China - Xinjiang Highway Project

Document of The World Bank FOR OFFICIAL USE-ONLY Report No: 21913 IMPLEMENTATION COMPLETION REPORT (CPL-37870) ON A LOAN IN THE AMOUNT OF US$150.0 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A XINJIANG HIGHWAY PROJECT JUNE 15, 2001 This docunent has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2000) Currency Unit = Yuan (Y) Y 1.00 = US$ 0.120817 US$ 1 = Y 8.2770 FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS CPMS - Chinese Pavement Management System EMS - Electrical and Mechanical Systems EAP - Environmental Action Plan EIA - Environmental Impact Assessment EIRR - Economic Intemal Rate of Return ICR - Implementation Completion Report NTHS - National Trunk Highway System PEO - Project Execution Office RAP - Resettlement Action Plan SDPC - State Development and Planning Commission TUDH - Turpan-Urumqi-Dahuangshan Highway XCD - Xinjiang Communications Department XHP2 - Second Xinjiang Highway Project XUAR - Xinjiang Uygur Autonomous Region Vice President: Jemal-ud-din Kassum, EAPVP Country Manager/Director: Yukon Huang, EACCF Sector Director: Jitendra N. Bajpai, EASTR Task Team Leader/Task Manager: Jacques Tollie, EASTR  FOR OFFICLAL USE ONLY CHINA XINJIANG HIGHWAY PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry I 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 6 6. Sustainability 7 7. Bank and Borrower Performance 7 8. Lessons Leamed 9 9. Partner Comments 9 10. Additional Information 16 Annex 1. Key Performance Indicators/Log Frame Matrix 17 Annex 2. Project Costs and Financing 18 Annex 3. Economic Costs and Benefits 20 Annex 4. Bank Inputs 36 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 37 Annex 6. Ratings of Bank and Borrower Performance 38 Annex 7. List of Supporting Documents 39 Borrower's Contribution Maps: IBRD 25200 25203 niThis 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.   Project ID: P003612 Project Name: XINJIANG HIGHWAY PROJECT Team Leader: Jacques M. Tollie TL Unit: EASTR ICR Type: Core ICR Report Date: June 22, 2001 1. Project Data Name: XINJIANG HIGHWAY PROJECT L/C/TF Number: CPL-37870 CountryIDepartment: CHINA Region: East Asia and Pacific Region Sector/subsector: TH - Highways KEY DATES Original Revised/Actual PCD: 10/09/92 Effective: 02/08/95 02/08/95 Appraisal: 10/15/93 MTR.- Approval: 08/30/94 Closing: 12/31/2000 12/31/2000 Borrower/lImplementing Agency: PEOPLE'S REPUBLIC OF CHINA/XINJIANG UYGUR AUTONOMOUS REGION Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Russell J. Cheetham Country Manager: Yukon Huang Nicholas C. Hope Sector Manager: Jitendra N. Bajpai Richard Scurfield Team Leader at ICR: Jacques Tollie Hatim Hajj ICR Primary Author: Jacques Tollie 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactoty, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability. L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: 1. The objectives of the project were to: (a) facilitate mobility and increase the efficiency of road transport; (b) promote the development of institutional capabilities in the Xinjiang Communications Department (XCD); (c) improve the efficiency of road passenger transport services; (d) increase the safety of road transport; and (e) improve highway maintenance operations.  The project objectives were clear, focused and responsive to the development needs of the province. They also had high national priority. Recognizing the anticipated traffic growth, the Government had identified transport bottlenecks to be one of the most severe constraints to economic growth. The economic reforms introduced since the early 80's had led to a large upsurge in both freight and passenger traffic, severely taxing the transport system. The project was designed to achieve a better balance between demand and supply for the sustained development of the economy. As such, the objectives were in line with the Bank's Country Assistance Strategy which supported sectoral reforms and investments aimed at removing infrastructure bottlenecks and modernizing the transportation system and its management. 3.2 Revised Objective. None 3.3 Original Components: The project components consisted of: (a) construction of the Turpan-Urumqi-Dahuangshan Highway (TUDH) with a length of 283.3 km of which 101.3 km are class I (4-lane access controlled) and 182.0 are class II (2-lane road); (b) improvement of 16 km linking access roads to TUDH; (c) construction supervision of TUJDH and linking roads; (d) institutional strengthening and training; (e) upgrading of highway maintenance capabilities; (f) road safety program; and (g) study of inter-city and rural passenger transport. Equipment was also provided for operation and maintenance of TUDH, maintenance of highway networks, laboratories, environmental monitoring, institutional strengthening and road safety. These components were well related to achieving the project objectives : (i) the TUDH was designed to upgrade two most trafficked sections in Xinjiang that cross in Urumqi: the Turpan-Urumqi section (176.3 km) of the east-west NTHS corridor (Route 312) between the port of Lianyungang, south of Beijing and Horgas, at the Xinjiang-Kazakhstan border; and the Urumqi-Dahuangshan section (107.0 km) of the north-south Route 216 linking the two main cities of Altay and Hotan ; (ii) the Linking Roads Program helped counter the then prevalent approach of limiting Bank financing to development of the NTHS expressways themselves, benefiting mostly end-to-end traffic and limiting project benefits to the area alongside the expressway; and (iii) on the institutional side, the project focussed on sector issues of most relevance to Xinjiang: capacity building in highway planning and management, traffic safety, road network maintenance, and modernization of passenger transport organization to better adapt to a market economy. Regarding the latter, a Passenger Transport Study was part of the list of provincial-based studies of highway sector issues, to be supported by Bank projects as agreed between MOC and the Bank, and to be later disseminated by MOC for use to other provinces. The project components were technically demanding for the implementing agencies as this was the first Bank project in Xinjiang. However, the design of the project benefited from the experience of prior Bank financed high grade highway projects in China, key risks were identified and adequate mitigating measures were put in place. 3.4 Revised Components: The project was modified in the early stage of implementation to allow a 62 km section of the Turpan-Urumqi Highway to be upgraded from 2-lane to 4-lane, to accommodate the pace of increased traffic. The upgrading was fully appraised in 1995/96 and found economically justifiable. Consequently, the Loan Agreement was amended on June 14, 1996. It is worth noting that the design standards called for a class I right-of-way to be provided on the full length of TUDH, to facilitate the future expansion of the two-lane sections. -2-  3.5 Quality at Entry: The quality at entry is considered satisfactory, based on the relevance of project objectives, the quality of the technical, economic and financial analyses, the attention to preservation of the environment and cultural heritage, implementation readiness, and overall risk assessment and sustainability. Like most Bank financed projects of that period, the perfornance indicators were not explicitly developed; they were however retrofitted in the project at a later stage of project implementation. