China - Seventh Railway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 31554 IMPLEMENTATION COMPLETION REPORT (CPL-38970 SCL-38976) ON A LOAN IN THE AMOUNT OF US$ 400 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE SEVENTH RAILWAY PROJECT April 20, 2005 This document 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 January 1, 2005) Currency Unit = Yuan Yuan 1.00 = US$ 0.12 US$ 1.00 = Yuan 8.28 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS EIRR Economic Internal Rate of Return CR China Railways FCTIC Foreign Capital and Technical Import Office ICB International Competitive Bidding ICR Implementation Completion Report NDRC National Development and Reform Commission MOR Ministry of Railways MOF Ministry of Finance NPV Net Present Value PAD Project Appraisal Document SAR Staff Appraisal Report SOE State Owned Enterprises TA Technical Assistance TMIS Telecommunications and Traffic Management Information System Vice President: Jemal-ud-din Kassum Country Director David R. Dollar Sector Manager/Director Jitendra N. Bajpai Task Team Leader/Task Manager: John C. Scales  CHINA SEVENTH RAILWAY 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 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 11 8. Lessons Learned 13 9. Partner Comments 14 10. Additional Information 19 Annex 1. Key Performance Indicators/Log Frame Matrix 20 Annex 2. Project Costs and Financing 21 Annex 3. Economic Costs and Benefits 23 Annex 4. Bank Inputs 34 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 36 Annex 6. Ratings of Bank and Borrower Performance 37 Annex 7. List of Supporting Documents 38  Project ID: P003571 Project Name: CN-7th Railways Team Leader: John Carter Scales TL Unit: EASTR ICR Type: Core ICR Report Date: April 21, 2005 1. Project Data Name: CN-7th Railways L/C/TF Number: CPL-38970; SCL-38976 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Railways (99%); Central government administration (1%) Theme: Infrastructure services for private sector development (P); Administrative and civil service reform (S) KEY DATES Original Revised/Actual PCD: 12/02/1993 Effective: 03/19/1996 Appraisal: 10/14/1994 MTR: Approval: 06/01/1995 Closing: 12/31/2002 09/30/2004 Borrower/Implementing Agency: PRC/THE MINISTRY OF RAILWAYS Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautam Kaji Country Director: David R. Dollar Yukon Huang Sector Manager/Director: Jitendra N. Bajpai Nicholas C. Hope Team Leader at ICR: John C. Scales ICR Primary Author: Vickram Cuttaree; Jitendra Sondhi; Richard Bullock 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, 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: U Project at Risk at Any Time: Yes  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The main objectives of the project were to assist the Ministry of Railways to (i) redefine the relationship between the Railway and the Government, (ii) reshape the railway's organization and strengthen its internal management, (iii) expand the railway's transport capacity, raise its investment efficiency, and enhance its finance; and (iv) modernize the railway's technologies and bolster the efficiency and quality of its transport operations and service. This project supported the Bank strategy for the Railways Sector in China to increase its capacity while at the same time introduce China Rail to modern railway management and technologies. Although the objectives reflect the Bank's strong desire to support the broad reform agenda and at the same time to finance physical improvement, they appear to be lacking focus and client buy-in. The subsequent restructuring of the project in 1999 can be partly explained by the fact that the project had too many components and the client lacked commitment on some project components. 3.2 Revised Objective: The project was restructured in 1999 without any change in the overall objectives. The changes in components are detailed in the "Revised Component" section. 3.3 Original Components: The Project included seven components which are summarized below: Component Total Cost Bank Loan (US$ million) (US$ million) At appraisal (1995) At Appraisal (1995) Expanding corridor capacity 955.3 151.8 Modernizing Information Systems 199.6 38.9 Upgrading Telecommunications 131.9 39.7 Commercializing container 153.1 26.3 Transport Enhancing Environmental 6.7 4.4 Protection Expanding System Capacity 123.8 92.5 Technical Assistance 7.4 7.2 Sub-Total 1,577.8 360.8 Total (incl. Physical and price 1,747.5 400 contingency) Expanding Corridor Capacity (subsequently restructured): The project included the electrification and upgrading of 890 km of the 1,044 km Wuhan-Guangzhou line (the last remaining section of the Beijing-Guangzhou trunk line to be electrified and modernized). Modernizing Information System: The project financed the acquisition of computer hardware, software and a related TA to help railway managers make better-informed decision and improve railway efficiency and service quality. Upgrading Telecommunications Systems: The project financed the acquisition of telecommunications equipment and related TA to enable MOR expand and modernize the railway's trunk transmission and data telecommunication networks. - 2 -  Commercializing Container Transport (subsequently restructured): The component planned to finance the purchasing of container transport and handling equipment and for a TA and the computer software needed to modernize and commercialize rail-based container transport operations. Enhancing Environmental Protection: The project financed a TA and equipment for MOR to (a) undertake pilot programs to address pressing environmental problems; and (b) strengthen the capabilities of its environmental staff. Expanding System Capacity (subsequently restructured): This component was designed to help MOR initial efforts in its long-term plan to introduce heavy-haul operations, employing heavier trains with a higher ratio of payload to tare weight, to the core network. The project was to finance the procurement of three-phase AC electric locomotives, including equipment, tools, spare parts and training, and secure heavy-haul expertise, including helping MOR to progressively raise the axle load limit on the core network from 21 to 25 tonnes. Technical Assistance (subsequently restructured): The project financed studies to implement (a) railway enterprise reform, (b) railway tariff reform, and (c) labor productivity enhancement. It also provided MOR with a series of TAs (including software in some cases) to prepare future railway projects and to develop and apply new railway technologies and management techniques: (d) a feasibility study of dedicated passenger rail, (f) an application of the RIS Decision Support System, (g) Information Systems Studies, (h) a Telecommunications Network Systems Study, (i) a Diesel Engine Design study, (j) an action plan for Restructuring the Railway's Manufacturing and Overhaul Sector, training to strengthen MOR's Treasury Function. Assessment: The project was within the implementing capacity of MOR and extensive effort was made by the Bank in appraising it. The appraisal team used published information from MOR (such as the 30-point Action Statement) and several working papers were prepared to support the appraisal. However, in retrospect, the project tried to deal with too many issues and the combination of line-specific physical improvements (implemented by regional administrations) and several TAs with a more global policy focus (implemented by central units) contributed to increasing the project complexity and the lack of commitment of the borrower to some components. There was also limited consistency between the stated objectives and the project components. 3.4 Revised Components: The reasons for the restructuring were that (i) MOR's decision to accord higher priority to the Beijing-Kowloon line caused a shortfall in counterpart funds, requiring additional funding for the Wuhan-Guangzhou electrification; (ii) MOR and the Bank could not reach an agreement on the procurement of AC electric locomotives, (iii) MOR belief that container transport by rail was sub-optimal led to the container transport component being canceled and (iv) recent changes in CR operation resulted in some TA being less relevant. As a result, the total amount of the loan was reduced from US$ 400 million to US$ 371 million and the loan closing date changed from December 31, 2002 to June 30, 2003. The reasons for restructuring are more detailed in Section 5 of the ICR. The following components were revised: Expanding corridor capacity: Because of higher traffic demand on the Beijing-Kowloon line, MOR decided to give it higher priority and redirect funds to this line, causing a shortfall in counterpart funds. This shortfall resulted in MOR requesting that US$ 100.0 million be added to the Bank lending for the electrification of the Wuhan-Guangzhou line. Commercializing container transport: During the mid-term review of this component, the Bank team concluded that it was premature and unrealistic to assume that the component could be implemented within the timeframe of the project. This component was then cancelled. - 3 -  Expanding system capacity: MOR sent the Bank draft bidding documents for the AC-electric locomotives (US$ 100 million) shortly after the loan became effective in March 1996. However, the Bank withheld its "no objection" to the documents because the technical specifications did not provide for ICB procurement; in addition the starting tractive effort for the locomotives to be procured was only 12 percent better than that of the existing locomotives. MOR and the Bank could not reach an agreement on the technical specifications of the locomotives and MOR obtained in May 1997 bilateral financing as an alternative to the Bank's loan. Technical assistance: During the mid-term review, MOR advised the Bank that it would like to maintain the overall amount allocated in the original Railway VII for technical assistance/studies but requested to replace some studies by some items which they considered were better linked to CR's current interests. The loan was restructured as follows: Component Original Allocation Revised Allocation Actual (US$ million) (US$ million) (US$ million) Expanding corridor capacity 151.8 249.0 199.2 Modernizing Information 38.9 38.9 44.1 Systems Upgrading 39.7 39.7 19.9 Telecommunications Commercializing container 26.3 0 0 Transport Enhancing Environmental 4.4 4.4 2.0 Protection Expanding System Capacity 92.5 0 0 Technical Assistance 7.2 7.2 3.0 Sub-Total 360.8 339.2 268.2 Total (incl. Physical and 400.0 371.0 277.6 Price contingency) Actual expenditure was US$278 million, compared to US$ 371 million following restructuring. About US$139 million in savings occured due to competitive prices using ICB procedures. Following the corporate separation of railways communication from MOR, the data telecommunication network project was cancelled, saving a further US$ 10 million. 