Announcement of China Plans New Mongolian Railway on May 15, 1989

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 89/ 66 Contact: Leandro V. Coronel IDA NEWS RELEASE NO. 89/70 (202) 477-3641 CHINA PLANS NEW MONGOLIAN RAILWAY WASHINGTON, May 15, 1989 -- China will build a 948-kilometer railway between Inner Mongolia and northeastern China which is expected to stimulate coal production and other industries in a very poor region -- where 3 million people live. The project is being supported by a $70 million loan from the World Bank and an $80 million credit from the International Development Association, the Bank's concessionary lending affiliate. The project is part of the government's plan to expand the railway network to create low-cost, reliable freight and passenger transport. Coal freight is expected to comprise 80 percent of the eastbound traffic from Inner Mongolia to the industrial province of Jilin in northeast China. Inner Mongolia has coal reserves of more than 200 billion tons. Jilin is experiencing a coal shortage projected to be about 27 million tons by the year 2000. The railway will consist of a single-track line that will connect with the national network. The newly established Inner Mongolia Local Railway Corporation will manage the project, which will involve recruitment and training of staff, and installation of operational equipment. Other benefits of the five-year project will include easier mobility for local residents and savings in transport costs. The central government will contribute $92 million and the government of Inner Mongolia $108 million toward the cost of the project. The World Bank loan is for 20 years, including five years of grace, with a variable interest rate, currently 7.65 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent of the undisbursed balance. The IDA credit is for 35 years, including five years of grace; it carries no interest, but has an annual charge of 0.75 percent on the disbursed balance and a variable charge of up to 0.5 percent (currently zero percent) on the undisbursed balance. Note: IDA credits are denominated in SDRs (Special Drawing Rights), which are valued on the basis of a "basket" of currencies. The U.S. dollar equivalent of the SDR amount of the IDA credit reflects the exchange rates existing at the time of the negotiation of the credit.