China - Third Jiangxi Highway Project

Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 34673-CN PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OFUS$200MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A THIRD JIANGXI HIGHWAY PROJECT May 24,2006 Transport Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performanceo f their official duties. Its contents may not otherwise be disclosed without World Bankauthorization.  CURRENCY EQUIVALENTS ExchangeRateEffective January 6,2006 Currency Unit = Yuan (Y) Y 1.00 = US$0.124 US$l.OO = Y 8.07 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AADT = Average Annual Daily Traffic km = Kilometer BOT = Build-Operate-Transfer km2 = SquareKilometer CDIJP = Communications DesignInstitute ofJiangxi LRIP = LocalRoads Improvement Program Province M = Million CNAO = ChinaNationalAudit Office m = Meter CPS = Country Partnership Strategy m2 = SquareMeter CQ = Consultant Qualification M O C = MinistryofCommunications DA = DesignatedAccount MOF = MinistryofFinance EA = Environmental Assessment MTE = MediumTruck Equivalents EAP = Environmental ActionPlan mu = Chinese measure oflandarea (15 mu/hectare) EL4 = Environmental ImpactAssessment NCB = NationalCompetitive Bidding EIRR = Economic InternalRate ofReturn N P V = Net Present Value EMP = Environmental Management Plan NTHS = NationalTrunkHighway System EMDP = Ethnic MinorityDevelopment Plan O D = Origin/Destination EPB = Environmental ProtectionBureau PCU = PassengerCar Units ETC = Electronic Toll Collection PMO = ProjectManagement Office E&M = ElectricalandMechanical PPIAF = Public-Private InfrastructureAdvisory Facility FIRR = FinancialInternal Rate ofReturn PRC = People's Republic ofChina FMR = FinancialManagement Report PRO = Project ResettlementOffice FSL = Fixed-SpreadLoan QCBS = Quality- andCost Based Selection GCTAB = Ganzhou City Traffic Administration Bureau RAP = ResettlementAction Plan GFB = GanzhouFinance Bureau RGE = Ruijin-Ganzhou Expressway ICB = InternationalCompetitive Bidding RIB = Resettlement InformationBooklet ICR = Implementation Completion Report RPF = Resettlement Policy Framework IDF = Institutional Development Fund SA = SpecialAccount JHP2 = Second Jiangxi Highway Project SBD = StandardBidding Documents JHP3 = ThirdJiangxiHighway Project SEPA = StateEnvironmental ProtectionAgency JPCD = Jiangxi ProvincialCommunications S I A = Social ImpactAssessment Department SOE = Statement ofExpenses JPFD = Jiangxi ProvincialFinanceDepartment TGE = Taihe-Ganzhou Expressway JPHAB = Jiangxi ProvincialHighway Administration TOR = Terms ofReference Bureau voc = Vehicle Operating Cost JPHHAB = Jiangxi Provincial High-class Highway VSL = Variable-Spread Loan AdministrationBureau Acting Regional Vice President: Jeffrey S. Gutman Country ManagerDirector: DavidR.Dollar Sector Manager: Jitendra N.Bajpai Task Team Leader: Christopher R.Bennett  CHINA Third JiangxiHighwayProject CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 Rationale for Bank Involvement............................................................................................. Country and Sector Issues....................................................................................................... 1 2. 1. 2 3. Higher-Level Objectives to Which the Project Contributes ................................................... 2 B. PROJECT DESCRIPTION ................................................................................................. 2 LendingInstrument................................................................................................................. 2 2. 1. Project Development Objective and Key Indicators............................................................... 2 Project Components................................................................................................................ 3 4. 3. 4 Alternatives Considered andReasons for Rejection............................................................... Lessons Learned and Reflected inthe Project Design............................................................ 5. 4 C. IMPLEMENTATION .......................................................................................................... 5 Partnership Arrangements....................................................................................................... 5 2. 1. Institutional and Implementation Arrangements .................................................................... 5 Monitoring and Evaluation o f Outcomes/Results ................................................................... 6 4. 3. Sustainability........................................................................................................................... . . . 6 5 6 Loadcredit Conditions and Covenants .................................................................................. Critical Risks and Possible Controversial Aspects ................................................................. 6.. 7 D APPRAISAL SUMMARY . ................................................................................................... 8 1. Economic and Financial Analyses .......................................................................................... 2. Technical................................................................................................................................. 9 8 3 Fiduciary ............................................................................................................................... 10 4 Social..................................................................................................................................... 10 5. .. Environment.......................................................................................................................... 11 6. 14 Policy Exceptions and Readiness.......................................................................................... Safeguard Policies................................................................................................................. 7. 14 Annex 1: CountryandSector or ProgramBackground ......................................................... 15 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies .................20 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 22 Annex 4: DetailedProjectDescription ...................................................................................... 27 Annex 5: ProjectCosts ............................................................................................................... 33  FOROFFICIAL USE ONLY  This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.  Annex 6: ImplementationArrangements ................................................................................. 34 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 36 Annex 8: ProcurementArrangements ...................................................................................... 43 Annex 9: EconomicandFinancialAnalysis ............................................................................. 50 Annex 10: SafeguardPolicyIssues ............................................................................................ 67 Annex 11: ProjectPreparationandSupervision ..................................................................... 81 Annex 12: Documentsinthe ProjectFile ................................................................................. 83 Annex 13: Statementof LoansandCredits .............................................................................. 84 Annex 14: Country at a Glance ................................................................................................. 89 Annex 15:Maps ........................................................................................................................... 91 IBRD34204. IBRD34205. IBRD34206. January 2006  CHINA THIRD JIANGXI HIGHWAY PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASTR Date: May 24,2006 Team Leader: Christopher R.Bennett Country Director: David R. Dollar Sectors: Roads andhighways (100%) Sector ManagedDirector: Jitendra N.Bajpai Themes: Regional integration (P); Other public sector governance (P); Export development andcompetitiveness (P); Rural services and infrastructure (S) Project ID: PO93906 Environmental screening category: Full Assessment LendingInstrument: Specific Investment Loan [XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 200.00 Proposedterms: VSL, 20 years, including5 years o f grace and annuityprincipal repayment, at six-month LIBOR for US$200 million plusvariable spreadfor Variable-Rate Single Currency Loans RECONSTRUCTIONAND DEVELOPMENT Total: 544.61 166.78 711.39 Borrower: PEOPLE'S REPUBLIC OF CHINA Responsible Agency: Jiangxi ProvincialCommunications Department 3'd Floor FangxinBuilding No. 508 Hongcheng Road Nanchang, Jiangxi, 300025 People's Republic of China Tel: 86-791-652-4052 Fax: 86-791-651-6339  FY 2007 2008 2009 2010 2011 Annual 5.00 60.00 70.00 60.00 5.00 Cumulative 5.00 65.00 135.00 195.00 200.00 Project development objective Re$ PAD B.2, TechnicalAnnex 3 The project development objective is to improve east-west passenger and fkeight flows inJiangxi provinceby investing inthe construction o f an expressway, enhancing local roads, and strengthening highway management. The objectives will be measured usingthe following outcome indicators: 0 inthe Ruijin-Ganzhou corridor: (a) increased average daily traffic; (b) decreased accidents on the existing road G323; and (c) decreased travel time from Ruijinto Ganzhou; 0 for the road sections o fthe Local Roads Improvement Program: (a) increased average dailytraffic; (b)reduced numbero f days closed; (c) reduced travel times; (d) increased bus services; and 0 implementationo fkey recommendations from the institutional strengthening components with regard to tunnel safety, roadside safety, and electronic toll collection. Project description[one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 COMPONENT A: RUIJIN-ANZHOU EXPRESSWAY (RGE) The RGEwill be a 117kmlong section (about US$627million, or 88 percent o f the total project cost) o f the Xiamen-Chengdu expressway, which belongs to one o f the east-west corridors o f the National Trunk Highway System.  COMPONENT B: LOCAL ROADS IMPROVEMENT PROGRAM The Local Roads Improvement Program (LRIP) o f approximately US$74 million aims to improve access inpoor areas ofthe province by upgrading existingroads inpoor condition. COMPONENT C: INSTITUTIONAL STRENGTHENING The institutional strengthening component o f about US$lO million reflects the current needs o f the JPCD inkey areas. The component includes: (a) traffic safety operations for tunnels; (b) traffic safety improvement for expressways; (c) implementation o f electronic toll collection; (d) training; and (e) equipment. Which safeguard policies are triggered, ifany? Re$ PAD D.6, TechnicalAnnex 10 Environmental Assessment (OP/BP/GP 4.01) Involuntary Resettlement (OP/BP 4.12) Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: None. Loadcredit effectiveness: The project has no conditions o f effectiveness. Covenants applicable to project implementation: The legal covenants specify the following stipulations: 0 the proceeds o fthe loan will be onlent to Jiangxi Province on the same terms and conditions as the Bank loan, with the provincebearingthe foreign exchange risk; 0 the Financial Manual Plan, satisfactory to the Bank,will be applied inimplementingthe project; 0 the EMP, RAP and RPF, satisfactory to the Bank, will be appliedto implementthe project; and 0 the EMP and RAP for the expressway section financed through a BOT, satisfactory to the Bank, will be applied while constructingthe BOT expressway section andthe Bank will be allowed to supervise such works. The following reports will be submittedto the Bank for its approval andcomment: - For the RGE and BOT Expressways: 0 EIA, EMP and RAP for expressways andrelatedworks; and  0 Semiannual reports on the progress o f works, including resettlement and environmental issues. - For the LRIP component: 0 Before commencing work on any local road section there will be an economic and technical analysis, EL4 and, ifnecessary, an EMP; 0 A social impact assessmentto determine the necessity o fanEMDP, andifnecessary, the EMDP; 0 Iflandacquisitionisrequiredthere shallbeaRAPprepared inaccordancewiththe principles andprocedures set forth inthe RPF; 0 Semiannualreports on the progress o fworks and any environmental issues; and 0 Assessment of social impacts o f the LRIP by December 31,2010. - For the institutional strengthening component: 0 Finalreport on traffic safety operations for tunnels by December 31,2007; 0 Final report on traffic safety improvement for expressways by December 31,2008; 0 Finalreport on implementingETC for Jiangxi province by December 31,2007; and 0 Annual training report; - Reporting and Monitoring 0 Semiannual progress report on all components using agreed standard format; 0 Semiannual environmental monitoring report; 0 Annual internal and independent monitoring reports o f resettlement activities; and 0 Annual monitoring and evaluation reports o fproject implementation. - Financial 0 Jiangxi province must maintain a financial management system andprovide semiannual project consolidated financial statements inaccordance with accounting standards acceptable to the Bank and must meet standard annual auditing requirements.  A. STRATEGIC CONTEXT AND RATIONALE 1. Country andSector Issues The Government of China is committed to developing an efficient multimodal transport system to enhance competitiveness and promote development. At the core o f their program is the National Trunk Highway System (NTHS), comprised o f 12 major expressway corridors (five vertical and seven horizontal) connecting all provincial capitals and main cities. The initial NTHS backbone has made great progress toward providing the core network connectivity. The development i s now shifting toward linking poorer western regions with eastern China, the engine o f China's economic growth. Jiangxi i s a landlockedprovince insouth central China with a population o f over 40 million. It i s one o f the lagging regions in China by every standard: (a) 32 counties out o f a total o f 99 counties and cities in Jiangxi province are identified as poor; and (b) 21 o f which are classified as national-level poverty counties. Ganzhou City Prefecture i s the largest prefecture and accounts for 24 percent (39,600 km2)o f Jiangxi province. Located in the south o f Jiangxi, it i s a highly mountainous area. Most poor counties o f the province are located in Ganzhou City Prefecture. With a population o f 8.3 million, the prefecture has agricultural, mineral and manufacturing industries. The citrus industry, already exporting over 350,000 tons annually, is undergoing rapid expansion. There is significant potential for growth inthe miningindustries due to the highlevels o f nonferrous and rare earth metals inthe area. The Need for Improved High-Grade Access to K e y Facilities. Lack o f transport accessibility is one o f the constraints to the social and economic development o f these southern landlocked mountainous areas. The Ruijin-Ganzhou Expressway (RGE) i s planned to link Ganzhou and the area east to an expressway currently under construction in Fujian province. This will provide a high-quality transport link to the coastal port and international airport at Xiamen (Fujian province). Inthe future, the expressway network will continue to develop westward, eventually connecting with Chengdu (Sichuan province) and Kunming(Yunnan province). T h e Need for Improved Local Road Access to Markets and Services. Local roads, Class IV andunclassified roads, account for about 75 percent o f the total mileage (61,860 km) o f the road network in the province; and more than half o f these roads are unpaved. Ganzhou City Prefecture is poorly served by local roads. Out o f the total mileage o f 11,544 km, over 77 percent o f roads are Class IV or unclassified, some 2 percent lower than the average technical standard inthe province. The Need for Improved Sector Management. The previous two Bank highway projects have helped the Jiangxi Provincial Communications Department (JPCD) improve their operations in a number o f key areas, such as safety and road maintenance; however, more needs to be done. There i s a need to further improve planning and safety processes at the JPCD. There i s also a need to start the deliveryo f anti-HIV/AIDS education inthe sector. 1  2. Rationalefor BankInvolvement The east-west linkages o f the NTHS are critical for the development o f China's lagging regions and to attain the full benefit o f the NTHS network connectivity. The RGE will be a key contributor to the development of the NTHS and will stimulate trade-led growth in a landlocked poor province o f China. It will further strengthenregional integration andthe competitiveness o f Jiangxi province and its neighbors. The local roads improvement program (LRIP) will address the needs o f the poor and disadvantaged people within Ganzhou City Prefecture. The project will build on the institutional strengthening activities from the Bank's previous two projects to assist the JPCD to manage the road network effectively. The project will address key areas, including safety, maintenance and operations. Two additional institutional strengthening activities will be undertaken as separate projects in conjunction with the JHP3 project. An HIVIAIDS education program (financed through an IDF grant) will educate construction workers and local residents on HIV/AIDS, as well as strengthening the JPCD's ability to execute efficient HIV/AIDS education programs on its projects. In conjunction with Shaanxi province, a study will be done to investigate the viability o f using micro-enterprises to maintain local roads, applying techniques used in Latin America and elsewhere. A request for hnding of this activity has been made to the Public-Private InfrastructureAdvisory Facility (PPIAF). 3. Higher-LevelObjectivesto Whichthe ProjectContributes The project contributes to Pillar 2 o f the 2006 Country Partnership Strategy (CPS) `Reducing Poverty, Inequality, Social Exclusion'. The enhanced highway sector management and lower transportation costs will expand the economic opportunities for the rural poor. B. PROJECTDESCRIPTION 1. LendingInstrument The Bank will finance the project through a specific investment loan. The Borrower has selected the variable-spread loan (VSL) option in which the spread over LIBOR is reset every semester. The Borrower's main reason for selecting a VSL rather than a fixed-spread loan (FSL) i s because FSL charges are slightly higher than VSL charges and the Borrower does not foresee usingthe conversion options of the FSL. VSL repayment terms are governed by standard country terms. 2. ProjectDevelopmentObjective and Key Indicators The project development objective i s to improve east-west passenger and freight flows inJiangxi province by investing in the construction o f an expressway, enhancing local roads, and strengthening highwaymanagement. The objectives will bemeasured using the following outcome indicators: 2  0 inthe Ruijin-Ganzhou corridor: (a) increased average daily traffic; (b) decreasedaccidents on the existing road G323; and (c) decreasedtravel time from Ruijinto Ganzhou; 0 for the road sections o f the Local Roads Improvement Program: (a) increased average daily traffic; (b) reduced number o f days closed; (c) reduced travel times; (d) increased bus services; and 0 implementation o f key recommendations from the institutional strengthening components with regard to tunnel safety, roadside safety, and electronic toll collection. 3. ProjectComponents COMPONENT A: RUIJIN-GANZHOU EXPRESSWAY(RGE) The RGEwill be a 117 km long section (about US$627 million, or 88 percent o f the total project cost) o f the Xiamen-Chengdu expressway, which belongs to one o f the east-west corridors o f the NTHS. With the main north-south corridors now complete, the focus is shifting to providing east-west linkages, thereby completing network connectivity. It will connect Ganzhou City in the west with the Guangdong - Beijing expressway. In the east it will terminate just west o f RuijinCity. The project will link with a 31 km expressway section between the RGE and the Fujianprovincial border, which will bebuiltusingabuild-operate-transfer (BOT) scheme with a concession contract signed for a 22-year period. This B O T i s considered linked to the RGE project so the Bank's safeguard policies will apply. With the completion o f the expressway, and the link between the Fujian border and Xiamen (under construction), Ganzhou City will have direct high-quality access to the port o fXiamen. The area crossed by the RGE i s a succession o f three basins separated by mountains: the Ganzhou, Yudu and Ruijin basins. Between these basins the mountains are high, some exceeding 1,000 meters (m) o f altitude. The main river between Huichang and Ganzhou i s the Gong. In Ganzhou City, the Gong River becomes the Gan River. The Gong River links the Ganzhou basin with the Yudu basin via a narrow valley. The terrain i s very challenging and required careful route selection and designs so as to minimize the environmental and social impacts while providing adequate access to local communities. COMPONENT LOCAL B: ROADS IMPROVEMENT PROGRAM The Local Roads Improvement Program (LRIP) o f approximately US$74 million aims to improve access inpoor areas o f the province. The amount o f the Bank financing shall be US$lO million. The LRIP will be implemented in two phases. Phase Io f the program includes upgrading two existing roads: Chuengyi -Fengzhou (Chonfeng) road (48.5 km) and Meicun-Longbu (Meilong) road (34.8 km). The additional road sections for Phase I1 will be identified using the same selection criteria as in Phase I.Ganzhou City Prefecture i s the priority area for the LRIP, and i s where the expressway component will be built. Currently its road network density i s about 0.23 km/km2, about 38percent lower than the average road density (0.37 km/km2) in the province. Among the total mileage o f 11,544 km inGanzhou City Prefecture, 8,901 km o f roads are Class IV or unclassified, some 2percent lower than the average technical standard in the province. As one o f the poorest prefectures with lowest densities o f road network in the province, the LRIP component will support high-priority needs o f local access. 3  COMPONENTC:INSTITUTIONAL STRENGTHENING The institutional strengthening component o f about US$lO million reflects the current needs of the JPCD inkey areas. The component includes: 0 Traffic Safety Operations for Tunnels. A provincial tunnel safety management plan will be established to ensure that there are adequate resources and procedures to handle tunnel emergencies. 0 Traffic Safety Improvement for Expressways. This activity will improve traffic safety conditions on expressways by establishing appropriate roadside facility policies. 0 Implementation of Electronic Toll Collection (ETC). An ETC implementation strategy for Jiangxi province will be established based on the national ETC plan. This will especially focus on the institutional and operational issues associated with ETC implementation. 0 Training. Domestic and foreign training activities will cover a range o f topics including design, safety, maintenance, management, finance and the environment. 0 Equipment. Equipment will be procured for expressway management and maintenance, and environmental monitoring. These will include weighing stations, quality control sets and road condition monitoring equipment. The institution will also be strengthened through the HIV/AIDS education and the micro- enterprises for roadmaintenance projects, which will be financed through grants. 4. Lessons Learned and Reflectedinthe Project Design The extensive experience that the Bank has developed based on the numerous highway projects inChina and the corresponding lessons learnedwere incorporatedinthe project design. Among them are: 0 The developmentplans of large urban centers should be incorporated early in the project design of national and provincial transportation links. The development plans of Ganzhou and Ruijin cities were incorporated early inthe project design to ensure good linkages to the expressway. The location of the alignment and some interchanges were adjusted to better reflect local development plans. The project i s consistent with the provincial and national transportation plans. 0 Thepreparatory activities greatly contribute to theproject's success. Substantial preparatory work, including land acquisition, resettlement, environmental impact and design studies performed duringproject preparationhave contributed to the readiness o fthe project. 0 Ensure client ownership of institutional components. The proposed institutional strengthening component builds on the achievements from the previous two Bank-financed highway projects in Jiangxi Province and the lessons learned in the implementation o f institutional components o f other highwayprojects inChina. 5. Alternatives Considered and Reasons for Rejection Linkage with Fujian Province. There is a 31 km expressway section linking Ruijin with the Fujian border that was not included as part o f the project. This was excluded by the JPCD since 4  they wanted it completed urgently so as to take advantage o f the new link with FujianProvince to supply traffic to Jiangxi's existing expressways. In September 2005, the JPCD signed a 22- year concession contract with a Hong Kong-based company to build this section using a BOT scheme. The same safeguard policies will be applied to this road section since it i s considered linkedto the RGE. Scope of the LRIP. An alternative to expand the scope o f the LRIP to allow any local road in the province to be eligible was considered. However, it was decided to focus only on road sections located in the Ganzhou City Prefecture. This decision was taken to enhance the potential impact o f the expressway component, which i s located entirely in the Ganzhou City Prefecture, and to prioritize its impact on the poorest southern area o f the province. It was originally planned to include only periodic road maintenance and improvement or rehabilitation inthe LRIP. However, the construction of new local road sections will be considered, ifthese are properlyjustified. RGE Alignment Alternatives. The original feasibility study o f the RGE considered a southern and a northern alignment. After further work a combination o f both alternatives, with some refinements, was selected. The final alignment minimizes the resettlement requirements and limits the negative environmental impacts, while reflecting local development plans. It will provide the best overall benefits to the people livinginthe project area. C. IMPLEMENTATION 1. PartnershipArrangements None. 2. InstitutionalandImplementationArrangements The Borrower i s the People's Republic o f China (PRC), which will onlend the loan proceeds through the Ministry of Finance (MOF) to Jiangxi Province on the same conditions as the Bank loan to PRC. The overall direction of the project at the central level will rest with the Ministryo f Communications (MOC) located inBeijing. At the provincial levelthe Jiangxi Provincial Communications Department (JPCD) i s responsible for the overall project implementation in close coordination with the Jiangxi Provincial Finance Department (JPFD) and with support from the National Development and Reform Commission (NDRC), MOF, M O C andthe Jiangxi Provincial Planning Commission (JPPC). The World Bank LoanProject Management Office (PMO), which is part o f the JPCD, will act as the executing agency. It will carry out the procurement and financial oversight for the project, established inGanzhou City Prefecturefor the LRIP component - to fulfill their obligations. and will provide support to other project implementation units - such as the LRIP-PMO to be After the RGE construction is completed, it will be operated and maintained by a division under the Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB), which i s a specialized agency under the JPCD. JPHHAB has limited administrative, management and legislative authority, and is strictly controlled by the JPCD. Under JPHHAB, there are four 5  expressway management divisions, each in charge o f one expressway. The RGE i s one o f these four divisions. JPHHAB and its divisions are responsible for expressway management, maintenance and toll collection. In addition, JPHHAB i s also responsible for the administration o f all expressways in Jiangxi except for three expressways managed by the Jiangxi Highway Bureau and Ganzhou City. Particular duties of expressway administration include: maintenance planning, road condition inspection, disputes management and compensation. Construction supervision o f the RGE will be carried out by a domestic supervision team, assisted by foreign specialists on an as-needed basis. 