3.5 Quality at Entry: The Quality at Entry is rated unsatisfactory. Although the timing of the project was well chosen, was in line with the CAS and extensive effort was put in the preparation, the project design was too ambitious and did not take into consideration the institutional constraints and commitment of the implementing agency. The State Council approved in 1994 a 30-Point Action Plan Statement of Railway Reform, prepared by MOR, which was used to support the preparation. The CAS aimed to assist China in alleviating infrastructure bottlenecks, reforming SOEs, and safeguarding the environment. Moreover, 31 working papers were prepared on the different project components. However, there was a disconnect between the project objectives and its components: with the exception of some TA, there was no specific component to help "redefine the relationship between railway and the government" and "reshape railway's organization and strengthen its internal management". There was also limited evidence in the appraisal that MOR was fully committed to implement all project components, such as the Container Transport Commercialization. Thus, the project complexity could have been reduced to allow for appropriate timing of reforms and to reflect more MOR's needs. - 4 -  4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project outcomes are discussed below by objective. The overall project objective outcome is rated satisfactory. The original objectives fell into four groups: (i) Redefine relationship between railway and government; and (ii) Reshape the railway's organization and strengthen its internal management The review of these two sections is combined as they are linked and both supported by a set of TA. This project included several studies designed to support the reform of China railways and reshape its internal organization, specifically to improve the regulatory framework, examine financing strategies, improve labor productivity and develop the structure of a PSO system. Outcome. The achievements of these objectives are rated satisfactory for both of them. Although it is difficult to measure the direct contribution of the specific TAs, substantial institutional reforms have been implemented since then and the overall direction of change has been in line with what was recommended by the Bank. Moreover, many of the tools financed through the project are in wide use today and are instrumental in supporting the reform process. The studies focused on several key areas such as railway reforms, labor productivity enhancement, application of new railway technology and management techniques, and improvement of environmental staff capabilities. There was extensive discussion and debate of all the related issues during the life of this project and several important steps have been taken to reform the railway system to meet the needs of the market economy. In particular, as noted in the ICR for Railways VI, the Outline of the Tenth Five-Years Plan For National Economic And Social Development (Approved by the Fourth Session of the Ninth National People's Congress on March 15, 2001), stated that the purpose of the government is `To accelerate the reform of transportation management system and operation mechanisms with the core focus on the separation of the government functions and the enterprise functions, railways will "separate infrastructure from transport operations"'. More concretely, over the last decade, substantial institutional reforms have taken place within MOR, with many non-core activities divested and overall employment reduced by about 1 million staff. MOR is increasingly focussing on the 'government' role and providing individual `railway enterprises' (e.g. regional administrations) with substantial operational autonomy. Within the administrations, Passenger Transport business has been separated on accounting basis. (iii) Expand the railway's transport capacity, raise its investment efficiency, and enhance its finance: This originally had two components but was reduced to the Wuhan-Guangzhou electrification following the 1999 loan restructuring Outcome. The achievement of this objective is rated satisfactory. The electrification of the Wuhan to Guangzhou line was completed and commissioned in September 2001, with its freight capacity increasing by about 24% and an increase in maximum speed of 10-20%. This completes the electrification and modernization of the Beijing-Guangzhou trunk line. Most of the key performance indicators have been achieved (or close to target) or exceeded (please refer to Annex 1 for details). One exception is the average speed for passenger train (88 km/hr vs. 136 km/hr) but it seems that there was a mistake in the project restructuring document: it is a very high value for passenger train speed and the original appraisal indicates only a target speed of 71-71 km/hr. Currently, the line is again broadly at capacity; the passenger traffic using the line is greater than expected at appraisal but the freight traffic is less, reflecting the increased emphasis of MOR over the period on the improvement of its passenger services, as well as the diversion of a greater proportion of freight traffic than expected to the parallel Beijing to Kowloon line. - 5 -  (iv) Modernize the railway's technologies and bolster the efficiency and quality of its transport operations and service The project funded three physical components covering the continued implementation of TMIS, upgrading the telecommunications system and environmental protection. It also financed a series of studies to strengthen MOR internal management, covering the RIS investment support system, TMIS-related studies and diesel engine design. In addition some of the loan savings from the Wuhan-Guangzhou electrification were used to finance track maintenance equipment. Outcome. The achievement of this objective is rated satisfactory. Although the impact of network-wide system investments such as these is not easy to assess directly, the overall impact of these interventions was strongly positive. MOR can now manage its railway system on a real time basis. TMIS has played an increasingly important role in the management of train operations and the loan provided funds for a series of upgrades and improvements over the six years from 1998 to 2004. The introduction of a modem telecommunications system was a prerequisite for the implementation of the traffic management information system. During the project period, MOR obtained a license for providing commercial telecom services on its internal telecommunication system and established a new company (RAILCOM) for this purpose, which is now responsible for the infrastructure funded with the loan. The continued introduction of modem mechanized track maintenance procedures also had a significant impact in improving track quality and enabling MOR to speed-up its services and compete more effectively with other modes of transport. 4.2 Outputs by components: Expanding Corridor Capacity. This component is rated highly satisfactory. The outputs for the related components are as follows: Electrification and upgrading of the Wuhan-Guangzhou line Output. Electrification of the Wuhan - Guangzhou line was completed and the line opened to electrified services in 2001. The cost of this component was 30% more (in terms of US$) than budgeted at the time of appraisal even though the Bank financed equipment cost 25% less than expected. This higher than budgeted cost is explained by the high inflation rate during the years during and following the preparation (24% in 1994, 17% in 1995, 8% in 1996 and 3% in 1997) and possible additional works that were done along the line. The saving on Bank-funded equipment is explained by the use of ICB for procurement. Implementation of Safeguards. The implementation of both the environmental and resettlement policies was rated satisfactory and no problems were reported. The last supervision occured in 2001, after the completion of the capacity expansion component. Track Maintenance: A list of the equipment purchased for the electrification project is provided in section 9 of the client report. Output. The component has been very successful. It is a component with high client ownership, as demonstrated by the development of a special program for engineering and maintenance during the Eleventh Five Year Plan. It has allowed them to mechanize track maintenance, make moderate reductions in the labor force, reduce track closure times, and improve maintenance quality. Upgrading Telecommunication Systems. The telecommunications equipment procured included the transmission network, telecommunication network, satellite communication network, microwave transmission network and satellite telephone network. During the project period, railway communications were separated from the railway proper and placed in a stand-alone company. - 6 -  Output. This component is rated highly satisfactory. For most indicators, the technical performance of the telecommunication system was well above the target by 2000, and even more so by 2003. The new company is now responsible for the infrastructure funded with the loan. The performance of the upgraded telecommunications system, together with the targets set at project appraisal, is summarized in Annex 1. Modernizing Information Systems (TMIS) During Railway VII, the equipment purchased under Railway VI was further developed, with the project financing mainframe computers, yard computers and terminals, and some special-purpose software implemented for automatic wagon number recognition, container tracking and a ticket and waybill information database. Output. This component is rated highly satisfactory. TMIS is now fully implemented, providing on-line information to operational management. The development of a computer based transport planning model, RIS, was initiated in 1989 using a PHRD grant with the results being used as input to the 1992 Sector Report--China Railway Strategy. The activities funded under the current project were designed to strengthen the functionality of the model. The model has been improved by MOR and its consultants and is in use. Specifically, MOR used this model to evaluate and rank investment options for inclusion in the 11th Five Year Plan. Enhancing Environmental Protection and Technical Assistance The two components have been reviewed together as they are both supported by TAs. The objective of these components was to support MOR in areas such as improving environmental stafff capabilities, railway reforms, labor productivity enhancement and to apply new railway technologies and management techniques. Output. These two components are rated satisfactory. It is very difficult to assess the impact of a few individual studies on an organization as big and complex as MOR. After the list of TA was reviewed to accommodate MOR's most recent needs, the studies were completed and contributed to improving MOR's overall performance, as noted in sections (i), (ii) and (iv) of the outcome assessment. Some of the reforms have taken place (such as separation of the passenger transport business on an accounting basis) and even if others have yet to be implemented (such as the separation of infrastructure from transport operations), our improved policy interaction with MOR shows that several steps to reform the railway system have benefited from the two project components. 