthe technical review byMOR on August 17, 2005 and was sent to SEPA for final approval. B. Basisof the EnvironmentalAssessment Regulatory, policy and administrative requirements for environmental assessments o f development projects inChina were followed during the preparation and evaluation o f the EA.Major laws and regulations applied to the EA are as follows: (1) Environmental Protection Law o fthe P.R. China; (2) Environmental ImpactAssessment Law o fthe P.R. China (October 2002); (3) Law o f Water and Soil Conservation (June 1996); (4) Law o fPrevention and Control o fPollution From Environmental Noise (October 1996); (5) Law o fPrevention and Control o fAir Pollution (August2000); (6) Law o f Prevention and Control o fWater Pollution(May 1996); (7) Law o f Prevention and Control o f Environmental Pollutionby Solid Waste (October 1995); (8) State Council OrderNo. 253; Ordinance o fEnvironmental Management for the Construction Projects (November 1998); (9) Circulation on StrengtheningEnvironmental Impact Assessments for Construction Projects ReceivingInternational Financing (June 1993); (10) Technical Guidelinesfor Environmental Impact Assessment. O f the ten World Bank SafeguardPolicies, Environmental Assessment (OP/BP/GP4.0 l), Natural Habitats (OP/BP4.04), and InvoluntaryResettlement (OP/BP 4.12) are applied inthe EA. C. ProjectDescription The proposedproject is the double-tracking and realignment o fthe existing railway from Liupanshui to Zhanyi, a section o fthe Guiyang-Kunming line. A detailed description is given inAnnex 4. A total o f 20,380 mu(ca. 1,360 ha) o f landwill be occupied, including 10,140 mu(678 ha) newly acquired. 14 existing railway stations will be closed down and 4 new stations will bebuilt. D. BaselineEnvironment Theproject areais located inthe middleofYunguiPlateau, Southwest ofChina. Itbelongs to a sub- tropical plateau monsoon climate with mild humidsummers and cold dry winters. The area i s 1,400 - 2,400m above sea level. 45  Land to be acquired for the project is mainly farmland, wasteland and forest land, which features agricultural ecological environment. The existing line traverses a provincial nature reserve/ tourism area, the Zhujiangyuan [Pearl River Source] Nature Reserve, established in2000. The Reserve includes areas adjoining the right of way o f the existing railway for the section K332+500 -K465, o f which two sections, Songshaoguan - Shuzhichang (8 km) and Songlin - Hunshuitang (6 km), are included inthe Reserve's Experimental Zone. The biodiversity of the Reserve has been surveyed by Yunnan Provincial Forestry Institute. The main function of the Reserve is water and soil conservation for the source of the Pearl River. A recent field survey and investigation along the present railway line shows that 48 towns, villages, schools and hospitals are affected by noise. Baseline noise monitoring was conducted for all these sensitive sites. It was foundthat daytime noise levels were inthe range 50 - 70 dB and nighttime noise was between 45 and 63 dB, which is not incompliance with the applicable standard for some sites. This is mainly due to operation of the railway, nearby highways and human activities along the line. Vibration was also monitored and the results are well within the relevant standard. The mainrivers near or crossed by the line include the Xiangshui and Nanpan; their water quality is fairly poor due to the region's economic development. Routine monitoring data of waste water discharge were collected from three rail depots and all stations, which indicated overall compliance, except at Liupanshui South depot, where the wastewater treatment facility is not properly operated. Current air quality inregions and cities along the line was assessed based on monitoring data from regional environmental monitoring centers. It was concluded that air quality along the line can basically satisfy the Level I1standards o f ambient air quality. The main pollutant is TSP. According to the field survey and consultation with cultural property departments, there are no cultural relics within the area of the project. The cities of Liupanshui (GuizhouProvince) and Qujing(Yunnan Province), throughwhich the line passes, have a total population o f 8.59 million. The project will directly affect the above-mentioned 21villages and 27 schools because of their proximity to the line. E. EnvironmentalImpacts Ofthe land to be occupied, 50.4% is paddy fields and dry farm land, 27.2% is barren land, and 15.3% is woodland and economic forest land. The basic farmland occupied by the project accounts for only 0.2% ofthe total basic farmland ofthe cities along the line. The project will do little harm to the area's agricultural production. About 177,000 trees inthe areas will be cut downand removed, most ofwhich are plantedtrees. The loss o f vegetation cover will be of short duration since extensive re-vegetation is planned for borrow and disposal areas, sub-grade slopes and land occupied temporarily, to restore the ecological loss. The proposed 50 new tunnels (78 km), 100bridges (33.9 km) and 488 underpasses will provide adequately frequent passage from one side of the line to the other for local animals, such as pangolin, snakes, and frogs. The newly built second track will basically follow the existing line, and will traverse the experimental zone of Zhujiangyuan Nature Reserve for about 20 km, causing soil erosion and loss of surface vegetation. The railway runs no closer than 2.5 kmto the Huashan Reservoir (the main water resource conservation area for the Pearl River), thus would have negligible impact on it. Protected 46  animals are not present inthe experimental zone, due to humanactivities along the existing railway line. Onthe other hand, more than half (54% to be exact) of the 20 km section through the Reserve is intunnels and on bridges, so animals will have ample passages for migration. Duringrailway construction, 2.4 millionm3ofsoilwill be borrowedand 17.8millionm3ofspoils will be generated, which will have a potential impact ifnot managedproperly. The construction of the tunnels and bridges will also have an impact on groundwater and surface water. Duringthe constructionphase noisewill come mainly fromthe construction equipment. According to modelingresults, once the new line is operating most o fthe sensitive sites will not meet the relevant noise standard, unless mitigatingmeasures are taken (see below). Impacts o n the water environment duringthe construction phase include discharge of sanitary sewage from construction camps, surface run-offfrom the camps, storage areas, and bridge construction. Duringthe operationphase, wastewater discharge fromdepots and stations will be reduced by 155,000 tons per year and improved incompliance with relevant standards. The main source of air pollutionduring the constructionphase will be construction dust. New boilers to be installed will adopt appropriate technologies to mitigate pollutiondischarge to ensure compliance with relevant standards. The operation of the electric locomotives will have no negative impacts o n air quality. Duringthe operationperiod, domestic solid waste and trainwaste will be collected and transported to designated locations for disposal. Electromagnetic interference, generated from sparks when a locomotive's pantograph loses contact with the overhead catenary, could have an impact on TV signal reception. However, according to site investigations towns and