3. Monitoring and Evaluation of Outcomes/Results Annex 3 contains the performance indicators adopted for the project. The PMO will monitor and evaluate the data that will be collected by the various project implementation units and will prepare and submit to the Bank semiannual reports using guidelines and standards previously agreed with the Bank. The baseline data and target values were agreed and will be included as part o f the monitoring reports. The Ganzhou City Prefecturewill monitor and evaluate the LRIP component. Annual independent audits o f the special accounts will be carried out, and an implementation completion report (ICR) will be prepared within six months o f the closing date o f the Bank loan. 4. Sustainability The sustainability o f the project i s defined by: (a) the current central government's policy to improve accessibility to the western and central provinces; (b) the provincial government's commitment to establish a transport corridor with access to an international seaport; and (c) the constantly growing traffic in the corridor, sustained economic growth o f the province and rapid development o f the cities o f Ganzhou and Ruijin. All o f the above are enhanced by the matured andwell-established relationship between the Bank and Jiangxi province through two successful lending operations. 5. CriticalRisks and Possible Controversial Aspects RiskRating with Risk Mitigation Mitigation To project development objective Expressway does not 1 The assumptions used inthe traffic modeling for the feasibility S attract or generate study were independently verifiedby a consultant sufficient traffic 1 An appropriate toll rate will be adopted for the expressway 1 Local government development plans were integratedwith the expressway planning to ensure adequate access 1 Upgrading o f interconnecting roads started prior to the RGEproject identification so will be completedprior to expressway opening. Local roads do not 1 Roads included inthe LRIP were carefully selected to ensure that N enhance access to the poor are served with improved access to markets and social markets and services services (see Annex 4) 1 Existing roads connecting to the sections identifiedfor upgrading as part o f the LRIP have already beenupgraded 6  Limited impact from 1 The preparationteam worked closely with the JPCD to ensurethat M institutional the institutional strengthening activities are o f value to the JPCD strengthening 1 Accurate engineering designs available on time, based on sufficient M subsurface investigations 1 Ensuring timely land acquisition and resettlement 1 Selection o f competent contractors bythorough prequalification I 1 Adequate quality assurance during construction Poor attention to 1 Proiect will have the EIA,EMP, RAP andRPF completed ina N timelymanner and filly disclosed 1 Road alignment was selected to minimize environmental and social impacts 1 Alignment adjusted to avoid cultural relic sites 1 Inthe unlikelyevent ethnic minorities are encountered, anEMDP will be prepaied and submittedto the Bank 1 Provide close support to the JPCD to ensure safeguard issues do not M expressway not leadto undue delays I M Note: HighRisk- H, Substantial Risk- S, Modest Risk-M,Low or NegligibleRisk-N. Environmental Impact Assessment - EIA, Environmental ManagementPlan- EMP, Resettlement Action Plan- RAP, ResettlementPolicy Framework - RPF, Ethnic Minority Development Plan- EMDP. 6. LoadcreditConditionsandCovenants The project has no conditions o f effectiveness. The legal covenants specify the following stipulations: 0 the proceeds o f the loan will be onlent to Jiangxi Province on the same terms and conditions as the Bank loan, with the provincebearing the foreign exchange risk; 0 the Financial Manual Plan, satisfactory to the Bank, will be applied inimplementing the project; 0 the EMP, RAP and WF, satisfactory to the Bank, will be applied to implement the project; and 0 the EMP and RAP for the BOT, satisfactory to the Bank, will be applied while constructing the BOT highway section and the Bank will be allowed to supervise such works. The following reports will be submitted to the Bank for its approval and comment: - For theRGE and BOTExpressways: 0 EIA, EMP and RAP for expressways andrelatedworks; 0 Semiannual reports on the progress o f works, including resettlement and environmental issues. 7  -For theLRIP component: 0 Before commencing work on any local road section there will be an economic and technical analysis, EIA and, ifnecessary, an EMP; 0 A social impact assessmentto determine the necessity o f an EMDP, and ifnecessary, the EMDP; 0 If land acquisition is required there shall be a RAP prepared in accordance with the principles and procedures set forth inthe RPF; 0 Semiannual reports on the progress o f works and any environmental issues; and 0 Assessment o f social impacts o f the LRIP by December 31,2010. -For the institutional strengthening component: 0 Final report on traffic safety operations for tunnels by December 31,2007; 0 Final report on traffic safety improvement for expressways by December 31,2008; 0 Final report on implementingETC for Jiangxi province by December 31,2007; and 0 Annual training report; - Reporting and Monitoring 0 Semiannual progress report on all components usingagreed standardformat; 0 Semiannual environmental monitoringreport; 0 Annual internal and independent monitoring reports o f resettlement activities; and 0 Annual monitoring and evaluation reports o f project implementation. - Financial 0 Jiangxi province must maintain a financial management system and provide semiannual project consolidated financial statements in accordance with accounting standards acceptable to the Bank and must meet standard annual auditing requirements. D. APPRAISAL SUMMARY 1. EconomicandFinancialAnalyses Economic (Cost benefit) EIRR= 14.6, NPV (12%) =US$189.0 million This economic evaluation covers the two project components that account for 98% of the project's costs: (a) construction o f the 117 km RGE expressway, and (b) the upgrading o f two rural roads (83 km) for the first-phase construction under the LRIP. The principal measured benefits o f the project are savings in vehicle operating costs (VOC), travel time savings to vehicle occupants, and enhanced road safety. The estimated overall economic internal rate o f return (EIRR) for the project i s 14.6 percent, with those for the RGE and LRIP being 14.2 and 22.6 percent, respectively. The overall economic net present value (NPV), based on a 12percent discount rate, i s estimated at US$189.0 million, o f which the RGE i s estimated to contribute US$152.5 million and the LRIP US$36.5 million. The evaluation results and a description o f the methodused to derive them are provided in Annex 9 and are summarized as follows: 8  EIRR(inYo) NPV(US$M,12%) Ruijin-Ganzhou Expressway(RGE) 14.2 152.5 Local RoadImprovement Program (LRP) 22.6 36.5 Total Project 14.6 189.0 Financial FIRR=0.8, NPV (5.13%) =US$-328.3 million The construction of the RGE i s the main component o f the project (the total cost o f the RGE constitutes about 88 percent o f the total project cost). The JPCD i s planning to use the toll revenue from the RGE to cover the amortization charges o f the Bank and domestic loans. Although the highway will generate enough total revenue over the loan period to finance operations, maintenance and debt service, with a standard amortization schedule there will be a low profit margin in the early years o f operation. A conservative traffic projection combined with high construction costs resulting from the mountainous terrain affects the financial rate o f return o f the investment, which i s expected to be about 0.8 percent. However, based on the proposed toll rate, the RGE may not need any external cash injection over the life o f the project due to the large sum of depreciation reserves and the flexible principal payment terms on the domestic loan. Unlike the RGE, which i s tolled, the LRIP roads will have no revenue. The financial evaluation has confirmed the availability o f sufficient counterpart finds and the capacity o f the JPCD to finance operating expenses of the LRIP. All the indicators show that the financial risks are modest. A detailed assessment i s provided inAnnex 9. 2. Technical The detailed project description is in Annex 4. The RGE design and traffic studies were subjected to in-depth technical reviews by the Bank and independent consultants. The expressway standards adopted are justified by the traffic forecasts and the fact that the project belongs to the NTHS system. Safety conditions in tunnels do not allow bidirectional two-lane highways. Highways without expressway standards would have resulted in numerous access points and the presence o f pedestrians, bicycles, animals and slow vehicles, which would not be compatible with the project's objective o f enhancing long-distance traffic through safe and efficient operations. The M O C expressway standards with a design speed o f 100 km/h were adopted, taking into consideration the difficult mountainous terrain o f the project area. The following issues needed special attention from a technical point o f view: 0 proper consideration o f traffic safety and tunnel hazards throughout the design process, especially giventhe long steep slopes and numerous tunnels; 0 including provision for non-motorized traffic on river bridgeswhere no alternative route was available; 0 sufficient geological investigations on technically challenging locations to minimize the risk of encountering major problems at the construction stage, given the mountainous terrain; and 9  0 fully operational electrical and mechanical (E&M) works at the opening of the highway to traffic, especially those dealing with tunnel safety. The Communications Design Institute of Jiangxi Province's (CDIJP) designs were initially reviewed by the M O C Design Institute No. 2 in Wuhan. The structure and pavement designs were further reviewed by an international consulting firm financed by a Spanish Trust Fund grant. The alignment was reviewed by the Bank appraisal team. The traffic analysis was reviewed by an international consultant. Cost estimates reflect November 2005 prices and are based on the preliminary design. The prevailing unit rates for civil works were checked against effective rates in similar works under Bank-financed projects in Jiangxi and other provinces in China, recent costs o f foreign experts from highwayprojects and recent price quotations for equipment. 3. Fiduciary Financial Management. The adequacy o f the project financial management system was assessedbased on guidelines issued by the Financial Management Sector Board on November 3, 2005 (see Annex 7). The assessment concluded that the project meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02. It was confirmed that the project would have in place an adequate project financial management system that can provide, with reasonable assurance, accurate andtimely information on the status o f the project inthe reporting format agreed with the Bank. Procurement. A procurement capacity assessment o f the implementing agencies was carried out during preappraisal (see Annex 8). The assessment concluded that the overall risk o f the procurement process i s average. The JPCD and the dependent entities involved in the project have allocated adequate resources, including experienced staff, to implement the project. These agencies (except the PMO for the LRIP component) are familiar with Bank procurement procedures and appear adequate for procurement implementation. An action plan to strengthen the procurement capacity o f the implementing agencies was discussed with the JPCD and agreed upon. The plan calls for the preparation and dissemination o f a project-specific procurement manual, training workshops, along with measures to avoid excessive cost overruns and improve procurement economy and efficiency. The ways in which the Tendering and Bidding Law o f China differs from the Bank guidelines were addressed in the assessment, and clarifications for the procedures to be followed for Bank-financed national competitive bidding (NCB) procurement were included inthe loan agreement. 4. Social The RGE and the two road sections under Phase Io f the LRIP will affect 86 villages, largely through land acquisition and house demolition. The project will require acquisition o f 15,619 mu o f land, out o f which 5,333 mu or 34 percent are farmland. A total o f 310,463 m2o f houses will be demolished, affecting 1,718 households. A Resettlement Action Plan (RAP) was prepared by the JPCD with support fiom professors o f Wuhan University. This RAP covers the RGE and LRIP components, as well as the B O T 10  section (as an annex). The socioeconomic and inventory surveys were conducted in May 2005. Supplementary surveys were done in July and November 2005 to accommodate the changes to the project alignment. The compensation rates were determined through consultation with the affected people and with a principle o f "not lower than the rates applied for Jiangxi Highway I1 and other local projects." Emphasis was given to the rehabilitation strategy, including construction o f the new residential area inthe same village for relocation o f 28-48 households. A Social Impact Assessment (SIA) for both the expressway and the LRIP Phase Iroads was undertaken by Zhongshan University. The SIA focused on improving the project design by identifying the social impacts of the project on the communities in the project area, and consultation with the various stakeholders for improvement of the project design. The SIA confirmed that the project would improve the transportation conditions and the local economy. It also identified the main concerns o f the villagers with regard to land acquisition, relocation, road construction and road safety. The SIA was sent to the design institute (CDIJP), PMO and Project Resettlement Office (PRO) so that the comments and suggestions on resettlement issues would be well considered duringthe process o f RAP preparation. The resettlement management agencies were established with sufficient and capable staffing at all administrative levels. Internal and external monitoring systems were established. Wide- ' ranging consultations were undertaken, with an estimated 80 percent o f the affected people having participated. The RAP was disclosed locally and the local government confirmed its agreement and commitment to implement the RAP in accordance with its terms. Comments fi-om the SIA addressed in the RAP included: (a) most o f the affected villagers prefer to receive land compensation incash; (b) some affected farmers were worried about receiving insufficient payments and the potential for misuse o f the land compensation; and (c) the affected farmers wanted to open an appropriate channel for grievances and feedback. The LRIP Phase Iroads were included inthe Project RAP. An RPF was prepared for the LRIP component. This will be used for the roads to be included inPhase I1o f the LRIP program. For the Phase I1 roads, a census survey o f displaced persons and valuation o f assets will be undertaken for an Abbreviated Resettlement Plan; or a socioeconomic studies and baseline census will be undertaken for a Resettlement Plan. The approach to be used will be finalized once the Phase I1roads are identified. A screening for ethnic minorities was undertaken as part of the SIA process. The analysis showed that the She and Yao people living in community inthe project area o f Ganzhou are not indigenous and that the Bank policy therefore does not apply. 5. Environment The RGE consists o f a 117 km expressway on a new alignment, and construction o f approximately six km o f at-grade interconnecting roads on new alignments. The environmental impacts include occupation o f fertile agriculture land and barren land; increases in dust, noise and motor vehicle emissions; soil erosion, borrow area excavation, disposal of excess waste material; community severance; resettlement; and safety during construction. 11  A large part of the effort duringthe early preparationo f the RGEdesignwas directedtoward the selection of an environmentally and socially benign alignment, which was also technically, politically and economically acceptable. The selection o f the alignment was carried out as follows: During the September 2004 feasibility stage, two broad corridors were identified by the design institute and compared. The North Line alignment usedthe same corridor as the one used by NR 323 and the Ganlong Railway. The South Line scheme was proposed based on fewer crossings o f the Gong River, NR 323 and the Ganlong Railway. The selected alignment also met the local government requirements. In stage two, within the preferred North Line corridor, two segments of the alignment, namely, the Yudu and Jiangkou segments, were further refined. Following comparisons, the Yudu Scheme I1was selected based on the least land occupation and resettlement, and associated lower disturbance and impacts. The scheme also met with local government approval. In the Jiangkou section, the alternative was selected that gave the least land occupation, least resettlement and least interference with the Ganlong Railway and NR 323. Duringthe Preliminary Design in September and October 2005, additional alignments were compared (steps 3 and 4), as the design evolved and more geotechnical, cost, environmental and resettlement information became available. After thorough analyses, alternatives were selected based on: (a) lower environmental impacts; (b) lower resettlement and land occupancy; and (c) tradeoffs between lower construction cost and environmental impact against lower resettlement. In cases where there were no viable alternatives because of the proximity o f the RGE to towns, mining easements or railway lines, full consideration was given to mitigate adverse environmental and resettlement impacts arising out o f the alignment. This i s the case in Section K31-K33.5 where the alignment passes through a flood-prone area. Since the alignment could not be shifted and the construction o f the expressway embankment could have worsened the flood levels and the duration o f the floods, a viaduct was introduced in this section and its length was increased to minimize the increase in flood levels and to reduce the duration o fthe flood. The final outcome o f the work on the alignment is one with acceptably low environmental and social impacts, a shorter length than originally proposed, and one that avoids unstable geotechnical areas, above ground karst, cultural relic sites andnature reserves. To mitigate environmental concerns, a standalone EMP was developed. It includes applicable environmental standards, mitigation measures, monitoring plans for the construction and operational phases, environmental training, institutional buildingand strengthening plan. During construction, the implementation o f the EMP will be supervised by the Environmental Office o f MOC, the project Supervision Consultants retained by the Jiangxi PMO, and the contractor's environmental staff. During the operation o f the RGE, JPHHAB will be responsible for the monitoring and implementation o f any environmental measures. In addition, the State Environmental Protection Agency (SEPA) and the Ganzhou and Ruijin Environmental Protection Bureaus (EPBs) will monitor the implementation o fthe EMP. 12  Three rounds o f public consultation were carried out during the preparation o f the EA: the first round followed the preparation o f EA Terms o f Reference (TOR) inDecember 2004; the second and third rounds during the preparation o f the draft EA reports in September and October 2005 respectively. A total o f 646 people and families were consulted. The major concerns and feedback centered on adequate and timely compensation for land acquisition, resettlement and relocation; timely rehabilitation and/or restoration o f damaged irrigation systems; construction safety; dust and noise pollution; better access to the RGE; and a sufficient number o f passageways to cross the RGE. The rural public was concerned about road blockages and access to services during the project, safety, noise and dust. The EA reports were placed in 12 libraries in the affected areas, and in all city libraries and resettlement offices. In addition, the major findings and the summary o f the EA reports were published in the local and provincial newspapers. To address the concerns raised by the project-affected people, the JPCD has responded by: (a) setting up land acquisition and resettlement offices under the PMO to develop, supervise and implement the RAP and restoration o f the affected irrigation systems; (b) ensuring that an adequate number o f passageways and crossings for pedestrians and farm vehicles (one about every 600m) were included in the design; (c) providing safety barriers at selected locations along the rural roads to provide protection to students, residents and livestock; (d) ensuring that there i s provision for installing noise barriers, noise insulation windows and tree planting to minimize noise impact from the RGE and the interconnecting roads; and (e) ensuring that the contractors reclaim and restore borrow areas, camp sites, waste dumps, asphalt plant sites, etc. The EA/EMP for the BOT section were prepared in a consistent manner to the RGE, following the Bank's policies. They will be implemented inthe same way as the RGE, and supervised by the Bank. The LRIP roads will mostly follow the existing road alignments, and involve strengthening, minor widening and realignment of the existing low-grade roads to increase their transportation capacity, minimize congestion, increase drivingvisibility and provide all-season access. The EA investigations did not find any protected areas or cultural relics along the selected alignments or with the LRIP roads. The LRIP component i s located inthe remote hilly region o f Jiangxi and the construction of the roads will likely be carried out by local contractors who may lack proper managerial and trained staff, Supervision i s expected to be weak and the environmental management o f the rural road construction may be poor. Therefore, the project provides for the local transport bureau and the contractors to receive environmental management training by specialists from the JPCD and local EPBs. The training will encompass environmental protection during construction, noise and dust control, construction camp management, borrow pits and disposal sites reclamation, construction safety and health, etc. Monitoring will be carried out by local EPBs. 13  6. Safeguard Policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I NaturalHabitats (OP/BP 4.04) [ I [XI PestManagement (OP 4.09) [ I [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [ I [XI InvoluntaryResettlement (OP/BP 4.12) [XI [ I Indigenous Peoples (OD 4.20, beingrevised as OP 4.10) [ I [XI Forests (OP/BP 4.36) [ I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP/GP 7.60)* [ I [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI 7. Policy Exceptions and Readiness The project will comply fully with Bank policies. The project meets regional criteria for implementation. 