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement ofobjective. The project has substantially achieved its major development objectives, and made a positive impact on the transport operations in Xinjiang . The overall satisfactory rating is based on the performance indicators shown in Annex 1. The physical targets have been substantially met and the significant congestion in the main corridors traversing the capital is no longer a problem for the province. However the economic return is lower than anticipated at appraisal, mainly because of lower than expected traffic volumes and project cost overruns. Performance with safeguard policies including environmental, cultural property, and involuntary resettlement has been satisfactory. The training of staff has resulted in better performance of the seven entities under XCD that were selected for strengthening under the project. The findings of the Passenger Transport Study were found useful and helped the province modernize its passenger transport organization. The Highway Safety program raised awareness about the importance of traffic safety and contributed to reduce its severity, although much remains to be done. The findings of the Highway Maintenance Study were also found to be useful and were incorporated in the follow-on Bank funded Second Xinjiang Highway Project (XHP2). 4.2 Outputs by components: Physical objectives. TUDH was opened to traffic on August 20, 1998, about 3 weeks ahead of the planned completion date. The traffic engineering facilities were completed in June 1999. The TUDH as a whole, including the linking roads, was accepted after quality inspection in December 1999. The remaining ancillary works were completed in December 2000 when the defect liability period also ended. Service and administrative facilities were completed although slightly delayed. The 24-km connection within the city of Urumqi between the Turpan-Urumqi and Urumqi-Dahuangstan sections of TUDH, which was considered critical for an efficient through-traffic flow, was constructed as agreed with domestic funds and opened to traffic simultaneously with TUDH. Construction supervision. The supervision of TUDH was carried by an association of Chinese/foreign consulting companies. The joint supervision teams have performed satisfactorily in assuring the quality of the works. The joint-team approach provided the local staff with extensive experience in the supervision of high grade highway construction. Institutional Strengthening. Overseas as well as domestic training have been completed satisfactorily and there is a strong sense that the institutional strengthening program has had a positive impact on the management of the provincial highway sector. Both domestic and overseas training afforded opportunities for XCD staff to acquaint themselves with the latest technologies in highway construction, management, and maintenance. A total of 1215 persons (or 1230 person-months) received domestic training and 180 persons (or 187 person-months) overseas training. On-the-job training and technology transfer by the foreign supervision consultant team were also offered. In total seven institutions in XCD were provided specific training and modem equipment: the Xinjiang Highway Administration Bureau; the Project Executive Office (PEO), the Xinjiang Highway Planning, Survey and Design Institute; the Traffic Science Institute; the Xinjiang Communications School; the Technical Workers' School; and the High-Grade - 3 -  Highway Construction Authority. All acknowledged a positive outcome in terms of increased efficiency in discharging their duties. In particular, the project facilitated the smooth transition of the PEO from a temporary operational unit to a permanent High-Grade Highway Administration Bureau, exposed to modem methods in high grade highway management and quality control, project management, highway planning and design, and highway maintenance. Traffic safety. The three-prong approach (training, equipment, black spot program) was implemented satisfactorily. Eleven persons received training in highway safety in Norway for a total of 11 person-months. They were responsible for implementation of the black spot components. A further 4 person-months of training were provided in China for staff working on the black spot improvement program included in the project. However in view of the newness of the task, there were delays in the identification and engineering design of the program. Eventually the program (consisting of four black spots) was merged with the overall program (20 black spots) planned and carried out under the highway safety component of the follow-on project. In addition, about 280 staff from the Traffic Police received training in highway traffic regulation and law enforcement. Although the number of accidents per 10,000 vehicles was reduced due to measures taken under the project, it remained high by intemational standards and showed the need for continuous attention to the matter from Xinjiang Government, including a broadening of the approach to tackle the issue. Highway Maintenance. The Finnish National Road Administration helped the Xinjiang Highway Administration Bureau in conducting the Highway Network Maintenance Study. The Highway Research Institute of MOC (Beijing) was also involved in the training of staff and in conversion of the data from the Chinese Pavement Management System (CPMS) to the Bank's HDM system. The findings of the Highway Network Maintenance Study provided a more rational basis for maintenance planning in Xinjiang, and served as a basis for the development of the Highway Maintenance Program under the follow-on project. Intercity and Rural Passenger Transport Study. The study was completed in May 1997, with assistance from SDPC in Beijing and the Norway Transportation Research Institute. It provided a diagnosis of the passenger transport industry and services, and recommendations for improving their efficiency and quality. Some of the recommendations were implemented and contributed to the much needed improvement in the performance of the subsector in view of the market economic development of Xinjiang. Environment. Since the TUDH corridor traverses mostly flat terrain and some hilly areas, its construction was expected to have only limited adverse impact on the environment, except in hilly areas where soil erosion and drainage problems could occur; those were adequately identified and assessed in the EA report with mitigation measures in the EAP. Relevant engineering design and technical specifications provided specific treatments for the protection of embankment slopes and roadside drainage, which were applied during the construction and operation phases. No unforeseen adverse environmental problem emerged. Monitoring according to the EAP was carried out regularly with respect to air quality, noise, lead content of soil, crops and herbage, water quality, wild animals, transmigration of livestock and grazing. Reduction of noise in towns and villages along the TUDH has been generally effective, owing to appropriate mitigation measures such as noise barrier installation. Control of air pollution has been more problematic in some areas, since factors were mostly outside the purview of the implementing agency. Protection of cultural heritage was particularly well handled. Because of the archeological importance of ancient cities like Wulapo and Turpan, XCD decided to conduct an expanded survey of the sensitive area during project preparation to mitigate any risk of delay in case of discovery during construction. The survey led to some realignment in the vicinity of Wulapo. These measures proved effective in the preservation of the sites. -4 -  Resettlement. The impact of the project can be surnmarized as follows: Qua lity Cost (rnil ion Yuan) Planned Actual Planned Actual Land acquisition (mu) 20241 23097 33.3 34.3 of which: * grassland 9578 9808 8.0 8.2 . wasteland 7569 9817 2.4 3.9 * others 3094 3472 22.9 22.2 House demolition (sq.m) 39109 38459 15.7 11.2 People affected by project: 1545 1628 19.4 27.9 of which: . relocated 498 598 * others 1047 1030 Other structures 21.7 41.9 Contingencies 6.3 2.0 Total 96.4 117.3 The larger than expected impact explained the 20% increase in resettlement cost, mostly incurred for the construction of TUJDH due to some missing items of temporary land use in the Resettlement Action Plan (RAP) and the increase in construction/reconstruction of infrastructures in the relocated villages. The amount of land acquisition under the project represented a marginal portion of the total cultivated land in the affected villages. The April 1999 supervision mission, which reviewed the implementation of the land acquisition at the completion of TUDH, found the process satisfactory in terms of restoration and improvement of income, livelihood and productivity. The resettlement objectives have therefore all been met. All activities planned in the RAP including the rehabilitation program have been successfully completed. Equipment. Equipment for laboratory testing during construction, operation and maintenance of TUDH, institutional strengthening, passenger transport study, highway maintenance study were procured satisfactorily and all put to the intended use. This contributed to strengthening the agencies involved. 