villages along the line use closed-circuit cable television systems (through a nation-wide "Village Linkup" campaign of China Broadcasting and Television Ministry) or satellite receivers for TV, on which electromagnetic interference has little impact. The project's social impact will include disturbance o f communities, safety issues, and public health concerns o f the temporary population (construction laborers) interms of hepatitis and HIV/AIDS etc. Off-setting the above adverse impacts, the project will bringmore convenient transportation for the areas along the railway, promote the movement o f goods and passengers, as well as information, and benefit the circulation o f the local industrial and agricultural products to the outside world. The construction and operationperiods o f the Project will provide many work opportunities, which will increase the income of the residents and the local farmers along the line. More convenient transportation will bringtourists to local areas. The improvement of the infrastructure conditions will help attract foreign investment. All ofthese will help improve the local economy along the railway. F. MitigationMeasures The EIA report developed a series ofmeasures to avoid, minimize, mitigate or otherwise compensate the negative impacts from the Project. The main measures are summarized below. 47  DesignPhase The railway alignment was carefully selected to avoid occupying the sensitive ecosystems and minimize requisition ofbasic farmland. For the soil borrow and spoil disposal sites a landscaping and reclamationplan has been proposed. Local plants and trees will be carefully selected for the landscaping and re-vegetation. Extensive consultation has been held with Zhujiangyuan Nature Reserve authorities, and an expert institute was involved for the environmental impact assessment, analysis of alignment alternatives and development of mitigationmeasures. The entire line will adopt continuous welded rail and reinforced concrete cross-ties (sleepers), to reduce noise and vibration. Mitigation measures to minimize noise were incorporated into the design for 45 sensitive receptors at which the noise level is predicted to exceed the applicable standards. These measures include noise barriers, double-glaze windows, tree-planting and resettlement. Septic tanks have been designed for new stations to treat domestic sewage. Wastewater treatment facilities at three depots, especially Liupanshui South, will be renovated and properly maintained to meet the discharge standard. Based o n feedback from public consultation, a total o f 62 passageways and 488 underpasses have been designed, to reduce the social severance impact on various towns, villages and residential areas, taking into account the requirements of various agricultural vehicles. Construction Period The land that is temporarily used will be restored promptly following its use. The locations o f the borrow sites and soil disposal areas havebeen and will be carefully chosen to minimize the occupation of farmland, cultivated land and woodlands. Concrete and stone pitching will be used for highbackfillingand deep cutting of the slopes. The borrow sites will be restored with extensive landscaping, tree planting and reclamation. The spoil disposal areas will adopt retaining walls and drainage systems as well as re-vegetation measures. A comprehensive soil erosion preventiodcontrolplan has been developed. Where tunnels are to be built a careful survey and forecast of groundwater has been made, and proper engineering measures will be adopted to minimize the disturbance of the groundwater system and thus minimize the impact on the mountainecological environment and living patterns of villages on the mountain. The groundwater situation for these villages will be monitored duringboththe construction and operationperiods, and a drinkingwater supply back-up plan has been developed in case of emergency. For construction activities within and close to the Zhujiangyuan Nature Reserve, no borrow and spoil disposal will be allowed. Construction sites and camps will be strictly managed to minimize their environmental impact. No vehicle/equipment repair and maintenance will be allowed. Environmental educatiodtraining will be conducted for supervision engineers and contractors/workers on ecological environmental protection, biodiversity conservation and the identification of protectedplants and animals etc. Loud construction equipment will be kept away from the residential areas, where quieter equipment will be used. The mainconstruction activities will be strictly controlled duringdaytime. Incase of 48  night-timeconstruction near sensitive sites, localEPBs' approval will beneededandprior notice to public should beprovided. Inorder tominimizeimpactonsurfacewater, duringtheconstructionperiodconstructionmaterial storage sites will bekept away from surface water bodies and will beproperly managed (e.g. covered). Construction wastewater will be treated insettling tanks before beingdischarged. The cofferdam method will be adopted duringconstruction o fthe piers for major bridges. The construction o friver crossing structures will be timed for the low-water season whenever possible. Domestic wastewater from the construction camps will be treated inseptic tanks. Solid waste from the camps will be collected and transported to municipal landfill sites for proper disposal. Watering will be carried out to suppress construction dust. The frequency o fwatering will be increased indry or blusteryweather. Covering canvaswill be usedfor the transportation o fbulk materials, and wheels will be washed before leaving the construction sites. Before construction begins, the contractors will be notified o fthe procedure for treating and reporting on culturalproperty and historical sites that may be encountered duringthe construction. The contractors will be requiredto stop their construction immediately and wait for the investigation and appraisal byprofessional archaeologists. Construction will not be allowed to resume untilapproval has beenobtained from the department incharge o f cultural property. Coordination with local governments will be maintained to minimize traffic impact on existing roads. Clear signagewill be installed for traffic management. Routes for the transportation o f construction materials will be selectedto avoidpassing through residential areas. Construction workers will receive education on basic knowledge o f disease control, especially relevant infectious diseases. Necessary self-protection devices, such as safety helmets, earplugs and other safety protectiondevices, will be provided to workers. Construction sites and other dangerous place will be fenced to preventaccess by the public. Construction bidsthat fail to show environmental protection consciousness or propose a viable environmental management systemwill be rejected as unresponsive. The Environmental Management Planwill be incorporated into the biddingdocuments so that its implementation will be an obligationon the contractors. Relevant environmental protection training on environment policies and laws, possible environmental impacts, mitigationmeasures, routine monitoring, reporting systems, emergency treatment, etc., will be conducted for all accepted contractors and construction supervision engineersbefore construction starts. OperationPeriod The operationunitswill enhancethe maintenance, service and administration ofvarious