'Bysupportingtheproposedproject, theBankdoesnotintendtoprejudicethejnaldeterminationof theparties'claimsonthe disputed areas 14  Annex 1: Country and Sector or ProgramBackground CHINA: ThirdJiangxiHighway Project China and Road Sector Development Duringthe last decade there were many changes affecting the transport sector in China. Since the early 1990s, the economy has moved from a centrally planned environment to one that i s more commercialized and competitive; the degree o f openness has increased; patterns o f transport demand have changed; passenger and freight traffic have grown rapidly, puttingheavy demands on infkastructure; and the role o fthe private sector has substantially increased. Inthe past, China underinvested inroads, but since the mid-1990s, with a rapid increase inthe rate o f road construction, it has become one o f the fastest countries inbuildingits road network. By the end o f 2004 the total road network extended roughly 1,870,661 km, with 34,288 km o f expressways and about 600,584 km of Class Ithrough I11 highways (see below). With its complementary railway and waterway networks, China has developed one o f the most diverse transportationnetworks inthe world. China Highway Statistics (2004) Road Class Length(km) Road Type Length (km) National 129,814 Expressway 34,288 Provincial 227,871 Class I 33,522 County 479,372 Class I1 231,715 Township 945,180 Class I11 335,347 Special 88,424 Class IV 880,854 Others 354,93 5 Total 1,870,661 Total 1,870,661 Source: Ministryo f Communications. Inthe late 1990s, governments at all levels embarked on major highway investment programs. At the core was the National Trunk Highway System (NTHS), which is the backbone, and most important element of, the national transportation network. The NTHS was originally to be a 35,OOOkm network composed o f 12 major highways. There are five north-south corridors: Beijing-Fuzhou, Beijing-Zhuhai, Chongqing-Zhanjiang, Erlianhaote-Hekou, and Tongjiang- Sanya; and seven east-west corridors: Dandong-Lhasa, Hengyang-Kunming, Lianyungang- Huoerguosi, Qingdao-Yinchuan, Shanghai-Chengdu, Shanghai-Ruili, and Suifenhe-Manzhouli. With an estimated cost of US$l50 billion, the NTHS will connect all provincial capitals and cities with populations exceeding 500,000 inhabitants (100 major cities). By the end o f 2004, roughly 34,288 km, or 97 percent o fthe total length, was completed. In December 2004, the Chinese government approved an expanded NTHS, or the "7918 Highway Network." The plan to build 7 capital radials, 9 north-south major highways and 18 east-west corridors, totaling some 85,000 km o f high-grade expressways, i s expected to be completed in2020. The "791 8 Highway Network" was designed to reach more than one billion people in China by connecting all provincial capitals and large urban centers of more than 500,000 inhabitants with cities o f more than 200,000 inhabitants. The network location intends 15  to allow people in eastern areas to access an expressway within half an hour, the central provinces within an hour, and the western areas within two hours. In addition, it will improve communications between economically developed areas, such as the Yangtze and Pearl River Deltas inthe east and the midwest and northeast areas. It will also enhance the connections with the west, and will promote the economic growth o f central and southeastern provinces, including Jiangxi. Jiangxi Province Jiangxi province i s about 160,000 km2,has 12 cities and 77 counties with a 2004 population o f 43 million. Its neighboring provinces are Hubei, Hunan and Anhui, as well as the coastal provinces o f Zhejiang, Fujian, and Guangdong. Jiangxi i s famous for its combination o f natural landscape and rich cultural heritage. Jiangxi's plans to rise in the middle o f China are based on industrialization and opening to the outside by integrating the province with the Yangtze and Zhujiang river deltas, along with Fujian province. The major cities are Nanchang (capital), Jiujiang, Ganzhou, Jingdezhen, Jian, and Ruijin. Jiangxi's main transport network i s based on highways and waterways that developed around the national highways and the Gan River as the main arteries. The primary network connects the capital Nanchang with main urban cities and the neighboring provinces. The whole network i s formed on a "3 vertical, 4 horizontal" expressway skeleton, with Jingdezhen-Yiwu, Jiujiang- Lichuang, and Wuning-Longnan expressways to the north and south, as well as Zhiyuan- Ruichang, Liyuan-Jinyushi, Guangchang-Lianhua, and Ruijin-Chuengyi expressways to the east and west. Along the expressway skeleton, main lines in the network are clustered around Jiangxi's major industrial areas that generate the highest passenger and cargo flow in the province. Of Nanchang's exports, only two percent are exported through Xiamen, which i s the closest port. Most o f the exports use Shanghai (40 percent), Shenzhen (37 percent) and the remaining through Ningbo. The lack o f a high-quality transport link to Fujian province has constrained Jiangxi's accessibilityto the seaport at Xiamen. Ganzhou City Prefecture. At the west end of the RGE expressway, and home to the LRIP roads, Ganzhou City Prefecture has under its jurisdiction one prefecture, two cities and 15 counties. It is the largest administrative zone in the province. The area o f the entire city prefecture is 39,390 km2,which i s about 23.5 percent o f the area o f the province. The 2003 population of the city was 8.3 million. Its topography i s mainly hilly and some basins surrounded by mountains. The average elevation i s about 500 m above sea level. There are rivers runningsouth-north and east-west and the GanRiver i s the most important. The forest area o f Ganzhou i s very large and the area i s rich inundergroundminerals with more than 64 kinds of proven solid minerals, most o f them nonferrous and rare metals. It i s an industrialized city prefecture mainly dedicated to metallurgy, electrical power, coal, chemical machinery, timber industry, building materials, food and textiles. It has unique scenic spots, beautiful landscape, a longstanding history, relics and a cultural heritage that provides the basis for rich natural and cultural resources. RuijinCity. At the east end ofthe expressway, the city has an area of 2,448 km2andhas under its jurisdiction seven towns, ten townships and 237 village committees with 601,265 inhabitants 16  in2003. It has 26 kindsofprovenreserves such as gold, tungsten, uranium, rare earth, coal and limestone. Ruijinhas a long history, beautiful landscape, many tourism resources and i s famous for its revolutionary base as the starting point o f the Long Marchin 1935. Huichang, Yudu and Gan Counties. BetweenRuijinand Ganzhouthere are three counties rich inminerals, forest andtourism. HuichangCounty with a 2003 populati'on of433,690 is adjacent to Fujian and Guangdong provinces. Yudu County, located east o f Ganzhou Prefecture, has 902,351 inhabitants (2003) and an area o f 2,893 km2. Gan County has an area o f 2,993 km2and 557,000 inhabitants (2003). It i s locatedinthe upstreamarea ofthe Gan River. Highways. In 2003 Jiangxi had 61,233 km o f roads, with a road density o f 36.7 km/km2. The roads consist of: 1,040 km o f expressways; 330 km Class I;7,372 km Class 11; 5,606 km Class 111; and 23,443 km Class IV. Class I1and above roads account for 14.3 percent o fthe total road length, while Class IV and above roads account for 61.7 percent o f the total length. All the counties, and 79.3 percent o f administrative villages, have road access. Recently, Jiangxi has concentrated on expressway construction. The length o f expressways in operation increased from 420 km in 2000 to 1,040 km by the end o f 2003, a 148 percent increase. Duringthe same period, the national expressway lengths increased by 82 percent from 16,3 14 kmto 29,745 km. Road transportation i s the main mode in Jiangxi's transportation system. In 2003, Jiangxi had 53,000 road transportation business operators, 260,000 people in transportation employment, 110,000 operating vehicles, and 5,065 passenger routes (including 1,25 1 interprovincial lines). This same year, Jiangxi also reached a total passenger volume of 332 million persons, 181.3 million person-km o f passenger movement, 210 million tons o f cargo volume, and 16.2 billion ton-km o f cargo movement. Railway. The total length o f Jiangxi's railways in operation is 3,044 km (2005) out o f the national length o f about 75,000 km. Jiangxi has five arterial and 11 secondary lines. The five arterial lines are: Zhegan, Jingjiu, Yingxia, Yuangan, and Wujiu. The main line i s Jingjiu railway line (connecting Beijing and Hong Kong), which i s the main north-southline that crosses 22 counties and has 715 km. The main east-west line i s the Zhegan railway with 564 km that connects middle and southwestern China. Waterways. In 2003, Jiangxi's waterways accommodated a total o f 3.88 million passengers, 82 millionperson-km o f movement, 18.48 million tons o f cargo volume, and five billion ton-km o f cargo movement. The Ganjiang-Poyang drainage system covers most o f the province and empties into the Yangtze River, which forms part o f the province's northern border. Poyang Lake, at 3,583 km2,is China's largest freshwater lake. The Gan River and Poyang Lake waterways are Jiangxi's main waterways, which are further connected with 62 navigable rivers, making a total o f 5,560 km o f waterways in the province. Class waterways amount to 41 percent o f the system and are comprised o f 156 km Class IV; 214 km Class V; 741 km Class VI; and 1,160 km Class VII. Jiangxi has 1,188 inland harbor berths (39,679 m inlength). There are 55 ports that are capable o f handlingmore than 10,000 tons o f cargo annually. The port o f Jiujiang can handle six million 17  tons o f cargo a year, with the ports of Nanchang, Zhangshu, Ji'an, Ganzhou and Boyang all having annual capacities o f over one milliontons. Bythe end o f 2003, Jiangxi had4,581 civilian transport vessels that provided 570,000 net tons of capacity and 15,900 passenger spaces. With the development o f vessel capacity, a large number o f old-fashioned wooden boats became obsolete and were replaced by steel, large tonnage, multifunctional, and energy-efficient vessels. Interms o f route development, Jiangxi has started reaching its goals o f stabilizing inland waterways, developing Yangtze River transport, extendingbusiness toward the coastal areas, and exploring maritime transportation opportunities. With this goal, Jiangxi's river and ocean fleet has developed from one vessel to 32 vessels; the maritime fleet has developed to five vessels with 320,000 tonnages, covering more than ten countries and regions. This has become the main means of transportation for Jiangxi's international trade. Air Transport. The Changbei airport locatedinNanchang i s the province's main airport, which i s supplemented with airports located in Ganzhou, Jingdezhen, Jiujiang, and Jingangshan. In 2004, the Nanchang airport was designated as an international airport and open to foreign flights. Since then, several international flights were authorized including Nanchang-Guangzhou- Singapore, Nanchang-Shanghai-Seoul, andNanchang-Shanghai-Los Angeles. Vehicle Fleet. The number o f private automobiles in the province reached 300,679 (2002), which included 73,203 buses and 176,499 trucks. During the period 1990-2002 the number o f private automobiles increased annually by an average of 8.2 percent and buses by 13.3 percent. Sector Issues for China and Jiangxi Province China needs to address the following issues to reduce risks and bottlenecks inits transport sector: 0 Government and Administration. China's government bodies need to adapt to their new roles as regulators. Because the central government has only limited powers over provinces, and China lacks a single, national ministry responsible for all transport modes, the pace of administrative reform varies from province to province. Furthermore, because government bodies have maintained a strong cultural reluctance to cross jurisdictional boundaries, services that require cooperation across suchboundaries have developed slowly. 0 Regional Disparities. Provinces along China's eastern seaboard have benefited from logistical accessibility and well-developed infrastructure, thereby growing more quickly than their western counterparts. The northeast, the seat o f much o f China's early heavy industry and still dominated by state-owned enterprises, is now highly polluted and suffering high unemployment. Current central government efforts aim to narrow the widening wealth and income disparities among regions by attracting more domestic and foreign investment to the interior. Inadditionto the nationalissues, Jiangxi province mustaddressseveral keyissues: 0 The Need for Improved High-Grade Access to Key Facilities. Lack o f transport accessibility i s one o f the constraints to the social and economic development o f these 18  southern landlocked mountainous areas. The RGE expressway will link Ganzhou and the area east to an expressway currently under construction inFujianprovince. This will provide a high-quality transport link to the coastal port and international airport at Xiamen (Fujian province). In the future, the network will continue to develop westward, eventually connecting with Chengdu (Sichuan province) and Kunming(Yunnan province). 0 The Need for Improved LocalRoad Access to Markets and Services. The Ganzhou City Prefecture i s poorly served by local roads. Local roads, Class IV and unclassified roads, account for about 77percent o f the total mileage (8,901 km) o f the road network in the Ganzhou City Prefecture; and more thanhalfo f these roads are unpaved. 0 The Need for Improved Sector Management. The previous two Bank highway projects have helped the JPCD improve their operations in a number o f key areas, such as safety and road maintenance; however, more needs to be done. There i s a need to further improve planning and safety processes at the JPCD, as well as to assist them in implementing better quality assurance. There i s also a need to start the delivery o f HIV/AIDS education in the sector. 19  Annex 2: Major Related Projects Financedby the Bank and/or other Agencies CHINA: ThirdJiangxiHighway Project Latest Supervision (ISR) Ratings' Sector Issue Project' (Bank-financed projectsonly) Implementation Development Progress(IP) Objective P O ) Bank-financed CompletedProjects 0Remove Highway Capacity China Highway Project (1-3) Bottlenecks (1) 0Institutional Beijing-Tianjin-Tanggu Expressway (2-4) Strengthening/Training (2) 0Rural Roads and Poverty Sichuan ProvincialHighway (1-5) Alleviation (3) 0Highway Safety (4) Shaanxi ProvincialHighway (1-4, 6) 0 Operationand Maintenance of Jiangxi ProvincialHighway (1-3) High-Grade Highways (5) 0 Cost Recovery (6) The values inparenthesis 1through 6 correspond to the sector issues addressedineach project. The IPiDORatings are: HS (Highly Satisfactory), S (Satisfactory), U(Unsatisfactory), HU(Highly Unsatisfactory) 20  ~ Other Development Agencies LsianDevelopment Bank ONGOING PROJECTS HebeiandLiaoning Expressways Liaoning and Jilin Expressways HebeiRoads Development Chengdu-Nanchong Expressway Changchun-Harbin Expressway Shanxi Roads Development Southern Yunnan Road Development Chongqing-Guizhou Roads Development Ganlong Railway Project (GanzhodJiangxi - LongyadFujian) PLANNEDPROJECTS Shanxi Expressway Chongqing-Guizhou Expressway Guangxi Highway Development Shanxi and Shaanxi Roads Western Yunnan Road Development Southern Sichuan Roads Development Japan Bank for International Cooperation ONGOING PROJECTS (formerly Overseas Economic Hainan Development Cooperation Fund of Japan) Qingdao Development Guiyan-Xinzhai Highway Hangzhou-Quzhou Expressway Wanxian-Liangping Highway Liangping-Changshou Highway HainanEast Expressway Xinxiang-Zhengzhou Highway 21  Annex 3: Results Framework and Monitoring CHINA: ThirdJiangxi Highway Project Results Framework PROJECTDEVELOPMENT OUTCOME INDICATORS USE OF RESULTS OBJECTIVE INFORMATION Improve east-west passenger and freight flows inJiangxi province by investing inthe constructionofan expressway, enhancing local roads, and strengthening highway management [A] Supportingtrade-led growth in [A] Inthe Ganzhou-Ruijin [A] The development plans ofthe Jiangxi province through improved Corridor: local govemments are integrated highway access to prosperous eastern A.1Increasedaverage daily withthe national andprovincial region and export outlets traffic transportation links andthe A.2 Decreasedaccidents onthe highway access to Xiamen in existing road G323 Fujian A.3 Decreased travel time [B]Reducingpovertybyimproving [B] Onthe roadsections ofthe [B]The selection o fthe localroad access to markets and services for Local Roads Improvement sections maximizes the benefits poorer areas o f Ganzhou City Prefecture Program: for the low-income populationin B1.Increasedaverage daily the Ganzhou City Prefecture traffic B.2Reducednumber ofdays closed B.3 Reducedtravel time B.4 Increaseddaily bus service [C] Improving highway sector [C] Implementationo f key [C] The policy-related studies, management inJiangxi province recommendations from the training and technical assistance institutional strengthening are relevant andhave an overall components positive impact. INTERMEDIATE RESULTS RESULTSINDICATORS USE OF OUTCOME MONITORING [A] Approximately 117kmo fthe [A] Completion of 117kmo f Monitoring o f implementation Ruijin-GanzhouExpressway (RGE) the Ruijin-Ganzhou progress and action planto Expressway address possible delays [B] Localroads inthe direct areaso f [B] Successful improvemento f influence o fthe project inGanzhouCity local roads inthe Ganzhou City Prefecture Prefecture: Phase I= 83.3 km & Phase I1to be determined [C] Staff o f JPCD and relatedagencies [C] Successful completion o f with improved technical and the institutional strengthening management capacity inthe road sector. studies and staff trained 22  s 0 ea - 0 .C b r)i .C n 00 59 M M M .e m I A 9 N 0 0 0  $ 0 0 0 0 0 0 Z > 5 F " 3 3 id a 0  ek f E z: ; : b E i e Eee5 E c t E F  gz gz 2m 0 1 g2 2 g 0d a s s i3 0 0 i3 s wl g 3 g g  Annex 4: Detailed Project Description CHINA: ThirdJiangxi Highway Project COMPONENT RUIJIN-GANZHOU A: EXPRESSWAY (RGE) The RGE will be a 117 km long section (about US$627 million) o f the Xiamen-Chengdu expressway, which i s one of the east-west corridors o f the NTHS. With the main north-south corridors now complete, the focus i s shiftingto providing east-west linkages, thereby completing network connectivity. The RGE will start inRuijin City, at a point located about 31 km west o f the FujiadJiangxi border. It will end near Ganzhou City, at the starting point o f an existing expressway linking Ganzhou City to the Guangdong-Nanchang expressway. A 31km expressway section between Ruijinand the Fujian provincial border will be built using a BOT scheme defined on a concession contract already signed for a 22-year period (this BOT i s considered linked to the RGE project so the Bank's safeguard policies will apply). This BOT section will be opened to traffic before the RGE. A new expressway inFujian, due to be open to traffic inlate 2006, will connect the BOT with the Fujian expressway network. Jiangxi province has made a commitment that the BOT section will be completed prior to the RGE. They are using the BOT rather than including this section in the RGE so that their expressway network can be connected to Fujian province at the earliest opportunity. Inthe west near Ganzhou City the expressway will connect with an expressway section already completed and connected to the World Bank-financed Second Jiangxi Highway project. With the completion of these expressways, Ganzhou will have direct, high-quality road access to Xiamen and Jiangxi province will have a cross-provincial link with its two north-south expressways. The area crossed by the RGE is mountainous with rivers. The terrain i s very challenging and required careful route selection and designs so as to minimize the environmental and social impacts while providing adequate access to local communities. Main Characteristics This is a list o f the main characteristics of RGE as reflected in the preliminary engineering design: 0 length: 116.8 km; 0 designspeed: 100km/h; 0 cost estimate: Y 5.06 billion, or USS627 million (average cost o f US$5.4 milliodkm); 19.1km of bridges, with 76 bridges intotal, four super-long (the longest one i s 1.4 km long, the longest span is 70 m), 44 long, 25 medium, and three small. All bridges are simple bridges (precast beams or box girders); 27  0 9.6 km o f tunnels, with seven tunnels in total, one super-long (4.16 km), two long, one medium and three short; 0 11.8 millionm3o f earthworks and 11.7 millionm3o f stoneworks; 0 six interchanges connectingto cities, counties and important towns; 0 two service areas, three parking lots, six toll stations, one main operation center and various subcenters; and 0 about six kmo f interconnectingroads on new alignments. The preliminary designs were completed duringthe fourth quarter o f 2005, and the final designs were completed inthe second quarter o f 2006. Location The project area lies in Ganzhou City Prefecture. The expressway runs roughly parallel to the existing NR 323. The RGE i s one section o f Xiacheng expressway, an expressway planned between Xiamen in Fujianprovince and Chengdu in Sichuan province. Xiacheng is 2,63 1kmlong and successively crosses Fujian, Jiangxi, Hunan, Guizhou, Chongqing and Sichuan. In Jiangxi province, Xiacheng i s about 245 kmlong and includes four sections: Section A between Fujian border and the west o f Ruijini s about 31 km and crosses Ruijin county; Section B (the RGE) between the west o f Ruijin and the west o f Ganzhou i s about 117 km long and i s the main component o f the ThirdJiangxi HighwayProject (JHP3); Section C west o f Ganzhou connects the RGE and the Taihe-Ganzhou expressway (TGE i s the main component o f the Second Jiangxi Highwayproject-JHP2) and i s 11kmlong. This i s already built and i s presently used as an interconnecting road linking TGE to Ganzhou City; and Section D i s planned between the west o f TGE and the Hunan border and will be about 88 km long and located in a mountainous area, although the technical studies have not as yet started. An agreement was reached between Fujian and Jiangxi on the alignment o f the Xiacheng expressway at the border crossing. On the Fujian side, the section o f the Xiacheng near the border with Jiangxi i s already under construction. Works started in September 2004 and are expected to be completed by the end o f 2006. The border betweenFujianand Jiangxi i s located inthe 1.4 kmlongAiling tunnel (800 minFujian and 600 minJiangxi). The contractors ofthe Fujianside will end their work at the border. The contractors selected by Jiangxi will have to complete the Ailing tunnel to the border with Fujian. An agreement between both the provinces 28  on the Ailing tunnel operation and maintenance activities, including interventions incase o f fire, remains to be reached. Cities and Counties Crossed by RGE The BOT (Section A) is fully located in Ruijin County. The RGE (Section B) crosses five counties or cities: Ruijin City, Huichang County, Yudu County, Gan County, and Ganzhou District of Ganzhou City Prefecture. All the area crossedby sections A and B i s within Ganzhou Prefecture, which comprises two cities (Ganzhou and Ruijin) and 15 counties. Statistics 2003 Population Land Area km2 Ruijin City 601,300 2,448 Huichang County 434,000 2,722 Yudu County 902,400 2,893 GanxianCounty 556,700 2,993 GanzhouDistrict 455,700 426 Total Project Area 2,950,100 11,482 GanzhouCity Prefecture 8,312,000 39,390 Jiangxi Province 42,542,300 166,900 There are almost three million inhabitants along the route, which accounts for 35 percent o f the total population in Ganzhou City Prefecture and seven percent o f the province. It i s also 30 percent o fthe total area o f Ganzhou City Prefecture and seven percent o f the entire province. The recommended alignment totals 116.8 km in length and was designed to serve Huichang, Yudu and Ganzhou and to be in accordance with the development plans o f these cities or counties. General Description of Area The area crossed by the RGE is a succession of three basins separated by mountains: the Ruijin basin (200 mhigh),the Yudu basin (200 mhigh) and the Ganzhoubasin (100 mhigh). Between these basins the mountains are high, some exceeding 1,000 m o f altitude. The main river between Huichang and Ganzhou i s the Gong. In Ganzhou, the Gong River becomes the Gan River. The Gong River links the Yudubasin with the Ganzhoubasinvia a narrow valley. The geology o f the area includes mudstone, which may be not stable, limestone with presence o f karst holes, red sandstone and metamorphic rock, which do not raise major problems. Various nonactive faults can be detected. The geology at the entrance and exits o f two long tunnels raise important difficulties. Existing Roads and Railways The existing NR 323 links Ruijinand Ganzhou cities. It was realigned and upgraded to Class I1 (12 m wide) in recent years so the condition i s good. It i s located in the Gong river valley 29  between Ganzhou and the east o f Yudu, including a passage through a narrow valley. Then it uses secondary valleys with a low pass and a long detour before joining the Ruijin basin. It crosses various towns like Jiangkou (Gan County), Yudu (Yudu County), Xiaomi and Xijiang (Huichang county). NR 323 is the only east-west road parallel to the expressway. The feasibility study indicates a traffic volume o f 7,000-12,000 passenger car units (PCU)/day in 2005. The traffic volumes are low inrural areas and increase inurbanized areas. The current distance fkom Ruijin to Ganzhou on NR 323 i s about 150 km and takes about 2.5 hours. This will be significantly reduced to about 120km, with a travel time o f about 1.25 hours, after the expressway i s constructed. Further to the east, NR 323 i s the key road section that connects Ruijinwith Linchang. It starts in Ruijin and ends inXiaomeiguan in Dayu County. Its standard and passing capacity is very poor. The road section that runs along the river i s fkequently flooded and the traffic i s interrupted. Inaddition, pedestrians, bicycles and rickshaws mix together and result in crowded carriageways with very dangerous driving conditions. There are also a large proportion o f heavy vehicles andmost trucks are overloaded. Ruijinis bypassedby a good Class I1road. The NR 319 links Ruijinto the border with Fujianin the east. It also links Ruijinwith NingxinCounty inthe North. This i s a good Class I1road. NR 206 crosses Jiangxi province from the Anhui border inthe northto the Guangdong border in the south andcrosses Ruijin. A two-track railway from Beijing to Guangzhou passes by Ganzhou and Jiangkou. A new one- track railway from Ganzhou to Longyan in Fujian province opened to traffic in May 2005 for freight and in October 2005 for passengers. It crosses the Jiangxi/Fujian border at the same location as the Ailing tunnel but through another tunnel located about 40 m above where the Ailing tunnel is beingbuilt. Most ofthe time, this new railway alignment follows the corridor o f NR 323. The section o f Ganlong railway in Jiangxi i s about 170 km long. It begins in Ganzhou and crosses Gan County, Yudu and Ruijinand ends in Longyan in Fujianprovince. Its construction was recently completed (2004) and it i s presently inoperation. The route o f the RGE intersects with: (a) NR 323 twice and with NR 105 once; (b) several provincial highways; (c) the Ganlong railway line twice; (d) the Gong River twice and the Gan River once. COMPONENT LOCALB: ROADS IMPROVEMENT PROGRAM The Local Roads Improvement Program (LRIP) o f approximately U S 7 4 million aims to improve access in poor areas o f the province. The LRIP will be implemented in two phases. The Phase Iprogram includes the Chuengyi - Fengzhou (48.5 km) and Meicun - Longbu roads (34.8 km). These existing roads will have upgraded pavement, improved alignment and will be widened. The existing sections on either side o f both LRIP roads have already been upgraded. Designs for the works were completed in late 2005, with a planned construction date at the beginning o fthe second quarter 2006. 