4.3 Net Present Value/Economic rate of return: The Economic Internal Rate of Retum (EIRR) on the TUH (eastem section) and UDH (northem section) are estimated to be 14.6% and 16.5% versus the SAR estimate of 17.8% and 20.7%, respectively. The EIRR for the total project is 15.4% versus the SAR estimate of 19.3% The revised EIRR are lower than anticipated at appraisal mainly because of slower build-up of traffic volumes and project cost overruns. Details are provided in Annex 3. 4.4 Financial rate of return: TUDH was opened to traffic in August 1998. The new highway is under XCD's management. The toll charges, which are controlled by the govemment to be on the low side, are the main revenues for the highway. XCD will also bear all the financial obligations of TUDH, including repayment of the loan (principal and interest). It is expected that the net profit after tax will be negative until 2010 because of the low traffic volume and the toll policy. Combined with the project cost overrun, this policy led to an estimated FIRR to total investment of -9.9%. (no financial evaluation for the project was attempted in the SAR). XCD has guaranteed that financial assistance would be provided should TUDH suffer a shortage of cash. -5 -  4.5 Institutional development impact. The project has had a substantial institutional development impact, as noted above. The provincial institutions involved with implementation of the project have gained significant hands-on capabilities by handling such a complex project as TUDH from design to construction including related problems such as land acquisition, resettlement and environmental monitoring. The skills acquired under the main highway component using the FIDIC contractual approach were directly applied in the construction of other government-funded projects. Measures taken to strengthen the seven institutions within XCD were effective. The passenger transport study provided methodological approaches and a joint local/foreign management model which were useful in other studies. It is worth noting that in view of the improved capabilities of PEO/ XCD, the Bank arranged for PEO to provide technical assistance to the three provinces of Ningxia, Inner Mongolia and Gansu while preparing the Tri-Provincial Highway Project in 1997. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The major factor outside the control of government that affected project outcome was the external economic conditions. TUDH opened to traffic in mid 1998, at a time when an economic and financial crisis had swept across Asia and left many countries in the region in worsened economic conditions. This had an adverse effect on the regional demand for transport and, combined with over-optimistic assumptions regarding the traffic diversion from the old road to the new highway, slowed down significantly the build-up of traffic on TUDH. Results of 1999, the first year of operation of TUDH, were alarming. However signs that traffic growth has recovered are apparent from preliminary data for year 2000. Globally, the impact was moderate on the economic viability , but it was more important on the financial viability. 5.2 Factors generally subject to government control: Results regarding traffic safety have been mixed. The expected drop in traffic accidents subsequent to the opening of TUDH did not materialize. A main factor impacting on the safe and efficient operation of the expressway is the good cooperation between XCD and the Traffic Police in charge of enforcement. This is all the more important as the major reason for traffic accidents was found to be related to driver behavior. 5.3 Factors generally subject to implementing agency control: Adequacy of design surveys. About 28 km of TUDH is located along a river bed on a steep mountain area with unstable slopes. There were also sections with marshland, salty soil, damp loess. Aware of these adverse geological conditions, XCD carried out an expanded program of geotechnical surveys which contributed to limit the cost overruns. 5.4 Costs and financing: Despite the increase in volume of civil works (about 62.4 km or about 22% of the length of the Highway was converted from 2 lane to 4 lane), the overall total project cost -- net of taxes and fees -- in US dollar equivalent ($323.2 million) was close to the appraisal estimate ($317.5 million). It is worth noting that in 1994 price escalation was high in China and the appraisal cost estimates reflected this high inflation. In actual fact, physical contingencies were higher and price contingencies were lower than expected. On the physical side, some cost overruns were incurred mostly due to adverse geological and geotechnical conditions. -6 -  6. Sustainability 6.1 Rationale for sustainability rating: The project is likely to be sustainable when considering the achievements under each of the components, and sustainability is enhanced by follow-on projects, as argued below: (i) Traffic congestion has been remedied in the main corridors crossing in Urumqi. The gap on Route 312 existing to the west is being tackled under the ongoing Second Xinjiang Highway Project and the proposed Third Xinjiang Highway Project. Once the latter are completed, the east-west traffic traversing Xinjiang along this NTHS corridor till the Kazakhstan border will be facilitated. (ii) The Linking Roads component has greatly enhanced accessibility and mobility, and broadened the zone of influence of the TUDH. The program is being expanded by XCD by further investments to improve the connections with rural roads. (iii) The Highway Maintenance Study has led to significant transfer of technology to local staff. The study has also provided an important input for the design of an important maintenance component under the follow-on project. (iv) Important recommendations of the Passenger Transport Study have been implemented. The attention to transport services has been pursued under the follow-on project through a Strategic Study of Regional Transport. Improving traffic safety is a longer term undertaking. Results achieved under this project are encouraging, but clearly the agenda is unfinished. The efforts are being pursued under the follow-on projects. 6.2 Transition arrangement to regular operations: The TUDH was opened to traffic in August 1998. Operation and maintenance of the highway have been generally satisfactory except for the slower than expected build-up of traffic. Also traffic safety has remained an issue, requiring continuous coordination and improved cooperation with the Traffic Police. 