4.3 Net Present Value/Economic rate of return: The project estimated EIRR was recalculated after the Project restructuring and was equal to 28.9% (with 25.8% for the "Expansion of Corridor Capacity", 30.2% for the "Upgrading of the Telecommunications Systems" and 42.2% for the "Modernization of Information Systems"). Although the PAD included estimates of the EIRR for the telecommunications and TMIS components, these were based on generalised assumptions about the impact of these management systems on the general level of railway efficiency. It is not possible to directly identify such impacts in practice, particularly given the many other changes that have occurred since the PAD was originally prepared in 1994, and for the purposes of preparing this report, the project team has restricted the economic reevaluation to the electrification of the Wuhan-Guangzhou line. The EIRR reevaluation has been conservative and incorporated what could be measured or reasonnably assumed as costs and benefits. However, as detailed in the Annex 3, assumptions have been made about the project funds that were devoted to the electrification component and the related portion of the benefits that were derived from it. Thus 51% of the project expenditure was included in the re-evaluation ($US 602.4 million out of $US 1,160 million of actual total project costs). The benefits are grouped into two categories: (i) capacity-expansion related benefits (total benefits of $US 259 million) and (ii) operating cost-related benefits (total benefits of $US 2,913 million). - 7 -  The estimated EIRR for the Wuhan - Guangzhou component is 12.4 percent. This relatively low figure does not mean that the electrification project was not a success. Among the benefits, one, avoiding an increase in road capacity, did not occur. Moreover, benefits associated with many other improvements, though part of this component, could not be isolated and accounted for. Finally, the undervaluation of the Chinese RMB further discounted the operating and capacity benefits generated by the electrification. The sensitivity analysis, with more favorable assumptions regarding shadow pricing of labor or time savings, indicated an increase in the EIRR to 15.9 percent. The details of the re-evaluation are in Annex 3. 4.4 Financial rate of return: No financial rate of return was calculated at Appraisal 4.5 Institutional development impact: The Institutional Development Impact is rated as substantial. As noted in the ICR for Railway 6, while it is not always clear how the Bank has influenced individual decisions about reform within MOR, the overall impact of our involvement has been very positive. It is also difficult to assess the impact of an individual project on an organization as big and complex as China Railways. However, our advice was valued and frequently sought on railway-reform related issues. Over the last few years a number of high level meetings have been held between Bank staff and the Minister and Vice-Ministers of Railway to discuss reform and the overall direction of change. Also, given the high system-wide impact of some of the project components, in particular the TMIS and track maintenance, it is clear that the projects have supported the past reform process and are having an important and continuing impact on the operations of China railways. - 8 -  5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The project area experienced severe floods in the early stages of project implementation. This required certain flood protection works to be carried out prior to physical implementation of the Wuhan-Guangzhou electrification. In addition, other related works to enhance capacity also caused delay in project implementation. For instance, quality problems with the supplier of contact wire for the catenary system delayed the completion of the Wuhan-Guangzhou electrification by about six months. 5.2 Factors generally subject to government control: There was no factor subject to government control that affected the implementation and outcome. 5.3 Factors generally subject to implementing agency control: The decision by MOR to accord higher priority to completion of the Beijing-Kowloon railway line, parallel to the Wuhan-Guangzhou segment, caused the shortfall in counterpart funds. The traffic demand on the Beijing-Kowloon line exceeded the one on the Wuhan-Guangzhou line and MOR decided to redirect the available funds. This affected the pace of implementation and the project had to be subsequently restructured in January 1999. The restructuring led to discontinuation of the AC electric locomotive component (about US$ 100 million), enlargement of the corridor expansion component that included Wuhan-Guangzhou electrification (by US$ 98 million) and cancellation of the container transport component (about US$ 29 million). The total amount of the loan was reduced from US$ 400 to 371 million and the loan closing date was changed from December 31, 2002 to June 30, 2003 and subsequently extended to September 30, 2004. MOR (the implementing agency) and the Bank could not agree on the draft bidding documents submitted for the procurement of the 32 new AC electric locomotives since they did not provide for ICB procedure (as per the Loan Agreement) and the proposed technical specifications indicated a lower power rating than that agreed to during project preparation. The implementing agency did not thus fully implement the commitments made earlier leading to dropping of this component. MOR also had second thoughts about the container transport component that focused on commercialization of rail-based container transport operations and sought its cancellation. There was considerable delay in the bid evaluation by MOR for automatic block equipment that caused a delay of over one year in its procurement and installation. A similar delay occurred in the procurement of the SCADA traction remote control system. 5.4 Costs and financing: The cost estimates for equipment procured with Bank funding through ICB procedures were invariably found to be high, leading to savings. Some of the savings (US$ 39.5 million) were utilized to procure additional project related equipment but US$ 90 million was cancelled from the loan. While the cost of Bank funded equipment and services was well within the estimates, the cost of locally funded equipment, services and works was higher than the project appraisal estimates by about 40 percent. Most of the local cost overrun comes from a high inflation rate during the first few years following preparation, which was not anticipated during the original appraisal. - 9 -  6. Sustainability 6.1 Rationale for sustainability rating: The project sustainability is rated as likely. MOR has shown remarkable ability for implementing complex physical projects and this project was no exception. The Wuhan-Guangzhou corridor expansion that included electrification over a route of 890 km was carried out on a congested working railway and completed in a reasonable period of about three years. MOR also successfully implemented the components related with modernization of its information system (TMIS), upgrading telecommunications and technical studies. MOR has robust maintenance systems and is proficient in asset maintenance. Therefore, sustainability of the assets created by the project is highly likely. In line with the project objective of improving quality of service, the passenger services on Wuhan-Guangzhou sector have seen a reduction in travel time and an improvement in comfort level. This trend is expected to continue in the future as MOR strives to meet the competitive challenge from highways and air transport by sustained improvement in service quality coupled with competitive pricing. In respect to the project objectives of redefining the relationship between railway and government and reshaping of railway's organisation and strengthening its internal management, the success has been more difficult to measure directly. However, MOR has taken several steps towards these two goals that will enable it to meet the challenge of functioning in a market economy and growing competition from road and air. These include: l Separation of a number of non-core units including manufacturing factories, companies handling materials and supplies and railway communications, four railway design bureaus, and 38 construction units l Separation of a large number of social activities, mostly by transfer to local authorities, including 225 primary and secondary schools, about 50 kindergartens and 13 hospitals. l Separation of passenger transport business within RRAs on an accounting basis, and of about 100 branch lines from main lines on an accounting basis l Introduction of new regulations to permit foreign investment in railways, as required under WTO agreements. l Creation of three, special-purpose companies to handle containers, special cargo (oversized and perishable cargos) and Post and Parcels. These measures enabled MOR to reduce the staff deployed on transport services from 2.03 million in 1995 to 1.53 million at the end of 2003, a reduction of about 25%. Over the same period its staff productivity increased from 749 to 1455 thousand ctkm per person, an increase of 94 percent. However, it has not yet established a plan for the separation of ministry functions (policy and regulation) from the operational railway responsible for the enterprise. This aspect is now being handled by NDRC and it is expected that a suitable format will be developed shortly as the State Council is keen to redefine the relationship between the ministry and the railway enterprise. 