30  Ganzhou City Prefecture, which i s the largest prefecture in the province, i s the priority area for the LRIP, and i s where the expressway component will be built. Currently its road network density is about 0.23 km/km2,about 38 percent lower than the average road density (0.37 kml km2)inthe province. Of the total mileage of 11,544 kminGanzhou City Prefecture, 8,901 km o f roads are Class IV or unclassified, some 2 percent lower than the average for the province. As one o f the poorest prefectures with the lowest densities o f road network in the province, the LRIP component will support high-priority needs o f local access. The LRIP component aims at improving the highway network inpoor areas o f the province in order to promote economic and social development and contribute to poverty alleviation. The Bank and the JPCD agreed that the size o f the LRIP should be about ten percent o f the total project cost and the amount of the Bank financing shall be US$lO million. Since construction will commence prior to the signingo f the Loan Agreement, retroactive financing will need to be applied. The LRIP roads are part o f the five-year highway improvement program o f Ganzhou City Prefecture. The following criteria were adopted inPhase Ito select the roads (the additional road sections for Phase I1will be identifiedusingthese same selection criteria): 0 expected positive impact o f the project on population access to education, health and other production and/or commercialization o f localproducts; 0 strong support by local government andresidents; 0 the technical standard after construction for upgrading for the major part o f the program should be Class I11or Class IV roads; 0 current minimum daily traffic volumes o f 400 medium truck equivalent (MTE) for Class IV and 500 MTEfor Class I11roads; 0 the contribution to the Jiangxi provincialplanto improve the functional responsiveness o fthe highway network with good traffic growth potential; and 0 expected EIRR higher than 12 percent COMPONENT INSTITUTIONAL C: STRENGTHENING As the thirdhighway project inJiangxi, the institutional strengthening componentwas developed after reviewing the outcomes from the previous activities. Where these earlier activities were supply driven (as opposed to demand-driven) they could not be sustained. Consequently, in establishing the institutional strengthening activities for JHP3, the focus was on ensuring that they met the specific needs o f the JPCD. This led to the following institutional strengthening component o f about US$10 million: 0 Traffic Safety Operations for Tunnels. A tunnel safety management plan will be established to ensure that there are adequate resources and procedures to handle tunnel emergencies. This plan will consider both technical and operational factors so as to ensure that all parties responding to a tunnel emergency are clear in their roles, have appropriate equipment, and correct operating procedures to respond ina timely manner. The study, to be completedby 2007, will produce a series o f recommendations that will form the basis for the JPCD to implement a province-wide tunnel safety policy. 31  0 Traffic Safety Improvementfor Expressways. This activity, to be completedby2008, will improve traffic safety conditions on expressways. Detailed accident records will be analyzed to identify countermeasures for roadside facility-related accidents. It will result in a decision-making support system for roadside facility planning, design and operations. It will contribute toward establishing appropriate roadside safety technical policies for the JPCD. 0 Implementation of Electronic Toll Collection. The current five-year plan calls for the implementation o f electronic toll collection (ETC) on expressways in China. This will be done through a dual-use integrated circuit (IC) card system, which can be manually swiped or automatically recorded through a transponder. With the technology selected, the implementation o f ETC in Jiangxi i s not so much a technological issue but primarily a business process issue. This activity will identify what actions are required in order to successfully implement province-wide ETC on expressways. By 2007 it will prepare recommendations on changes to business process, financial flows, as well as any technology issues. The outcome will be a strategy that can be adopted by the JPCD to implement ETC. 0 Training. Domestic and foreign training activities will cover a range of topics including design, safety, maintenance, management, finance and the environment. 0 Equipment. Equipmentwill be procured for expressway management andmaintenance, and environmental monitoring. These will include weighing stations, quality control sets and road condition monitoring equipment. Two separate projects funded by grants to further strengthen the JPCD's institutional capacities will beundertakenat the same time as the JHP3: 0 HIV/AIDS.The JPCD will develop the ability to execute effective anti-HIV/AIDS activities for its staff, as well as those o f contractors, other workers and local residents where construction projects are under way. An anti-HIV/AIDS education program will be conducted for JPCD staff, workers on the JHP3 construction sites and local residents. This activity will be funded by an IDF Grant. 0 Micro-Enterprises for Road Maintenance. In conjunction with Fujian province, a study will be done to investigate the viability o f using micro-enterprises to maintain local roads, applying techniques used in Latin America and elsewhere. This study will include pilot testing o f micro-enterprises on paved and unpaved roads inboth provinces. An application has been made to PPIAF to fund this project. 32  Annex 5: Project Costs CHINA: ThirdJiangxi Highway Project Taxes 23.44 Project Cost Net o fTaxes 687.45 Overall Tax Impact 96.6% 33  Annex 6: ImplementationArrangements CHINA: ThirdJiangxiHighwayProject The project will be implemented by the Jiangxi Provincial Communications Department (JPCD) and the agencies at the cityldistrict level responsible for road management in Jiangxi Province. The Ruijin-Ganzhou Expressway (RGE) Project Management Office (PMO) under the JPCD has coordinated the project preparation and will remain the Bank's main counterpart during implementation. Similar arrangements were made on the two previous Bank-financed highway projects inJiangxi and have proved very effective. The Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB) will operate and maintain the RGE after it i s opened to traffic. The PMO has appointed the Communications Design Institute o f Jiangxi Province (CDIJP) and No. 2 Survey and Design Institute under M O C to carry out design studies for the project. The PMO will manage construction works as the "Client" with the assistance o f a domestic supervision organization. Foreign supervision consultants will be usedon an as-neededbasis. With respect to resettlement, the Project Resettlement Office (PRO) under the PMOhas prepared the Resettlement Action Plan (RAP). The PRO will lead the resettlement operations under the oversight of the key PMO of Jiangxi Province. This i s led by the Vice-Governor and manages multilevel resettlement offices established along the alignment in counties (citieddistrict) and towns. Other relevant government agencies responsible for planning, financing, communications and land administration will be involved at different levels. The PRO has been staffed with experienced experts andtheir responsibilitieshave beenspecified inthe RAP. The RAP includes a detailed trainingprogram for the capacity buildingo f the PRO. The PMO will issue a specific regulation for the approval and use o f resettlement funds. The payment process to beneficiaries will be streamlined to avoid possible fund deductions during the disbursement, and each affected village will have a specific account in local banks. The designated banks will report daily on the use o f resettlement fund items to the PMO for internal monitoring. The P M O will also strengthen the capacity o f town-level and county-level staff to manage the resettlement funds. For the environment, the PMO has prepared an Environmental Management Plan (EMP) for the RGE, which includes practical and cost-effective measures necessary to mitigate the environmental impacts o f the project by incorporating them in the design and by implementing them during the construction and operation phases. The EMP also specifies the appropriate monitoring plans, training, institutional arrangements, implementation schedule, budget needs, etc. necessary to implement the mitigation measures and strengthen the borrower's capacity. Since the project is the third World Bank-financed project in Jiangxi Province, the JPCD has developed ample internal capacity in its environment unit to implement, supervise and monitor the EMP. With respect to the Local Roads Improvement Program (LRIP), the Ganzhou City Traffic AdministrationBureau (GCTAB) under the Ganzhou City Government o f Jiangxi Province has identified and prepared two local roads to be included in Phase I.The Gannan Survey and Design Institute o f Jiangxi Province and the Traffic Planning and Design Institute of Jiangxi 34  Province have designed the LRIP roads; Hongtai Investment Company Ltd. under GCTAB will handle procurement; resettlement and environment will be under the oversight o f the PMO; and works will be managed with the assistance o f domestic firms for supervision. The implementation of the EMPs prepared for each road section will be supervisedby the PMO. Finally, the P M O i s preparingthe institutional strengthening and policy development component and will coordinate the implementation o f activities. Depending on activities, other units from the JPCD will contribute. The P M O will be responsible for procurement on the project. The PMO staff have experience in procurement from the previous two World Bank-financed projects in Jiangxi; thus they are familiar with the Bank's procurement principles and procedures. The procurement will be done by an experienced procurement company. 35  Annex 7: Financial Management and Disbursement Arrangements CHINA: ThirdJiangxi HighwayProject The Bank's financial management assessment, based on guidelines issued by the Financial Management Sector Board on November 3, 2005, has concluded that the project: (a) meets minimumBank financial management requirements, as stipulated inBP/OP 10.02; and (b) 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 in the reporting format agreed for the project and as required by the Bank. Funding sources for the project include the Bank loan and counterpart funds. The Bank loan proceeds will flow from the Bank into the project Designated Account (DA) to be set up at and managed by the Jiangxi Provincial Finance Department (JPFD), to the project implementing agencies, and finally to contractors or suppliers. The Bank loan will be signed between the Bank and the People's Republic o f China through its Ministry o f Finance (MOF), and onlending agreements for the Bank loan will be signed between M O F and the Jiangxi Provincial Government through its JPFD, and then between JPFD and the Jiangxi Provincial Communications Department (JPCD), and Ganzhou Prefecture through its Ganzhou Finance Bureau (GFB). The constitution o f counterpart funds will be appropriations from central, provincial and municipal governments and commercial debt. N o outstanding audits or audit issues exist with any o f the implementing agencies involved inthe project. However, the Bank will continue to be attentive to financial management matters during project supervision. Audit Arrangement The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank-financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People's Republic o f China. The Jiangxi Provincial Audit Office was identified as auditors for the project. Annual audit reports will be issued by above audit office and subject to reviews by the China National Audit Office (CNAO). The Bank currently accepts audit reports issued by CNAO or provincial/regional audit bureaus/offices for which CNAO i s ultimately responsible. The annual audit report o f the project consolidated financial statements will be due to the Bank within six months after the end o f each calendar year. This requirementis stipulated inthe Loan and Project agreements. Consolidated project financial statements shall be submitted by the PMO by June 30 each year. FundsFlow and Disbursement Arrangements Funds flow for the Bank loan will follow Bank and MOF requirements. One DA will be established and managedby JPFD. The funds flow will be as follows: 36  The World - - Designated PMO Suppliers and Bank Account (RGE) contractors managed byJPFD GFB LRIP -b (LRIP) * P M O Counterpart funds will be appropriations from central, provincial and local governments, and commercial debt. The appropriations will be provided to the implementing agencies through finance bureaus. Commercial debt will be provided to the PMO through the JPCD and to the LRIP-PMO through the Ganzhou Hongtai Investment Company, Ltd. The Bank loan proceeds will be disbursed against eligible expenditures as given inTable A7.1 Table A7.1: Loan Disbursement Table AmountOf theLoan Category Allocated Percentage of Expenditures (inUS$ M) to be financed (1) CivilWorks A1 (RGE) 182.4 48% B (LRIP) 10.0 25% (2) Goods 5.7 100% (3) Consultants Services, 1.4 100% training and technical assistance studies (4) Front-end Fee 0.5 Amount due under the Loan Agreement Total 200.0 The four disbursement methods, reimbursement, advance, direct payment and special commitment are all available for the project. The statement-of-expenses (SOE) limits will be set upinline withprocurementpost-review threshold, as given inTable A7.2. Table A7.2: SOE Limits Expenditure Category Contracts Equivalent or Less than Civil Works US$4,000,000 Goods US$500,000 FirmConsultant us$200,000 Individual Consultant US$50,000 Training All eligible 37  One DA will be established in JPFD. The authorized allocation o f the DA i s proposed to not exceed US$13 million. From the DA inJPFD, the Bank funds would be disbursedto the project implementing agencies and finally to suppliers and contractors. JPFD will be directly responsible for the management, monitoring, maintenance and reconciliation o f the DA activities o f the project. Supporting documents required for Bank disbursements will be prepared and submitted by project implementing agencies to JPFD for final verification and consolidation before sending to the Bank for further disbursement 1 processing. The flow o f the withdrawal application i s as follows: I Approval World PMo byJPFD Bank Financial Management and Reporting Requirement RiskAnalysis and Conditions The risks with corresponding mitigating measures were identified during assessment and are given in Table A7.3. On the basis o f this, the overall financial management risk-rating o f this project at the appraisal stage is modest. The Financial Management Specialist will monitor the project financial management risk duringproject implementation. Table A7.3: Project Financial Risks and MitigatingMeasures Conditions of Risk Risk Incorporated Risk Rating Mitigating Measures Negotiations, Board or Effectiveness Inherent Risk Countrylevel Modest See the following mitigating measures utilized inthe project. * EntityLevel Modest Some of the P M O staff are new to Bank- financed projects, and it is the first time for the Ganzhou LRIP-PMO to implement a Bank-financedproject. Therefore, well- designed financial management and disbursement training will be arrangedby the PMO andJPFD. 38  Conditions of Risk Risk Incorporated Risk Rating Mitigating Measures Negotiations, Board or Effectiveness Project Level Modest The project will be implemented by P M O andLRIP-PMO, while the financial management and disbursement will be managed and supervisedby JPFD. Previous experience has shown that clear communica- tion and well-planned coordination among these implementing agencies i s critical to successful project implementation. Close monitoring and extensive guidance by the task team from initial preparation stage . throughout the whole implementation process is also necessary to ensure the multi- implementing agencies will cooperate well and efficiently work for this project. I I The Financial Management Specialist will work with the P M O and implementing entities at all levels to improve their budgeting execution and monitoring. Accounting L o w Accounting policies and procedures are already inplace. Checking by the task team at the initial implementation stage to ensure the information system was correctly set up. This shouldbe followed up by regular supervision missions. Internal Control Modest See below. Also, no internal audit arrange- ment for the project. However, disbursement documents will be reviewed by JPFD to secure compliance. The task team will ensure that a mechanism i s inplace to confirm that the Bank loan and counterpart funds are released to the ultimate beneficiaries on a timely basis, and avoid bottlenecks indisbursements. Financial L o w The format o f financial statements is Reporting stipulated by MOF and all the implementing agencies will use this format for project Auditing Audit Office, has extensive experience with StrengthsandWeaknesses Strengths. JPFD has managed two Bank-financed projects and has accumulated extensive experience in project financial management and disbursement, which will benefit the implementation of this project. Additionally, the PMO i s currently implementing the Second Jiangxi Highway Project (JHP2) and will share its experience andtrain the Ganzhou LRIP-PMO. Weaknesses and Action Plan. As shown below, only one significant weakness was identified. The accompanying action plan shows how this was addressed. 39  Significant Responsible Weaknesses Action Plan to Remedy Person Mitigating Measures Ganzhou prefecture The Ganzhou municipal Ganzhou The Ganzhou Government has issued an is poor and its government should provide Municipality official commitment letter to confirm they finance bureau i s the necessary funding to will be providing sufficient counterpart short o f funds. support project funds and implementing the project in construction. comtdiance with Bank's reauirements. ImplementingEntities JPCD has issued authorization to establish the PMO to implement the project. Most o f the PMO staff worked on the proceeding JHP2, and so already have experience with Bank-financed projects. The LRIP-PMO was set up by Ganzhou Hongtai Investment Company Ltd., a wholly owned subsidiary o f Ganzhou Prefecture Government, to implement the LRIP component. The PMO will provide technical support to the LRIP-PMO as well as supervise project implementation. Budgeting Although the cost table was prepared for the project, and the project will prepare its annual implementing plan, from experience the budgeting system within projects i s usually not well maintained or monitored. The Financial Management Specialist will work with the related agencies to improve their budgeting system duringproject implemenation. Accounting The administration, accounting and reporting o f the project will be set up in accordance with Circular #13: "Accounting Regulations for World Bank Financed Projects" issued in January 2000 by MOF. The circular provides in-depth instructions for accounting treatment o f project activities and covers the following: 0 Chart o f account; 0 Detailed accounting instructions for each project account; 0 Standard set o f project financial statements; and 0 Instructions on the preparation o f project financial statements. The standard set o f project financial statements mentioned above was agreed to between the Bank and MOF and applies to all Bank projects appraised after July 1, 1998 and includes the following: 0 Balance Sheet; 0 Summary o f Sources and Uses o f Fundsby Project Component; 0 Statement o f Implementation o f Loan Agreement; 0 Designated Account Statement; and 0 Notes to the Financial Statements. 40  Each o f the implementing agencies will be managing, monitoring and maintaining respective project accounting records. The original supporting documents for project activities will be retainedby the originating implementingagencies. Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform i s one o f the factors critical to the successful implementation o f project financial management. Based on discussions, observations and review o f the educational background and work experience of the staff identified for financial and accounting positions inimplementing agencies, the task team had reservations that some o f the staff were appropriate for the work they are expected to assume. To strengthen the financial management capacity and achieve a consistent quality o f accounting work, a project financial management manual (the Manual) was prepared. The Manual provides detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management and withdrawal application procedures. The Bank reviewed the Manual and found to be acceptable. As some o f the financial staff are new to World Bank projects, a well-designed and focused training program in project financial management and disbursement will be provided by JPFD prior to project effectiveness to all financial and accounting staff to ensure a good understanding andknowledge o fthe following: 0 The Bank's financial management policy and disbursement procedures; 0 Fund/asset/contract management; 0 Format and content o fproject financial statements; 0 Audit requirement; and 0 Onlending andrepaymentmanagement. The implementing agencies will use the computerized financial management system Golden Butterfly (Jin Die), a well-established Chinese accounting software package approved by MOF, for the project. The task team will monitor the processing o f accounting work closely, especially inthe initial stages to ensure complete and accurate financial information will be provided in a timelymanner. Internal ControlandInternalAuditing The related accounting policy, procedures and regulations were issued by MOF and the project will follow these documents. The funds flow will be arranged and monitored through the channel o f the finance bureau and will be based on an expenditure reimbursement basis. There is no formal independent internal audit department for the project. However, this will not impact on the project's financial management as JPFD management, monitoring and annual external audits will serve as the mechanism to ensure that financial management controls are functioning appropriately. 41  FinancialReporting The format and content o fthe project financial statements represent the standard project financial reporting package agreed to between the Bank and MOF, and was discussed and agreed to with all parties concerned. In line with the Financial Monitoring Report (FMR) guidelines, the unaudited project consolidated financial statements will be submitted as part o f the FMR to the Bank on a semiannual basis (prior to August 15 and February 15 o f the following year), and will include the following four statements: 0 Balance Sheet; 0 Summaryo f Sources and Uses o fFundsbyProject Component; 0 Statement o f Implementation of Loan Agreement; and 0 Designated Account Statement. Both the PMO and LRIP-PMO will prepare financial statements on their implemented components, which will then be used by the PMO for preparing the consolidated project financial statements and submitted to the Bank for review and comment on a regular basis. Financial Covenants No additional financial covenants were proposed by the Financial Management Specialist other than the standard financial covenants, (e.g., maintaining project accounts in accordance with sound accountingpractices, audit requirement and SOE), as described inthe legal document. Supervision Plan A detailed supervision plan for this project was included as part o f the China Audit Strategy document. This document takes into consideration o f the size of project and the financial management risk rating o f this project. 42  Annex 8: ProcurementArrangements CHINA: ThirdJiangxiHighwayProject A. General Procurement for the project will be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004, and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The general description o f various items under each category i s described below. For each contract to be financed by the Loan, the different procurement methods, consultant selection methods, the need for prequalification, estimated costs, prior review requirements and time frame are agreed to inthe Procurement Plan. The Procurement Planwill be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurementof Works. Works procuredunder this project for the expressway component (the RGE)will include: (a) 16 subgrade works contracts with an average size o f about US$25 million and four pavement works contracts of about US$15 million; (b) two contracts for electrical and mechanical works (E&M works); (c) and other ancillary contracts for the RGE's traffic engineering works, greening works, construction o f buildings on a slice-and-package basis. There will be two phases o f the LRIP contracts. In the first phase, seven contracts with an average size o f about US$5.1 million were identified and the second phase will be determined later. The E&M works, greening works, and building construction works will not be financed by the Bank and will be procured usingnational competitive bidding (NCB) procedures. Other works estimated to cost at or more than US$12 million equivalent per contract will be procured under the international competitive bidding (ICB) procedures, and works estimated to cost less than US$12 million equivalent per contract under the N C B procedures. The procurement will be done usingthe Bank's current Standard BiddingDocuments (SBD) for all ICB contracts and the Bank-approved Chinese Model Bidding Document (MBD) (dated May 1997 and issued by MOF) for all NCB contracts. In case o f adopting MBDs, all new revisions to the Bank SBD since 1997 will be incorporated. Procurement of Goods. Goods procuredunder this project will include contracts for equipment for expressway management and maintenance and the environment. The total estimated cost for the contracts is about US$8.8 million. International competitive bidding, NCB and Shopping procedures will be applied where applicable. Goods estimated to cost at or more than US$0.5 millionper contract shall be procuredunder the ICB procedures, those estimated to cost less than US$0.5 million equivalent per contract under the N C B procedures, and those estimated per contract to cost less than US$O.l million equivalent under the Shopping procedures. The procurement will be done using the Bank's current SBD for all ICB and the Bank-approved MBD for all NCB contracts. In case o f adopting MBDs, all new revisions to the Bank SBD since 1997 will be incorporated. 