7. Bank and Borrower Performance Bank 7.1 Lending: At the identification phase, the staff made sure that the project objectives and scope were consistent with both the government's priorities and the Bank's assistance strategy. In particular, the sector issues addressed under the project were selected amongst the priorities identified in a Bank sector strategy report titled Highway Development and Management Issues, Options, and Strategies (February 1994). During project preparation Bank staff helped the project to benefit from extensive consultations with experts on technical aspects of the project design (in particular using the Canadian and the Norvegian Trust Funds). The initial feasibility studies were revised to meet Bank standards. However, they overestimated the pace of traffic build-up on the new highway. Regarding the institutional aspects, the manpower needs study and related forms developed during preparation were the first of their kind in China and set the standard for succeeding Bank-financed Highway projects in China. At project appraisal, measures were taken to minimize the risks of delays and construction quality, and timely and successful implementation of training and technical assistance. Attention was given to the quality of the design and the construction by bringing in foreign experts to supplement the effort of the local staff. However, performance indicators were not developed during the lending phase. Regarding - 7 -  safeguards policies, consultation with the affected people was enhanced by including four specific assessments as follows: (a) identification of migration patterns of the Khazak herders, and other livestock migration routes; (b) a detailed cultural relics survey; (c) construction traffic impact study; and (d) a social survey of people affected by resettlement or compensation for the land relocation. The findings did enhance project design and quality at entry. 7.2 Supervision: Given that the TUDH component was the first of its kind in Xinjiang, the Bank team paid special attention to minimizing the implementation risks. Supervisors and contractors were provided with timely advice on working properly under the FIDIC conditions of contract. In particular the roles of the employer, the "engineer", and the contractors had to be clarified, as well as the relationships between local and foreign supervision teams. The Bank showed responsiveness and flexibility in approving needed modifications. In the case of the upgrading of the 62 km section on Turpan-Urumqi, a mini-appraisal was conducted to ensure compliance with the project requirements. Bank involvement was also critical in the studies, where staff provided useful advice to improve quality of the analyses and recommendations. The Bank conducted 11 supervision missions from 1995 to 2000, a little less than 2 missions per year on average. A total of about 70 staff-weeks were spent on supervision activities. Efficiency gains were achieved by Bank missions dealing with several projects during each stay. Continuity of staffing on the project was generally achieved, with an adequate skill mix. Resettlement and environment staff provided specialized reviews during the critical phases of the project. 7.3 Overall Bank performance: For reasons stated above, overall, the project is assessed as satisfactory. Borrower 7.4 Preparation: All aspects of project preparation were handled satisfactorily, in spite of the technical and managerial complexity of the project. During the preparation phase, stakeholders commitment was high. Recognizing its lack of experience with the construction of modem highways and with intemational procurement methods, XCD was cooperative with the foreign assistance in charge of the technical design review. As noted above, traffic forecast overestimated the diversion ratio. Otherwise, quality of engineering studies and design was good. In view of the concems about the impact of TUDH (especially the northern section of Urumqi-Dahuangshan) on the livelihood of Kazakh herders, a special study was commissioned and its results were reflected in the design of underpasses and drainage structures across this section of TUDH. 7.5 Government implementation performance: Both the Ministry of Communications and the State Planning Commission were supportive of the project. MOC was itself involved in the studies under the project and this contributed to the implementability of their recommendations. The process for obtaining internal clearances for bidding documents and evaluation reports was generally timely, especially with regards to the electrical and mechanical (E&M) systems component. 7.6 Implementing Agency: Overall project management was satisfactory. XCD was alert to adapt the project to changing circumstances, and to suggest changes to project components accordingly. Civil works and goods were procured and supervised in accordance with agreed procedures. In particular, the contract for supply and installation of E&M facilities was satisfactorily managed. This was one of the few examples of timely completion and availability of E&M systems under Bank-financed highway projects in China. - 8 -  Another noteworthy achievement was the timely completion of the 24-km connection within the city of Urumqi between the Turpan-Urumqi and the Urumqi-Dahuangshan sections of TUDH. This was constructed as agreed with domestic funds and opened to traffic simultaneously with TUDH. 7.7 Overall Borrower performance: Overall, the performance of the national and regional governments as well as the project implementation agency is assessed as satisfactory. 8. Lessons Learned Needfor improved traffic forecasting. There is a need to adopt a more cautious approach to traffic forecasting, particularly on toll roads in provinces in China's hinterland, as demonstrated by two seemingly contradictory events that occurred under the project: early on, the project was modified to allow for the upgrading from 2 lanes to 4 lanes of some sections of TUDH; however later on, it was found that the actual traffic was far below expectations, not only on the new road but also in the whole corridor. Of course nobody could have foreseen the 1997 financial crisis that swept across Asia, but the assumptions regarding traffic growth on the one side, diversion ratio on the other side, were clearly too optimistic. Traffic safety. Traffic accident rates in China continue to raise serious concerns. Attempting to reduce the accident rate in a particular province is a high risk/high return situation. Experience under the project suggests that one should not underestimate the risks, nor should one have too high expectations within the confines of one single project. A broader, multi-sector approach, with a longer timeline, is warranted for meaningful results. This should figure prominently in the dialogue between the Bank and the Chinese Government, both at national and provincial levels. Efficiency of technical assistance (TA). The efficiency of TA in Highway Projects has sometimes been questioned in terms of its high costs and limited effectiveness as perceived by some provinces. The TA provided for the studies under this project has been considered successful by all parties involved in terms of outcome (as presented in Section 4.2), and the ingredients for success appear to be: (i) firm grounding in a sectoral strategy, (ii) support from MOC as well as the concerned province, (iii) good selection of local and international teams, (iv) appropriate arrangements for the conduct of the studies and their dissemination, and (v) recognizing that the process of change may take time, devise action plans for short-term and long-term recommendations. 