6.2 Transition arrangement to regular operations: There was minimal disruption to existing traffic during the construction period on the Wuhan-Guangzhou line. The transition period to regular operation was short and is already over. - 10 -  7. Bank and Borrower Performance Bank 7.1 Lending: The Bank performance at lending is rated unsatisfactory. The Bank prepared the project with the active participation of the client. However, a very complex project was developed that was rather ambitious in its objectives with respect to redefinition of the relationship between the railway and the government and restructuring of railway organization. The wide range and large number of components added to the project's complexity. In hindsight, it appears that some components were introduced too early and that the Bank team was optimistic about the level of commitment and ownership of MOR with respect to certain policy changes included in the project, such as the commercialization of rail transportation of containers. This resulted in the need to restructure the project about three years after the loan became effective. 7.2 Supervision: The Bank supervised the project on a regular basis in a satisfactory manner. Initially, project implementation was slow due to the shortfall in counterpart funding and unresolved issues related to the procurement of AC Electric locomotives. After the restructuring of the project in January 1999, the pace of implementation and disbursement picked up. Restructuring caused the loan closing date to be changed by six months from December 31, 2002 to June 30, 2003. After this extension and a second to allow completion of the delayed TA contracts, the loan actually closed on September 30, 2004. There were no residual problems that required resolution except that one TA study, on further development of the TMIS, was only partially completed and its final phase will be taken up as part of the on-going National Railways Project. 7.3 Overall Bank performance: Overall, the Bank's performance is rated as satisfactory. All physical components have been implemented satisfactorily and overall the project has achieved its development objectives. The project objective regarding redefinition of the relationship between the railway and the government and the restructuring of railway organization has been achieved only partially. As a result of the TA studies carried out and the continuing dialog with the Bank, the government and MOR now have a much better understanding of the rationale and need for railway restructuring. The State Council has now assigned the responsibility of railway restructuring to NDRC which is engaged in a dialog with the Bank. It is expected that a suitable restructuring format will be developed in the near future. Borrower 7.4 Preparation: The Borrower performance in Preparation is rated unsatisfactory. Although MOR worked closely with the Bank during the preparation of the project, it became apparent during the early stages of the project implementation that MOR was not fully committed to the commercialization of rail transportation of containers. The ownership of MOR for some of the TA studies was also lukewarm, leading to the delay in implementation. 7.5 Government implementation performance: The Government did not have any negative impact on the implementation of the project. The Government implementation performance is therefore rated satisfactory. 7.6 Implementing Agency: The implementation performance is rated satisfactory. Some issues impacted the implementation but they mostly occurred before restructuring or originated during project preparation. Moreover, the successful implementation post-restructuring and the overall positive project outcome compensate for the implementation issues. The corridor expansion of the Wuhan-Guangzhou line was implemented successfully with limited disruption to existing traffic during the construction period. The implementation of physical components was carried out with speed and efficiency. However, the implementation of TA studies was slow, apparently due to lack of capacity and enthusiasm of the beneficiary departments - 11 -  within MOR. Another problem encountered was the slow disbursement, due to a lack of counterpart funds following a higher priority given by MOR to the completion of the Beijing-Kowloon railway line (parallel to the Wuhan-Guangzhou segment). Finally, the implementation agency did not fully implement the commitments made regarding the procurement of the AC locomotives. 7.7 Overall Borrower performance: Overall, MOR's performance was satisfactory. The development objectives were achieved and, following the project restructuring, the implementation of the project was satisfactory. - 12 -  8. Lessons Learned This was a successful project although it had a slow start and had to be restructured 33 months after the date of loan effectiveness. The reasons for project restructuring have been discussed in section 5 above. The risk for delays in implementation increases if the project is complex and has multiple objectives and a large number of components. The multiple objectives and the large number of components, and the lack of commitment to some components by MOR contributed to the project restructuring. It did not help that the project also combined a regional component (corridor expansion of the Wuhan-Guangzhou line) representing the major portion of the loan, and several smaller components impacting the whole organization. The project objectives and components should have a direct and strong relationship to ensure success in achieving project objectives. The project objectives were to (a) redefine the relationship between railway and the government, (b) reshape the railway's organization and strengthen its internal management, (c) expand railway's transport capacity, raise its investment efficiency and enhance its finance, and (d) modernize the railway's technologies and bolster the efficiency and quality of its transport operations and service. Project components such as expanding corridor capacity, modernization of information systems, upgrading communication systems and expanding system capacity were directly related with objective (c) and (d) and did help achieve these objectives substantially. However, the project, aside from a few TA studies, did not directly address objectives (a) and (b). The readiness for implementation, timing of reforms, and level of commitment of the borrower to implement the proposed reforms have to be ensured during project appraisal. Apparently MOR did not support the commercialization of rail transportation of containers at the time of appraisal. Till recently, MOR held the view that container transport by rail was sub-optimal because of the reduced payload per unit of capacity when goods move in containers rather than in break bulk in situations of constrained capacity. This problem appears more to be of a project component being introduced too early, with limited commitment from the client, and China Railways is now moving in this direction. The difference in expectations regarding the procurement of locomotives is another problem that contributed to the project restructuring, and which could have been clarified during project appraisal. The cost estimates of the borrower should be rechecked carefully against international (comparable countries) and historical prices to avoid high levels of savings. MOR based its cost estimates on prices it had paid for similar equipment. In actual fact the prices contracted for equipment were substantially lower resulting in the savings of about US$ 139 million against an estimated cost of US$ 330 million. MOR was of the view that the savings arose due to competitive prices quoted under ICB procedure. Monitoring indicators should be based on well-defined data that are routinely collected by the borrower. If a new statistic is selected as a monitoring indicator, there is a high probability that such data will not be available during and after project implementation, except by special studies. In the case of the electrification of Wuhan-Guangzhou component, `operating expenses per thousand ctkm' was selected as an indicator. The origin of this indicator was not documented at the time of appraisal but it is actually a China-wide (rather than section-specific) planning figure which has not been recalculated for 10 years and which is updated by national indexation. - 13 -  9. Partner Comments (a) Borrower/implementing agency: 1. Capacity Expansion Component: 1.1 Outcome/Achievement of Objective: 1.1.1 Wuhan - Guangzhou Line (Description): This electrification double-tracked section of line is the south section of the heavily used Beijing-Guangzhou Line. It passes through an economically important area in the south central region of China. It carries both freight and passengers between center of china, south of china at relatively high intensities. The electrification of this line relieved the congested conditions of railway transport form north to south of China, and accelerated the economic development of the areas along the line. It also reduced the pollution to the environment, and enforced the sustainable energy strategy of China. Meanwhile, it reduced the transportation cost of railway enterprises. The overall performance rating of the project is 100%, and good-quality rating is more than 90%, with excellent safety during construction and no significant operating accidents even though construction continued along busy existing lines for long periods. The technical standards used were suitable and the overall planning and design rational. The overall evaluation