43  Selection of Consultants and Training. The domestic supervision consultants (estimated cost o f USS12.1 million for Parts A and B) will be procured usingdomestic procedures. The foreign supervision consultants (estimated cost o f US$0.4 million) will be procured as individuals or firms, on an as-needed basis. Services for firms estimated to cost at or more than US$0.2 million, if any, will be procured under QCBS procedures, and for firms estimated to cost less than USSO.2 million equivalent per contract, under consultant qualification (CQ) procedures in accordance with the provisions of paragraphs 3.7 through 3.8 o f the Consultant Guidelines. Services for individuals will be procured in accordance with the provisions o f paragraphs 5.1 through 5.4 o f the Consultant Guidelines. A program for domestic and overseas training activities with a total budget o f USS1.06 million will be included in the project. Firms will be engaged to manage this process using the same criteria as listed above for consulting services. The Standard Request for Proposals (May 2004) may be used. Short lists o f consultants for services estimated to cost less than US$0.3 million equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraphs 2.6, 2.7 and 2.8 of the Consultant Guidelines. Table A8.1 summarizes the thresholds for the procurement methods and prior review. Table A8.1: Thresholds for Procurement Methods and Prior Review Expenditure ContractValue Threshold Procurement ContractsSubject to Prior Review Category (US$ M) Method (US$ M) 1.Works Equal to or Above US$12 M ICB All contracts (US$455.65 M) Less than US$12 M NCB All contracts equal to or above US$4M (US$34.41 M) 2. Goods Equalto or Above USS0.5 M ICB All contracts (US$5.75 M) Less than US$0.5 M NCB Firstcontract Less than US$O.l M Shopping Firstcontract 3. Services Equalto or above US$0.2 M QCBS, QBS Allcontracts equal to andabove UStS0.2M (firms) CQ All contracts equal to and above US$0.2 M Less than US$0.2 M( f m s ) I C All contracts equal to or above US$0.05 M Individual Total value o f contracts subject to prior review: US$495.51 M Overall Procurement RiskAssessment: Average Frequency ofprocurement supervisionmissions One every six months proposed: (includes special procurement supervision for post- reviewiaudits) Retroactive Financing. Retroactive financing will be required for the LRIP component as construction i s expected to commence in April 2006, approximately three months prior to loan signing. There is also a need to start early construction o f some access roads to the RGE site. It was agreed that any civil works expenditures incurred after March 1, 2006 would be eligible for reimbursement from the loan, as long as the procurement was consistent with the Bank's 44  guidelines. The amount available for retroactive financing o f eligible expenditures for all civil works i s US$5 million. B. Assessment of the Agency's Capacityto ImplementProcurement Procurement activities will be carried out by the World Bank Loan Project Management Office o f the Jiangxi Provincial Communications Department (PMO). It is comprised o f eight departments led by one PMO director and four vice directors. Most o f the staff were transferred from the former PMOS o f previous World Bank- and Asian Development Bank-financed projects. The key staff for procurement appear to be adequate, given the position they were assigned. The LRIP-PMO including about 16 persons was established in Ganzhou for the LRIP component. This agency and its staff are new to Bank projects and therefore inexperienced in the Bank's procurement rules and guidelines. The PMO will assist them with training and other advice. As a supplementary resource to the capacity o f the PMO, the China National Machinery Import & Export Corporation (CMC) was engaged as the procurement agent, and two qualified design institutes were recruited. All have worked previously on Bank-financed highway projects. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project was carried out by the Procurement Specialist during project preparation. The assessmentreviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the JPCD's relevant central unit for administration and finance. Most o f the issuedrisks concerning the procurement component for implementation o f the project were identified and include: 0 The capability o f the LRIP-PMO for the LRIP component and its staffs lack o f knowledge and experience inthe Bank's procurement policies andprocedures; and 0 The Bank's latest procurement policies and procedures, especially new features o f electronic biddingandpublishingcontract award information, andthe Bank's latest versions o f standard procurement documents are new to the PMO. The corrective measures that were agreed are: (a) the PMO shall take full responsibility for handlingall o fthe LRIP's procurement, insteado f the LRIP-PMO; (b) the Bank's latest standard documents related to the project shall be reviewed by the PMO and its procurement agent and design institutes in advance; and (c) the P M O shall complete the selection o f a procurement agent as soon as possible. The overall project risk for procurement i s Average. C. ProcurementPlan The Borrower, at appraisal, developed a Procurement Plan for project implementation that provides the basis for the procurement methods. This plan was agreed between the Borrower and the Project Team on January 6, 2006 and i s available at the PMO's office in Nanchang (Attachment 1). The status o f both the RGE and LRIP designs at appraisal gave confidence that this planwas realistic. 45  The Procurement Plan will be available in the Project's database and posted to the Bank's external website after loan approval. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. Table A8.2 shows the project costs by procurement arrangement as embodied inthe procurement plan. Table A8.2: ProjectCosts by ProcurementArrangements (US$ M) Expenditure ProcurementMethod' Category ICB NCB Other2 NBF3 TotalCost 1. Works 455.65 70.35 0.00 46.11 572.11 (166.63) (25.72) (192.35) 2. Goods 5.75 0.00 0.00 3.01 8.76 (5.75) (5.75) 3. Services 0.00 0.00 14.29 0.00 14.21 (1.40) (1.40) 4. Miscellaneous 0.00 0.00 115.89 0.00 115.89 (0.00) 5.Front-end fee 0.00 0.00 0.50 0.00 0.50 (0.50) (0.50) Total 461.40 73.36 130.60 46.11 711.47 (172.38) (25.72) (1.90) (0.00) (200.00) Figures inparentheses are the amounts to be financed by the loan. All costs include contingencies. Includes civil works and goods to be procured through national shopping, consulting services, training and technical assistanceservices. Not Bank-financed. D. Frequencyof ProcurementSupervision In addition to the prior-review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended supervision missions at six-month intervals to visit the field to carry out post-review o f procurement actions when some procurement activities have been carried out, or when some post-review contracts have been signed and implemented duringthe reviewperiod. 46  Attachment1 I I ProjectProcurementPlanI I Estimated I Prioror I I Ost yade works 10/05/06 I 10/05/09 1 AS 1 K31+000-K42+000,1 lkm 24.23 ICB/Works Prior 2 AS2 K42+000-K5 1+100,9. lkm 23.17 ICB/Works Prior 3 AS3 K51+100-K60+300,9.2km 26.96 ICBiWorks Prior 4 AS4 K60+300-K65+700,5.4km 23.17 ICBiWorks Prior 5 AS5 K65+700-K69+100,3.4km 23.17 ICB/Works Prior 6 AS6 K69+10O-K73+720,4,62km 24.23 ICBiWorks Prior 7 AS7 K73+720-K80+700,6.98km 18.96 ICB/Works Prior 8 AS8 K80+700-K86+500,5.8km 27.39 ICBiWorks Prior 9 AS9 K86+500-K94+600,8. lkm 25.28 ICBIWorks Prior 10 AS10 K94+600-K103+000,8.4km 26.33 ICBiWorks Prior 11 AS11 K103+000-K107+300,4.3km 25.28 ICBiWorks Prior 12 AS12 K107+300-K114+200,6.9km 25.28 ICBiWorks Prior 13 AS13 K114+200-K120+900,6.7km 26.33 ICBiWorks Prior 14 AS14 K120+900-K130+500,9.6km 25.28 ICBiWorks Prior 15 AS15 K130+500-K137+100,6.6km 26.33 ICBiWorks Prior 16 AS16 K137+100-K148+053, 10.95km 25.28 ICBiWorks Prior Subtotal 16 contracts (2)Pavement works 10/05/06 I 10/05/09 17 AP1 K31+000-K65+700,34.7km 16.85 ICB/Works Prior 18 AP2 K65+700-K94+600,28.9km 14.75 ICBiWorks Prior 19 AP3 K94+600-K120+900,26.3km 13.69 ICBiWorks Prior 20 AP4 K120+900-K148+053,27.2km 13.69 ICB/Works Prior Subtotal 4 contracts 58.98 (3) Traffic safety facilities works 01/22/08 10/05/09 21 JT1 K31+000-K65+700,34.7km 2.76 NCBiWorks Prior 22 JT2 K65+700-K94+600,28.9km 2.56 NCBiWorks Post 23 JT3 K94+600-K120+900,26.3km 2.20 NCB/Works Post 24 JT4 K120+900-K148+053,27.2km 2.25 NCB/Works Post Subtotal 4 contracts 9.77 (4) Greening works 01/22/08 10/05/09 25 LH1 K31+000-K65+700,34.7km 4.09 NBF/LCP 26 LH2 K65+700-K94+600,28.9km 3.79 NBF/LCP 27 LH3 K94+600-K120+900,26.3km 3.26 NBFiLCP 28 LH4 K120+900-K148+053,27.2km 3.33 NBF/LCP Subtotal 4 contracts 14.47 (5) M&E Works 01/22/08 10/05/09 Tolling system, telecommunication system, surveillance system 29 JD1 (K31+000 - K147+800) 9.94 NBFiLCP Ventilation, lighting, fire-fighting, 30 JD2 power-supplyingfor tunnels 7.76 NBF/LCP Subtotal 2 contracts 17.70 47  Subtotal 7 contracts 35.58 (2) Secondphase contracts 01/01/07 1015109 To be identifiedlater 25.00 NCBNorks (8) SupervisionConsultant 04/17/06 I 1015109 50 SC3 Domestic supervisionconsultant 0.80 NBFILCP Total of LRIP 61.38 ...Continued 48  Notes: CQ = Selection Basedon Consultant's Qualifications IC = Individual Consultant Selection ICB = International Competitive Bidding LCP = LocalCompetitive Procedures NBF=NotBank-Financed NCB =National Competitive Bidding SOE = Statement of Expenditures 49  Annex 9: Economic and Financial Analysis CHINA: ThirdJiangxi Highway Project A. Preface The economic evaluation o fthe project covers the following two mainproject components: 0 construction of a 117kmexpressway between RuijinandGanzhou (RGE); and 0 upgrading and improvement of the two local roads (about 83 km) under the Local Roads Improvement Program (LRIP). The analysis is based on the actual and forecast data on traffic volume, vehicle operating cost (VOC), user's time cost savings, reductions in accident costs and economic project cost. The main inputs for the evaluation are: 0 capital investment and maintenance costs, reflecting December 2005 prices; 0 the benefit stream, also reflectingDecember 2005 prices, that is comprised o f savings inVOC, travel time savings, andreduction inaccident costs; 0 a capital investment period of 2006-2010 and an evaluation o fbenefits period o f 20 years; and 0 the full benefit starting to accrue in July 2009 for the RGE and January 2008 or after, depending on the road, for the LRIP. This Annex contains: (a) the economic evaluation of the RGE, the LRIP and the overall economic evaluation of the project, including probabilistic risk analysis; (b) a financial analysis o f the RGE and LRIP components; and, (c) a financial analysis o f the JPCD. B. EconomicAnalysis ExpresswayComponent (RGE) For purpose of evaluation, the RGEwas divided into three sections: Length of the Length of the new existingroad(km) highway(km) Ruijin-GanzhouExpressway Section 1:Ruijin- Yudu 72.0 58.6 Section2: Yudu- Ganxian 50.0 39.3 Section 3: Ganxian- Ganzhou 18.0 19.1 TOTAL 140.0 117.0 Sources:JPCD andBankstaff. Overview. Jiangxi province is located in the south center o f China. The nearest seaport for this landlocked rovince i s over 675 km away. The total land area o f Jiangxi province i s about 166,900 km or 68 percent of the size o f the United Kingdom. Jiangxi i s an important inland P transport hub o f China serving the north-south transport corridor and linking the central and western provinces to the coastal areas inthe east. The northernpart o f the province i s a basinthat 50  has the largest freshwater lake inChina (Poyang Lake), which links with the Yangtze River. Much o f southern Jiangxi i s covered by hilly and mountainous terrain. All the main cities and manufacturing centers of the province surround the lake and its tributaries. The capital o f the province i s Nanchang, which i s located at the center o f the province in the north. All the major long-distance transport modes (railways, highways, inlandwaterway and air transport) converge at the city. Compared to coastal regions, Jiangxi i s not an advanced province and most o f the development i s concentrated inthe northern part. Economic development insouthern Jiangxi lags behindthe rest o f the province. Many local prefectures in southern Jiangxi are classified by the State as the poorest areas inChina. Highway Development Plan: Justification for Investment. In China, the rapid economic growth in recent years has caused income and development disparities between the coastal provinces and the inland provinces. To reduce the imbalanced development, the government embarked onthe National Trunk Highway System (NTHS). One o fthe highways i s to horizontally connect Xiamen (the largest seaport o f Fujianprovince in eastern China) to four southern inland provinces (Jiangxi, Hunan, Guizhou and Sichuan). This highway will start inXiamen and end in Chengdu (the capital o f Sichuan). The total lengtho f the highway will be about 2,631 km. The total lengtho f the highway inJiangxi i s about 250 km, which will pass through seven major cities insouthern Jiangxi. TheRGE(117km)is the easternsection ofthe highway inJiangxi andwillbe able to provide the shortest land transport from Nanchang to Xiamen port (625 km), compared to Shanghai port (873km), Ningbo port (770 km, Zhejiang province) and Shenzhen port (675 km, Guangdong province). The construction o f the highway inFujianprovince (260 km)i s expected to be completed in 2006. The RGE i s the only missing section o f the Nanchang-Xiamen Corridor. Completion o f the RGE will improve accessibility for this remote hilly and mountainous region, as well as help balance the income and economic development within the province. Given the important role o f the RGE for the province and for the State, the project has the highest priority in Jiangxi's highway development plan. CurrentCondition of the RGE Corridor (without the project). There are several local roads in the highway corridor, but only two roads (NR 323 and NR 319) would be significantly affected by the RGE. The current pavement conditions o f these two roads are good/ fair. The alignments result in low speeds and high safety risks. For the NR 323 road as an example, the estimated motorized traffic for 2005 was about 7,000-12,000 passenger car units (PCU) per day throughout its length. The non-motorized and other traffic (bicycles, animal carts, small farm tractors andmotorcycles, etc.) are substantial inthe urban areas. Highway NR 323 and RGE Comparisons Section 1 Section 2 Section3 Ruijin-Yudu Yudu-Ganxian Ganxian-Ganzhou RoadClass (old roadI newroad) I1I Expressway I1I Expressway I1I Expressway RoadCondition (old roadI newroad) Fair I Good Fair I Good Fair I Good Terrain Mountainous Hilly Flat Capacity (AADTIday) (oldroadI newroad) 10,000145,000 10,000 1545,000 10,000 145,000 MotorizedTraffic-2005 (AADTIday) 6,380 7,450 8,900 ProposedOpening Year 2009 2009 2009 Note: AADT = Averageannual daily traffic. Source: JPCD. 51  The EstimatedTraffic Growth on the RGE Corridor. The JPCD's estimates of traffic inthe RGE corridor were made on the basis of routine traffic counts and a comprehensive origin and destination (O/D) survey that took place in August 2004 (updated in September 2005). The projections o f normal, generated and diverted traffic were made for 41 zones on the basis o f a conventional growth model. The traffic on the RGE includes diversion from the existing roads. The forecasts were further assessed and confirmed by an independent transport consultant hired by the Bank. Given the historical gross domestic product growth of Jiangxi was 11.7 percent during 1995-2003 and the current forecasts in coming years (about 7-8 percent), the projected traffic growth rates in the project corridor are estimated to be 7.9 percent per year in 2005-10, 5.8 percent per year in 2010-20, and 3.8 percent per year in2020-30. The overall traffic growth rates are summarized as follows: Annual Traffic GrowthRate(percent) Car Bus& Truck Average Current: 1995-2005 24.8 11.6 17.3 Projection: 2005-2010 8.1 7.5 7.9 2010-2020 6.1 5.2 5.8 2020-2030 4.2 3.2 3.8 Source: JPCD. Alignment Alternatives. The RGE feasibility study considered and compared three main alternative route alignments between Ruijin and Ganzhou on the basis o f local economic development, the shortest traveling route, the lowest engineering cost and coordination with the entire highway networks. The other major criteria for selection o f an alternative were to seek an alignment that would: (a) avoid areas that have complex conditions geologically, (b) avoid possible engineering difficulties, and (c) coordinate comments from the local governments and peoples. The preferred alignment was selected because of better coordination with the local economic development plan and local/national transport networks. Details are available in the feasibility studyreports. Traffic on the Highway (withthe project). The RGE is planned to become operational inJuly 2009. Diversion ratios o f the corridor traffic on the RGE are based on information provided by the O/D survey and the traffic studies. They were calculated by usingfinancial VOC for the road users, with the impacts o f the level o f proposed tolls on the new highway, travel distance and experience from other recently Bank-financed highways in China. The results of the analysis indicate that between 55 and 59 percent o f motorized vehicles in 2010, depending on the road section, may be diverted to the new highway. The traffic diversion i s expected to increase linearly inthe first ten years to reach 59-65 percent by the year 2020 and stabilize thereafter. Traffic generated by the new expressway i s assumed to be ten percent o f the normal traffic. This assumption i s consistent with experience on other recent highway projects inChina. No diversion o f traffic from the railway to the new highway was assumed. This i s because the much higher highway tariff does not encourage traffic diversion from the railway (highway tariff is about Y 0.20-0.25 per ton-km compared with Y 0.04-0.06 per ton-km for railway). The highway corridor traffic forecast, by sections, i s summarized as follows: 52  Normal Traffic, by Sections (AADT) Section 1 Section 2 Section3 Ruijin- Yudu Yudu Ganxian - Ganxian - Ganzhou Traffic on the existing corridor: 1995 2,299 2,849 3,227 2000 3,819 5,205 5,941 2001 5,937 7,105 7,977 2002 8,611 9,250 10,264 2003 10,206 11,223 13,953 2004 11,298 12,345 13,699 2005 12,507 13,578 15,067 Traffic without the project: 2010 17,400 19,700 22,900 2020 28,000 34,600 42,600 2030 37,100 50,200 65,800 Traffic with the project: a. Traffic on the existing roads 2010 7,100 8,000 10,300 2020 10,000 12,300 17,400 2030 13,300 17,900 26,900 b. Traffic on the new RGE 2010 10,300 11,700 12,600 2020 17,900 22,300 25,200 2030 23,800 32,300 39,000 c. Traffic diversion (in %) 2010 59.2% 59.4% 55.0% 2020 I 63.9% I 64.5% I 59.2% I 2030 64.2% 64.3% 59.3% Economic Costs. Investment costs were converted to economic costs by the elimination o f price contingency, taxes, custom duty on imported materials and by the application o f shadow price factors. The resulting overall economic cost i s about 90 percent o f the financial cost. Economic Benefits. The economic analysis includes the benefits derived from: (a) VOC savings on the new highway for normal and generated traffic, (b) time savings through relieved congestion on the existing road, and (c) lower accident costs. The benefits resulting fi-om the lower level o f congestion were quantified. The value o f passenger time savings was estimated at Y 1.50 per passenger-hour, on the basis o f updated values from a report on feasibility study methodology for highways in China. The same sources were used for vehicle accident rates on different classes o f roads. The values used inthis analysis are summarized as follows: Economic Vehicle Operating Costs Costs in Y/km (December 2005 prices) With the project Without the project Section 1 Section 2 Section 3 Section 1 Section 2 Section 3 Car 0.978 0.948 0.908 1.097 1.067 1.027 Mediumbus 1.925 1.718 1.479 2.322 2.105 1.838 Large bus 4.582 3.950 3.239 5.157 4.526 3.758 Small truck 2.108 1.833 1.466 2.215 1.949 1.595 Mediumtruck 2.992 2.517 2.042 3.449 2.949 2.399 Large truck 4.337 3.663 2.989 4.896 4.234 3.484 Tractorhailer 6.255 5.173 3.922 7.014 5.869 4.509 Source: P C D . 53  Economic Evaluation. Total costs and benefits streams, Economic Internal Rate o f Return (EIRR) and Net Present Value (NPV) for each section o f the expressway were calculated using the VOC model. The overall EIRR for the RGE i s estimated at 14.2 percent, with the following results for each road section: Economic Evaluation of RGE Yudu-Ganxian 869.4 Ganxian-Ganzhou (173.7) Source: Bank evaluation. The distribution o fthe estimated benefits shows that: 0 road users on this highway corridor are the mainbeneficiaries; 0 cars will receive 61.5 percent o f the project benefits, while trucks will receive 32.9 percent; 0 bus passengers will receive 5.2 percent. These benefits are more likely to accrue to lower- income people; 0 these proportions are approximately the same as the proportion o f traffic; and 0 about 50 percent o f total benefits will accrue to the long-distance traffic. The breakdown o fbenefits i s as follows: Distribution of the Net Benefits (Y million) Road user Road agencv Societv Total benefits 5,439.1 (4,219.3)' 1,2 19.8 By vehicles: Truck- Buses Trailers Total 3,347.0 281.3 1,792.0 5,439.1 61.5% 5.2% 32.9% 0.3% 100.0% Road agency i s negative because it bears the investment cost. Source: Bank evaluation. Sensitivity Analysis. The basic evaluation of the project, by section and on the whole, shows that the selected alignment is economically viable, and the sensitivity tests with respect to a one- and-a-half-year delay in project completion, zero value o f time, no generated traffic and the lower traffic projection on the new highway confirm this result (see below): 54  Sensitivity Tests on the Economic Evaluation of RGE EIRR( O h ) NPV (12%, Y million) Delay the completion to December 2010 13.2 971.6 (a) Highercapital cost (+lo%) 13.1 617.9 (b) Lower benefits (-10%) 13.0 495.9 Combine (a) and (b) 12.0 6.0 Zero value o f passengertime 13.8 1,004.8 Zero generated traffic 13.7 890.0 Lower traffic projection (-20%) 12.9 433.6 Switching values %increase Cost increase to reduce EIRRto 12% 125% Benefit reductionto reduce EIRRto 12% 80% burce: Bank evaluation. The results of sensitivity tests (EIRR inpercent) to cost and benefit variation are summarized below: Sensitivity of Evaluation Results (EIRR in %) to Cost and Benefit Variation -10% 8.7% 10.3% 11.7% 13.0% 14.2% 15.3% 16.4% 17.4% 0% 7.8% 9.4% 10.7% 12.0% 13.1% 14.2% 15.2% 16.2% Economic Analysis-Local Road Improvement Project Component Selection of Highways and I t s Traffic. The first phase of the LRIP (upgrading of Chuengyi - FengzhouRoad and Meicun-Longbu Road) was identified duringpreparation and i s evaluated in this annex. Furtherphases ofthe LRIP will befinalized duringproject implementation. The aim o f the component i s to upgrade low-grade busy roads to Class I1or Class I11with all-weather accessibility. The total length of the two roads i s 83.3 km. The main characteristics are listed below: Details of LRIP Phase IRoads Length Traffic Road class (Km) (AADT 2005) Terrain (old/ new) 1. Chuengyi -Fengzhou Road 48.5 1,299 Mount. IVI I11 2. Meicun-Longbu Road 34.8 664 Mount. IV/ I1 Total 83.3 Source: JPCD. 55  The current traffic level i s inthe range o f 660 to 1,300 vehicles per day. Since the two roads are located inthe same district, the local economic development and traffic patterns are quite similar. The two roads pass through less developed areas and traffic growth rates were conservatively estimated to be 4.0 percent from 2005 to 2010, reduced by 0.5 percent for each o f the five years from 2005 to 2030. There is no generated traffic assumed. Economic Costs and Benefits. Financial costs were converted to economic costs using the same method and factors as for the RGE, with the following results: Financial and Economic Cost For LRIP (Y million) Financial Economic Construction period 1. Chuengyi -FengzhouRoad 188.32 169.82 2006 -2008 2. Meicun-Longbu Road 170.96 154.16 2006 - 2008 Total 359.28 323.98 Source: JPCD. Similar to the RGE, the VOC equations were used to quantify the economic costs and analyze benefits o f the two roads. The main evaluated benefits would be reduced VOCs through the provision o f a better road surface, and the associated upgrading o f road class would also result in higher traffic speeds and improvement o f the road roughness index ensured by all-weather conditions. Economic Evaluation and Sensitivity Analysis. The best estimates o f EIRRsfor the two roads range from 16.2 to 28.7 percent. The overall EIRR and N P V (12 percent) for the LRIP are 22.6 percent and Y 291.7 million, respectively. EIRR andNPVSummaryfor LRIP EIRR(in YO) NPV (12Y0,Y million) 1. Chuengyi -Fengzhou Road 16.2 54.8 2. Meicun-Longbu Road 28.7 236.9 Total 22.6 291.7 Source: Bank evaluation. The risks considered inthe economic evaluation are: 0 slower-than-projected growth o f traffic; 0 higher-than-projected cost of civil works; and 0 lower-than-expected VOC savings. All these risks were analyzed through sensitivity tests and the evaluation results were found to be robust for all o f them. For the project component to be unacceptable (i.e,, an EIRR lower than 12percent or a nil N P V at 12percent discount rate), the benefits would have to fall to less than 49.5 percent o f those inthe base case with no change incosts, or the costs would have to increase to 56  more than 2.03 times those o f the base costs, or the costs would have to increase by 1.34 times and the benefits fall to 66 percent at the same time. Additional benefits not included in the EIRR calculations but expected from the project are: increased income o f rural farmers who live in the poor areas because o f better access to town markets and jobs, and increased accessibility to schools and hospitals. The quantifiable beneficiaries are estimated at: (a) about 2,070 extra children attending school (about ten percent o f 20,752 children inthe directly served areas), and (b) about 3,710 extra people attending health services (1percent o f 370,900). Benefits for each are as follows: TheExtra Benefitsfor LRIP Extra children Extra people attending attending health Minority school/ year services/ year population 1. Chuengyi -Fengzhou Road 740 1,860 6,517 2. Meicun-Longbu Road 1,330 1,850 6,540 Total 2,070 3,710 13,057 Source: JPCD. Overall Economic Evaluation Overall EIRR. The overall EIRR o f the project (including RGE and LRIP) i s 14.6percent and the NPV (12 percent) i s Y 1,511.5 million. They are summarized as follows: Summary of Economic EvaluationResults EIRR(inYO) NPV (YW o n , 12%) Ruijin-GanzhouExpressway (RGE): 14.2 1,219.8 LocalRoadImprovementProgram(LRIP) 22.6 291.7 Total Project 14.6 1,511.5 Source: Bank evaluation. Project Risks. All sections o f the RGE and LRIP show acceptable economic returns. The JPCD has extensive experience inthe construction and operation o f high-grade highways and rural road projects, thereby minimizing the technical risks associated with the implementation o f the project. The main tangible risk i s that o f prolonged delays affecting the construction schedule. The impact o funcertainty was tested through the probabilistic risk analysis. Probabilistic Risk Analysis. To determine the degree o f uncertainty for the project, a probabilistic risk analysis using Monte Carlo techniques was carried out. In a Monte Carlo analysis, each uncertainty factor is allowed to vary at random between set limits and all uncertainty factors are allowed to change simultaneously. Monte Carlo simulation provides probability distributions o f the potential outcomes o f decisions. By analyzing these distributions, we can assess the risk associated with makingvarious decisions. The product o f the analysis is a judgment on the possible range o f the decision variable, and on the likelihood of each value withinthis range. 