protection works. Fieldsupervision on the ecological environment along the line will be enhancedand the potential negative geological hazards will be identified ina timelymanner for mitigation. The new line will be klly fenced duringthe operation stage, to ensure the safety o fcommunities along the railway. The project will leave abandonedrailway subgrade totaling 11kmand 14closed stations (ca. 5,3 15 muofland). These will beusedfor reclamation, ruralroads and/or other purposesaccording to local 49  development planning. Dismantlement o f stations will follow proper procedures and hazardous waste (e.g. asbestos) will be treated inaccordancewith relevant regulations and guidelines. All railway departmentswill strengthenmanagementofwastewater treatment facilities to make sure the discharge i s incompliance. G. AlternativesAnalysis Though the double-track upgrade i s mainly following the corridor o f the existing line, there are sectionswhere alternative alignments have been carefully evaluated with integrated consideration o f environment, social and engineeringaspects. Alternative selection was conducted at two stages: pre- feasibility and feasibility. During the feasibility study stage, various options were considered, including: - Meihuashan-Qiewu Section: Two options were considered for straightening Section K268+450 -K292+685: alignment - with new station at Xinying, and alignment with a new station at Banuokuai. Qiewu-Zhanyi Section Alternative options were carefully studiedfor four major sections, including: (a) Fenghuangshanstation section: two options; (b) Xuanwei Station section: three options; (c) Gelutunnel: three options; (d) Yanfang - HeilaowanSection: two options. The final alignment hasbeenchosenbasedon a series o ftechnical, environmental and social criteria, i.e. avoidance o f environmentally sensitive areas and culturalproperties, less social interference, shorter length, less land occupation, and compatibility with localmaster planning. H. EnvironmentalManagementPlan A stand-aloneEnvironmental Management Planhasbeendevelopedwhich specifies policies, regulations and applicable environmental standards, environmental management system, mitigation measuresand environmental monitoring programs for the construction and operation phases. The EMPwill be implementedby contractors and supervised bythe Project Management Offices ofthe two railway administrations (Kunming and Chengdu) duringconstruction andbythe Environmental Departments o fthese administrations duringoperation. An independent environmental supervision consultant will be hiredby MOR to supervise andmonitor implementation o fthe EM?. The EMP includes environmental monitoringprograms for boththe construction andoperation phases. The monitoring content includes soil and water loss, noise, dust, and degradation o fwater quality, river sedimentation, solid waste treatment and electromagnetic radiation. Duringthe construction phase, environmental monitoring will be conducted intwo approaches: daily and routine monitoring consisting o fmainly visual observations and limitedequipment measurements, and periodic monitoring by accreditedprofessionals usingstandardmethods. Monitoringreports will be compiled once every six months, summarizing the findings o fthe monitoring. The reports will be submitted to the project proponents as well as relevant organizations and the World Bank. During the operation phase, monitoring will beconducted for soil erosion, noise, water and electro-magnetic interference. To ensure the project's environmental performance, the EMP has developed training programs for personnel at the various management and supervision organizations involved inthe project. The 50  environmental training for contractors and construction supervisors will be held before the start o f construction. The training will cover basic knowledge o f environmental protection and pollution control, the results o f the EIA and requirements o f the EMP, the methodology for site environmental management and monitoring, and reporting requirements. The training for the various railway bureaus (groups), regional railway administrations, management sections o f the various stations and railway sections as well as the environmental organizations will cover environmental management, management organization, applicable environmental standards, mitigationmeasures, environmental policies and pollutioncontrol technologies. I.PublicConsultationandInformationDisclosure Public consultations were carried out duringthe EA for people affected by the project, local governments and relevant experts. Various techniques were used inpublic consultation, including survey questionnaires, public meetings, and interviews with affected groups and individuals as well as small discussion groups. Intotal, 1,825 persons were involved inthe public consultation process. The primary concerns o f the public included noise, traffic safety, land acquisition and compensation, soil erosion, and environmental education o f laborers. The EA team respondedto the public concerns by ensuring that adequate passageways were includedfor the convenience o f farm vehicles and to mitigate impacts on daily farm work and communication; design o f noise barriers and sound insulation windows to minimize the impacts o f noise from the railway for 45 sites with a total budget allocation o f about RMB 30 million; full fencing of the railway line for traffic safety; and other measures developed inthe EMP. Incompliance withEIAprocess requirements ofthe Chinese government andthe World Bank, the completed EA documents were disclosed inthe public places o f the two cities along the alignment the week o f September 24,2005, and summaries o fthe EIA and EMPwere disclosed in 6 counties andvillages identifiedas environmentally sensitive sites inthe EIA. SocialAspects A. Introduction The Bank asked MOR to prepare a full resettlement action plan (RAP) to reflect the likely magnitude and complexity o f expected resettlement. An experienced entity, the Southwest Jiaotong University, together with the SSDI, conducted the socio-economic survey and preparedthe RAP. The first draft RAPwas completed inJuly 2005, andthe final version was adopted on September 9,2005. Its preparation was fully consistent with the Bank's requirements inOP 4.12 and relevant laws and regulations inChina. The RAP covers: (a) a socio-economic survey inthe project area to analyze the project impacts, understand the socio-economic background inthe project area as the basis for resettlement planning, and consult the affected people for their feedback on the resettlement planning; (b) a supplementary socio-economic survey among ethnic minoritypeople to explore essential information on the impacts that the proposedproject would have on them; (c) a detailed inventory o f various categories o f impacts and a census o f affected people; (d) resettlement policies, compensation rates, resettlement schemes andbudget; 51  (e) resettlement management arrangements; and (f) full consultationwith the affected communities. The final draft RAP was placed inlocal libraries and its availability was announced inlocal newspapers by September 28,2005. B. Socio-economic Surveys The initial socio-economic survey was conducted through deskwork to analyze government statistics and academic research and sample surveys covering interviews, group discussion, and questionnaires. The project area spans the border of Yunnan and