of the design and quality is very satisfactory. The project represents a great improvement in the scientific and technological standards. In respect of communication, signal, power and so on, a large amount of advanced technologies and equipment have been imported, which accelerated the research and development of the best domestic equipment and the modernization of China' electrified railway system. To increase the loadings of the trains and to speed-up transportation and reduce waste, some matching projects were implemented at the same time as the electrification: the sidetracks of stations have been added; at grade crossings have been changed into flyovers; new high-speed switches have replaced the old ones. While electrifying the busy main line, the problem of managing the interference between constructions and running trains has been managed well. This experience can be applied during the electrification of other busy main lines in the future. The environmental protection measures such as sound barrier facilities introduced at the Shanxiang Market in Changsha city. Testing was made on a 24-hour basis to monitor noise levels at sensitive spots before and after construction, according to the requests of MOR and the World Bank. 1.1.2 Wuhan-Guangzhou Line (Results): The improvements along this line included the following: l After completion of the project, All 43 kg tracks of departure tracks have been changed into 50 kg rails and the rail of this line were continuously welded which will allow for increases in speed along this line. l The signal equipment along this line have been interlocked together and more powerful electric/hydraulic switches introduced to ensure the safe transportation. l Optical fiber communication and wireless networks have been provided alongside the line. l The wiring for the signaling and power supply have been updated, which ensures the safety and reliability of signals, and power supply and also creates favorable conditions for any increase of power supply. l After electrification, the efficiency of the locomotive depots have reached the highest domestic standards. l 3 new passenger stations were built at Xianning, Chibi and Miluo along the line. For those new stations, the passenger waiting rooms have been updated, which offer safer and more comfortable conditions for passengers. - 14 -  In 2000, there were 32 passenger train pairs operated between Wuhan to Puqi and 40 passenger train pairs between Puqi to Guangzhou. After project in 2003, the passenger train pairs increased to 39 pairs and 45 pairs respectively. Converted turnover of this line (north section) was 3.381 billion ton/km for Wuhan-Puqi section and 48.266 billion ton/km in 2000. After project, above figure is going up to 3.623 billion ton/km and 49.894 billion ton/km.down-direction 4.649 bil.ton/km. The freight density also increased from 45% to 50% for the whole line. The passenger train speed jumps up from 76km per hour in 2000 to 88 km per hour in 2003. The freight train speed rose up from 40 km per hour to 5o km per hour compare with before and after project . At same time ,the average operation cost also grew up from 400 RMB per 1000km in 2000 to 500 in 2003.RMB per 1000km. 1.2 Sustainability Wuhan-guangzhou electrification line is one of main railway lines in the network of the Chinese Railways. With the rapid economic development of areas along the two lines, the demand for freight and passenger transportation rose quickly. In the future, not only the local volume but also the through volume of freight and passenger transportation will increase steadily. In the pass years, it has been increase the speed of passenger trains. The proposed improvements will include, adjustment of the curves, strengthening and stabilizing the contact system, and reinforcement of bridges. Through the increase in operating speed, the running time of the project lines will shortened, so as to satisfy passengers' demand for rapid and convenient transportation. The project was implemented while these busy lines continued in operation. The coordination of design, implementation, and construction and the high consciousness of the need to maintain quality were all very important. Advanced and reliable technologies and methods were adopted to ensure the principle of "first, safety; second, quality; third, speed". There were no accidents during the implementation of the project. Under the direct help of experts form the Bank; the environmental protection has assisted the objective of sustainability. All the staff had been trained to use the new equipment and new technologies. All the imported equipment included the required spare parts for more than 2 years of operations. 1.3 The Reasons for Decrease of Investments for Wuhan-Guangzhou Line: The Wuhan-Guangzhou Railway Line was an important project in national "Tenth Five Plan". In the 1995 Staff Appraisal Report of the World Bank, the overall estimated budget of this project was $1127 millions, of which $400 million was to be provided by the Bank. The actual investment is $960million, including$281 million from the Bank. It is about 8 years since the start of the project the actual costs of the investment have decreased. The main reasons are that MOR decided to keep existing statues of Wuhan-Guangzhou line and Beijing- Kowloon line completed in 1996. There is no any other additional project included - 15 -  1.4 Lessons Learned for Wuhan-Guangzhou Line: 1.4.1 Restruction and Amendment to Loan Agreement For a variety reasons, (such as the change of technical policies, actual market conditions, the quick development of new technology, and insufficient up-front preparation), implementation time for Wuhan-Guangzhou project was longer than expected. Also, the cost estimates had to be adjusted during amendment to loan agreement in 1999. 14.2 A large amount of saving has been occurred during implementation of the project Procurement for the most equipments are by ICB, In practice, some bidders reduced the price of their bids (even lower than the price of materials) in order to win, but could not carry out the contract or provide the quality of goods specified. This factor influenced the project implementation time for the project. But on other hand, a large amount of saving was occurred. Putting so many contingencies fee into consideration at beginning of project, which caused the saving of the loan. Total U$D 90 million was cancelled before close date of Seventh Railway loan. 1.5 Land Expropriation and Environmental Protection 1.5.1 Land Expropriation: The land acquisition work of Wuhan-Guangzhou Line was monitored by Southwest Jiaotong University from1999. Meanwhile, the resettlement experts from the World Bank guided and checked the work annually. In 1999, the delegation of the Bank came to Wuhan-Guangzhou Line and checked the resettlement conditions, which it then thought satisfied the Bank's requirements. The land expropriation work of Wuhan-Guangzhou Line involved in 26 cities and counties along this line. There were 2927 mu land was expropriated, and more than 90,796 square meter of housing were demolished. These activities were managed jointly by the local governments and relevant office within railway administration. There were three methods for compensating the affected persons: 1. Redistribution of land; 2. Providing alternative development sites: 3. Cash compensation. The basic assumption of this method was that all who accepted these payments would be volunteers. Total cash compensation given to affected household reached 151.13 mil. RMB. Among them, there was 117.14 mil. RMB used for Guangdong province; 33.17 mil. RMB for Hunan province. Wuhan-Guangzhou electrification line was put into operation in 2002. Because of the serious attention of MOR and local governments, the land expropriation work was fulfilled on time. All the people affected were resettled and compensated, and both they and local government were satisfied. Through the above-mentioned policies, the production and living standards of the families affected had been well taken care of and their living conditions were much better than before. Most of them were satisfied with their new houses. In respect of arrangement of production, some people got new land, or were found work after getting compensation. Their incomes generally increased after this arrangement. After getting the compensation for land expropriation, the villages used the money to improve the welfare of their villagers, or to improve the conditions for cultivation. 1.5.2 Environmental Protection In south section of Wuhan to Guangzhou line passes through mountainous areas, thus the protection of environment and vegetation was very important. During construction, the slopes have been stabilized, and some additional afforestation took place along the line. Some additional protection has also been included for the trees that have been transplanted during construction. Using electric trains, compared with diesel ones, eliminated CO2 in tunnels and the noise protection measures also implemented for the line. - 16 -  2. Track Maintenance Component: From 1999-2003, the track maintenance equipment procured financed by Seventh Railway VII project included: tamping machine: 15 sets; Dynamic track stabilizer: 2 sets; Ballast cleaning machine: 2 sets; Ballast regulating machine: 2 sets; Rail grinding train; Rail flaw detection car: 1 set; Switch grinding machine: 1 set; Testing devices for track maintenance equipments: 1 set. Utilizing totally foreign loan is U$D 49.65 mil. and domestic fund 12.41 mil. USD. The operational results of using this equipment achieved or surpassed the predictions at the outset of the project. After the completion Railway VII project, there are in total 19 overhaul depots. The teams can over-haul and maintain 36,000 km of line, and 11700 sets of switches, which ensures more efficient overhaul and maintenance of a significant part of the main lines in China, especially benefiting efforts to increase operating speeds. With the large maintenance equipment, 19 maintenance teams reduce the closed time by about 5000 hours per year; the interval between overhauls is improved from 7 years to 10 years; and. Meanwhile, the using of large maintenance equipment reduces the labor intensity of works and makes them more consistent. Rail Grinders machine can cover about 600 km of rail per year, expanding the life of the tracks by about 1.5 times, improving the quality of railway transport, and improving the quality of service for passengers. Rail Detector Cars can cover detection about 6000 track km per year on average, and detect about 80% of rail flaws, which raises efficiency and improves the safety of transportation. The Railway VII Project has played an important role in the improvement of the engineering and maintenance activities of China Railway. Due to the great benefits from this component, the government has developed an additional program for engineering and maintenance work during "Eleventh Five Plan". We hope that special arrangement can be supported by the World Bank. 3. Telecommunication and TMIS 3.1 Telecommunication: 3.1.1 General: This sub-component original included the transmission network, data telecommunication network, satellite communication network, microwave transmission network and conference telephone network. Due to separate of railways communication industry from MOR, data telecommunication network project has been cancelled. Through the construction and commissioning of these networks, the performance of the telecommunication network of China Railways was significantly improved. It now meets the needs of a modem railway system and is reliable enough to meet the needs of modem railway dispatching, passenger ticket reservation system, TMIS (Traffic Management Information System). 