57  The uncertainty factors associated with the economic evaluation o f the project were identified as: (a) traffic growth rate, (b) traffic diversion ratio to the new expressway, (c) value o f VOC, (d) changes in capital investment, and (e) one-year delay o f opening. The results o fthe probabilistic risk analysis show that the EIRR for the most likely scenario is 13.1percent, the low scenario is 6.9 percent and the high scenario i s 19.7 percent. The standard error o f the mean i s 0.4 percent. The detailed results o f the Monte Carlo test and probabilistic risk analyses are summarized as follows: Summary of Probabilistic RiskAnalyses (percent) Most likely Standard error Range of EIRR EIRR of the mean Ruijin-GanzhouExpressway (RGE): 6.1 - 19.7 12.8 0.4 LocalRoadImprovement Program (LRIP) 20.8 21.8 21.2 0.0 Total Project 6.9-- 19.7 13.1 0.4 Source: Bank evaluation. C. Financial Analysis Preface The financial evaluation of the project i s comprised of three sections: 0 an assessment of the revenue-earning entity (RGE), focusing on consolidated financial statement; 0 an assessment of the nonrevenue-earning entity (LRIP), focusing on financial risk interms o f construction, operation and maintenance; and 0 an assessment o f the financial capacity o f the JPCD to sustain highway activities, focusing on the adequacy o f funding allocations inthe overall road development plan. The financial cost o f capital for the RGE i s assumed to be 5.13 percent for the project (27.2 percent from the Bank at 4 percent, 36.2 percent from the local bank at 6.12 percent and 36.6 percent from the grants at 5 percent). Financial Evaluation of RGE Component The RGE will be operated from its opening for traffic (July 2009) by a financially independent entity, responsible for the day-to-day management, operation and maintenance o f the expressway. The main income o f the RGE would be derived from tolls charged to road users. The Jiangxi govemment will set the toll rates. The Financial Objective. The JPCD has indicated that the financial purpose o f toll collection on the RGE is to repay the project's Bank and domestic loans, cover operating and nonoperating expenses and cover routine maintenance. The toll charges are assumed to increase once every five years (20 percent or an average o f 3.7 percent per year). 58  Financial Forecast Tolls. The toll will be charged on the basis o f vehicle size (small passenger cars, large buses, small trucks, medium trucks, large trucks and trailers) and distance traveled. The same toll i s used on all expressways inJiangxi. The RGE will be operated as an open toll road. Some traffic may not pay a toll, including the toll-exempted vehicles (police, ambulance and military), which are estimated to account for ten percent o f total traffic. The proposed toll rate for the RGE i s as follows: 1 ;;; 7; ;: Toll Charges(Y/vehicle-km) M;;; vehicle vehicle vehicle vehicle ~ Source: JPCD. Operations. The operating costs o f the RGE can be broken down between the working costs (wage and benefits, maintenance, operating materials and supplies, administration, others) and depreciation. All other expenses, including interest payments on the loans, are also taken into account inthe calculation ofthe RGEprofitability. Profitability. It is estimated that the RGE will generate enough revenue over the loan period to achieve the above-mentioned financial objective. However, low profitability will take place in the early years with the repayment o f the Bank and domestic loans. The total interest payment alone in 2012 (Y 173.97 million), for example, i s about 94.9 percent o f the total operating costs (Y 183.31million), or consuming 51.8 percent o fthe total revenue (Y 335.8 million) inthat year. Because o f the low toll growth assumptions, the profitability o f RGE is predicted to be low until 2015 (see the Income statement, page 1o f 3, Attachment 1). Cash Flow. Despite the low profitability and the financial pressure o f the loan repayments, the RGE's cash flow should be sufficient to meet all project needs because o f the large sum o f depreciation reserve, which allows the RGE to meet cash outflows in the early years of operations. In 2012, for example, the total annual depreciation reserve (Y 151.1 million) will represent about 4.7 times the total annual working cost (Y 32.23 million), thereby generating strong internal cash flow and providing sufficient funds for the RGE's operations, maintenance expenses and loan repayments. It i s estimated that the RGE will not require any external cash injection and will be able to maintain cash available at least Y 100million every year for the life of the project (for the sources and applications o f funds, see page2 of 4, Attachment 1). Leverage and Liquidity. The low profitability and highproportion o f borrowings will dilute the equity o f the RGE and cause a debtlequity ratio and debtlcapital ratio (the financial leverage o f the company) above 50 percent until2020. However, this will not affect the liquidityo fthe RGE, as its liquidityis ensuredby the strong cash flow status. The current ratio will be inthe sound range of 1.1and higher, which should be at least 1.O to avoid short-term solvency problems (balance sheet, page 3 o f 4, Attachment 1). Inaddition, the JPCD has reiterated its full commitment to the RGE, guaranteeing its financial viability, releasing an official document to the Bank confirming its full 59  financial support. The major assumptions and results o fthe financial evaluation are shown inpage 4 o f 4, Attachment 1. Financial Internal Rate of Return (FIRR). The low profit margin will impact the FIRR on the capital investment. The financial evaluation shows that the best-estimate FIRR i s expected to be 0.8 percent with N P V o f Y -2,626 million, at the discount rate o f 5.13 percent. Because o f the low profitability in early years, the FIRR and N P V will not change much if completion i s delayed by one year (0.6 percent). Financial Probabilistic Risk Analysis. To determine the degree o f financial uncertainty for the project, a probabilistic risk analysis usingMonte Carlo techniques was carried out. The six most uncertain factors that may affect the financial evaluation were identified: (a) traffic growth rate, (b) the basic toll level, (c) toll charges growth rate, (d) total working costs, (e) capital investment, and (f) delay in opening the highway to December 2010. The risk analysis reveals that the most likely FIRR would be 0.8 percent, while the worst and the best FIRR would, respectively, be -0.6 percent and 1.9percent. Details are summarized as follows. Summary of Financial Sensitivity and Probabilistic RiskAnalysis Financial Sensitivity Tests Financial Simulation and RiskAnalysis Open in Open in Rangeof Most Likely Std. Error of July 2009 Dec 2010 FIRR/ NPV FIRR/ NPV The Mean FIRR(in%) 0.8 0.6 - 0.6 1.9 - 0.8 0.1 NPV (5.13%, Y million) - 2,626 - 2,734 - 3,246 - 2,045 - 2,623 32.7 Source: Bank evaluation. FinancialEvaluation of the LRIP Component The preparation team has some concerns about the availability o f counterpart funds for the LRIP from Ganzhou city prefecture (see Annex 7). The financial evaluation o f the LRIP components therefore focused on the JPCD's capacity to minimize financial risks; i.e., their ability to respond to any lack o f counterpart funds for the construction, including the future maintenance expenditure o f the LRIP roads. JPCD budget forecasts show that the investment and maintenance/operation o f the LRIP would constitute only a small fraction o f the JPCD's fund flows. Based on the JPCD's plan, the capital investment o f the LRIP will require less than 0.6 percent o f the projected annual total JPCD revenue. In addition, the required maintenance and operation expenditure o f the LRIP i s less than 0.13 percent o f the total maintenance expenditure o f the JPCD. These low ratios indicate that the project presents a modest financial risk as regards the availability o f counterpart funds for the construction and maintenance o f the project roads. The details are shown inAttachment 2 and summarized as follows: 60  JPCD: Investments,RevenueandMaintenanceExpenditures(Y million) 2006 2007 2008 2009 2010 Investments and Revenue: LRIP Investments (a) 71.85 143.71 143.72 Total JPCD Revenue (b) 24,186 25,472 26,742 29,286 31,058 Ratios (a)/(b) 0.30% 0.56% 0.54% Maintenance Expenditures: LRIP (c) 0.76 0.78 Total JPCD Maintenance Expenditure (d) 527.0 545.0 564.0 582.0 601.0 Ratios (c)/(d) 0.13% 0.13% Sources: JPCD and Bank evaluation. D. FinancialEvaluationof the JPCD The JPCD provided its financing plan forecasts for total revenue and expenditure during the Tenth Five-Year Plan (loth FYP, 2001-05) and Eleventh Five-Year Plan (llth 2006-10).FYP, Based on the available information, the financing plan has two features: (a) lesser portion o f revenue i s invested innew construction, and (b) less dependency on grants from the government. Based on the JPCD's plan, the total budget for new construction for the1lth FYP will be about 78.4 percent o f total revenue, compared with 85.5 percent o f the total revenue for the loth FYP. The lower percentage on new construction will allow the JPCD to allocate more financial resources to maintenance during 2006-10. The average unit maintenance budget has increased from Y 7,340h-n for the loth FYP to about Y 8,87O/km in the llth FYP. The emphasis on maintenance will reduce deterioration o f the existing road network, causing lower rehabilitation expenditures inthe longrun. Although the JPCD budgets for a grant from M O C every year, a moderate self-financing ratio (total internal cash generation against total revenues) for the 1lth FYP (27.6 percent) will ensure the implementation o f the development plan even without a grant from MOC. This ratio has improved since the loth FYP (21.5 percent). The detailed sources of highway revenue and expenditures for 2001-10 are shown inAttachment 2. With regard to the long-term sustainability of road maintenance with the allocatedresources, the average yearly increase inmaintenance expenditures duringthe 1Oth FYP (5.5 percent) exceeded the growth o f the road network (0.8 percent), which means a net increase in the average maintenance expenditure per kilometer. The trend should continue during the llth FYP with percentages at 2.9 percent and 0.6 percent, respectively. JPCD: Average Increaseinthe RoadNetworkand RoadMaintenanceExpenditures (in YO) 10" FYP 11"FYP (2001-05) (2006-10) Average annual increase inthe roadnetwork 0.8 0.6 Average annual increase inmaintenance expenditures 5.5 2.9 Sources: JPCD and the Bank evaluation. . 61  Attachment 1 Page 1 of 4 ThirdJiangxi Highway Project INCOME RGE STATEMENT - Cy million, year ending December 31) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Traffic (million veh-km)' 209.41 523.52 556.53 591.58 628.89 668.58 710.85 755.81 803.66 854.59 Revenue Tolls 119.00 297.50 316.26 335.79 356.59 378.69 482.02 512.51 544.30 578.15 Others Total ---------- 119.00 297.50 316.26 335.79 356.59 378.69 482.02 512.51 544.30 578.15 ODerating Taxes Business tax 5.95 14.88 15.81 16.79 17.83 18.93 24.10 25.63 27.22 28.91 City tax 0.42 1.04 1.11 1.18 1.25 1.33 1.69 1.79 1.91 2.02 Education levy 0.18 0.45 0.47 0.50 0.53 0.57 0.72 0.77 0.82 0.87 Total -16.37 17.39 18.47 19.61 20.83 26.51 28.19 6.55 29.95 31.80 Net Revenue ---------- 112.45 281.13 298.87 317.32 336.98 357.86 455.51 484.32 514.35 546.35 ODerating Costs Wages and benefits 3.00 7.50 7.73 7.96 8.20 8.45 8.70 8.96 9.23 9.51 Maintenance 6.08 15.21 15.67 16.13 16.61 17.11 17.63 18.16 18.70 19.27 Materials and supplies 1.59 3.98 4.10 4.22 4.35 4.48 4.61 4.75 4.89 5.04 Administration 1.20 3.00 3.09 3.18 3.28 3.38 3.48 3.58 3.69 3.80 Others 0.28 0.70 0.72 0.74 0.77 0.79 0.81 0.84 0.86 0.89 Total working costs 12.15 30.39 31.31 32.23 33.21 34.21 35.23 36.29 37.37 38.51 Depreciation - 151.08 151.08 151.09 151.09 151.21 151.33 151.45 151.58 Total operating costs ---------190.09 12.15 30.39 182.39 183.31 184.30 185.30 186.44 187.62 188.82 Operating Profit ---------356.26 100.30 250.74 116.48 134.01 152.68 172.56 269.07 296.70 325.53 Financial IBRD - 60.87 57.78 54.55 51.19 47.70 44.07 40.30 charges: Local Bank - 119.22 119.22 113.10 106.98 100.86 97.80 91.68 79.44 67.20 Other income (expenses) Profit Before Taxes --(2.74)(39.96)(12.08) 100.30 131.52 17.15 120.08 157.32 202.02 248.76 Income tax2 - 27.21 51.92 66.67 82.09 Net Profit After Taxes -- 100.30 131.52 (2.74) (39.96') 112.08) 17.15 92.87 105.40 135.35 166.67 Working ratio 11 11 10 10 10 10 8 7 7 I Operating ratio 11 11 61 58 55 52 41 39 37 35 The highway will be opened to traffic in July 2009. No income tax during the trial period(2009-10) and netted from the tax credit after 2010. 62  Attachment 1 Page 2 of 4 ThirdJiangxiHighway Project SOURCESAND APPLICATIONS OF FUNDS RGE - + Cy million, year endingDecember 31) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sources: Net profits - 100.30 131.52 (2.74) (39.96) (12.08) 17.15 92.87 105.40 135.35 166.67 Depreciation - 151.08 151.08 151.09 151.09 151.21 151.33 151.45 151.58 State contribution 117.00 175.50 175.50 117.00 JPCD contribution 297.54 446.31 446.31 297.54 Borrowing: IBRD 308.18 462.27 462.27 308.18 Local 409.60 614.40 614.40 409.60 Others Total 1.132.32 1.698.48 1.698.48 1232.62 131.52 148.34 111.12 139.01 168.24 244.08 256.73 286.80 318.25 Amlications: Capital expenditure 1,132.32 1,698.48 1,698.48 1,132.32 5.85 6.03 6.21 6.39 6.58 6.78 6.99 7.19 7.41 Other expenditure Loan repayment: IBRD - 76.73 79.82 83.05 86.41 89.90 93.53 97.30 Local - 100.00 100.00 100.00 100.00 50.00 100.00 200.00 200.00 200.00 Change w l capital - (18.93) (28.42) (2.99) (3.11) (3.31) (3.52) (16.44) (4.86) (5.06) (5.38) Total 1.132.32 1,698.48 1.698.48 1,113.39 77.43 103.04 179.83 182.90 136.11 176.75 292.03 295.66 299.33 Net Funds Flow - 119.23 54.09 45.30 l68.71) (43.89) 32.13 67.33 (35.30) 18.92 Open balance - 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 Closing balance - 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 180.24 D/SCover _- __ __ -- 1.14 1.22 0.81 0.88 1.12 1.17 0.92 0.98 1.05 63  Attachment 1 Page 3 o f 4 Jiangxi Highway Project BALANCESHEET - RGE Cy million, year ending December 31) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Assets: Fixed Assets At cost 4,530.50 4,532.32 4,532.41 4,532.51 4,532.60 4,532.70 4,536.23 4,539.86 4,543.60 4,547.45 Less: Depreciation - 151.08 302.16 453.25 604.34 755.55 906.88 1,058.33 1,209.91 Net fixed assets 4.530.50 4.532.32 4,381.33 4,230.35 4.079.35 3.928.36 3.780.68 3,632.98 3.485.27 3,337.54 Current Assets Inventory 0.60 1.49 1.58 1.68 1.78 1.89 2.41 2.56 2.72 2.89 Receivable 0.30 0.74 0.79 0.84 0.89 0.95 1.21 1.28 1.36 1.45 Cash 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 180.24 Subtotal - - -175.55 _ - -152.43- - - 140.99 120.13 _ 220.99 - 108.69 209.10 174.02 165.40 184.58 Other Assets Total Assets ~- 4.650.63 4.707.87 4.602.32 4.382.78 4.188.04 4.069.35 UEL7.8 3.8o7.00 Liabilities & Euuitv State funds- Equity 1,041.90 1,069.39 1,060.71 1,014.64 996.26 1,056.93 1,096.55 1,098.59 1,230.49 1,393.60 L/T loans: IBRD 1,540.90 1,540.90 1,540.90 1,464.17 1,384.35 1,301.30 1,214.89 1,124.99 1,031.46 934.16 Local 2,048.00 2,048.00 1,948.00 1,848.00 1,748.00 1,648.00 1,598.00 1,498.00 1,298.00 1,098.00 Subtotal 3,588.90 3.588.90 3.488.90 3,312.17 3,132.35 2,949.30 2.812.89 2,622.99 2,329.46 2.032.16 Current Liabilities 19.83 49.58 52.71 55.97 59.43 63.12 80.34 85.42 90.72 96.36 Other Liabilities Total Liabilities & Equity 4.650.63 4.707.87 4.602.32 4.382.78 4.188.04 4.069.35 3.989.78 3.807.00 3.650.67 3.522.12 Debt/ equity ratio 18/22 77123 17/23 71123 76124 74126 73121 11129 66134 60140 Current ratio 6.1 3.5 4.2 2.7 1.8 2.2 2.6 2.0 1.8 1.9 64  Attachment 1 Page 4 of 4 Third Jiangxi Highway Project Assumptions for Financial Forecasts- RGE 1. Normal Traffic (AADT): Small Medium Large Small Medium Large Tractor Car bus bus truck truck truck -Trailer Total Section I: Ruijin- Yudu 2010 5,787 133 258 385 802 2,925 1 10,291 2020 10,216 215 414 616 1,289 5,174 1 17,925 2030 13,730 262 505 751 1,571 6,953 1 23,773 Section 11: Yudu - Ganxian 2010 7,050 249 482 1,028 863 1,988 61 11,721 2020 13,680 442 853 1,811 1,527 3,865 109 22,287 2030 20,250 594 1,147 2,434 2,052 5,721 146 32,344 Section 111: Ganxian- Ganzhou 2010 7,619 278 540 1,147 936 1,987 71 12,578 2020 16,340 497 961 2,034 1,668 3,559 116 25,175 2030 26,616 668 1,292 2,734 2,241 5,268 156 38,975 2. Toll Rates (Yiveh-km): Increase 20% every five years Small Medium Large Small Medium Large Tractor Car bus bus truck truck truck -Trailer 2010 0.40 0.80 1.15 0.40 0.80 1.15 1.50 3. Operating Taxes: a. Business Tax 5% of total revenue. b. City Tax 7% of business tax. c. Education levy 3% of business tax. 4. Operating Cost: Increase 5 %pa. a. Wages and benefits: Y 25,0001 staff/year, 50 staffs/ station, six stations. b.Maintenance (Y millionhn): Routine Major Maintenance (annual) Maintenance (/lo years) RGE 0.13 1.30 c. Operating materials and supplies Y 0.034 million per km. d. Administration 40% o f wage and benefits. e. Others Y 0.006 million per km. f. Depreciation 30 years straight-line method. 5. Incometax 33.0% 6. Borrowing: TheIBRD 4.00% on 20 year maturities, LIBOR US$based single currency including five years grace period. The local Bank 6.12% flexible principal payment. 65  Attachment 2 Jiangxi Highway Revenueand Expenditure During its lofhand llth (Y million) FYP The 10IhFive Year Plan The 11" Five Year Plan 2001 2002 2003 2004 2005 Total 2006 2007 2008 2009 2010 Total Revenue 1. Roadusers' fee 1,408 1.485 1,650 1,853 2,002 8,398 2,162 2,335 2,521 2,723 2,941 12,682 2. MOC subsidy 812 1,055 2,486 2.713 2,100 9,166 2,205 2.300 2,415 2,500 2,625 12,045 3. Toll revenue 450 737 1,709 2,578 2,785 8,259 3,340 3.975 4,583 6,236 6,966 25.100 4. Business sales income 100 506 1,000 28 270 1,904 291 315 340 367 397 1,710 5. Local financing 200 425 200 260 200 1,285 216 233 252 272 294 1,267 6. Bonds 189 770 544 510 429 2,442 463 391 332 349 366 1,901 7. Bankloan 2,970 5,302 4,981 8,711 9,676 31,640 10,865 11,108 11,297 11,638 12,051 56,959 8. Fund-raisedby local 942 726 2,685 1,486 3,107 8,946 3,356 3,464 3,582 3,708 3,845 17,955 9. Externalcapital 59 1,186 1,487 1,483 1,193 5,408 1,288 1,351 1,420 1,493 1,573 7,125 Total 7.130 12.192 16.742 19,622 21,762 24.186 25;?22 26,742 29,286 31.058 136,744 Exmnditure: I. Administration 209 182 268 290 313 1,262 332 338 343 349 355 1,717 2. Major trunkroad 3,232 8,025 9,025 9,066 9,590 38,938 10,478 10,839 11,299 13,346 13,944 59,906 3. Generalmain road 2,199 2,321 2,670 2,392 3,970 13,552 4,176 4,457 4,673 4,887 5,119 23,312 4. Ruralroad 650 699 3,411 4,755 4,240 13,755 4,364 4,564 4,799 5,023 5,257 24,007 5. Roadtransport depot 47 65 76 94 70 352 182 197 213 230 248 1,070 6. Major maintenance 153 164 174 188 196 875 205 212 219 226 234 1,096 I. Medium maintenance 131 140 149 161 168 749 176 182 188 194 200 940 8. Routinemaintenance 109 117 124 134 140 624 146 151 157 162 167 783 9. Managementhearch 44 47 50 54 56 251 59 61 63 65 61 315 10. Repaymentof interest and principle 356 432 795 2,488 3,019 7,090 4,068 4,471 4,788 4,804 5,467 23,598 Total 7.130 12,192 16,742 19.622 21,762 24.186 25,472 26,742 29.286 31,058 136,744 Total RoadNetwork (km) -(a) 60,292 60,696 61,233 61,860 62,307 306,388 62,732 63,144 63,538 63,905 64,322 317,641 Average annual increase -- 0.7% 0.9% 1.0% 0.7% 0.8% 0.7% 0.7% 0.6% 0.6% 0.7% 0.6% Total road maintenance expenditure (million Y)-(b) ' 393 421 447 483 504 2,248 527 545 564 582 601 2,819 Average unit maintenance expenditure ( Y ' O O 0 h ) - (b)/(a) 6.52 6.94 7.30 7.81 8.09 7.34 8.40 8.63 8.88 9.11 9.34 8.87 Average annual increase -- 6.4% 5.2% 7.0% 3.6% 5.5% 3.6% 2.7% 2.8% 2.6% 2.6% 2.9% 'S u m of major, medium and routine maintenance. Actual: 2001-04. 66  Annex 10: SafeguardPolicyIssues CHINA: ThirdJiangxi Highway Project I. ENVIRONMENTALSAFEGUARDISSUES A. Background Table A 10.1 shows the key components o f the project. The RGE will be constructed entirely on a new alignment, while the interconnectingroads will be mostly constructed new alignments. As mentioned earlier, the LRIP roads will mostly follow the exiting road alignments, but would involve strengthening, minor widening and realignment o f the existing low-grade roads to increase their transportation capacity, minimize congestion, increase driving visibility and provide all-season access. The construction o f the RGE i s scheduled to commence in October 2006, although some site access roads may be built earlier, and i s expected to be completed in 2009; the LRIP road construction will commence in April 2006 (Phase I), Phase I1will be and completed in2009. Table A1O.l Major Project Components Items RGE Interconnecting LRIP Roads (Phase I) Expressway Roads Meicun-Longbu Chuengyi - Fengzhou - Road classification Expressway Grade I1 Grade I11 Grade I1 Total length (km) 116.8 - 6 48.5 34.8 Design speed (kmih) 100 80 40 40 Alignment New Partiallynew Partially New Partially New InDecember 2004 the Communications Design Institute of Jiangxi Province (CDIJP) engaged the Research Institute o f Highways (RIOH) of the Ministry of Communications to undertake the preparation o f the environmental impact assessment for the RGE project and they completed the Environmental Assessment (EA). The Terms o f Reference (TOR) for the EA were prepared in December 2004. They were reviewed, revised and approved in early 2005 by the Bank. The first draft Environmental Impact Assessment (EIA) report was prepared and submitted (in Chinese) to the Bank in May 2005, followed by a second draft (EIA and Environmental Management Plan-EMP-in English) inSeptember 2005. The final revised draft reports (EIA, EMP and EA summary), incorporating a late five km change in the alignment to accommodate the RuijinGranneng power plant and the comments bythe Bank were submitted to the Bank and the State Environmental Protection Agency (SEPA) in December 2005. The reports were approved by SEPA prior to negotiations. The LRIP Phase IEA and EMP were prepared by the Nanchang-based Jiangxi Provincial Environmental Protection Scientific Research Institute. The first draft was submitted for review at the time o f the preappraisal mission. The Phase I1roads will have an EIA and EMP prepared ina similar manner. The project is classified as a Category A project since it involves major expressway construction on new alignment, at-grade interconnecting roads to be upgraded on new alignments, increase in 67  noise and motor vehicle air emission, occupationo f fertile andbarrenland, excess waste material disposal, community severance, soil erosion, resettlement, etc. B. Basisof the EA The preparation o f the EA followed the regulatory and policy requirements for environmental assessment o f development projects in China and the World Bank's Safeguard policies. O f the ten Bank Safeguard policies applied to the project, the project triggered Environmental Assessment (OP/BP/GP4.01) and Involuntary Resettlement (OD4.30). The Public Disclosure (BP 17.50) policy also applies. The EA investigations did not find any protected areas or cultural relics along the selected alignment or with the LRIP roads. Relevant international environmental agreements inwhich China i s a signatory were also consulted where appropriate. C. BaselineEnvironment The RGE alignment passes through the low-lying, rolling areas o f south-central Jiangxi Province. The topographic relief i s low in the east and high in the west, with hilly and mountainous terrain, running generally in a northeast-southwest direction. The project area lies inthe mid-subtropical, monsoon zone, with monsoon rains in summer and winter. The area is characterized by four distinct seasons; mild climate, hot summers with high rainfall, short extreme winters, and longnonfrost periods. Field investigations along the RGE alignment identified about 57 villages/townships and nine schools located about 30 to 150 m fiom the expressway center line. These will be vulnerable to increased noise, dust, etc., due to construction activity. The expressway will also cross three rivers but, fortunately, it will not pass through or near any nature reserves or protected areas or disturb any cultural relic sites. The upgrading of the interconnecting roads impacts on one administrative village and no schools. For the local roads, six townships and 20 villages will be impacted. N o schools will be impacted. Baseline air quality monitoring, conducted in MarcWApril 2005, showed average daily nitrogen dioxide (NO$ concentrations between 0.006 and 0.013 milligrams/cubic meter (mg/m3),well below the Class I1 Air Quality Standard o f 0.12 mg/m3. The average daily total suspended particulate matter (TSP) concentrations varied between 0.03 to 0.06 mg/m3against 0.30 mg/m3 Class I1regulatory requirement. The results indicate good existing ambient air quality along the expressway alignment. Only air quality monitoring will be conducted for the LRIP component duringconstruction, and not duringoperation. The day and nighttime noise monitoring results for 28 sensitive locations along the expressway show that all villages meet Class I1[60 dB (A) day and 50 dB (A) night] requirements and some villages can meet Class I[55 dB (A) day and 45 dB (A) night] requirements. Of the schools, only the Yanba Primary School can meet the Class Irequirements. As a comparison, noise along NR 323, whichparallelsthe expressway, exceeds Class I1criteria within 120mo fthe road. The results o f the surface water quality monitoring o f rivers and reservoirs show that for all monitored parameters (pH, oil, suspended solids and permanganate) the results were within their respective Class I1standard. 68  The average soil erosion intensity along the main expressway area i s 1,640 tons/km2/year. The allowable erosion intensity i s 500 tons/km2/year, requiring extensive erosion control during construction and operation. Archeological and Cultural Relic surveys, carried out during the alignment selection and optimization (May and October 2005), covered the main alignment corridors, alternatives, interchanges, interconnecting roads, borrow and disposal areas, etc., and did not identify any threats to any archeological or cultural relics as a result o f the construction o f the Expressway. The nearest identified relics (He Huanwen Tomb, Martyr Tomb, 1942) is a City-level relic about 350 m from the RGE alignment. N o cultural relics were identified inthe LRIP project area. Neither the RGE nor BOT sections pass through or anywhere near natural habitats or protected forests, All vegetation inthe area i s tertiary or younger. The same applies for the Phase ILRIP roads. D. EnvironmentalImpacts According to the modeling results, the soil erosion intensity during construction will reach about 1,706 tons/km2/year, and if no protection measures are taken during the construction period, the total soil lost will be considerably higher than the "no project" scenario. The erosion will continue during construction and the early part o f the operational phase, until such time as the "greening" mitigation measures take effect. Soil erosion for the rural road construction i s also expected to increase. The project will permanently occupy 12,525 mu o f land including 55 percent o f forest and woodland, and about 31 percent o f cultivated land. In addition, the project will occupy about 240 mu o f temporary land for 12 borrow pits. Twenty-four excess material disposal areas will also be required, but these will be rehabilitated. The construction o f the rural and interconnectingroads will require additional land, but as most o f these roads are upgrading o f the existingroads, any permanent occupation o f additional land will be limited. During construction, farm crops, trees and other vegetation on the occupied farmland and woodland will be lost to the project. However, the impact o f the loss o f vegetation cover will be o f short duration as the slopes, interchanges, borrow pits, disposal sites and other temporarily occupied areas will be landscaped and rehabilitated with grass, trees, shrubs, bushes and other vegetation. The landscapingprogram i s expected to result in an increase inthe vegetation cover along the Expressway. The primary impact on the water environment during the construction phase includes discharge o f sanitary sewage from the approximately 12 construction camps, and surface runoff from bridge construction, storage areas, mixing plants, etc. The camps are expected to generate about 2-3 tons o f sanitary sewage per day, which will be treated using septic tanks to minimize the impact on the receiving streams. All construction packages will include a typical design o f a septic tank system. Bridge construction could result in the resuspension o f river sediments and creates the risk o f oil contamination from leaks and spills. Solid wastes from camps, service areas, storage areas, ifnot handled properly, could also create pollution problems. 