Guizhouprovinces, and includes parts of Liupanshui, Qujingand Bijie cities. Most of the area is mountainous with rich natural resources; the local economy relies mainly on agriculture and primary products. Farmland takes up 20 to 37 percent of the total land. The GDP per head is inthe range RMB 3,840-6,030 (US$470- 740) and farmers' annual net income is typically RMl3 1,500-2,800 ($190-350); more than 60 per cent comes from non-farm activities. The survey foundthat there are some minoritypeople inthe project area and the abandonment of some railway facilities would adversely affect local inhabitants, especially inremote villages. Consequently, at the Bank's request, a consultant from the Central University of Nationalities conducted a supplementary socio-economic survey. It concluded that: (a) minoritypeoples account for some 20 percent ofthe regional population inthe project area; (b) the minoritypeople share most ofthe same socio-economic characteristics as other residents; (c) the potential negative impacts affect individual members of the minoritynationalities but do not affect minoritynationality communities as such. These impacts can be mitigated by implementing the RAP. Specifically, the RAPprovides compensation and other mitigationmeasures for individual members ofminority nationalities who will lose land. The Plan will also provide measures to restore access for (minority and non-minority)people inWeining County, where realignment of the railway will lead to discontinued service and closure of local stations. C. ResettlementImpacts The feasibility study considered various alternatives with a view to minimizing resettlement. However, on the basis o f the preliminary alignment choice, the project is expected to affect 85 villages in23 townships o f 6 counties inYunnan and Guizhou provinces. About 10,140 muof land is to be acquired, including 8,640 mu o f cultivated land and about 1,000 mu of forestland; 8,870 mu o f land will be leased; and about 3,530 households and 14,100 persons as well as 49 enterprises and 20 shops will needto relocate. The physical indicators came from detailed investigation at railway stations, and sampled investigation along the railway line extrapolated by reference to maps. Accordingly these estimates are subject to change as the project design proceeds, so a contingency in the resettlement budget is planned to address investment increase due to variation inthe resettlement impacts. The current detailed physical indicators are shown inTable 10.1, Linear projects such as railway lines typically are subject to some variation infinal alignment during implementation. This entails some variation inthe scope of impacts and resettlement. Accordingly, inthe event that they are needed, additional resettlement investigations will be conductedand a supplementary detailed RAP will be conducted. No construction works o n the line will be allowed to start until an appropriate detailed investigation has been carried out and a resettlement plan, satisfactory to the Bank, has been worked out. 52  Table 10.1: Affected Structures, Fixed Assets and Population Item Unit Liupanshui Bijie Qujing Total General Affected Cities/Counties/Districts Units 2 1 2 5 AffectedTownships Units 8 3 12 23 AffectedVillages Units 15 15 55 85 A. Resettlement Al. Householdsto be relocated No. 1,197 32 2,297 3,526 A2. Population to berelocated People 4,789 126 9,187 14,102 A3. Houses to be demolished OOOm2 180 5 344 529 B. Land Mu 2,847 917 6373 10,137 B1. Plow land Mu 1,286 402 2,926 4,614 B2. Gardenland(orchards) Mu 569 184 1,275 2,027 B3. Forest Mu 281 91 625 997 B4. Landunderbuildings Mu 407 135 894 1,436 B5.Waste land Mu 305 106 653 1.063 D. ResettlementPolicies and CompensationRates Policies applicable to resettlement planning include Chinese laws and regulations as well as the Bank's OP 4.12. The following groundrules were followed inthe design of the project and preparation of the resettlement action plan: Optimize project design to minimize the extent of landacquisition and resettlement. Survey socio-economic baseline conditions, especially those of persons affected by the project. Entitle all project-affected persons, including those who lack household registrationor other documents, such as business documents and legal documents, to make sure all will be better off or at least maintaintheir livelihoods. Determine compensation for land, houses or other properties at replacement cost, and provide the option of compensation either incash or kind. Consult the affected persons on arrangements for compensation and assistance. Establish mechanisms to address complaints and grievances by the affected persons, including discussions, negotiations, arbitration, and legal proceedings. Arrange supervision and monitoring to ensure compliance with OP 4.12 during implementation. T o restore the living standards o f the people affected, compensation for land is legally calculated for diverse kinds of land based on the Land L a w of China, while compensation for housing i s determined for various houses at replacement cost inaccordance with provincial regulations and market prices, rural houses with fixed rates and urban houses inline with professional evaluation. Compensation for attachments and subsides for relocation activities are also defined indetail. All the compensation rates andprinciples have beenformally agreed by the twoprovinces and lower administrative levels before loan negotiations. Table 10.2lists the main compensation rates. 53  Table 10.2: M a i n Compensation Rates Items Unit Rates-/mu) Liupanshui Bijie Qujing City City City Land acquisition Vegetable land Mu 29,900 18,000 26,400 Dryland Mu 18,616 18,000 21,000 Orchards Mu 18,000 18,000 21,000 Forest Mu 10,000 10,000 18,000 Landunderbuildings Mu 15,000 15,000 12,000 Waste land Mu 2,000 2,000 5,000 Land leasing Vegetable land Mdyear ,150 ,000 ,200 Dryland Mulyear 716 ,000 ,000 Houses Steel-cement m2 400 400 400 Cement-brick m2 360 260 360 Brick-wood m2 220 220 200 Earth-wood m2 140 120 120 Subsidyfor relocation Household 300 300 300 Transitionfee for m2 20 20 20 residential houses Transitionfee for m2/month 20 20 20 commercial houses I Houses in urban areas will be compensated according to commercial evaluation. Houses in rural areaspossibly will be divided into several classes to be compensated. E. ResettlementSchemes Inmostvillages alongthe railway the landto berequisitionedwill amountto lessthan 10percent of the village total area. Various options have been discussed with the affected communities and people including land redistribution and cashpayments. At the request of the affected people, cash payment was selected for the vital resettlement program. Most affected families plan to buildreplacement houses inthe same villages. This way they can keep the original production and life style, customs and the stability o f social relationships, and it is favorable for restoring or enhancing the production and living standards after land requisition and resettlement. Productive development will be promoted by givingpriority to land resettlement and developing manufacturing and service industries as complements. A detailed relocation and rehabilitationplan will beprepared in each affected village or community in accordance with detailed investigation before the resettlementprocess begins. Livelihood development: Invillages where a relatively large part o f the total land area is to be requisitioned, the remaining land will be redistributed among the villagers; land compensation will be used inaccordance with decisions by the village commissions. Invillages where only a small part ofthe land is to be acquired and consequently landwill not need to be redistributed, land compensation will be disbursed to the affected households with approval from the village commissions. Local infrastructure affected will be hlly and timely restored by the project under supervision by the project management and resettlement monitor. 