China - Fifth Railway Project

 ICRR 10370 Report Number : ICRR10370 ICR Review Operations Evaluation Department 1. Project Data : OEDID: OEDID : L3406 Project ID : P003486 Project Name : Fifth Railway Project Country : China Sector : Railways L/C Number : Loan 3406-CHA Partners involved : None Prepared by : Antti P. Talvitie, OEDST Reviewed by : Hernan Levy Group Manager : Gregory K. Ingram Date Posted : 06/30/1999 2. Project Objectives, Financing, Costs and Components : Objectives : (1) Introduce recent developments in rail technology and maintenance and rehabilitation practices; (2) add capacity where such additions were urgently needed and justified; (3) develop system-wide plans and planning tools for Ministry of Railways (MOR) major sub-sectors; and (4) develop modern planning and analytical techniques for investment priorities and tariff structure . Components : (1) Introduction of recent technology and advanced materials for maintaining and rehabilitating tracks, system-wide; (2) elimination of the shortage for critically needed materials, components and equipment for rehabilitating locomotives and rolling stock; (3) double-tracking of the Zhegan line (944km); (4) expansion of capacity at the Xuzhou marshalling yards; and (5) an action plan to develop and implement the Railway Costing System, with recommendations for tariff restructuring . Project Costs and financing : The project costs were US$1550.3 million (US$1005.7 million at appraisal) for which a World Bank loan of US$330 million was approved in September 1991. US$7.7 million was canceled at loan closing in December 1998; there were no extensions. The local contribution was US$1,227.9 million (US$675.7 million at appraisal). 3. Achievement of Relevant Objectives : The objectives were achieved . This was especially true for the physical objectives dealing with maintenance, rehabilitation and capacity expansion . The extensive and complicated planning and management objectives were also achieved, but there were pockets of lesser achievement . The economic rate of return of the completed project components ranged from 29 to 233 % with a weighted average of 34.2%. This was somewhat higher than in the SAR, ranging from 27 to 36 with a weighted average of 32.5. There were substantial cost increases due to design changes and devaluation of the yuan . The cost increases were offset by higher demand and improved performance . Although there were no explicit environmental objectives, it was agreed during the appraisal that the Bank would assist MOR in environmental protection . Three studies were identified and funded by the UNDP . The study reports and a study tour to abroad had positive effects on MOR practices to control pollution . 4. Significant Achievements : The permanent way and rolling stock components achieved significant cost savings and quality improvements . The planning studies improved railways operations and a master plan for telecommunications in the railways was prepared. The Railway Investment Study provided the Chinese with a powerful tool to evaluate trade -offs between capacity expansion and operational improvements, and culminated in a study report for China's Railway Strategy. 5. Significant Shortcomings : There were no significant shortcomings in this project. There were problems with resettlement and environment and procurement, but these were resolved satisfactorily during implementation . The Locomotive and Rolling Stock Maintenance and Rehabilitation Study failed to produce a long term plan and the short term plan was not successfully integrated into system wide practice . If implemented, the ambitious short term study plan would have led to substantial reforms and changes in maintenance practices and that raised internal resistance and eventual dismissal of the study team. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : There are two broadly applicable lessons . They are the same as in the Fourth Railway project, but from a different perspective. The Fifth Railway project had railway capacity expansion components but i ts extensive planning studies represented a departure in the emphasis toward system-wide modernization and railway management . Again, the former were successful and the latter partially so . The first lesson is, then, that tangible progress always occurs on issues whose benefits are clearly understood . The second lesson is that sustained dialogue and discussion must precede the introduction of new or far -reaching, often abstract proposals for change management . These changes must be worked through in every -day context over a long period of time to become an internalized practice. 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is thorough. Its section on 'Future Operations' discusses future plans, not how the components implemented under this project will be operated in the future . However, other sections of the ICR address the issue of 'future operation' (of this project) and indicate that future operation of this project is addressed adequately by the borrower.