69  Wastewater from the operational phase will include sanitary sewage from service stations and parking lots, car-washing effluents and pavement runoff. Wastewater from point sources will be treated to the applicable standards before discharge to the receiving streams. Surface runoff will be smaller compared to the receiving river flows and its impact, based on modeling, i s expected to be insignificant. Traffic accidents on the bridges involving the transportation o f hazardous materials could result in spills and pose a risk of water contamination. Analysis o f accident data and prediction indicate that there exists a slight probability o f water contamination from such accidents. However, the consequence could be severe and the spills may impact water quality, aquatic life and ecosystem, and health and safety o f the people livingdownstream o f the spills. The designs will ensure that there is no direct discharge to water from structures. Noise from multiple construction machines and equipment will not exceed the applicable daytime noise standards at 55 m from the machinery, and will meet the nighttime standards at about 250 m. Since there are only a few residents who live within 55 m from the construction sites, the daytime noise impacts will be limited. Nighttime activities are not envisaged. Modeling o f the noise levels inthe 55 villages and seven schools located near the RGE show that all 62 locations would be subject to excess noise to differing degrees. During the construction stage, seven locations (four schools and three villages) will experience higher noise levels. Duringthe operational stage, inthe short term (2009), three schools and21 villages will exceed the noise level by up to 15 dB (A). Inthe medium term, an additional 26 locations will require protection as the noise levels increase with increases in traffic. For the rural road upgrading, with lower but closer traffic, the noise levels will increase but are expected to fall between Class I11and Class IV standards. Fugitive dust from unpaved access roads, disposal areas, materials storage areas, crushers and mixing plants, asphalt plants,materials transport, etc., will be the primary air contaminant during the construction phase. Depending on the terrain and climatic conditions, the impact area can range from 50 m from the source o f dust to 300 minthe case o f asphalt plants. The "with and without" project scenarios predict an increase inN02,but lower carbon monoxide (CO) and total hydrocarbons (THC) emissions during project operation due to increased vehicle traffic and speed. Motor vehicle emissions and air modeling predicts NO2 concentrations below the standards under normal weather conditions but exceeding the standards under unfavorable weather conditions. The expressway will be fully fenced with controlled access and will separate farmland and rural communities from one another. To minimize the impact on the communities and farmers, 203 underpasses will be constructed for use by the local communities. The expressway will improve accessibility to the project areas including a potential increase in tourists. The nearest tourist attraction i s the Tongtianyan Grotto, located about 1.5 km from the expressway. 70  E. Analysis of Alternatives The analysis and selection o f the alignment was carried out in four stages. Duringthe September 2004 feasibility stage, two broad corridors were compared and the South Line scheme was selected based on fewer crossing o f the Gong River, NR 323 and the Ganlong Railway. The selected alignment also met local government requirements. In stage two, within the preferred corridor, two segments o f the alignment, namely, the Yudu and Jiangkou sections were further refined. O f the three comparative schemes in the Yudu section, Yudu Scheme I1was selected based on the least land occupied and lowest resettlement, and associated lower disturbance and impacts. The scheme also met with local government approval. Inthe Jiangkou section, Scheme Iwasselectedbasedontheleastlandoccupation,leastresettlementandleastinterferencewith the Ganlong Railway andNR 323. During the preliminary design stages in September and October 2005, additional alignments were compared as the design evolved and more geotechnical, cost, environmental and resettlement information became available. After thorough analyses, some alternatives were selected based o n lower environmental impacts (e.g. Scheme I1o f Yuyang-Hefeng section for shorter tunnel length and fewer noise-sensitive locations; Scheme Io f the Gong River section for lower impact on the river, etc.), some were selected based on lower resettlement and land occupancy (e.g. Scheme I1 of Yudu Tunnel) and some selections involved tradeoffs between lower construction costs and environmental impact against lower resettlement (Scheme I1 of Sanmen). Inthe cases where alternative alignments were not viable, because o f the proximity to towns or mining easements or railway, full consideration was given to mitigate adverse environmental and resettlement impacts arising out o f the alignment. This was the case for Section K31-K33.5 where the alignment passes through a flood-prone area. Since the alignment could not be shifted and the construction o f the expressway embankment would have worsened the flood levels and the duration o f the floods, the length o f the viaduct was increased to minimize the increase in flood levels. F. Mitigation Measures DesignPhase To control soil erosion, the design includes concrete and stone pitching on steep slopes, interception ditches and landscaping. The stone pitching will have an immediate beneficial effect on soil erosion. The borrow pits will be rehabilitated through the conversion o f the pits into ponds or landscaping. Erosion from the construction waste disposal sites will be controlled byconstructing retainingwalls and waste stockpiles will be coveredwith soil andlandscaped. To control noise, the design includes measures such as noise barriers, soundproof windows, tree planting, etc. to minimize noise impact on schools and villages. Twenty-nine noise barriers, soundproof windows at 22 locations and six plantation belts (total cost o f Y 24.5 million) are included in the mitigation measures. At other locations where the predicted noise levels are below the applicable standards, noise monitoring will be undertaken and, ifnecessary, mitigation measures will beimplementedto control noise. 71  The design also includes wastewater treatment facilities to treat contaminated water from service areas, car-washing operations, repair shops, etc. Community severance i s mitigated through the inclusion o f 203 underpasses, 43 grade separation bridges and numerous culverts and some dedicated footbridges, capable o f accommodatingvehicular and pedestrian traffic. ConstructionPhase The construction workspace will be minimized to reduce the impact o f land occupation. Areas that must be occupied will be revegetated after completion o f the project. Workers will be sensitized to protect trees and wild animals. To minimize soil erosion in disturbed areas, temporary protection measures, such as grass mats, will be applied in places where permanent protection cannot be completed intime for the rainy season. Large and noisy construction activities will be kept at least 50 m away from populated areas. Operation o f noisy construction machinery and activities will be restricted to the daytime and banned at night in sensitive areas. Seven noise barriers are planned to mitigate excessive noise impact during construction. At other places, temporary noise barriers will be constructed to protect the sensitive receptors from the impact o f the constructionnoise. The project will use cofferdam in bridge construction to isolate work areas to minimize the impact on surface water. Where possible, the construction will be scheduled duringthe low-flow periods. Construction camps will be located to minimize disturbance to the nearby communities. Solid wastes will be stored with proper protection and removed from the sites regularly by qualified vendors for proper disposal. The camps will be maintained in sanitary, hygienic and orderly conditions with good housekeeping to minimize health hazards to the workers and adverse impacts to the surrounding environment. Sewage from the camps will be treated in septic tanks to meet the irrigation discharge standards. All construction packages will include a typical design o f a septic tank system. To suppress airborne dust, unpaved access roads and Construction sites will be water sprayed at least twice a day. Mixing stations and hot-mix plants will be located at least 300 m on the leeward side o f the nearest village to minimize dust and smoke impacts. Trucks carrying dust- generating materials, and materials stockpiles will be coveredwith canvas. The EMP will be incorporated into the bid documents and its implementation will be a contractual obligation. Training will be provided to all winning contractors and construction supervision staff on environmental policies and regulations, potential impacts, mitigation measures, daily monitoring andreporting, emergency handling, etc. The LRIP component i s located in the remote hilly region o f Jiangxi and the construction o f the roads will likely be carried out by local contractors who may lack proper managerial and trained staff. Supervision i s expected to be weak and the environmental management o f the rural roads construction may be poor. Therefore, the project provides for the local transport bureau and the winning contractors to receive environmental management training by specialists from the JPCD andlocal EnvironmentalProtection Bureaus (EPBs). The training will encompass environmental protection during construction, noise and dust control, construction camp management, borrow 72  pit and disposal site reclamation, construction safety and health, etc. The monitoring will be carried out by the local EPBs. Operation Phase To minimize the impact from noise, the EMP recommends that infuture, no new school, hospital or other sensitive facilities should be built within 310 m from the central line o f the Expressway or 30 to 50 m from the central line o f the interconnectingroads. Traffic management and motor vehicle safety and emissions control will be enforced to minimize air and noise pollution. Location and types of noise mitigation measures to be implemented are also included for the mid-term period. G. EnvironmentalManagement Plan A standalone Environmental Management Plan (EMP) was developed and includes applicable environmental standards, environmental management system, mitigation measures and monitoring plans for the construction and operation phases. The implementation o f the EMP will be supervised by the Environmental Office o f the JPCD, the PMO, and the Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB), which will be responsible for the Expressway operation. Inaddition, the local EPBs inthe project area will monitor it. The EMP includes environmental monitoring programs for construction and operation phases. The parameters to be monitored include noise, dust, water quality, etc. Duringthe construction phase, environmental monitoring will be conducted on a daily and routine basis using mainly visual observations and portable equipment such as hand-held noise meters, while periodic monitoring will be carried out by accredited institutes using standard methods. Monitoring reports will be compiled at regular intervals and submitted to the PMO, the relevant Provincial agencies andthe World Bank. Duringthe operational phase, noise levels will bemonitored once quarterly, while air and water quality will be monitored twice a year. To ensure proper environmental performance o f the project, the EMP emphasizes institutional building and strengthening and includes detailed programs for training o f technical personnel from the governments, project proponent and operational units, environmental institutions and the contractors. Environmental training for contractors and construction supervisors will be held prior to commencement of construction. Each contractor and construction supervision unit will have full-time, on-site, staff for environmental supervision on a daily basis. The training will cover basic knowledge o f environmental protection and pollution control, the outcome o f the EIA and requirements o f the EMP, environmental management and monitoring, reporting requirements etc. Training for the JPCD, PMO, the Expressway Administration, and environmental institutions will cover environmental management, regulatory framework, applicable environmental standards, mitigation planning, environmental decision-making and pollution control technologies. The cost o f environmental management and mitigation measures i s estimated at about Y 44 million. 73  H. PublicConsultationandInformationDisclosure Two rounds o f public consultation were carried out during the preparation o f the EA: the first round followed the preparation o f EA Terms of Reference (TOR) in MarcWApril 2005 and the second round followed the preparation o f the draft EA reports in September 2005. The consultations involved 646 households and individuals whose opinions were sought through questionnaires, public meetings in villages and with local people's representatives, and interviews with the affected groups and individuals. Among the people surveyed, some 84 percent felt that the expressway and the interconnecting roads were necessary and wished to see the construction start as soon as possible. On the environment, 56 percent o f the people surveyed cited noise and 53 percent cited dust as the major concerns during construction. Most o f the affected people (67 percent) would like to see landscapingand tree plantingas measures to mitigate adverse impacts o f the project. The main public concerns included adequate compensation for land acquisition, resettlement and relocation, timely rehabilitation or restoration o f damaged irrigation systems, construction safety, noise at schools, better access to and exits from the expressway, and sufficient numbers of passageways to cross the expressway. For the rural roads, the public was also concerned about roadblocks and access to services during the road upgrading, student safety, and convenient links with and access to the expressway. The project has responded to the public concerns by: (a) setting up land acquisition and resettlement offices under the JPCD to implement the RAP; (b) developing plans for irrigation system restoration; (c) providing for passageways and crossings for pedestrians and farm vehicles at about every 600 m to mitigate community severance impacts; and (d) providing for noise barriers, noise insulation windows and tree plantingto minimize the impacts o f noise from the Expressway and interconnectingroads. In compliance with the EIA process requirements of the government of China and the World Bank, the draft EIA and EMP reports (RGE, BOT and LRIP) and parts o f the public consultation records were disclosed inpublic places inlibraries and social centers along the project corridor. The project information and availability o f the reports were advertised inthe Gannan Daily, the province-wide newspaper. The public consultation and information disclosure are summarized in the tables below. Additional disclosures were carried out in December 2005 and January 2006. Table A10.2 PublicConsultation Activity By whom, with whom When Where Draft EA TOR, meetings, ByEAteam with affected December 2004 Villages, schools and interviews and people and local agencies interviews along the questionnaires expressway route meetings and interviews residents and local agencies 2005,- individuals September 2005 74  TableA10.3 InformationDisclosure Document Date of disclosure Location Draft EA Reports September 2005 12townships Draft Final EA Reports November 20-22 All county (cityidistrict) libraries in 2005 the affected areas. Resettlement Offices Newspaper Advertising November 22, Gannan Daily I. BOTSection The BOT section connecting the east end o f the RGE to the Fujianborder i s considered link d to the RGE. The EA and EMP for the BOT section are consistent with those o f the RGE. The EA and EMP were disclosed. The contract with the concessionaire states that: "This project (A section) [i.e. the Boa will link with the WB financed RGE, therefore the principles and procedures o f EIA and EMP o f A section will be the same as that o f B section [i.e. the RGE]. The environment will be monitored during construction phase and operation phase and reported to the Bank periodically." The JPCD will therefore ensure that appropriate supervision and monitoring i s conducted throughout the construction phase. The BOT monitoring results will be included in the environmental reports submitted to the Bank covering the RGE. The Bank's missions will supervise the BOT environment at the same time as the RGE supervision. 11. SOCIAL SAFEGUARDISSUES A. ResettlementPlanning The Project Resettlement Office (PRO) contracted CDIJP and Resettlement Research Center o f Wuhan University to assist in the planning process. The census, inventory and socioeconomic surveys were conducted on the expressway and local roads in May 2005 and two more supplementary surveys in July and November 2005. The Anthropology Department of Zhongshan University conducted a social impact assessment for the project in M a y 2005 to assess the social impact o f the entire project. The resettlement planning activities provided a detailed record of project adverse impacts, including land, housing, enterprises, schools and the number of people affected. The socioeconomic survey and ,social impact assessment were conducted through questionnaires, interviews and focus group discussions. They provided a baseline socioeconomic living standard and facilitated the consultation process with key stakeholders in the resettlement planning process. Their feedback was incorporated inthe development o fthe RAP. The RAP contains three components: (a) the RGE; (b) the LRIP; and (c) the BOT section, which i s considered linked to the project. B. ProjectImpacts The RGE and LRIP impacts are summarized inTable A10.4. 75  TableA10.4: Summaryof ProjectResettlementImpacts Items RGE LRIP Total Land acquisition (mu) 12,535 3,094 15.629 Farmland included (mu) 4,521 819 5,340 House demolition (m') 274,370 41,617 315,987 Number o f households relocated 1,541 191 1,732 Number o f enterprises affected 5 0 5 Number o f schools affected 1 0 1 Number o f villages affected by landacquisition 66 20 86 Total number o fpeople affected by land acquisition and resettlement 7,826 2,785 10,611 Total resettlement cost (Y million) 216.93 42.61 259.54 The impact analysis indicates that, given the linear nature o f the project and the efforts at selecting the optimum alignment, the project impacts are quite scattered along the roads. Among the 66 affected villages along the expressway, only two villages will lose more than ten percent o f their farmland, and 31 villages will lose less than five percent o f their farmland. All the 20 villages along the local roads will lose less than five percent o f their farmland. Inconclusion, the loss o f farmland along the expressway i s 4.85 percent, while the farmland loss o f the local roads i s 4.12 percent. The socioeconomic survey indicates that the income structures o f the affected farmers are quite diverse and on-farm income i s only one o f their many sources o f income, so the project will not undulyimpact on the farmers. C. LegalFramework The RAP was prepared in line with relevant Chinese laws, regulations and World Bank Operational Policy 4.12 on Involuntary Resettlement. The most important laws and regulations include: 0 LandAdministrative Law o fthe People's Republic o f China; and 0 Details for Implementation o f the "Land Administrative Law o f the PRC" in Jiangxi Province Taking into consideration the Bank's policy on resettlement, the following principles were adopted for resettlement planning and implementation: 0 compensation will be paid at replacement cost without depreciation; 0 landcompensation will bepaid before acquisition; 0 house compensation will be paid before construction o f the new houses; 0 relocation will be started after completion o fthe new houses; 0 compensation rates must be finalized through consultation; 0 lack o f legal title will not bar a displaced person from his or her entitlements; and 0 the objective o f resettlement i s to enable the displaced people to improve or at least restore their living standards. 76  D. Rehabilitation Strategy and Action Plan With the development o f a market economy in the country, more opportunities are opening for the rural population. Through intensive consultation with the affected farmers, those who lose less than ten percent o ftheir total farmland prefer to receive landcompensation incash and make use o f the money to generate further cash income from secondary and tertiary industries. Farmers inthe two villages whose land losses will be more than ten percent will firstly receive a piece o f land through land redistribution in the village, and then use the land compensation collectively for construction o f a village road, paying part of medical insurance, participation in technical training, completion o f the irrigation systems for orange orchards or increase o f the irrigated land, and opening o fnew cultivated land, etc. About 1,541 households will have to move for construction o f the expressway, among which ninevillages will havemore than 50 households to be relocated. Deductingthe households who do not need to rebuild and do not want to move collectively into the residential area, 28 to 48 households in each village will resettle into newly built residential areas, ranging from nine to 18 households in each village group. The residential areas will be built inthe same villages o f the relocatees. The costs for landleveling o f the house plots, water andpower supply, road access in the new area will be paid from the resettlement budget. All the affected households will move out o f the old houses after completion o fthe new ones. Five enterprises are partly affected. Production will be restored shortly with the cash compensation. One primary school will be rebuilt inthe same village and the relocation will be undertaken duringthe school vacation. E. Management Organization A multilevel organization was established for implementation o f the RAP. This organization includes the Resettlement Offices at the province level, Ganzhou City, the five county/city/ districts, and the levels below. All the offices have been established, staffed and equipped. An independent monitor, the Resettlement Research Center o f Wuhan University, was selected to monitor the resettlement implementation. The RAP contains a detailed staffing list and their detailed responsibilities. A training program i s also proposed for the resettlement staff. F. Public Consultation and Participation Public consultation and participation have played a key role in formulating the RAP. The affected farmers, village leaders and local governments participated in the census and inventory andthey were widely consulted through the socioeconomic survey and social impact assessment on the project alignment to discuss compensation rates, livelihood rehabilitation strategy and relocation sites. Their feedback was incorporated inthe RAP. Public consultations and participation will continue during the RAP implementation. Affected farmers will play a key role in determining the usage o f land compensation funds and the selection o f relocation sites. Project information will be provided to the affected farmers through television, radio broadcast, newspapers, bulletins and posters. The RAP will be summarized into a resettlement information booklet (RIB) and distributed to every affected household prior to the project commencing. It will include the detailed status o f the affected households, the 77  resettlement policy and compensation rates applied in the project, the project implementation progress, the procedures for complaint resolution and any other materials that may be appropriate. A sample RIB i s in the RAP and the final RIB will be reviewed by the Bank prior to distribution. Regular consultationmeetings will be held inthe villages. The RAP was available for review in the PMOS and the local libraries o f all counties/cities/districts in November 2005. The availability o f these reports was advertised in the Gannan Daily on November 20, 2005. The RAP was placed inthe Bank InfoShop inDecember 2005. G. GrievanceRedressMechanism A mechanism was designed for grievance redress under the project. All grievances can be filed inbothwritten andverbal form. Theredress channel lies within the project management systems at village, township, county, city and project resettlement offices. Recording requirements and timefi-ames were established for grievance resolution. This mechanism will be disclosed as part o f the RIB. H. ResettlementImplementationMonitoring Internal and external monitoring was designed as part o f the project. The PROs will carry out internal monitoring o f the resettlement implementation. The monitoring procedures, content, staffing, responsibility, timeframe and reporting are detailed in the RAP. An external monitor was contracted for independent monitoring o f the RAP implementation. A monitoring guideline was developed and attached to the RAP. Independent monitoring will cover physical progress o f the RAP implementation, including compensation payment, allocation o f residential sites, rehabilitation activities and restoration o f infiastructure. The independent monitor will also review the public consultation process, operation of the PROs, grievance redress mechanisms and restoration o f livelihood for the affected farmers. Independent monitoring will be conducted twice a year duringthe project implementation period. I. CompensationandResettlementBudget The RAP contains compensation rates for various impacts. Land