54  Household development: All the affected houses and structures can only be demolished after full and timely compensationbasedon contracts reachedbetweenresettlement offices and the affected households. Throughout the process o f housing and relocation, the affected households will be eligible for assistance from the resettlement offices and local governments. The affected urban households will be paid incash to buy houses or be required indetermined residential areas to build new houses with full and timely compensation, including relocation subsidies. Meanwhile, the rural households will buildtheir new houses inthe original villages with assistance from the local governments after receiving full and timely house-related compensation. New rural residential areas will be defined and bepreparedto supplyproper conditions for housing by local governments. The local government authorities are obliged to waive any taxes pertaining to the housing o f the affected households. Local access roads: MOR has agreed to incorporate into the RAP arrangements to ensure restoration o f local access for affected persons. Local traffic will be allowed to use the project construction roads once the construction work i s complete, as well as upgraded local connection roads inthat part o f Weining County that will be subjectedto discontinuance o f rail service and local station closing. The RAP specifies actions to be taken and includes a corresponding budget. Table 10.3: Summary Resettlement Costs (RMB million) 1.RelocationCosts I 150.2 1.2 Subsidy 1.1 I 1.3 Residentialarea construction 1.8 I 1.4 Others I 26.2 I 2. Land Compensation 170.5 3. Land Leasing 88.7 4. Infrastructure restoration 20.3 5. Access roads 3.7 6. Management 29.9 6.1 Survey and Planning 7.7 6.2 ImdementationManagement 11.5 Y 6.3 Taxes 8.8 6.4 Monitoring and Evaluation 1.9 7. Contingencies 34.7 Total 497.9 F. Resettlement Budget and Funding The RAP contains a detailed resettlement budget and financing plan developed on the basis o f the inventory and compensation rates. The total resettlement budget (Table 10.3) is estimated at about M B 500 million (US$61million) and is included in theproject total cost. All resettlement activities under the project will be financed entirely through government funds. G. Resettlement Management Arrangements Organization and capacities: Incarrying out nine previous World Bank projects, the Ministryo f Railway has developed in-house capacity to implement, supervise and monitor RAPS. A multi-level organizational framework to plan and implement and supervise or monitor resettlement will be set 55  up, as showninFigure 10-1,This framework has resettlement offices at the project level as well as province, city, county and township levels. They will be staffed with experienced experts, whose responsibilities have been specified inthe RAP, supported with designed training programs. Before loan negotiations MOR negotiated agreements with the twoprovincial governments on executing the RAP. TheRAP is an annex to the agreements. Resettlement implementationschedule: The project resettlement is plannedto start at the end of 2006 and finish inJuly 2008. House demolition and restorationneeds halfa year and livelihood development will take more thanone year. The RAP stipulates that any delay to resettlement-related payment will entail the halting of relevant engineering construction. Resettlement monitoring: The project office has designed internal and independent monitoring mechanisms for overseeing implementation of the RAP. Internal monitoring will be conducted throughthe resettlement offices at various levels o f government, which focus onprogress with the resettlement plan's physical implementation. At the same time, an independent monitor, the Southwest Jiaotong University, is to be engaged to carry out external monitoring every six months. Apart from physical progress, it will also evaluate livelihood restoration efforts and their effectiveness. The RAP describes indetail the monitoring purpose, responsibilities, indicators, methodology, procedures and reporting requirements. H. ConsultationandParticipation Local governments, community and village leaders, and the affectedpopulation took part inthe census and inventory, the finalization of the alignment, compensation rates, and the relocation and livelihood development schemes. Project information and resettlement policies were and will be continuously disseminated before and during the consultation process. The RAP contains detailed information on procedures and the timeframe for grievance redress to guide the project offices to set up an adequate grievance redress mechanism. Theproject ofice ispreparing a resettlement information booklet describing this mechanism and will distribute it to all affected households. 56  Figure10-1: ResettlementManagementSystem Structure I I Resettlementoffice Coordinating group under the two provincial under the two provinces governments (Guizhou, Yunnan) Coordinating group Resettlementoffice under the three cities within the three cities' (Liupan, Bijie, Qujing) governments Coordinating group Resettlementoffice within county within counties' governments governments Township governments I Village commissions I.ActionsAgreed MORhas confirmedthat it has concluded agreements with the two provinces covering implementation o f the RAP, under which resettlement implementation must comply with the compensationrates and resettlement principles set out inthe RAP. MORwill set upa resettlement management system for the duration o fthe project, and before launching implementation o f the RAP will hire an external resettlement monitor. MORwill prepare, anddistribute among the affectedpeople, a resettlement information booklet describing the resettlement principles, compensation rates and resettlement schedule. MORhas confirmedthat a detailed annual plano frelocation and rehabilitation will be preparedineach affected village/community inaccordance with detailed investigation before carrying out resettlement. The external monitor will guide the local resettlement offices to conduct the detailed planning and implementation. 