9. Partner Comments (a) Borrower/implementing agency: XCD contributed to the ICR through (i) their own assessment of the project achievements and (ii) comments on the Bank's draft ICR. These contributions are presented below. Supporting documents are in Annex 7. (i) Borrower's Contribution Introduction 1. Turpan-Urumqi-Dahuangshan High-grade highway is the first highway project financed by World Bank loan. The early stage preparation of the Project was started since 1989. The project negotiation on Loan Agreement and Project Agreement conducted by June 1994 with the representatives from the Ministry of Finance, State Development Planning Commission, Ministry of Communication, Regional Planning -9-  Committee, Communication Department, Financial Department and Project Execution Office in World Bank headquarter in Washington, D.C. The Loan Agreement and Project Agreement were signed on November 11, 1994 by Ministry of Finance, Regional Government and World Bank. The loan was declared effective on February 8, 1995. The closing date for the loan account was to December 30, 2000. Each of task referred to in the Staff Appraisal Report, Loan and Project Agreement were performed, and execution of these tasks is formally evaluated in this report. A. Proiect Description 2. The major objective of the project was to assist the Xinjiang Regional Government in meeting the transport demand in the most important and congested corridor in the Region and to improve the management of then road network by introducing modem planning and management techniques. 3. The Project consist of: (a) construction of 170.9 kmn, four-lane divided, access control highway and 113.0 km of two-lane high-grade highway total of 283.9 km Turpan-Urumqi-Dahuangshan Highway (include Change two lane to four lane works). Telecommunication, lightning and toll system and maintenance and management facilities; (b) improvement of 16 km link road to provide traffic for main interchanges /intersections of TUD Highway; (c) staff training and institutional strengthening of equipment for 7 main organization under Xinjiang Communication Department (XCD); (d) improvement of highway maintenance capabilities for Xinjiang; (e) road safety measures; (f) intercity passenger transport study; (g) consulting services for construction supervision and training; (h) equipment procurement. B. Achievement of the Proiect Obiectives 4. The project achieved all major objectives for the various components as indicated in the following: (a) 283.9 km of Turpan-Urumqi-Dahuangshan Highway Project, telecommunication, lightning and tolling system, as well as the service areas along the whole route; (b) improvement of 16 km link road to provide traffic for main interchanges /intersections of TUD Highway; (c) staff training and institutional strengthening of equipment for 7 main organization under Xinjiang Communication Department (XCD); (d) improvement of highway maintenance capabilities for Xinjiang; (e) road safety measures; (f) intercity passenger transport study; (g) consulting services for construction supervision and training; (h) equipment procurement. C. Proiect Identification 5. The first World Bank project identification began in July 17 to 24, 1992; the project preparation started in November 9 to 22, 1992; the project preappraisal started in April 7 to 22, 1993; the preparation for formal appraisal was conducted in July 26 to 31, 1993; the formal appraisal was conducted by World Bank in November 1 to 13, 1993. The project negotiation on Loan Agreement and Project Agreement was held in June 1994 in Washington D.C. with the representatives from the Ministry of Finance, State Development Planning Commission, Ministry of Communication, Regional Planning Committee, Communication Department, Financial Department and Project Execution Office. The Loan Agreement and Project Agreement were signed on November 11, 1994 by Ministry of Finance, Regional Government and World Bank. The loan was declared effective on February 8, 1995. D. Project Planning and Design 6. According to the planning targets in SAR the project would help in: (a) support continuing development of road infrastructure to facilitate mobility and increase the efficiency of road transport in the - 10 -  interest of stimulating economic activity; (b) promote the development of institutional capabilities of Xinjiang highway agencies for transport planning and investment prioritization, construction and maintenance; (c) improve the efficiency of road passenger transport services; (d) improve highway maintenance operations. 7. To accomplish these objectives, the project's scope includes the: (a) construction of 170.9 km, four-lane divided, access control highway and 113.0 km of two-lane high-grade highway total of 283.9 km Turpan-Urumqi-Dahuangshan Highway (include change two lane to four lane works). Telecommunication, lightning and toll system and maintenance and management facilities; (b) improvement of 16 km link road to provide traffic for main interchanges /intersections of TUD Highway; (c) staff training and institutional strengthening of equipment for 7 main organization under Xinjiang Communication Department (XCD); (d) improvement of highway maintenance capabilities for Xinjiang; (e) road safety measures; (f) intercity passenger transport study; (g) consulting services for construction supervision and training; (h) equipment procurement. E. Proiect Implementation 8. The Turpan-Urumqi-Dahuangshan Highway Project was divided into 15 construction contracts. Contracts No. 1-9 were for civil works, Contract No. 10 was for traffic monitoring, telecommunications and toll system and Contracts No. 11 to 15 were for management and maintenance service facilities along the highway. The civil works construction of the highway was commenced in April 1995 and completed in August 1998. The Agreement of contract No. 10 (traffic monitoring, telecommunication and toll system) was signed by the end of 1997 awarded to China Harbor Construction Corporation under International Competitive Bidding (ICB). The works of Contract No.10 was started at the beginning of 1998 and put into operation in May 1999. The constructions of Contract No. 11 to 15 was commenced in 1997 and completed in September 1998. 9. Consultini! Services in Construction Supervision and Trainine. The Canadian SNC Lavalin Consulting Group was engaged to carry out these services. The allocation for this component in the SAR was US$ 4.1 million. The contract price was US$ 3,547,345. The actual payment amounted to US$ 3,602,500. The contract was completed along with the civil works. The contract provided 260 person-months of consulting services, including supervision training of local technical personnel. 10. Studies (1) Highway Network Maintenance Studv. The study subject has started since July 1993, and carried out by: Xinjiang Communication Department, High-grade Highway Administration, Highway Research Institution, Finnish National Highway Bureau. Between 1994-1995 that participants into the study topics have collected 4.4 million data in 6 categories related to road surface asphalt pavement to gravel surface pavement, and have carried out dynamic coaxial loading investigation towards 12,000 vehicles. The investigation also being done to freight charge for various vehicles from 14 transport enterprises. The subject has completed by December 8, 1995. Xinjiang Science Society invited the specialist from the Ministry of Communication, Highway Research Institute of MOC, Yunnan Provincial Highway Administration, Xinjiang University and Xinjiang Communication Department on April 16, 1996. The results was submitted to World Bank in December 1995 and approved by the Bank in January 1996. (2) Inter city and rural passenger transport study. This study was undertaken by Xinjiang Traffic Research Institute, and the Norwegian Transport Economic Research Institute as working partners providing consulting services for foreign component. State Development Planning Commission carried out - 11 -  some domestic consulting services. The study was started in December 1, 1995 and completed by the end of February 1997 for a period of 15 months. The results was submitted to the World Bank In May 1995 and approved in July 1997. (3) Traffic Safetv studv. This study was undertaken by Xinjiang Traffic Research Institute and Xinjiang Traffic Police General Team. The Study was confirmed in July 8, 1994 and started in October 1996. This Study was continued under the Second Xinjiang Highway Project. 