3.1.2 China Railways Communication Network Study (1)Background to the project In support of China's economic reform policies and using the support offered by the World Bank, the Chinese Ministry of Railways has been making great efforts to improve railway communication network over the last decade. By the end of 2003, the total length of the optical cables was over 68, 000 kilometers. This provided digitized connections from the Ministry of Railway to all the railway bureaus and digitized connections between the railway bureaus and almost 100% of the railway subsections with the total number of digital switches can provide more than one million subscribers (lines). The second phase of the packet-digital switching network covering all14-railway bureaus has been put into operation. The first video-conferencing facilities have been constructed using optical and satellite connections. The total funded by The world Bank was more near U$D.30 million. - 17 -  By end of 2003, The long distance automation rate increased from 95.64% in 1994 to 98.07% in 2003; Internal effective call completion rate can be reached at 99.90%; Average duration of fault reduced from 1.38 hours to 1.35 hours. 3.2 TMIS: 3.2.1 Execution of project (1) TMIS Central Processing System The procurement of TMIS central processing system financed by Sixth Railway Loan started in 1994. For the seventh railway project, actual investment was about U$D 44 million. The mainly equipments procured in 3 lots. The first lot was published the procurement notice in the newspaper in 1998, which included mini-computer systems, ups systems that ware used in local stations and leader departments for MOR headquarter and administration or sub-administration level. The contract of IBM mainframe computer was signed in 2000 as second lot. The last lot, which focused on software upgrade financed by loan saving in 2003. Up to now, all the systems run properly. History progress for TMIS development 3.2.1.1. From 1994-2001--- Setting up TMIS framework Major equipments financed by The World Bank Loan. (a) The fast phase of the project for the dispatching system for the Ministry and Bureau was put into operation in July 2000. Manual operations have been stopped totally after adopting the new system. (b) The automatic recognition system for wagon number began tests on a trial basis on March 1,2001 this system is an important tool for tracking freight wagons. At present, the number of freight wagon, the locomotive number, the freight wagon number and other information can be identified and confirmed in real time at the request of the owning administration and records are kept in the central data base of TMIS. (c) The container tracking system was put into operation fully on March 1, 2001. This system provides real time information about the location of each container. This not only raises the efficiency of management of the containers, but also allows the owners of cargo to check the location of their shipments. (d) The actual report information system has been fully implemented. This system has fully replaced the old telecommunication sending and receiving system. In most branch bureaus, the effective reporting rate is 100%. (e) The application of ticket & freight waybill analysis system. Currently, this system provides a information data base for the Ministry, the railway administration and sub railway administration. When fully developed this system provide information a full set of transport and finance statistics for each administration. 3.2.1.1. From 2001---2004 --- Improving TMIS system Almost sub-system has been gotten improving and mainly equipments for both hardware and software funded by The World Bank Loan. 3.2.4 Conclusions: By the end of 2004, MOR has completed the construction of TMIS system, and the TMIS components in the Railway VII project have been implemented satisfactorily. Through competitive bidding, MOR got low priced goods. Furthermore, MOR imported advanced technologies, trained many railway computer skilled staff, and improved the whole level of our technological teams. - 18 -  5. TA studies 5.1 There ware 7 studies completed, which included Framework on Railway Law, PSO, Improving productivity, RIS, TMIS oversea tour and New Diesel engine design. Total investment was more than U$D 3 million. All the companies we selected have rich experiences on this aspects, MOR thought the studies reached the target for those studies. 5.2 Conclusion MOR pays much attention on progress on policy and reform and will continue to cooperate with Bank in the future. 6. Additional Information None to add (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10. Additional Information None to add - 19 -  Annex 1. Key Performance Indicators/Log Frame Matrix Baseline 1993 Target 2000 Actual/Latest Indicator/Matrix 1995 PAD 1995 PAD Estimates Passenger train pairs, Wuhan-Puqi Section 19 29 39 Passenger train pairs, Zhuzhou-Hengyang Section 29 42 45 Freight tkm (million) 63,249 101,253 53,879 Passenger-km (millions) 28,669 40,706 46,985 Average freight train speed (km/hr) 54.4-52.7 59-57.9 44.95 Average passenger train speed (km/hr) 68.6-68.4 72.1-71.7 88.15 Yuan operating expenses per thousand ctkm 12.7 10.56 509 Rem: "Yuan Operating Expenses" was 1994 estimates (vs. 1993 actuals), so it is difficult to rely on this performance indicator Indicators for telecommunications system Indicator 1993 actual 2000 target 2000 actual 2003 actual Transit switch capacity 15,479 312,500 716,784 1,047,246 Local switch capacity (000 lines) 450 1,250 6,288 11,179 Connected subscribers (000) 325 1,062 1,358 6,603 OF transmission system 8 Mb/s (km) 1,150 6,200 11,919 17,538 OF transmission system 140 Mb/s (km) 2,535 7,500 45,836 68,002 Satellite earth stations 0 68 64 63 Mobile satellite earth stations 0 12 1 1 Data telecom network nodes 6 25 22 22 Data telecom network subnodes 42 70 40 40 Data telecom Intel PAD 218 600 431 431 Data telecom network maintenance centres 3 3 2 2 Conference network locations 0 70 48 48 Long distance automation (%) 10 60 95.6 98.1 Internal effective call completion rate (%) 98.81 99 99 99.9 Speech satisfaction degree (%) 98.2 99 98 98.5 Faults/100 DELs/Month 60 40 60 50 Average duration of faults 1.38 hr 1.40 hr 1.38 h 1.35h Staff/1000 DELs 175 80 90 60 Staff/100 km cable 132 101 110 90 Number of staff 56,253 64,884 60,315 60,700 - 20 -  Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Expanding corridor capacity 826.80 1160.02 1.3 Modernizing information systems 199.60 202.86 1.02 Upgrading telecommunications 131.90 138.83 1.05 Enhancing environmental protection 6.70 2.03 0.3 Technical assistance/studies 7.40 2.98 0.4 Total Baseline Cost 1172.40 1506.72 Total Project Costs 1172.40 1506.72 Total Financing Required 1172.40 1506.72 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 336.90 0.00 0.00 336.90 (0.00) (9.50) (0.00) (0.00) (9.50) 2. Goods 827.30 0.00 0.00 0.00 827.30 (353.30) (0.00) (0.00) (0.00) (353.30) 3. Services 0.00 0.00 8.20 0.00 8.20 (0.00) (0.00) (8.20) (0.00) (8.20) 4. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 827.30 336.90 8.20 0.00 1172.40 (353.30) (9.50) (8.20) (0.00) (371.00) Project Costs used for restructured project (in January 13, 1999 restructuring proposal) Project Costs by Procurement Arrangement (Actual/ Latest Estimates) (US$ million equivalent) Expenditure ICB NCB Others Local Financing Total Costs Category 3 Works - 6.06 - 527.42 533.48 Goods 255.81 - .97 703.71 960.49 Services - - 2.98 5.94 8.92 Miscellaneous - - - 3.83 3.83 Total 255.81 6.06 3.95 1,240.90 1,506.72 Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. - 21 -  1/ 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. 