57  Annex 11: ProjectPreparation and Supervision CHINA: Third National Railway Project Planned Actual PCNreview 10/26/2004 Initial PID to PIC 11/09/2004 Initial ISDS to PIC 11/09/2004 Appraisal 09/26/2005 Negotiations 11/27/2006 Board approval 01/23/2007 Planned date of effectiveness 04/23/2007 Planned closing date 06/30/2012 The long intervalbetween appraisal and negotiations was due to a combination o f lengthy internal clearances regarding environmental and social safeguards, on which the central government has been tightening up, and an economy-wide hold on major infrastructure investments to reduce the risk o f over-heating. Key institutions responsible for preparation of the project: 1. Ministryo f Railways, ForeignCapital and Technical Import Center 2. Second Survey and DesignInstitute of China Railways (Chengdu) Bank staff and consultants who worked on the project included: Name Title Unit Mr.Graham Smith LeadTransport Specialist (TTLat appraisal) EASTR Mr.JohnScales Senior Transport Specialist (TTLat negotiation) EASTR Mr.Carlos Escudero Legal Counsel LEGEA Ms.XinChen ProgramAssistant (primary-Beijing) EACCF Ms.Teresita Ortega ProgramAssistant (secondary-Washington) EASTR Mr.PeishenWang Environmental Specialist EASEN Mr.ChaohuaZhang Senior Social Sector Specialist EASSD Mr.SonglingYao Social Sector Specialist EASSD Mr.XiaopingLi Procurement Specialist EAPCO Ms.Yi Geng Financial Management Specialist EAPCO Mr.Jit Sondhi Railways Engineering& Mgt Specialist Consultant Mr.RichardBullock RailwayEcon. & Financial Evaluation Specialist Consultant Mr.PaulAmos Transport AdvisorIRailway Specialist TUDTR Mr.RobinCarruthers Peer Reviewer Railway economics - TUDTR Mr.BenEijbergen Peer Reviewer - Railways (Russian Railways) ECSIN Bank hnds expended to date on project preparation: 1. Bank resources: $482,400 2. Trust funds: NA 3. Total: Estimated Approval and Supervision costs: 1. Remainingcosts to approval: $20,000 2. Estimated annual supervision cost: $65,000 58  Annex 12: Documents inthe Project File CHINA: Third NationalRailway Project Nn. I Title Date 1 Pre-Feasibility Study Report Second Survey & Design Institute, MOR June 2004 2 Feasibility Study Report Second Survey & Design Institute, MOR July 2005 (General Specification) 3 Supplementary Data for Power FCTIC, MOR May 2005 consumntion 1 IProcurement Plan FCTIC, MOR 2 RevisedConsolidatedProcurement Plan FCTIC, MOR " , . , .'-q- '. October 2005 t. * 1 I Environmental Impact Assessment Second Survey & Design Institute, MOR Environment Impact Assessment Second Survey & Design Institute, MOR August 2005 (Abstract) Environment Management Program Second Survey & Design Institute, MOR August 2005 Geographical LocationMaps Second Survey & Design Institute, MOR August 2005 Environmental Impact Assessment Second Survey & Design Institute, MOR October 2005 (including Supplementary report) Environment Impact Assessment Second Survey & Design Institute, MOR October 2005 (Abstract) Environment Management Program Second Survey & Design Institute, MOR October 2005 Environmental MonitoringReport Second Survey & Design Institute, MOR May 2005 (for 1st halfo f 2005) (Chinese) 1 Resettlement Action Plan FCTIC & SSDI, MOR August 2005 2 Resettlement Action Plan (Summary) MOR August 2005 3 Draft Procurement Plan FCTIC, MOR October 2005 -iI 4 . ' . . 1 Social and Economic Assessment & Universityof Central Minority Sept 2005 Survey Report (Chinese) 2 Final TOR for Social & Economic FCTIC, MOR May 2005 Assessment & Survev 1 Financial Management Manual FCTIC, MOR October 2005 (Chinese) 59  Annex 13: Statement of Loansand Credits CHINA: Third NationalRailwayProject Difference between expectedand actual Original Amount InUS$ Millions disbursements Project ID FY Pulpose m m IDA SF GEF Cancel. Undisb. Ong. Flltl. Rev'd PO87318 2007 CN--GEF-Guangxi 0.00 0.00 0.00 5.25 0.00 0.00 0.00 0.00 IntegratedForestry Dev. PO91020 2007 CN-Fujian Highway Sector 320.00 0.00 0.00 0.00 0.00 320.00 0.00 0.00 Investment PO88964 2007 CN-GuangxiIntegrated 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 Forestry Dev PO83322 2007 CN-SICHUANURBAN 180.00 0.00 0.00 0.00 0.00 180.00 0.00 0.00 DEV PO93906 2006 CN-3rdJiangxi Hwy 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 P085333 2006 CN-5th InlandWaterways 100.00 0.00 0.00 0.00 0.00 87.51 10.41 0.00 PO81255 2006 CN-ChangjiangIPearlRiver 100.00 0.00 0.00 0.00 0.00 99.75 4.75 0.00 Watershed Reha PO85124 2006 CN-EcnomicReform 20.00 0.00 0.00 0.00 0.00 18.44 -0.96 0.00 Implementation PO70519 2006 CN-FuzhouNantai Island 100.00 0.00 0.00 0.00 0.00 100.00 8.50 0.00 Peri-UrbanDev PO90336 2006 CN-GEF-NINGBOWATER 0.00 0.00 0.00 5.25 0.00 5.00 0.05 0.00 & ENVMT PO82993 2006 CN-GEF-PCB Mgnt & 0.00 0.00 0.00 18.34 0.00 18.34 4.10 0.00 Disposal PO82992 2006 CN-GEF-TermiteControl 0.00 0.00 0.00 14.36 0.00 14.36 0.00 0.00 Demonstration PO81348 2006 CN-HENANTOWNS 150.00 0.00 0.00 0.00 0.00 149.63 0.00 0.00 WATER PO86629 2006 CN-HeilongjiangDairy 100.00 0.00 0.00 0.00 0.00 96.75 -2.00 0.00 PO84742 2006 CN-IAIL 111 200.00 0.00 0.00 0.00 0.00 169.04 20.57 0.00 PO99992 2006 CN-LiaoningMedium 218.00 0.00 0.00 0.00 0.00 218.00 0.00 0.00 Cities Infrastructure PO96158 2006 CN-RenewableEnergy II 86.33 0.00 0.00 0.00 0.00 84.11 -2.22 0.00 (CRESP II) PO75732 2006 CN-SHANGHAI URBAN 180.00 0.00 0.00 0.00 0.00 153.11 -6.89 0.00 APL2 PO69862 2005 CN -Agricultural 100.00 0.00 0.00 0.00 0.00 91.28 17.78 0.00 TechnologyTransfer PO71094 2005 CN Poor Rural - 100.00 0.00 0.00 0.00 0.00 93.75 34.95 0.00 CommunitiesDeveloDment PO81161 2005 CN-CHONGQING SMALL 180.00 0.00 0.00 0.00 0.00 176.02 24.57 0.00 CITIES PO72721 2005 CN-GEF-HeatReform 8 0.00 0.00 0.00 18.00 0.00 16.20 2.20 0.00 Bldg Egy Eff. PO67625 2005 CN-GEF-Renewable 0.00 0.00 0.00 40.57 0.00 38.22 0.00 0.00 EnergyScale-up Program PO75730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 165.14 29.14 0.00 PO68752 2005 CN-InnerMongolia 100.00 0.00 0.00 0.00 0.00 81.77 6.77 0.00 Highway & Trade Corrid PO81346 2005 CN-LIUZHOU 100.00 0.00 0.00 0.00 0.00 90.38 4.48 0.00 ENVIRONMENT MGMT P086505 2005 CN-NINGBOWATER & 130.00 0.00 0.00 0.00 0.00 112.86 -1.14 0.00 ENVMT PO67828 2005 CN-RenewableEnergy 87.00 0.00 0.00 0.00 0.00 86.57 52.87 0.00 Scale-up Program PO57933 2005 CN-TAI BASIN URBAN 61.OO 0.00 0.00 0.00 0.00 41.15 11.29 0.00 ENVMT PO75035 2004 CN - GEF-HalBasin 0.00 0.00 0.00 17.00 0.00 12.81 3.79 0.00 Integr.Wat. Env.Man. PO75602 2004 CN-2nd NationalRailways 200.00 0.00 0.00 0.00 1.00 35.59 -43.41 -44.41 (Zhe-Gan Line) PO77137 2004 CN-4th InlandWaterways 91.oo 0.00 0.00 0.00 0.46 71.83 15.29 14.79 PO73002 2004 CN-Basic Educationin 100.00 0.00 0.00 0.00 0.00 49.78 42.72 0.00 Western Areas PO84003 2004 CN-GEF GUANGDONG 0.00 0.00 0.00 10.00 0.00 9.83 2.93 0.00 PRD URB ENV PO77615 2004 CN-GEF-Gansu& Xinjiang 0.00 0.00 0.00 10.50 0.00 7 12 3.52 0.00 PastoralDevelop PO75728 2004 CN-GUANGDONGIPRD 128.00 0.00 0.00 0.00 0.64 85.29 -7.27 0.00 60  UR ENVMT P065035 2004 CN-Gansu & Xinjiang 66.27 0.00 0.00 0.00 0.00 33.72 11.40 0.00 Pastoral Development PO81749 2004 CN-Hubei Shiman 200.00 0.00 0.00 0.00 1.oo 71.38 12.38 0.00 Highway PO65463 2004 CN-JiangxiIntegrated 100.00 0.00 0.00 0.00 0.00 75.09 29.48 0.00 Agric. Modern. PO69852 2004 CN-Wuhan Urban 200.00 0.00 0.00 0.00 1.oo 122.09 114.57 0.00 Transport PO66955 2004 CN-ZHEJIANG URBAN 133.00 0.00 0.00 0.00 0.00 99.42 14.24 0.00 ENVMT PO76714 2003 CN-2nd Anhui Hwy 250.00 0.00 0.00 0.00 0.00 98.65 20.15 0.00 PO67337 2003 CN9nd GEF Energy 0.00 0.00 0.00 26.00 0.00 7.93 7.58 0.00 Conservation PO58847 2003 CN-3rd Xinjiang Hwy 150.00 0.00 0.00 0.00 0.00 30.70 18.70 0.00 Project PO70441 2003 CN-HubeiXiaogan 250.00 0.00 0.00 0.00 0.00 41.71 31.71 0.00 Xiangfan Hwy PO70191 2003 CN-SHANGHAIURB 200.00 0.00 0.00 0.00 0.00 122.44 45.44 0.00 ENVMTAPLI P040599 2003 CN-TIANJIN URB DEV I1 150.00 0.00 0.00 0.00 0.00 132.04 48.88 0.00 P068058 2003 CN-Yixing Pumped 145.00 0.00 0.00 0.00 0.00 77.69 31.89 0.00 Storage Project P060029 2002 CN-GEF-Sustain. Forestry 0.00 0.00 0.00 16.00 0.00 8.01 5.41 0.00 Dev PO68049 2002 CN-Hubei Hydropower 105.00 0.00 0.00 0.00 0.00 22.35 15.35 0.00 Dev in PoorAreas PO70459 2002 CN-InnerMongoliaHwy 100.00 0.00 0.00 0.00 0.00 20.33 0.33 0.00 Project PO58846 2002 CN-Natl Railway Project 160.00 0.00 0.00 0.00 5.00 