11. Equipment Procurement. This component includes the procurement of lab equipment, institutional strengthening equipment, inter city and rural passenger transport study equipment, highway maintenance study equipment and telecommunication system equipments. The types of procurement were adopted which are Intemational Competitive Bidding (ICB) or International Shopping and Domestic Procurement. The estimated cost in SAR was US$ 15.9 million and actual cost amounted to US$ 13,531,908. 12. Telecommunication , Liightning and Tolling System (Contract No. 10).. The International Bidding Documents of Contract No. 10 were reviewed by consulting experts from Japan Highway Communication Engineering Company. The bidding documents approved by World Bank in September 24, 1996. The tenders were issued on October 3, 1996. The first stage bids were opened on January 3, 1997 and evaluation report was submitted to the World Bank on April 24, 1997. The second stage bids were opened on June 24, 1997 and submitted to the Bank on October 30, 1997. World Bank approved the first stage report on May 6,1997 and second stage report on December 16, 1997. The contract was finally awarded to China Harbor Construction Corporation and the contract was signed on December 29, 1997. The contract price was US$ 999,602.72 and RMB Y38,429,901.49. The works were completed in contract period and put into trial operation. The system was approved by Review Committee and the defects liability period was started from November 1, 1999 and ends on October 31, 2000. 13. Staff Training. The total training program involved training of 191 persons for 150 person months at an estimated cost of US$ 2,084,510, according to the SAR. The actual executed training and study tour abroad included 180 persons and 187 person-months at a cost of US$ 1,234,339. The training includes A. Training abroad: a) from 1994 to 1995, on highway construction supervision for 30 persons 30 days in Canada; b) in 1995, on highway maintenance for 10 persons 60 days in Finland; c) in 1995, on highway project management for 6 persons 30 days in USA; d) in 1995, on highway planning and design for 5 persons 30 days in USA; e) in 1995, on highway finance management for 4 persons involving 6 person-months in USA; f) in 1996, on material testing for 2 persons 60 days in USA; g) in 1997, on E &M works for 8 person 30 days in England and France; h) in 1996, on road safety for 11 persons 30 days in Norwegian; i) in 1996, on highway maintenance equipment for 6 persons for 60 days in Finland; j) in 1996, on transportation economic management for 8 persons involving 12 person-months in the United States; k) in 1997, on environment monitoring and protection for 2 persons 30 days in Australia; I) in 1997, on expressway operation and management for 10 persons 30 days in France; m) in 1998, on highway maintenance and management for 8 persons 30 days in Australia; n) in 1998, on highway planning and design for 6 persons involving 9 person- months in the United States; o) in 2000, on traffic engineering for 8 persons 30 days in France; p) in 2000, on highway maintenance and operation management for 6 persons 30 days in Italy. B. study tour abroad: a) in 1995, on highway maintenance for 5 persons 30 days in Finland; b) in 1995, on maintenance equipment for 4 persons 15 days in Finland; c) in 1996, on highway administration organization for 5 persons 15 days in Italy and France; d) in 1996, on construction quality control for 5 persons 15 days in Italy and France; e) in 1997, on expressway construction and management for 5 persons involving 3 person-months in the United States; f) in 1997, on highway network planning for 7 persons involving 4 person-months in the United States; g) in 1999, on expressway maintenance and - 12-  management for 8 persons 15 days in Australia; h) in 2000, on expressway maintenance and management for 8 persons 15 days in Australia. F. Operation Experience 14. The operation conditions of Xinjiang Highway Project I and other project components are basically good. 15. Xiniian2 Highwav Project I: The highway was opened to traffic on August 20, 1998. The condition of the TUD Highway remained basically good during over two years of operation. The toll collection reached RMB Y 64 million from January to September 2000. The TUD Highway has great economic and social benefits and has been very beneficial to the Xinjiang Uygur Autonomous Region and to the areas along its alignment. It became the "economic Corridor" of Xinjiang Region and brought about a great advance in industrial and agricultural development. The Xinjiang High-Grade Highway Administration (XHGHA) was set up in March 1995. The XHGHA is an administrative unit of Xinjiang Communication Department (XCD). It is responsible for the operation and maintenance of high-grade highways in Xinjiang. The Xinjiang Highway Project II (Urumqi-Kuitun Highway ) is under construction at present, which also in charged by XHGHA. G. Work by Contractor and Consultant 17. Xinjiang Highway Project I was built under contracts awarded through competitive building. It was divided into 15 contracts. Contract No. 1-9 were for civil works: a) Contract No.1, 66.4 km, was built by Changqi Road Building Company; b) Contract No. 2, 14.59 kin, by joint venture of the first Engineering Company of Ministry of Railway and Brazil A.G Company; c) Contract No.3, 13.3 km, by joint venture of the first Engineering Company of Ministry of Railway and Brazil A.G Company; d) Contract No. 4, 62.38 km, by Xinjiang Kuntun Road and Dock Engineering Company; e) Contract No. 5, 19.54 km, by Xinjiang Road and Bridge Engineering Company; f) Contract No. 6, 16 m, by Shandong Road and Bridge Building Engineering Company; g) Contract No. 7, 20.73 km, by Shandong Road and Bridge Building Engineering Company; h) Contract No. 8, 17.1 km, by Shandong Road and Bridge Building Engineering Company; i) Contract No. 9, 53.21 km by Xinjiang Kuntun Road and Dock Engineering Company. The construction period was 42 months. The major quantities for civil works performed by the contractors were: Sub-grade: 27.74 million m3 of earth and stone works; 598,000 m3 of protection works. Pavement: sand gravel base 12.326 million m3; cement stabilized base 5.933 million m2; asphalt lower layer 5.011 million m2; asphalt middle layer 2.257 million m2; upper layer 5..933 million m2; linkage and relief road asphalt surface treatment 455,000 m2; cement concrete pavement 160,000 m2. Bridges, culverts and interchanges: 584 culverts, 82 small bridges, 35 medium bridges, 6 large bridges, 24 underpasses, 17 grade separations and 11 interchanges. Management and service areas along the highway: building area of the houses was 92,100 m2. 10. toll plazas (8 on mainline, 2 on ramp), 5 management divisions and stations, 1 service area and 2 parking areas. 18. Contract No. 10 covered the supply and installation of telecommunication, lightning and toll system. The contract was awarded to China Harbor Company and the contract period was 18 months. 19. Work by consultant: The consultants (Canadian) mobilized 6 persons and assisted local technical staff to supervise the construction of the highway over four years period. The consultant's engineers were involved in all aspects of supervision work. They were working closely with local engineers and contractors to improve job organization and management. Include local supervision personnel, it was 238 persons in 1995, 245 persons in 1996, 246 persons in 1997 and 236 persons in 1998. World Bank officials - 13 -  expressed their satisfaction with the work of the consultant when they supervised the project. Xinjiang Highway Project I was also praised by MOC and the Xinjiang Regional Government. 