compensation rates include land compensation and resettlement subsidy. Different rates were developed for different types o f land in line with the "Land Administration Law." The RAP contains detailed calculation tables and the different compensation rates for structures. Unit rate analysis was conducted for the replacement cost o f different types o f houses. The compensation budget was finalized through negotiation with the affected persons or units and with the management agencies concerned. The RAP contains a detailed resettlement budget that covers all basic resettlement costs, management costs, contingencies and taxes. The basic resettlement cost includes compensation for land, houses, other structures, standing crops and trees, the cost o f land leveling and infrastructure development at new sites, reconstruction of affected infrastructure and relocation subsidies. Management costs, including independent monitoring, are included inthe budget as well. A total contingency o ften percent i s provided inthe budget. The total resettlement budget 78  i s estimated as Y 259.54 million, four percent o f the total project cost for the expressway. Fund disbursement procedures and monitoring mechanism are designed and documented inthe RAP. J. Linkage The construction o f the 3 1km BOT expressway fiom the Fujianborder at Ailing to Ruijinat the east end o f the RGE will be started mid-2006 by a HongKong Company. The preparation team determined that this BOT section i s linked to the RGE component o f the project, which means that the Bank's safeguard policies will be applied. This i s embodied in the contract with the concessionaire, which states: "Since this project (A section) [i.e. the BOT] will link with the World Bank financed Ruijin-Ganzhou Expressway, the principles, procedures and compensation rates o f resettlement will be the same as that o f the B section [ i e . the RGE]. The resettlement activities will be monitoredboth internally and externally and reportedto the Bank periodically." For the construction o f the BOT, 3,061 mu o f landwill be expropriated and 47,511 m2o f houses will be demolished. The RuijinCity Government will execute the resettlement implementation with the same compensation policies and rehabilitation strategies as those set forth in the RAP for the RGE. The same monitoring system, internal and external, will apply. An abbreviated Resettlement Plan was prepared and attached to the project RAP as Annex 2. The legal agreement for the project contains a covenant obliging JPCD to implement the EA, EMP and RAP for the BOT section. The Huangjin Interchange at the west end of the RGE was put into operation in 2004. All the resettlement activities were completed satisfactorily in August 2003. The resettlement policies and compensation rates were consistent with those set forth inthe World Bank-financed Second Jiangxi Highway Project RAP. No issues remain. K. Resettlement Policy Framework Two roads were selected for Phase Iof the LRIP component. Their resettlement i s included in the project RAP. InPhase I1additional roads will be selected. For this purpose, a Resettlement Policy Framework (RPF) was prepared by the JPCD and submitted to the Bank in November 2005. An Abbreviated Resettlement Planwill be requiredwith the Phase I1roads. L. Indigenous Peoples Jiangxi Province has 112,800 ethnic minorities, constituting 0.27 percent of the total population. A census survey was undertaken with the social impact assessment (SIA) by the Anthropology Department o f Zhongshan University in M a y 2005. The total population in the project area i s about three million, among which 15,770 are ethnic minorities o f She, Miao, Tibetan, Zhuang, Man,Hui,Tong, (0.5 percent ofthe total population). The ethnic minorities are scattered inthe urbanareas, and concentrated inthree o f the 63 villages or six o f the 211 village groups inthe rural areas. Inthe six village groups, more than 30 percent o f the people are ethnic minorities and most o f them are She. The She people used to be Han until 1987 when they were informed that if their forefathers were She, they could also be She. 79  The Yao were moved by the government from GuangdongProvince inthe 1950s. They live ina village in Quannan County, about 300 km from the RGE project area. All the ethnic minorities were harmonized with the Han. The She do not have a different language from the Han. On the basis o f the SIA and due to the levels o f integration and lack o f distinctive culture, no Indigenous Peoples Action Plani s required. M. SocialImpact Assessment The RGE SIA focused on social impacts o f the project on the communities in the project area and on consultation with the various stakeholders for improvement o f the project design. Particular attention was paid to vulnerable groups, such as the poor, sick, disabled and children with parents working out o ftown. The SIA showed that the project would benefit local people and promote the local economy. Ganzhou City Prefecture i s a poor area in Jiangxi Province, and the income o f the rural population inthe project area i s about 50 percent lower than the average income o f Ganzhou City Prefecture. The SIA showed that people are poor due to a low level o f education, to poor health andto their traditional closed societies. It was for this reason-improving the economic level o f poor communities-that the LRIP selection criteria included the "expected positive impact o f the project on population access to education, health and other production and/or commercialization o f local products." The SIA confirmed that this project would improve the transportation conditions and improve the local economy. In particular, it would be helpful for children to be cared for while their parents are working out of town. It reflects the major concerns of the villagers for land acquisition, relocation, road construction and road safety. The SIA was sent to the design institutes, P M O and PRO. Comments and suggestions on resettlement issues were well incorporatedduringthe process o f RAP preparation. An SIA was done for the Phase ILRIP roads. For the Phase I1roads, a census survey o f displaced persons and valuation o f assets will be undertaken for an Abbreviated Resettlement Plan; or a socioeconomic study and baseline census will be undertaken for a Resettlement Plan. These are described inparagraphs 8 and 9 o fthe LRIP RPF. 80  Annex 11:Project Preparation and Supervision CHINA: Third Jiangxi Highway Project I Start Negotiations 105/16/06 1 Board Presentation 06/27/06 Signingo f LoanAgreement 07/27/06 Loan Effective 09/27/06 Key institutions responsible for preparation o f the project: 0 The World Bank Loan Project Office (or The World Bank Loan Project Management Office) of Jiangxi Provincial Communications Department-the client o f the project; 0 Jiangxi Provincial Communications Design Institute-the designer o fthe project; 0 The Highway Science and Research Institute o f MOC-consultant for environment; 0 The Involuntary Resettlement Research Center o f Wuhan University-consultant for resettlement; 0 ZhongshanUniversity-consultant for preparing the Social Impact Assessment; 0 Wuhan Zhongjiao Engineering Consulting Co., Ltd under the 2nd Highway Survey & Design Research Institute o f MOC-domestic design consultant; 0 TYPSA Consulting Engineers & Architects, Spain-foreign designreview consultant; 0 Jiangxi Provincial Communications Scientific Research Institute-consultant for studies on roadside safety and tunnel safety; 0 Jiangxi Provincial Center for Disease Prevention and Control-consultant for HIV/AIDS education; and 0 Ganzhou Hongtai Investment Co. Ltd.-client o f the LRIP. 81  Bankstaff and consultants who worked onthe project included: Gao Boping Roads Engineer Beijing Jean-Marie Braun Highway Engineer/Institutional (Consultant) Paris Carlos Escudero Country Lawyer Beijing Yi Genn Financial Mananement/Disbursements Beiiinn 82  Annex 12: Documentsinthe Project File CHINA: Third JiangxiHighway Project 0 Evaluation Report on Cultural Relics Resource -Ruijin-Ganzhou Expressway, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute, October 20, 2005 0 Evaluation Report on Cultural Relics Resource - Chuengyi -Fengzhou Section, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute,November 26,2005 0 Evaluation Report on Cultural Relics Resource - Meicun-Longbu Section, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute, November 26,2005 0 Environmental Impact Assessment - Chuengyi County-Fengzhou Highway, by the Jiangxi Provincial Environmental Protection Scientific Research Institute, October 2005 0 Environmental Impact Assessment - Meicun-Longbu Highway, by the Jiangxi Provincial Environmental Protection Scientific Research Institute, November 2005 0 Environmental Impact Assessment - RGE (Fifth Version), Research Institute o f Highways, Ministry ofCommunications, January 2006 0 Environmental Impact Assessment - BOT (First Version), Research Institute of Highways, MinistryofCommunications, September 2005 0 Environmental Management Plan - RGE (Fifth Version), by the Jiangxi Provincial Communications Department, January 2006 0 Environmental Management Plan - BOT (First Version), Research Institute o f Highways, MinistryofCommunications, September 2005 0 Environmental Summary - RGE, Jiangxi Provincial Expressways Administration, February 2006 0 Feasibility Study Report - Chuengyi -Fengzhou Road 0 Feasibility Study Report-Meicun-Longbu Road 0 Feasibility Study Report -RGE 0 Preliminary Design Review Report, M O C Design Institute #2, September 2005 0 Preliminary Design Review Report, TYPSA Consultants, November 2005 0 Phase I1Design Review Report, TYPSA Consultants, May 2006 0 Resettlement Action Plan, November 2005 0 Resettlement Policy Framework, November 2005 0 Response o f JPCD to Preliminary Design Report from TYPSA Consultants, December 2005 0 Review of Traffic Forecasts, Parsons Consultants, August 2005 0 Social Impact Assessment by Zhongshan University, M a y 2005 0 Terms o f Reference -Tunnel Safety Study, January 2006 0 Terms o f Reference - Roadside Safety Study, January 2006 0 Terms o f Reference - Electronic Toll Collection Study, January 2006 83  Annex 13: Statement of Loans and Credits CHINA: Third Jiangxi Highway Project Differencebetween Original Amount in US$Millions expected and actual Project FY Purpbse disbursements ID IBRD IDA SF GEF Cancel. Undisb. Orig. Rev'd Frm' PO75732 2006 CN-Shanghai UrbanAF'L2 180.00 0.00 0.00 0.00 0.00 180.00 8.33 0.00 PO70519 2006 CN-FuzhouNantaiIslandPen-UrbanDev 100.00 0.00 0.00 0.00 0.00 100.00 1.33 0.00 PO84742 2006 CN-IAILI11 200.00 0.00 0.00 0.00 0.00 179.50 2.98 0.00 PO85124 2006 CN-Ecnomic Reform Implementation 20.00 0.00 0.00 0.00 0.00 20.00 0.00 0.00 PO85333 2006 CN-Fifth Inland Waterways 100.00 0.00 0.00 0.00 0.00 99.75 7.15 0.00 PO86629 2006 CN-Heilongjiang Dairy 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 PO94388 2006 CN-HFC-23 Emissions Reduction 0.00 0.00 0.00 0.00 0.00 991.62 0.00 0.00 PO96158 2006 CN-Renewable Energy I1(CRESP 11) 86.33 0.00 0.00 0.00 0.00 86.33 0.00 0.00 PO67828 2005 CN-Renewable Energy Scale-up Program 87.00 0.00 0.00 0.00 0.00 86.57 21.75 0.00 PO68752 2005 CN-Inner Mongolia Highway &Trade Comd 100.00 0.00 0.00 0.00 0.00 89.46 1.96 0.00 PO67625 2005 CK-GEF-RenewableEnergy Scale-up 0.00 0.00 0.00 40.22 0.00 38.22 -0.35 0.00 Program PO69862 2005 CN - AgriculturalTechnology Transfer 100.00 0.00 0.00 0.00 0.00 94.50 8.13 0.00 PO71094 2005 CN - Poor RuralCommunities Development 100.00 0.00 0.00 0.00 0.00 99.66 23.86 0.00 PO57933 2005 CN-TAI BASK URBAK ENVMT 61.00 0.00 0.00 0.00 0.00 46.00 4.93 0.00 PO72721 2005 CN-GEF-HeatReform & Bldg Egy Eff. 0.00 0.00 0.00 18.00 0.00 16.20 1.52 0.00 PO75730 2005 CN-HUNAN URBANDEV 172.00 0.00 0.00 0.00 0.00 165.14 10.14 0.00 PO81346 2005 CN-LIUZHOU ENVIROKMENTMGMT 100.00 0.00 0.00 0.00 0.00 96.50 0.75 0.00 PO81161 2005 CN-CHONGQING SMALL CITIES 180.00 0.00 0.00 0.00 0.00 179.10 4.52 0.00 PO86505 2005 CN-NINGBO WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 120.46 -6.21 0.00 PO81749 2004 CN-Hubei Shiman Highway 200.00 0.00 0.00 0.00 1.00 136.14 47.14 0.00 PO65035 2004 CN-Gansu & Xinjiang PastoralDevelopment 66.27 0.00 0.00 0.00 0.00 43.48 11.90 0.00 PO65463 2004 CN-Jiangxi IntegratedAgric. Modern. 100.00 0.00 0.00 0.00 0.00 90.50 29.18 0.00 PO66955 2004 CN-ZHEJIANG URBANENVMT 133.00 0.00 0.00 0.00 0.00 108.59 1.03 0.00 PO75728 2004 CN-GUANGDONG/PRD UR EKVMT 128.00 0.00 0.00 0.00 0.64 103.13 -7.43 0.00 PO84003 2004 CN-GEF GUANGDONG PRD URBENV 0.00 0.00 0.00 10.00 0.00 10.00 1.48 0.00 PO69852 2004 CN-WuhanUrbanTransport 200.00 0.00 0.00 0.00 1.00 170.79 156.49 0.00 PO75602 2004 CN-2ndNational Railways(Zhe-Gan Line) 200.00 0.00 0.00 0.00 1.00 87.58 -39.75 -40.75 PO75035 2004 CN - GEF-Hai BasinIntegr. Wat. Env.Man. 0.00 0.00 0.00 17.00 0.00 14.00 5.65 0.00 PO77137 2004 CN-4th InlandWaterways 91.00 0.00 0.00 0.00 0.46 77.14 2.76 2.26 PO73002 2004 CN-Basic EducationinWesternAreas 100.00 0.00 0.00 0.00 0.00 64.31 47.32 0.00 PO77615 2004 CN-GEF-Gansu & Xinjiang PastoralDevelop 0.00 0.00 0.00 10.50 0.00 8.32 5.47 0.00 PO67337 2003 CN-2nd GEFEnergy Conservation 0.00 0.00 0.00 26.00 0.00 827 25.43 0.00 PO76714 2003 CN-2ndAnhuiHwy 250.00 0.00 0.00 0.00 0.00 146.81 37.91 0.00 PO68058 2003 CN-YixingPumpedStorage Project 145.00 0.00 0.00 0.00 0.00 120.59 37.69 0.00 PO58847 2003 CN-3rd Xinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 57.22 32.22 0.00 PO40599 2003 CN-TIANJIN URBDEV I1 150.00 0.00 0.00 0.00 0.00 134.80 29.60 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT AF'Ll 200.00 0.00 0.00 0.00 0.00 145.88 32.75 0.00 PO70441 2003 CN-Hubei Xiaogan Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 41.71 8.38 0.00 PO68049 2002 CN-Hubei HydropowerDev inPoor Areas 105.00 0.00 0.00 0.00 0.00 26.84 11.17 0.00 PO71147 2002 CN-TuberculosisControl Project 104.00 0.00 0.00 0.00 0.00 57.43 24.82 0.00 84  PO58846 2002 CN-Natl RailwayProject 160.00 0.00 0.00 0.00 0.00 22.98 22.15 0.00 PO60029 2002 CN-GEF-Sustain. Forestry Dev 0.00 0.00 0.00 16.00 0.00 8.99 12.07 0.00 PO70459 2002 CN-Inner Mongolia Hwy Project 100.00 0.00 0.00 0.00 0.00 33.51 2.51 0.00 PO64729 2002 CN-SustainableForestry Development 93.90 0.00 0.00 0.00 0.00 36.74 15.42 0.00 PO58845 2001 CN-Jiangxi I1Hwy 200.00 0.00 0.00 0.00 54.77 26.50 71.27 0.00 PO56596 2001 CN-Shijiazhuang UrbanTransport 100.00 0.00 0.00 0.00 0.00 62.14 62.14 0.00 PO56516 2001 CN-Water Conservation 74.00 0.00 0.00 0.00 0.00 4.86 3.45 0.00 PO56199 2001 CN-3rdInlandWaterways 100.00 0.00 0.00 0.00 0.00 34.94 14.11 0.00 PO51859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 32.71 28.11 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION CONTROL 105.50 0.00 0.00 0.00 0.00 50.08 50.08 0.00 PO45915 2001 CN-Ummqi UrbanTransport 100.00 0.00 0.00 0.00 0.00 33.14 33.14 0.00 PO42109 2000 CN-BEUING ENVIRONMENT I1 349.00 0.00 0.00 25.00 0.00 240.10 226.15 0.00 PO45910 2000 CN-HEBEI URBANENVIRONMENT 150.00 0.00 0.00 0.00 0.00 51.80 38.80 0.00 PO49436 2000 CN-CHONGQING URBAN ENVMT 200.00 0.00 0.00 0.00 3.70 113.68 103.71 0.00 PO56424 2000 CN-Tongbai Pumped Storage 320.00 0.00 0.00 0.00 100.00 41.78 133.28 0.00 PO58843 2000 CN-Guangxi Highway 200.00 0.00 0.00 0.00 19.70 12.54 29.91 5.21 PO64924 2000 CN-GEF-BELTING ENVMT I1 0.00 0.00 0.00 25.00 0.00 21.69 24.25 20.06 PO64730 2000 CN-Yangtze Dike Strengthening 210.00 0.00 0.00 0.00 0.00 76.67 76.67 76.67 PO58844 2000 CN-Henan Provincial Hwy 3 150.00 0.00 0.00 0.00 0.00 25.64 24.91 0.00 PO36953 1999 CN-HEALTH IX 10.00 50.00 0.00 0.00 0.40 20.05 18.92 12.14 PO42299 1999 CN-Tec Coop Credit N 10.00 35.00 0.00 0.00 0.00 20.86 19.02 0.00 PO43933 1999 CN-SICHUAN URBANENVMT 150.00 2.00 0.00 0.00 0.00 61.34 59.35 59.53 PO57352 1999 CN-RURAL WATER N 16.00 30.00 0.00 0.00 0.00 3.85 4.34 0.63 PO46564 1999 C N - Gansu & Inner MongoliaPoverty Red. 60.00 100.00 0.00 0.00 13.30 3.59 17.43 -7.98 PO46829 1999 CN-RenewableEnergy Development 100.00 0.00 0.00 0.00 0.00 2.62 2.62 2.62 PO41268 1999 CN-Nat Hwy4/Hubei-Hunan 350.00 0.00 0.00 0.00 0.00 33.11 33.11 0.00 PO49665 1999 CN-AnningValley Agric. Development 90.00 30.00 0.00 0.00 0.00 1.18 2.32 -1.02 PO51705 1999 CN-Fujian I1Highway 200.00 0.00 0.00 0.00 0.00 24.82 24.82 4.17 PO51856 1999 CN-Accounting Reform& Development 27.40 5.60 0.00 0.00 0.00 9.65 9.59 0.23 PO51888 1999 CN-GuanzhongIrrigation 80.00 20.00 0.00 0.00 0.00 7.42 7.80 0.00 PO38121 1999 CN-GEF-RENEWABLEENERGY 0.00 0.00 0.00 35.00 0.00 15.68 34.77 22.41 DEVELOPMENT PO03614 1998 CN-GuangzhouCity Transport 200.00 0.00 0.00 0.00 20.00 80.09 100.09 50.75 PO03619 1998 CN-2nd InlandWaterways 123.00 0.00 0.00 0.00 37.00 7.09 44.09 7.09 PO03606 1998 ENERGY CONSERVATION 63.00 0.00 0.00 22.00 0.00 10.13 11.00 0.00 PO03566 1998 CN-BASIC HEALTH (HLTH8) 0.00 85.00 0.00 0.00 0.00 14.07 9.80 0.00 PO36414 1998 CN-GUANGXI URBANENVMT 72.00 20.00 0.00 0.00 13.48 33.48 46.38 7.95 PO03539 1998 CN-Sustainable Coastal ResourcesDev. 100.00 0.00 0.00 0.00 2.06 30.56 32.62 17.91 PO45788 1998 CN-Tri-Provincial Hwy 230.00 0.00 0.00 0.00 5.04 0.97 6.01 0.00 PO03637 1997 CN-NAT'L RURALWATER 3 0.00 70.00 0.00 0.00 0.00 0.22 3.44 3.02 PO36405 1997 CN-Wanjiazhai Water 400.00 0.00 0.00 0.00 75.00 4.51 79.51 4.51 PO44485 1997 SHANGHAIWAIGAOQIAO 400.00 0.00 0.00 0.00 0.00 44.63 44.63 44.63 PO03594 1996 CN-GansuHexi Comdor 60.00 90.00 0.00 0.00 0.00 41.97 45.12 18.61 Total: 9,842.40 537.60 0.00 244.72 348.55 5,844.92 2,220.97 311.25 85  CHINA STATEMENT OF IFC's Held andDisbursedPortfolio (US$ M) Committed Disbursed FY Approval Company IFC IFC 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 2005 BCCB 0.00 59.20 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 11.89 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.04 0.00 0.00 0.00 8.04 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 BabeiNecktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank o f Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank o f 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 3.00 0.00 0.00 0.00 0.15 0.00 0.00 2002 CDH ChinaFund 0.00 2.12 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 18.00 0.00 0.00 0.00 4.60 0.00 0.00 2003 CSMC 0.00 7.17 0.00 0.00 0.00 7.17 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 11.47 0.00 0.00 0.00 0.94 0.00 0.00 2005 ChangyuGroup 0.00 18.09 0.00 0.00 0.00 18.07 0.00 0.00 1998 ChengduHuarong 4.04 3.20 0.00 3.91 4.04 3.20 0.00 3.91 2004 ChinaGreen Ener 20.00 0.00 0.00 0.00 11.50 0.00 0.00 0.00 2004 ChinaRe Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 ChinaWalden 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 0.00 0.00 2004 Colony China 0.00 16.07 0.00 0.00 0.00 4.68 0.00 0.00 2004 Colony ChinaGP 0.00 0.84 0.00 0.00 0.00 0.22 0.00 0.00 2006 Conch 80.51 40.43 0.00 0.00 80.51 0.00 0.00 0.00 2002 Darong 10.00 1.50 0.00 8.00 6.67 1.50 0.00 5.33 2006 Deqingyuan 0.00 2.82 0.00 0.00 0.00 0.00 0.00 0.00 1994 Dynamic Fund 0.00 5.43 0.00 0.00 0.00 3.17 0.00 0.00 2005 FangXin SHMT 7.20 0.00 0.00 4.80 7.20 0.00 0.00 1.42 2005 FangXin Limited 0.00 4.67 0.00 0.00 0.00 4.67 0.00 0.00 2005 FangXin SHDX 1.80 0.00 0.00 1.20 0.60 0.00 0.00 0.12 2005 FangXin SZFX 1.20 0.00 0.00 0.80 1.20 0.00 0.00 0.24 2004 Fenglin 19.00 0.00 6.00 14.00 14.77 0.00 6.00 13.79 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.23 0.00 0.00 0.00 50.23 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 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 JiangxiChenming 50.00 12.90 0.00 40.00 40.00 12.90 0.00 20.00 2006 LaunchTech 0.00 8.35 0.00 0.00 0.00 0.00 0.00 0.00 2001 MaanshanCarbon 6.00 2.00 0.00 0.00 6.00 2.00 0.00 0.00  2005 MaanshanCarbon 11.00 1.oo 0.00 0.00 5.00 1.oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 Minsheng Bank 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 I996 Nanjing Kudo 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 Nanjing Kudo 34.00 2.23 0.00 0.00 34.00 2.23 0.00 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 0.00 1995 Newbridge Inv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00 2005 North Andre 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1997 Orient Finance 0.00 0.00 2.86 3.57 0.00 0.00 2.86 3.57 2003 PSAM 0.00 1.98 0.00 0.00 0.00 0.00 0.00 0.00 RAKChina 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 SAC 3.OO 1.60 0.00 0.00 0.00 0.00 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2000 SEAF SSIF 0.00 3.82 0.00 0.00 0.00 2.14 0.00 0.00 2004 SHCT 40.00 0.00 0.00 30.00 30.86 0.00 0.00 23.14 2004 SIBFI 0.00 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 ShanghaiKrupp 21.00 0.00 0.00 41.99 21.00 0.00 0.00 41.99 2006 ShanshuiGroup 0.00 5.50 0.00 0.00 0.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 2002 Sino Gold 0.00 2.40 0.00 0.00 0.00 2.40 0.00 0.00 2005 Stora Enso 50.00 0.00 0.00 25.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 0.00 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 12.19 0.00 0.00 0.00 12.19 0.00 0.00 0.00 2004 Wumart 0.00 3.24 0.00 0.00 0.00 3.24 0.00 0.00 2003 XACB 0.00 19.74 0.00 0.00 0.00 2.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2003 Zhengye-ADC 15.00 0.00 0.00 7.00 11.59 0.00 0.00 5.41 2002 Zhong Chen 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 Total portfolio: 552.57 443.40 127.75 186.27 416.95 324.85 8.86 123.80 87  FYApproval Company Approvals PendingCommitment Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2004 SIBFI 0.00 0.00 0.00 0.00 2004 CCB-MS NPL 0.00 0.00 0.00 0.00 2002 ZhongChen 0.00 0.00 0.00 0.03 2004 ChinaGreen 0.00 0.00 0.01 0.00 2006 LaunchTech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2002 Sin0 Mining 0.01 0.00 0.00 0.01 2003 PeakPacific2 0.00 0.01 0.00 0.00 Total pending commitment: 0.02 0.02 0.03 0.04 88  Annex 14: Country at a Glance CHINA: Third Jiangxi Highway Project East Lower- POVERTY and SOCIAL Asia & middle- Chlna Pacific income 3eveiopment diamond' 2004 Population, mid-year (miliions) 1296.5 1,870 2,430 GNipercapita (Atlasmethod, US$) 1290 1,280 1,580 Lifeexpectancy GNI (Atlas method, US$ biliions) 1672.5 2,389 3,847 - Average annual growth, 1998.04 Popuiation (%) 0.7 0.9 10 Laborforce (%) 0.8 11 0.7 GNI Gross per primary M o s t recent estimate (latest year available, 1998-04) capita nrollment Poverty (%of populationbelow nationalPOvertyline) 5 Urbanpopulation (%of totalpopulation) 40 41 49 Lifeexpectancyat birth (pars) 71 70 70 I Infant mortality (per IOOOIivebirths) 30 32 33 Chiid malnutrition (%ofchildren under5) n 15 11 ' Access to improved watersource Access to an improvedwatersource (%ofpopulation) 77 78 81 Literacy (%ofpopulation age IS? 91 90 90 Gross primaryenrollment (%of school-age population) 115 1u 114 Male 125 10 115 Female 115 1Q 1u KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios' GDP (US$biilions) 256.1 542.5 1.418.3 1.653.8 Gross capital fonnationiGDP 34.4 412 43.8 45.2 Exports of goods and servicesiGDP 113 25.3 34.2 39.7 Trade Gross domestic savingsiGDP 34.5 42.7 42.5 44.9 Gross nationalsavingsIGDP 35.3 42.7 43.2 46.1 Current account balanceiGDP 0.7 19 3.2 4.2 Domestic Capital interest paymentsiGDP 0.4 0.9 0.5 0.4 savings formation Total debtiGDP 4.7 18.5 13.6 n.7 Total debtserviceiexports 7.3 7.7 7.2 3.6 Present value of debtiGDP 0.3 Present value of debtiexports 36.4 Indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannualgrowth) GDP 9.4 8.3 9.3 9.5 8.0 -China GDP percapita 7.9 7.4 8.6 8.9 7.3 lower-middie-incomeurouo Exports of goods and services 8.1 7.3 26.8 28.4 14.4 STRUCTURE of the ECONOMY 1984 1994 2003 2004 (%of GDP) Agnculture 32.0 20.2 14.6 15.2 Industry 43.3 47.8 52.2 52.9 Manufacturing 35.5 34.4 36.7 37.3 Services 24.7 319 33.2 319 Househoidfinal consumption expenditure 512 44.5 44.9 43.1 Generalgov't finai consumption expenditure 14.2 P.8 12.6 2 0 Imports of goods and services 114 23.4 327 36.7 I 1984-94 1994-04 2003 2004 (averageannualgrowth) Growth of exports and imports ( O h ) Agriculture 4.0 3.3 2.5 6.3 Industry 2.3 n.0 P.7 11.1 Manufacturing 117 n.1 14.9 0.2 Services 9.8 8.2 7.3 8.3 Householdfinai consumption expenditure 8.1 7.9 6.1 7.9 Generalgov't finai consumption expenditure 9.4 8.6 4.8 6.8 1 99 00 01 02 03 Gross capital formation 9.1 9.5 18.9 u.0 ---Exports -Imports Imports of goods and services 9.9 5.5 24.8 22.5 Note: 2004 dataarepreliminaryestimates 'Thediamonds showfourkeyindicators inthecountry(in bo1d)comparedwth its income-groupaverage.Ndataaremissing,thediamondwill be incomplete. 89  China PRICES and GOVERNMENT FINANCE I 1984 1994 2003 2004 Domesfic prices 1 Inflation (% change) 110 - Consumer prices 8.3 24.1 1.2 3.9 Implicit GDP deflator 4.9 1 5 ' 19.9 2.1 6.5 Governmentfinance (% of GDP, includes currentgrants) Current revenue 22.9 11.9 18.7 19.4 Current budget balance .. 1.0 1.3 1.9 Overall SurDlusldeficit -0.8 -1.2 -2.8 -1.7 -GDP deflator *CPI TRADE 1984 1994 2003 2004 (US$millions) Exportand import levels (US$mill.) Total exports (fob) 26,139 121,006 438,228 593,369 Food 3,232 10,015 17,533 18,870 Fuel 6,027 4,069 11,110 14,476 `600 000 Manufactures 14,205 101,298 403,560 552,818 Total imports (cif) 27,410 115,614 412,760 561,423 400,000 Food 2,331 3,137 5,959 9,156 200,000 Fuel and energy 139 4,035 29,214 48,003 Capital Qoods 7,245 51,467 192,869 252,624 Exportprice index (2000=100) 50 103 96 102 88 88 00 01 02 03 04 Import price index (2000=100) 74 96 102 112 Exports Imports Terms of trade (2000=100) 68 107 95 91 BALANCEof PAYMENTS l5 1984 1994 2003 2004 (US$ millions) Current account balanceto GDP ("A) Exportsof goods and services 29,039 137,378 485,003 655,827 Imports of goods and services 29,183 127,210 448,924 606,543 Resource balance -144 10,168 36,079 49,284 Net income 1,534 -1,036 -7,838 -3,523 Net current transfers 442 1,337 17,634 22,898 Current account balance 1,832 10,469 45,875 68,659 Financingitems (net) -2,363 20,058 71,148 137,705 Changes in net reserves 531 -30,527 -117,023 -206,364 86 88 00 01 02 03 04 Memo: Reserves including gold (US$ millions) .. 57,770 416,208 622,945 Conversion rate (DEC, /oca//US$) 2.8 8.6 8.3 8.3 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ mi//ionsj composition of 2004 debt(US$ mill.) Total debt outstandingand disbursed 12,082 100,457 193,567 177,709 IBRD 73 5,933 10,657 11,035 A: 11,035 IDA 181 6,097 10,314 10,670 Total debt service 2,285 11,135 37,073 24,498 iBRD 6 679 2,690 1,124 IDA 4 50 219 262 Composition of net resourceflows Official grants 112 337 Official creditors 831 3,117 -3,092 -2,485 Privatecreditors 240 6,691 -1,778 -13,373 Foreigndirect investment(net inflows) 1,419 33,787 55,507 60,906 Portfolio equity(net inflows) 0 3,915 7,729 10,923 I F: 55,772 World Bank program Commitments 959 4,035 1,250 1,250 ,A IBRD E Bilateral Disbursements 197 2,060 1,616 1,246 B IDA -- D Other multilateral -- ~ F Private Principal repayments 0 323 2,459 999 IC-IMF G -Short-term Net flows 197 1,737 -843 247 Interestpayments 9 406 450 387 Net transfers 187 1,331 -1,293 -140 Development Economics 9/8/05 90  IBRD 34204 CHINA THIRD JIANGXI Hanjiayuan CHINA Gulian Heilong HIGHWAY PROJECT R U S S I A N F E D E R A T I O N Jiang Heibaoshan Aihun Jagdagi Yitulihe Heihe K A Z A K H S T A N Nenjiang Tongjiang Wuyiling Manzhouli Tonjiang Manzhouli Hailaer Yakeshi Boketu Beian Hegang Qianjin Jiamusi Yierxie Nancha Dongfanghong Fuyu HEILO NSuihuaJIA NGG Qiqihar Jiamusi Qiqihar Altay Yierxie Ranghulu Fuyun HARBIN Jixi 44