13.14 18.14 0.00 PO64729 2002 CN-SustainableForestry 93.90 0.00 0.00 0.00 0.00 36.74 23.38 0.00 Development PO71147 2002 CN-TuberculosisControl 104.00 0.00 0.00 0.00 0.00 51.52 26.30 0.00 Project PO56199 2001 CN-3rd InlandWaterways 100.00 0.00 0.00 0.00 0.00 16.15 6.65 0.00 PO47345 2001 CN-HUAI RIVER 105.50 0.00 0.00 0.00 0.00 35.87 35.87 0.79 POLLUTIONCONTROL PO58845 2001 CN-JiangxiIIHwy 200.00 0.00 0.00 0.00 54.77 4.02 58.79 0.00 PO51859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 23.21 21.06 0.00 PO56596 2001 CN-ShijiazhuangUrban 100.00 0.00 0.00 0.00 0.00 53.90 53.90 0.00 Transport PO45915 2001 CN-Urumqi Urban 100.00 0.00 0.00 0.00 0.00 33.14 33.14 0.00 Transport PO42109 2000 CN-BEIJING 349.00 0.00 0.00 0.00 0.00 233.81 233.81 -0.30 ENVIRONMENT II PO49436 2000 CN-CHONGQING URBAN 200.00 0.00 0.00 0.00 29.50 76.17 104.07 0.00 ENVMT PO64924 2000 CN-GEF-BEIJINGENVMT 0.00 0.00 0.00 25.00 0.00 20.21 20.21 0.35 II PO58843 2000 CN-GuangxiHighway 200.00 0.00 0.00 0.00 19.70 3.37 23.07 3.37 PO45910 2000 CN-HEBEI URBAN 150.00 0.00 0.00 0.00 0.00 39.18 35.18 0.00 ENVIRONMENT PO58844 2000 CN-HenanProvincialHwy 150.00 0.00 0.00 0.00 0.00 25.41 25.41 0.00 3 PO56424 2000 CN-TongbaiPumped 320.00 0.00 0.00 0.00 100.00 39.49 144.69 5.58 Storage PO64730 2000 CN-YangtzeDike 210.00 0.00 0.00 0.00 0.00 73.99 73.99 5.32 Strengthening PO51856 1999 CN-AccountingReform& 27.40 5.61 0.00 0.00 0.00 7.15 7.04 0.59 Development PO51705 1999 CN-Fujian IIHighway 200.00 0.00 0.00 0.00 0.00 18.72 18.72 11.31 PO38121 1999 CN-GEF-RENEWABLE 0.00 0.00 0.00 27.00 0.00 10.11 17.88 9.67 ENERGY DEVELOPMENT PO36953 1999 CN-HEALTHIX (Shiyong 10.00 50.00 0.00 0.00 0.40 18.14 17.09 17.09 Wang, Back-up) PO41268 1999 CN-Nat HwyUHubei- 350.00 0.00 0.00 0.00 36.50 0.12 36.61 Hunan PO57352 1999 CN-RuralWater IV 16.00 30.00 0.00 0.00 0.00 I.48 1.22 1.22 P043933 1999 CN-SICHUANURBAN 100.00 2.00 0.00 0.00 0.00 57.23 57.25 7.68 ENVMT PO42299 1999 CN-Tec Coop Credit IV 10.00 35.00 0.00 0.00 5.84 14.38 17.99 0.00 PO39838 1998 CN ODS IV PHASEOUT 0.00 0.00 0.00 440.35 0.10 171.60 35.60 -30.64 PRJ PO03619 1998 CN-2nd InlandWaterwavs 123.00 0.00 0.00 0.00 40.21 1.95 42.16 5.16 PO03566 1998 CN-BASIC HEALTH 0.00 85.00 0.00 0.00 0.00 4.40 2.93 0.00 (HLTHB) PO36414 1998 CN-GUANGXI URBAN 72.00 20.00 0.00 0.00 13.48 26.21 39.07 15.84 61  ENVMT PO03614 1998 CN-GuangzhouCity 200.00 0.00 0.00 0.00 20.00 51.64 71.64 51.64 Transport PO03539 1998 CN-SustainableCoastal 100.00 0.00 0.00 0.00 2.06 22.62 24.69 22.62 ResourcesDev. PO44485 1997 CN-ShanghaiWaigaoqiao 400.00 0.00 0.00 0.00 0.00 28.43 28.43 28.43 PO36405 1997 CN-WanjiazhaiWater 400.00 0.00 0.00 0.00 75.00 4.41 79.41 4.41 PO03594 I996 CN-GansuHexi Corridor 60.00 90.00 0.00 0.00 0.00 36.42 40.72 33.60 PO03409 1995 CN THIRD ODS PHASE 0.00 0.00 0.00 120.10 0.00 30.72 18.22 13.05 OUT Overall Result 62  STATEMENTOF IFC's HeldandDisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC NApproval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 2006 ASIMCO 0.00 0.00 4.12 0.00 0.00 0.00 3.61 0.00 2005 BCCB 0.00 59.21 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 12.04 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.14 0.00 0.00 0.00 8.14 0.00 0.00 0.00 2005 Babei 11.oo 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 BabeiNecktie 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 I 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 2005 BioChina 0.00 3.70 0.00 0.00 0.00 3.13 0.00 0.00 2002 CDHChina Fund 0.00 2.02 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 17.99 0.00 0.00 0.00 11.38 0.00 0.00 2006 CDHVenture 0.00 20.00 0.00 0.00 0.00 0.51 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 10.53 0.00 0.00 0.00 0.00 0.00 0.00 2006 CapitalToday 0.00 25.00 0.00 0.00 0.00 0.32 0.00 0.00 2005 ChangyuGroup 0.00 18.07 0.00 0.00 0.00 18.07 0.00 0.00 1998 ChengduHuarong 3.36 '3.20 0.00 3.13 3.36 3.20 0.00 3.13 2004 ChinaGreenEner 20.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 2004 China ReLife 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 10.00 0.00 2004 ColonyChina 0.00 15.31 0.00 0.00 0.00 9.29 0.00 0.00 2004 ColonyChina GP 0.00 0.84 0.00 0.00 0.00 0.49 0.00 0.00 2006 Conch 81.50 40.93 0.00 0.00 81.50 0.00 0.00 0.00 2006 DagangNewspring 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Darong 10.00 0.24 0.00 8.00 6.67 0.24 0.00 5.33 2006 Deqingyuan 0.00 2.85 0.00 0.00 0.00 2.85 0.00 0.00 1994 DynamicFund 0.00 2.21 0.00 0.00 0.00 2.01 0.00 0.00 2007 Epure 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Fenglin 17.64 0.00 6.00 13.47 13.64 0.00 6.00 12.53 2006 FenglinHJMDF 0.23 0.00 0.00 3.27 0.00 0.00 0.00 0.00 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDM 50.85 0.00 0.00 0.00 50.85 0.00 0.00 0.00 2003 Great Infotech 0.00 1.73 0.00 0.00 0.00 1.03 0.00 0.00 2006 HangzhouRCB 0.00 10.85 0.00 0.00 0.00 0.00 0.00 0.00 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2006 HiSoft Tech 0.00 4.34 0.00 0.00 0.00 1.74 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 JiangxiChenming 40.00 12.90 0.00 18.76 40.00 12.90 0.00 18.76 2006 LaunchTech 0.00 8.35 0.00 0.00 0.00 8.33 0.00 0.00 2001 MaanshanCarbon 5.25 2.00 0.00 0.00 5.25 2.00 0.00 0.00 2005 MaanshanCarbon 11.00 1.oo 0.00 0.00 5.00 I.oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2006 Minsheng& IB 25.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 MinshengBank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 MinshengBank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 1996 NanjingKumho 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 NanjingKumho 31.38 2.23 0.00 0.00 31.38 2.23 0.00 0.00 2006 Neophotonics 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2001 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.oo 0.00 I995 NewbridgeInv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 2005 NorthAndre 8.00 6.74 0.00 0.00 0.00 4.25 0.00 0.00 2003 PSAM 0.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 R4KChina 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 RenaissanceSec 0.00 0.00 20.04 0.00 0.00 0.00 0.00 0.00 2006 Rongde 0.00 35.00 0.00 0.00 0.00 31.38 0.00 0.00 SAC HK Holding 0.00 1.60 0.00 0.00 0.00 1.oo 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2006 SBCVC 0.00 20.00 0.00 0.00 0.00 2.00 0.00 0.00 2000 SEAF SSIF 0.00 3.74 0.00 0.00 0.00 3.37 0.00 0.00 63  SH Keji IT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 SHCT 38.18 0.00 0.00 28.64 29.04 0.00 0.00 21.78 2004 SIBFI 0.14 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 ShanghaiKrupp 19.25 0.00 0.00 36.75 19.25 0.00 0.00 36.75 2006 ShanshuiGroup 50.00 5.50 2.20 0.00 50.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 SinoSpnng 0.00 0.00 20.00 0.00 11.oo 0.00 0.00 0.00 0.00 Stora Enso 20.83 0.00 0.00 4.17 0.00 0.00 0.00 2005 Stora Enso 29.17 0.00 0.00 20.83 0.00 0.00 0.00 0.00 2006 Stora Enso 50.00 0.00 0.00 175.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1 .oo 0.00 0.00 0.00 1.oo 0.00 0.00 Wanjie High-Tech 9.89 0.00 0.00 0.00 9.89 0.00 0.00 0.00 2004 Wumart 0.00 1.62 0.00 0.00 0.00 1.62 0.00 0.00 2003 XACB 0.00 17.95 0.00 0.00 0.00 0.64 0.00 0.00 2004 XinaoGas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2006 Zhejiang Glass 50.00 24.96 0.00 18.00 0.00 0.00 0.00 0.00 2003 Zhengye-ADC 10.43 0.00 0.00 4.87 10.43 0.00 0.00 4.87 2002 Zhong Chen 0.00 4.78 0.00 0.00 0.00 4.78 0.00 0.00 2006 Zhongda-Yanjin 21.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Approvals PendingCommitment FYApproval Company Loan Equity Quasi Partic. 