20. Work by Supervision Engineer. Xinjiang Highway Project I was contracted following International Competitive Bidding procedures. The supervision engineers controlled quality, duration of contracts and payments for works in accordance with the clauses, supervision procedures and methods of the "FIDIC" conditions of contract. To guarantee the work quality, the engineers implemented an overall supervision system of tasks "before, during and after construction". The construction was not allowed to start until materials and equipments were tested and found satisfactory. The spot-checking and inspection of ongoing works method adopted during construction were such that every aspect of the construction was tested or inspected for quality. No pavements were made for completed works if the quality was unacceptable after checking. In this way, the work quality and investment were efficiently controlled. 21. Experience. We have gained much experience through implementation of the Xinjiang Highway Project I. The main experience is: a)setting up rigid supervision procedures to enforce construction supervision as an effective method to ensure works quality, progress, investment control and satisfactory level for the management of works; b) helping contractors to improve their work abilities base on the conditions of contract and technical specifications before each work item were to start was a foundation to improve work progress and reach quality standard at the same time; c) strengthening site control, that is, the supervision engineers should be on-site and supervise each key phase of the procedures since checking and inspection of works are the guarantee to reach the quality required; d) insisting to do pilot work before the start of each new construction item was an effective method to meet quality requirements; e) the Employer was an organization center for implementation to control quality, progress and investment through coordinating relationship with each of the units involved; and f) consciously accepting the instructions of the World Bank and actively cooperating were the guarantee to successfully complete the project. H. Works by Proiect Execution Office 22. Project Preparation. Xinjiang Communication Department made a thorough preparation of Xinjiang Highway project I. The feasibility report was completed in 1992. The task-planning document was approved in February 1992. The TUD Highway was listed as one of the major projects in China by the State Planning Commission in 1995. The desigp of the TUD Highway was undertaken by Xinjiang Highway Planning, Survey and Design Institute. The joint venture of China Highway Engineering Consultants and SNC Lavalin International Engineering Company in Canada assisted in the completion of the design and in the preparation of Bid Documents. The project approval, preapppraisal, appraisal and negotiations were completed between July 1992 and June 1994. The project became effective on February 8, 1995. 23. Project Implementation.. To implement the TUD Highway component of the project, the Xinjiang Uygur Autonomous Region established a Construction Authority in April 1992 while Xinjiang Communication Department established Project Office responsible for bidding, management, coordination, land acquisition and resettlement, planning and financial management, building materials supply, etc. 24. Experience of Xiniianv Hi2hwav Proiect I. The Employer took the FIDIC condition of contract clauses as the basis of administering the implementation and ensure the progress and the quality of works. The experience had been that when the Employer paid attention to quality control good results were achieved. Attention was paid in particular to the following four areas of the works: a) expansion joint of bridges; b) pavements; c) compaction of sub-grade; d) backfilling of abutmnents. - 14 -  I. Work by the World Bank 25. Proiect Preparation. The World Bank started to work on Xinjiang Highway Project I in 1992. A Bank mission reviewed the feasibility study report, which was prepared by XCD. The Bank sent missions to investigate the technical, institutional and economic aspects and completed the appraisal of the project. The SAR described the scope, economic benefits and organizational arrangements for the implementation of the project. During the project preparation and implementation, the Bank staff provided a lot of assistance to the Implementation Agency. 26. Proiect Implementation. Bank mission visited Xinjiang many times to supervise the project during implementation and provided lots of practical suggestions on quality, financial management and institutional matters. With the Bank's assistance ajoint foreign/local supervision unit was set up to supervise civil works construction. Such arrangement not only ensured the quality of works but also helped the training of local staff. 27. Cooperation between the Executive Agencv and World Bank. The cooperation of the World Bank and Project Executive Agency was good. The World Bank officers had full understanding of the transport infrastructure development needs and were helpful in providing support to the Region. Xinjiang Regional Government and XCD would like to express heartfelt thanks to the World Bank for its cooperation and support, and hope to have further opportunity to get the Bank's assistance and chance for even better cooperation. 28. Experience. The major benefits have been: a) through World Bank financed highway project the FIDIC clauses of the conditions of contract have been widely adopted in Xinjiang for highway construction works since this system is very advantageous and effective; b) through the training of personnel, a batch of professionals were trained, and broadened and made full use of their knowledge during project implementation and they played important roles in their works; c) on Road Data Bank and Pavement Management System, the two components promoted the Xinjiang highway management system and staff learned a lot about gaining new technology and got much experience through the implementation of this project component. (ii) Borrower's Comments on the Bank's Draft ICR See Borrower's letter of June 1, 2001 overleaf. These comments have been taken into account in the ICR. -15-  To: Mr. Jacques Tollie, Sr. Highway Engineer, EASTR Transport Sector Unit, East Asia and Pacific Region, World Bank Fax No.: (202) 458-2587 From: Aman Haji, Director, PEO-XHGHCA Fax No.: 86-991-2574907 Date: June 1, 2001 Subject: CHINA: Xinjiang Highway Project I (Loan No. 3787-CHA) Implementation Completion Report (ICR) MESSAGE: Dear Mr. Tollie: Regarding the ICR of Xinjiang Highway Project I, we reviewed your fax dated May 2, 2001 and prepared our comments as follows: 1. Mileage: Total length of Turpan-Urnuqi-Dahuangshan High Grade Highway is 283.9 kin, of which Class I highway 101.9 kin, Class II highway 182.0 km and linkage 10.67 km. 2. Economic Cost in Economic Evaluation: The cost for Northern Section by the period ending December 2000 is 1071.90 million Yuan, not 2264.93 million Yuan. 3. Appendix B Income Statement: the Operating Taxes have been exempted since October 2000. 4. Appendix E: a) Operating taxes have been exempted. b) Maintenance Cost includes Capital Maintenance so that the Capital Maintenance Cost will not be calculated separately. 