3/ Includes portion of the project financed locally by the borrower. Amounts for ICB, NCB and Others refer to Bank Loan only Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. Expanding Corridor 249.02 642.66 0.00 187.02 973.00 0.00 75.1 151.4 0.0 Capacity Modernizing Information 38.90 160.70 0.00 44.07 158.79 0.00 113.3 98.8 0.0 Systems Upgrading 39.70 92.20 0.00 19.86 118.96 0.00 50.0 129.0 0.0 Telecommunications Enhancing Environmental 4.40 0.00 0.00 2.03 0.00 0.00 46.1 0.0 0.0 protection Technical 7.20 0.00 0.00 2.98 0.00 0.00 41.4 0.0 0.0 assistance/studies Expanding Corridor Capacity appraisal estimates used from restructured project (1999). For all other components, the 1995 initial appraisal estimates were used (data not available in the 1999 restructuring proposal) CoF.: Co-Financing from donors or other multilateral financial institutions Project Financing and Expenditure (in US$ million equivalent) Actual Planned Variance Project financing IBRD loan 268,156 281,000 (12,844) Railway Construction Fund 503,014 368,700 134,314 State Development Bank Loan 350,242 361,450 (11,208) Other resources 385,307 161,250 224,057 Total financing 1,506,718 1,172,400 334,318 Project expenditure Equipment 960,488 827,300 133,188 Civil Works 533,475 336,900 196,575 Consultants and training 8,924 8,200 724 Others 3,830 0 3,830 Total expenditure 1,506,718 1,172,400 334,318 Expenditures include physical and price contingencies Planned Costs as stated in the 1999 Restructuring Document - 22 -  Annex 3. Economic Costs and Benefits Introduction This Annex presents the economic reevaluation of the component of the Seventh China Railway project covering the electrification and modernization of 890 km of the double-track Wuhan-Guangzhou line 154 km between Hengyang and Chenzhou was previously electrified. Given the very dense traffic volumes on the project line, the primary benefit of electrification is the reduced operating costs possible through electrification, principally through reductions in traction energy and locomotive maintenance costs. Further benefits come from the increased capacity created by the increased hauling power and (relatively modest) speed improvements possible with electric traction. The original 1994 evaluation assumed that the upgraded line would be principally used by passenger traffic and that, without the project, freight traffic would be increasingly diverted to the parallel Beijing-Kowloon line, which at that stage was under construction but which would still need some additional capacity if the electrification did not proceed. By the time of the loan restructuring in 1999, the Beijing-Kowloon line had been completed as a double-track line (in 1997) and its capacity was thus not an issue. However, the 1999 evaluation then assumed that the Beijing-Guangzhou line would be the primary freight line and that passenger traffic that could not be accommodated on the project line would be diverted, partly to the Beijing-Kowloon line but principally to road, and that this latter diversion would require parallel road capacity to be constructed. Whilst this might have been partially true for local traffic, the method by which it was implemented within the evaluation, with the assumption of immediate major road construction that would be avoided if the rail project proceeded, was unrealistic in hindsight. Planning for the parallel Wuhan-Changsha-Guangzhou highway, one of the key links in the national network, was already well-advanced at that time and in the event its construction was completed before that of the parallel rail project. The ICR re-evaluation has therefore adopted a different approach which concentrates on the operating cost savings from electrification and in which diverted traffic in the `without-project' case (which would be largely comparatively short-distance traffic) is assumed to require additional road capacity (which would typically be local improvements, such as widening, to existing roads) to be constructed at the time of its diversion. In addition, the PAD evaluation appears to have been based using `without-project' traffic forecasts which include a significant volume of road traffic which has been directly generated by the assumed expressway. The costs and benefits associated with this traffic should not be linked to the rail electrification and it has been removed from the ICR evaluation. Finally, the ICR evaluation has also reviewed the treatment of a number of complementary costs; the capital cost of the electricity generating capacity, for example, does not need to be specifically identified as its cost is included in the price paid for electricity and the cost of catenary maintenance should be included as an operating cost. The reevaluation concludes that, based on a discount rate of 12 percent, the net present value (NPV) for the project is RMB 254 million and the economic rate of return (EIRR) is equal to 12.4 percent for the base re-evaluation - considerably below the 25.8% percent figure reported in the PAD (1999 update). Alternative assumptions on labour costs and passenger time savings increase the EIRR to a range between 13.0 and 15.9 per cent. - 23 -  Although the re-evaluation generates a lower figure than originally derived, it should be interpreted taking into account the particular circumstances of the Chinese Railways. The project cost, at about $1.3 million per route-mile, is expensive for a pure electrification project and a large number of other improvements were undoubtedly made at the same time, not surprisingly given the rare opportunity the project presented to undertake major works on a very heavily trafficked line. The evaluation addresses the benefits of electrification per se and in doing so has attempted to isolate the electrification-related costs (Table 5) and remove the cost of major works which are only distantly related to electrification. An example of such an exclusion is the new viaduct at Changsha, which provides an elevated approach to the town and whose benefits include much reduced urban severance, together with substantial urban development opportunities. In the absence of a comprehensive investigation, this adjustment to the capital cost has been conservative and a more detailed assessment would almost certainly make further reductions in the proportion of the project capital cost that should be included in the evaluation. The evaluation has also understated the long-term operating and capacity benefits generated by electrification, because of the current exchange rate of the Chinese RMB. The capital goods associated with the project have largely been acquired at world prices. However, the benefits, such as those derived from reduced locomotive maintenance costs, are at Chinese prices; Chinese electric locomotives cost around $1 million each at the present rate of exchange compared to world prices of $2-3 million, and the annual maintenance savings (which can typically be expressed as a percentage of capital cost) are correspondingly much lower than would normally be expected. Traffic Forecasts The changing roles over the project preparation and implementation period reflect the sharp growth in passenger traffic within the corridor compared to freight. Since 1990, passenger traffic in the combined Beijing-Guangzhou/Beijing- Kowloon corridors has grown at 8.1% p.a., compared to a national average of 4.8%p.a., whilst freight traffic has grown at only 1.6% p.a. compared to a national average of 3.8% p.a. At the time of project preparation in 1995, it was assumed that the growth in freight and passenger traffic would be comparable with each other, and this assumption was maintained at the restructuring appraisal in 1999. In practice, the rate of freight growth has been sluggish, and rather slower than for the country as a whole, whilst that of passenger traffic has been strong and rather faster than for the country as a whole. Despite the changes in the pattern of growth, the project corridor is currently running close to capacity, with the Beijing - Kowloon corridor accommodating any overspill that is not suppressed or diverted to road. There is no reason to suppose that this situation is going to change significantly in the near-medium term. For simplicity, the re-evaluation assumes that, with the project, freight traffic on the project corridor continues to grow at 1.5% p.a. indefinitely, with passenger demand growing at 5% p.a. to 2010 and 3% p.a. thereafter. - 24 -  Passenger traffic on Beijing-Guangzhou-Kowloon Line 140,000 120,000 100,000 80,000 60,000 Pass-Km 40,000 20,000 - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Beijing - Guangzhou Beijing - Kowloon Total Pass-km Freight traffic on Beijing-Guangzhou-Kowloon Line 250,000 200,000 150,000 t-km Net 100,000 50,000 - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Beijing - Guangzhou Beijing - Kowloon Total Net tkm - 25 -  Table 1 Traffic growth in main north-south corridors 1990-2003. (all traffic figures in millions of traffic units) Beijing - Guangzhou Beijing - Kowloon Total Pass-km Net tkm Pass-km Net tkm Pass-km Net tkm 1990 43117 156350 43117 156350 1991 49293 163378 49293 163378 1992 56484 172027 56484 172027 1993 63151 176053 63151 176053 1994 65121 185002 65121 185002 1995 64650 188373 64650 188373 1996 57032 182298 57032 182298 1997 61231 160726 3137 10392 64368 171118 1998 64173 139899 12546 41569 76719 181468 1999 71012 123902 15141 53150 86153 177052 2000 80659 124793 19128 54565 99787 179358 2001 79844 131658 22693 58258 102537 189916 2002 88717 131196 33028 61919 121745 193115 2003 86203 133799 32849 57358 119052 191157 Growth rate 8.1% 1.6% Source : China Statistical Yearbooks Table 2 compares the actual growth rates experienced with those assumed in the evaluations. Table 2 Forecast and actual growth rates - north-south corridors (% p.a.) Passenger Freight Actual 1990-1994 10.9 4.3 1995-2003 6.9 3.6 1999-2003 9.2 1.0 Original appraisal 1995-2003 5.5 6.3 2005 on 0.0 0.0 Restructuring appraisal 1999-2003 5.9 6.2 2009 on 0.0 0.0 Direct Project Costs The total direct outlays of the electrification and modernization project amounted to RMB 9.605 billion (Table 3). Direct project costs on an economic basis were derived from the financial costs by shadow pricing the labor component of local costs. 