2002 SML 0.00 1.oo 0.00 0.00 2004 NCFL 0.00 0.00 17.88 0.00 2007 Xinao CTC 40.00 10.00 0.00 140.00 2004 China Green 0.00 0.00 10.00 0.00 2006 Launch Tech 10.00 0.00 0.00 0.00 2005 MSShipping 0.00 5.00 0.00 0.00 2003 Peak Pacific 2 0.00 10.00 0.00 0.00 64  Annex 14: Country at a Glance CHINA: Third NationalRailway Project East Lower- POVERTYand SOCIAL Asia & middle- China Pacific Income )eveiopment diamond' 2005 Population,mid-year(millions) 1,304.5 1,885 2,475 GNI percapita (Atlas method, US$) 1,740 1,627 1,918 Life expectancy GNI (Atlas method, US$ billions) 2,269.8 3,067 4,747 T Average annual growth, 1999-05 Population(%) 0.7 0.9 1.o Laborforce (%) 1 0 1.3 1.4 GNI Gross per primary Most recent estimate (latest year available, 1999-05) capita enrollment Poverty(% dpopulatlon belownatlonalpovertyline) Urban population(% of totalpwulation) 40 41 50 Llfeexpectancyat birth (years) 71 70 70 Infantmortality(per f,OOOlive births) 26 29 33 Child malnutnticm(% dchlidren under 5) 8 15 12 Access to imDroVedwater source Access to an improvedwater source (% ofpopulation) 77 79 82 Literacy(% ofpopulationage 15+) 91 91 89 - Gross pnmaryenrollment (% of schod-aga population) 118 115 114 China Male 118 116 115 Lower-middle-income Brow ~ Female 117 114 113 KEY ECONOMIC RATIOS and LONG-TERMTRENDS I985 1995 2004 2005 iconomic ratios' GDP (US$ billions) 304.9 728.0 1,931.7 2,228.9 GrosscapitalformatIodGDP 37.8 39.3 38.7 Exportsof goodsand sewiceslGDP 10.0 23.1 34.0 Trade Gross domestic savtngslGDP 33.6 41.5 41.2 Gross nationalsavingslGDP 34.0 40.1 42.2 T Currentaccount balance/GDP 3 . 8 0.8 3.6 5.0 InterestpaymentslGDP 0.2 0.8 0.2 Domestic Capital Total debtlGDP 5.5 16.2 12.9 savings formation Total debt sewicelexports 7.7 8.6 3.5 Presentvalue of debffGDP 12.5 1 Presentvalue of debffexports 35.7 Indebtedness 1985-95 199545 2004 2005 2005-09 (average annual growth) - GDP 9.7 8.8 10.1 9.9 8.0 China GDP per capita 8.2 8.0 9.4 9.2 7.3 -Lower-middle-incomegroup Exportsof goods and sewices 9.4 19.7 28.4 23.8 10.3 STRUCTURE of the ECONOMY II 1985 1995 2004 2005 IGrowth of (% of GDP) capital and GDP (%) [ 1 Agncuiture 28.4 19.8 13.1 Industry 43.1 47.2 46.2 Manufactunng 34.9 services 28.5 33.1 40.7 Householdfinal consumptionexpenditure 53.2 47.5 48.5 00 01 02 03 W 05 Generalgov't final consumptionexpenditure 13.2 11.0 10.2 -GCF -GDP importsof goodsand seMces 14.1 20.9 31.4 1985-95 1995-05 2004 2005 (average annualgrowth) Growth of exports and Imports (%) I Agncuiture 4.2 3.3 6.3 5.0 I Industry 12.8 9.9 11.1 10.8 Manufactunng 10.0 SeNlces 9.5 9.7 9.8 10.1 Householdfinal consumptionexpenditure 10.2 5.7 1.1 Generalgov't final consumptionexpenditure 9.4 8.9 6.8 M ni n7 na M Gross capitalformation 9.4 10.1 13.0 13.5 -Exports -9-lmports Importsof goods and seMces 10.3 17.4 22.5 15.3 Note: 2005 data are preliminaryestimates. This tablewas producedfrom the DevelopmentEconomicsLDB database. The diamondsshow four key indicatorsinthe country (in bold) comparedwith its incomegroup average. Ifdata are missing,the diamondwill be incomplete. 65  China PRICES and GOVERNMENTFINANCE 1985 1995 2004 2005 Domesticprices Inflation(%) (% change) I B T I Consumerprices .. 16.9 4.0 1.8 ImplicitGDP deflator 10.1 13.7 6.9 3.8 Government finance (% of GDP, includescunent grants) Currentrevenue 28.0 10.8 16.6 17.5 Current budget balance 7.3 0.6 1.7 2.0 Overallsurpluddeficit 0.0 -1.5 -1.5 -1.3 L -GDP deflator *CPI TRADE I 1985 1995 2004 2005 (US$mi//ions) Exportand importlevels (US$ mill.) Totalexports(fob) 27,350 148,780 593,369 771,511 1,wo.MxI Food 3,803 9,954 18,870 T Mineralfuels, lubricants,and relatedmatenal 7,132 5,332 14,476 Manufactures 13,522 127,295 552,818 727,191 Total imports(cif) 42,252 132,084 561,423 674,331 Food 1,553 6,132 9,156 Fuel and energy 172 5,127 48,003 Capital goods 16,239 52,642 252,624 230,369 Export pnce index (2000=100) 52 118 102 106 99 w 01 02 03 Importpnce index (2000=100) 74 107 112 119 .Exports .Imports Terns oftrade (2000=100) 70 110 91 88 BALANCE of PAYMENTS 1985 1995 2004 2005 (US$millions) Currentaccountbalanceto GDP (%) L Exportsof goodsand services 30,489 167,974 655,827 843,537 Importsof goods and services 43,092 151,882 606,543 746,150 I"T I Resourcebalance -12,602 16,092 49,284 97,386 Net income 841 -11,774 -3,523 4,668 Net currenttransfers 243 1,434 22,898 10,000 Current accountbalance -11,518 5,752 68,659 112,055 Financingitems(net) 6,096 16,711 137,705 98,000 Changesin netreserves 5,422 -22,463 -206,364 -210,055 1 88 00 01 02 03 M 05 I Memo: Reservesincludinggold (US$ millions) .. 80,277 622,945 826,303 Conversion rate (DEC, /oca//US$) 2.9 8.4 8.3 8.2 EXTERNAL DEBT and RESOURCE FLOWS 1985 1995 2004 2005 /US$ millions) Compositionof 2004 debt (US$ mill.) Total debt outstandingand disbursed 16,696 118,090 248,934 IBRD 498 7,209 11,035 11,140 A 11,035 IDA 431 7,038 10,670 9,741 8: 10,670 . Total debt service 2,478 15,066 23,657 D: 4,783 IBRD 26 810 1,054 1,139 IDA 4 63 264 296 Compositionof netresourceflows Officialgrants 117 330 381 Officialcreditors 1,117 7,902 16 Pnvatecreditors 2,867 5,013 7,970 Foreigndirect investment(net inflows) 1,659 35,849 54,936 Portfolioequity (net inflows) 0 0 10,923 World Bank program Commitments 1,092 3,148 1,285 A IBRD E Bilateral Disbursements 565 2,269 1,188 1,131 B IDA D Other multilateral - F Private Pnncipalrepayments 0 364 999 1,004 C IMF --- G Short-tern --- Net flows 565 1,905 190 127 Interest payments 29 509 319 430 Nettransfers 536 1,396 -130 -303 Note:This table was producedfrom the DevelopmentEconomicsLDB database. 8/12/06 66  MAP SECTION   CHINA THIRD NATIONAL HARBIN HARBIN RAILWAY PROJECT M O N G O L I A CHINA LIU-ZHAN RAILWAY LINE NATIONAL RAILWAY SYSTEM: Jilin Jilin EXISTING DOUBLE TRACK CHANGCHUN CHANGCHUN EXISTING SINGLE TRACK J I L I UNDER CONSTRUCTION SINGLE TRACK EXISTING EXPRESSWAY N E I M O N G O L UNDER CONSTRUCTION EXPRESSWAY LIAONING MAJOR RIVERS SELECTED CITIES SHENYANG SHENYANG FushunFushun PROVINCE CAPITALS NATIONAL CAPITAL Anshan Anshan PROVINCE BOUNDARIES P INTERNATIONAL BOUNDARIES HOHHOTHOHHOT Huang Datong Datong BEIJINGBEIJING Tangshan ngshan BEIJING Dalian Dalian TIANJINTIANJIN Bo Hai H E B E I TIANJIN YINCHUAN YINCHUAN SHIJIAZHUANG SHIJIAZHUANG TAIYUANIYUAN NINGXIA JINAN JINAN XININGXINING S H A N X I S H A N D O N G Yellow ng LANZHOU LANZHOU Sea Hua Huang Q I N G H A I Luoyang Luoyang ZHENGZHOU ZHENGZHOU Xuzhou Xuzhou G A N S U JIANGSU H E N A N S H A A NXI'AN XI'AN X I NANJING NANJING Wu Wuxi HEFEIHEFEI SHANGHAI SHANGHAI A N H U I SHANGHAI H U B E I S I C H U A N ChangJiang WUHAN WUHAN HANGZHOU HANGZHOU Jinsha CHENGDU CHENGDU XIZANG Z H E J I A N G CHONGQING Nu CHONGQING CHONGQING NANCHANG NANCHANG H U N A N CHANGSHA CHANGSHA East Zhouzhou Zhouzhou China Lancang G U I Z H O U J I A N G X I Sea FUZHOU FUZHOU Liupanshui Liupanshui GUIYANG GUIYANG F U J I A N For Detail, See Xuanwei Xuanwei Jinsha IBRD 34496 Zhanyi Zhanyi KUNMING KUNMING Qujing Qujing TAIWAN Nu G U A N G D O N G Y U N N A N G U A N G X I GUANGZHOU GUANGZHOU Lancang NANNING NANNING Xun Shenzhen Shenzhen Kowloon Kowloon MACAO HONG KONG VIETNAM ANMAR 0 100 200 300 Kilometers MY LAO PEOPLE'S HAIKOUHAIKOU 0 100 200 300 Miles DEM. REP. This map was produced by the Map Design Unit of The World Bank. FEBRUAR The boundaries, colors, denominations and any other information IBRD shown on this map do not imply, on the part of The World Bank HAINAN Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 34495 Y THAILAND 2006 108