5. Please find the attached Table A, B and C. Sincerely yours, (Signed) Aman Haji, Director Project Execution Office, XHGHCA (b) Cofinanciers: None. (c) Other partners (NGOs/private sector): None. 10. Additional Information None. - 16-  Annex 1. Key Performance Indicators/Log Frame Matrix Outcome I Impact Indicators: ; __________.. __cttcstorlMatx PwlcWti in last PSR A.in uatslfat; (1) Reduced traflic congestion in TUDH (SAR for 1999) (Actual 1999) corridor (traffic in Medium Truck Equivalent per day): Old road New road Corridor Old road New road Corridor Total Total Eastern Section TUH: 1: Turpan - Baiyanggou 1492 2560 4052 1224 732 1956 2: Baiyanggou-mountainous area 1929 3470 5399 764 2910 3674 3: Mountain area- Fertilizer plant 1919 3470 5389 2773 2274 5047 4: Fertilizer plant- Urumqi 2000 7125 9125 3580 4065 7645 Northem Section UDH: 1: Dahuangshan-Tianchi 1482 2970 4452 1641 854 2495 2: Tianchi- Shanghahe 2046 7742 9788 4401 1182 5583 3: Shangshahe-Urumqi 9783 10407 20190 16167 3220 19387 (2) Reduced numberof traffic accidents (Yr. 1996) (Yr. 1999) involving fatalities: Number of fatalities per numberof vehicles: 25 per 10,000 vehicles 23 per 10,000 vehicles Note: The above data show that achievement of the first objective was only partial in 1999. The reasons are provided in para 5.1 of the main text Preliminary data for 2000 indicate (i) a resurnption of traffic in the corridor, and (ii) a substantial increase of traffic diverted to the new highway. Output Indicators: * _dlatpriMstAx ProJed Ila kW, ActtmULa EEtsmat (1) Number of persons/person-months of completed training: 1767/1782 1394/1417 (2) Studies completed: - Highway Network Maintenance 2 2 - Rural Passenger Transport (3) Highway safety: number of improved 4 Identificaton study done under XHP1, but black spots cvil works transferred under XHP2. End of project - 17 -  Annex 2. Project Costs and Financing Project Cost by Comronent (in US$ million equivalent) TUDH and Linking Roads (1) 188.10 270.75 144 Road Safety -- Pilot Program (2) 0.70 0.10 14 Supervision of Construction 8.30 7.87 95 Equipment (3) 15.90 27.42 172 Training (4) 3.20 1.90 54 Technical Assistance/Studies 1.10 1.02 93 Land Acquisition and Resettlement 11.90 14.13 119 Others (Fees and Taxes) (5) 5.40 33.36 617 Total Baseline Cost 234.60 356.55 Physical Contingencies 19.70 Price Contingencies 68.60 Total Project Costs 322.90 356.55 Total Financing Required 322.90 356.55 Notes concerning Annex 2a: Project Costs by Component 1. Appraisal estimates for civil works including contingencies amount to US$268.1 million, almost identical to actual amount of US$270.7 million. 2. Physical under-achievement of Road Safety Component is explained in Section 4.2: the Black Spots Program was identified late and it was mutually agreed that the corresponding civil works would be transferred under the ongoing XHP2. 3. Over-achievement re Equipment Component is mostly due to additional equipment acquired by XCD (non-Bank fnanced) for (i) supervision activities and (ii) TUDH operation and maintenance. 4. Training targets were achieved by about 80% (Section 4.2), at a lower cost than forecast. 5. Actual includes interest during construction. - 18 -  Annex 2b. Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Categories Procurement Method Procurement Method Appraisal Estimate Actual/Latest Estimate ICB NCB Others NBF Total ICB NCB Others NBF Total Civil Workes; TUDH and Linking Roads Road 242.80 11.40 - - 254.20 231.37 31.93 - - 263.30 Road Safety Black Spots - - 1.00 - 1.00 - - 0.10 - 0.10 TUDH-E&M Supply and Install 13.90 - - - 13.90 7.45 - - - 7.45 Equipment 7.70 - 4.50 7.20 19.40 6.96 2.26 18.20 27.42 Consultants and Training Supervision of Construction - - 12.00 - 12.00 - - 7.87 - 7.87 Highway Maintenance Study - - 1.00 - 1.00 - - 0.72 - 0.72 Passenger Transport Study - - 0.40 - 0.40 - - 0.30 - 0.30 Training - - 3.70 - 3.70 - - 1.90 - 1.90 Land Acquisition and Resettlement - - - 11.90 11.90 - - - 14.13 14.13 Others (fees and taxes) - - - 5.40 5.40 - - - 33.36 33.36 Total 264.40 11.40 22.60 24.50 322.90 245.78 31.93 13.15 65.69 356.55 Note: "Other" includes force account, international shopping, and consultants services. "NBF" includes non-Bank financed items. Annex 2c. Project Financing Project Financing by C omponent (in US$ million equivalent) . Percentage a Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank GovtI CoF. Bank Got. Col?. Bank Govt. CoF. TUDH - Civil Works 118.60 94.20 41.40 129.53 67.53 66.26 109.2 71.7 160.0 TUDH - E & M systems 10.40 3.50 0.00 5.73 1.72 0.00 55.1 49.1 0.0 Road Safety-Black spots 0.40 0.60 0.00 0.00 0.10 0.0 16.7 0.0 Supervision 5.00 7.00 0.00 3.53 4.33 0.00 70.6 61.9 0.0 Equipment 12.20 7.20 0.00 9.27 18.16 0.00 76.0 252.2 0.0 Training 2.90 0.80 0.00 1.57 0.33 0.00 54.1 41.2 0.0 Studies 0.50 0.90 0.00 0.32 0.69 0.00 64.0 76.7 0.0 Land Acquisition and 0.00 11.90 0.00 0.00 14.13 0.00 0.0 118.7 0.0 Resettlement Others (fees and taxes) 5.40 33.36 617.8 Project Total 150.00 131.50 41.40 149.95 140.34 66.26 100.0 106.7 160.0 Percent of Total 47.00 40.00 13.00 42.05 39.36 18.59 89.5 98.4 143.0 Note 1: "CoF." represents the Central Government, while the XUAR Government is the project owner. Note 2: Costs above include all contingencies. - 19 -  Annex 3: Economic Costs and Benefits ECONOMIC AND FINANCIAL EVALUATIONS Preface 1. The economic evaluation of the project covers the following two components: (a) construction of the 283.9 km Turpan-Urunqi-Dahuangshan Highway (TUDH); and (b) construction, rehabilitation and upgrading sections of six linking roads with a total length of about 10.7 km that would interconnect and feed traffic to TUDH at major intersections and interchanges. 2. The economic analysis is based on the re-evaluation of data on traffic, operational performance, costs and benefits of project components. The methodology used was similar to that employed by the SAR and is summarized as follows: (a) capital investment and maintenance costs were revised to reflect December 2000 prices and are included in the cost streams; (b) the benefit streams, also in December 2000 prices, consist of savings in vehicle operating costs, ship operation costs, reduced traffic congestion on existing routes, and enhanced road safety; and (c) a project life of 20 years has been assumed and the capital investment period for all components was from 1992 to 2000, depending on the construction phases. 3. Similar to the appraisal report, the ICR will combine economic evaluation of the six linking roads with TUDH because the construction and/or rehabilitation of the six linking roads is to service TUDH. As in the SAR, TUDH will be divided into two highways: Turpan/Urumqi highway (TUH or eastem section) and Urumqi/Dahuangshan highway (UDH or northem section). 4. This Attachment is comprised of three parts. Part I is the economic evaluations of TUH and UDH; Part II is the overall economic evaluation of the project, including sensitivity analysis and probabilistic risk analysis, and; Part III is the financial evaluation of the TUDH. - 20 -  PART l: ECONOmIC EVALUATION OF TUH AND UDH 5. As in the SAR, the highways were divided inito a total of seven sections for econornic evaluation. Length of the Length of the New Old Road (km) Highway (1m TUH: Section 1: Turpan - Baiyanggou 67.28 66.40 Section 2: Baiyanggou mountainous section 29.10 28.00 Section 3: Mountainous- Fertilizer plant 63.00 62.40 Section 4: Fenilizerplant-Urumqi 19.00 20.10 Subtotal 178.38 176.90 UDH: Section 1: Dahuangshan- Tianchi 56.50 53.20 Section 2: Tianchi- Shanghahe 49.00 47.80 Section 3: Shangshahe- Urumqi 6.50 6.00 Subtotal 112.00 107.00 Total 290.38 283.90 Highway Corridor Traffic 6. TUDH was opened to traffic in August 1998. The first full operating year was 1999. The highway corridor traffic of 1999 and its distribution between the old and the new highways are presented in the following table, indicating SAR forecast and actual traffic census data: NUMBER OF MOTORIZED VEHICLES PER DAY FOR 1999 The Old Road The Nevw Highway Total Corridor Diversion AADT MTE AADT MTE AADT MTE Factor (1) -_ (2) (3=12) (4=2/3) TUH (East ernSection): SAR: Section I -- 1,492 -- 2,560 -- 4,052 63.2% Section 2 -- 1.929 -- 3.470 -- 5,399 64.3% Section 3 -- 1,919 -- 3,470 -- 5,389 64.4% Section 4 -- 2,000 -- 7,125 -- 9,125 78.1% ICR: Section 11,20 9 1.224 723 732 1,932 1,956 37.4% Section 2 755 764 2,875 2,910 3,630 3,674 79.2% Section 32,74 0 2,773 2,247 2,274 4,987 5,047 45.1% Section 43,53 4 3,580 4,016 4,065 7,550 7,644 53.2% Ratios (ICR/SAR): Section 1 -18.0% -71.4% -51.7% Section 2 -60.4% -16.1% -32.0% Section 3 44.5% -34.5% -6.3% Section 4 79.0% -43.0% -16.2% UDH (Northern Section): SAR: Section I -- 1,482 -- 2.970 - 4,452 66.7% Section 2 -- 2,046 -- 7,742 - 9,788 79.1% Section 3 -- 9.783 -- 10,407 - 20,190 51.5% ICR: Section 11,56 3 1.641 793 854 2,353 2,494 34.2% Section24, 152 4,40t 1,115 1,181 5,267 5,583 21,2% Section 3 15,252 16,167 3,038 3,220 18.290 19,386 16.6% Ratios (ICR/SAR): Section 1 10.7