11 percent of local costs have been classified as labor expenses, based on the proportion in the parallel Beijing-Zhenzhou project in Railways VI. This amount (RMB 875 million) was shadow priced at a rate of 1.6 as in the SAR. - 26 -  TABLE 3: ICR Financial and Economic Direct Project Costs (RMB million) Local Foreign Total Financial (current) 7956 1649 9605 Economic (2003 prices) 8703 1702 10405 The adjusted local costs and foreign outlays were converted into constant 2003 RMB using the annual Gross Domestic and Imports Costs deflators respectively, to give the total economic direct costs of the project (RMB 2003) as 10.405 billion. The re-evaluation concentrated on the benefits associated with electrification as these can be specifically identified. However, a substantial share of the project expenditure was related to non-electrification components. About 35% was associated with civil works whose benefits have not been included in the evaluation and there were other components related to items such as track machinery and buildings. There were also elements, such as new track, which are essentially of a replacement nature rather than upgrading the infrastructure and hence would be incurred in a `without-project' case, although maybe not at this precise time. Table 4 summarises the various functional elements of the project and gives the share of each that has been included in the re-evaluation. TABLE 4: Expenditure included in economic evaluation ($US 000 current) Item Actual cost Cost included Comment Survey and design 7,577 7,577 Civil works Land 19,483 4,871 25% - remainder taken as diversions Subgrade 32,568 16,284 50% - remainder taken as diversions Bridges 22,944 11,472 50% Tunnels 7,864 7,864 Assumed all lowering Buildings 37,495 18,748 Share for substations etc Track 39,681 9,920 25% - 50% of remainder taken as diversions; replacement given 50% credit for cascading Other 367,379 - Assumed earthworks Subtotal 527,415 76,736 Equipment Communications 86,932 86,932 100% Signalling 132,176 118,958 10% allowance for cascading Power supply 169,684 169,684 100% Electrification 112,227 112,277 100% Track maintenance 48,380 - Independent of electrification Other 75,633 37,816 Assumed 50% Subtotal 625,031 525,667 Total 1,160,024 602,403 The re-evaluation of electrification thus includes 51% of the expenditure associated with the project, after allowance for cascading and unevaluated benefits. For simplicity, this proportion of 51% has been applied equally to all years, although in practice it is more concentrated towards the later years of the project when the signalling and electrification equipment was purchased. Because of the long life of many of the infrastructure works, a residual value of 20% of the capital expenditure has been included at the end of the evaluation period. - 27 -  Complementary Costs Although the PAD evaluation included a number of items as complementary investments, these have been excluded from the re-evaluation. As the line is not a new project but an upgrade of an existing line under operation, there will only be a marginal difference in carriage and wagon requirements as a result of avoiding traffic being diverted to other routes and modes and, although new electric locomotives were purchased, these enabled the existing diesel locomotives fleet to be cascaded to other routes, and the consequent deferral of replacement diesel locomotives. The differential cost of rollingstock capital in this type of project is most realistically measured through including annualized capital costs and this approach has been adopted in this case. No complementary costs for the incremental electrical generating capacity needed by the change from diesel power to electric traction have been included as this is already included in the cost of electricity embedded in the differential train operating costs supplied by MOR. The additional annual operating cost of catenary maintenance is not a complementary investment and has instead been treated as part of the differential operating costs. Project Benefits There are two groups of benefits of the project. All traffic hauled on the line now uses electric traction and so benefits from the reduced operating costs per unit of traffic. These arise from: l Reduced energy costs per unit of traffic l Lower locomotive maintenance costs - the maintenance cost of electric locomotives is typically about 40-50% that of corresponding diesel locomotives l An increase in the tractive effort with electric locomotives; CR have exploited this by reducing sectional running times (for fixed-consist trains such as passengers) and by increasing the average load for freight trains. This increase in running speed reduces operating costs slightly but also provides additional capacity in the corridor. l Against this, there is the cost of maintaining the electrical infrastructure (catenary, substations etc) The second group of benefits is associated with the traffic which is now able to use the additional capacity. Some of this would otherwise be diverted to other routes, primarily the Beijing-Kowloon corridor and the remainder (principally local passenger traffic) would not be able to travel by rail and would either be forced onto other forms of transport or would not be able to travel at all. For both groups, the benefits of the project are the reduction in operating cost, and in user disbenefit, of now being able to travel by a more direct route. However, these arise through quite different mechanisms: l Traffic which is diverted to another rail route will incur additional rail operating costs and (at least in the case of passengers) user disbenefit (largely in the form of increased travel time) l Traffic which is forced onto other modes, or cannot travel at all, will incur additional operating costs if it travels, assumed to be by road. It will also experience a change in user benefits as it is now making a completely different type of trip; this change may be positive or may be negative (e.g. the substitute road trip, which will probably be more expensive, may be faster, more frequent and not require as much time to get to and from the rail network). Some traffic will decide the new arrangements are too hard and not travel at all. In addition, if the road network is approaching congestion, any traffic which does travel by road is likely to impose costs on other road users. The incidence of these various costs and benefits depends on the approach that the railway would have adopted in the absence of the project. Based on the growth patterns in the corridor over the past decade, the re-evaluation assumes that all the freight that can economically transfer to the Beijing-Kowloon corridor has done so and that, as it continues to slowly grow, passenger traffic is slowly squeezed from the corridor. 50% is assumed to longer-distance traffic that is transferable to the parallel (longer) corridor; the remaining 50% is assumed to be shorter-distance traffic that is forced onto road or suppressed. For the purposes of evaluation, 10% of the 50% that diverts from rail is assumed to be suppressed. - 28 -  As the project corridor is already operating close to capacity, this process will occur in both the `with-project' and `without-project' cases, but it will be less and slower to develop in the `with-project ` case. The evaluation of the costs and user disbenefits associated with the traffic diverted to the parallel rail corridor is straightforward; it assumes the average penalty is 50% of the additional distance and time involved (as those diverting will presumably be those for whom it poses the least problems). For those that divert to road or are suppressed, the costs and benefits are estimated using the `rule-of-a-half' This is a standard technique in project evaluation. In this case, it also requires an assumption on the price elasticity of demand, which has been taken as -0.5.. Those transferring to road are assumed to require additional road capacity to be created, by small-scale road works, to preserve the level of service for other road users. Operating Cost Benefits to Traffic Remaining in Project Corridor The operational benefits of converting from diesel to electric traction are largely associated with energy savings and locomotive maintenance costs, offset to a limited extent by changes in the capital costs of electric as opposed to diesel locomotives. In theory, there are also theoretically some small benefits in rollingstock utilisation because of the increase in operating speed but this is comparatively small (average commercial speed of passenger and freight trains has increased by 16% and 5% respectively because of electrification) and this element has been omitted from the evaluation. The original evaluation used unit costs of electric and diesel traction supplied by MOR. These were derived in 1994 and have since been updated using various cost indices. However, the scope of these costs is unclear, for example the extent to which they include labor overheads and the extent to which they include on-train crew. Because of these uncertainties, the long period since they were first calculated, and the difficulty in obtaining updated estimates, the re-evaluation has derived costs from first principles, using realistic engineering-based unit costs. Whilst these are not directly derived from actual expenditures, they are almost certainly accurate to +/- 25% and are also more suitable for adjustment for future movements in relative energy costs. Data supplied by Guangzhou, which has had electric locos operating on part of the corridor for some years shows that the cost of maintaining electric locomotives is 35-40% that of diesels; a 60% saving has been adopted for evaluation purposes, typical of the experience on other railways. The average annual cost of electric locomotive maintenance has been estimated as 3.3% of the capital cost of RMB 9 million; taking a utilisation of 180,000 km p.a. (4500 hours @ 40 km/hr) gives a maintenance cost per km for electric locomotives of about RMB 2/km and for diesels of about RMB 5/km. For comparison, typical costs in North America for diesel locomotives are about $US1/km. The energy savings are based on an oil price of RMB 3800/tonne; this is based on the 2002 price of RMB 2900/tonne, updated to allow for the subsequent increase inn the price of crude oil to $US30/barrel; this is equivalent to RMB 3.46/litre. The economic price of electricity is taken as RMB 0.50 per kWh. Specific fuel consumption in the corridor is taken to be 3.0 l/000 gtk and 10.2 kWh/000 gtk, using typical rates from other railways with similar topography. The difference in the capital cost of the locomotives is based on their relative prices, (with electric locomotives ranging from 7% (passenger) to 45% (freight) more expensive than diesel), lives (with electric 20% longer than diesel) and utilisations (with electric 10% more than diesel for any given task).In addition, the cost of electric freight haulage is adjusted to reflect the 17% increase in maximum trailing load (from 3000 tonnes to 3500 tonnes) which has been achieved in the corridor. Using a real 6% cost of capital, electric locomotives on passenger trains are slightly more cheaper (by RMB 0.37 per loco-km) whilst those used for freight, when adjusted for the increase in trailing load are slightly more expensive by RMB 0.25 per loco-km. - 29 -  Because the system used by MOR to derive operating cost savings excludes the maintenance of the electrical catenary, the SAR included an annual amount of RMB 48.9 million as a complementary cost. This was based on a unit cost of RMB 70,000 per route-mile In 1992 prices, as quoted in Working Paper 25; in the 1999 evaluation it was quoted at RMB 70,000 per route-km and indexed to RMB 90,000 per route-km.. This seems a large figure; its origin is unknown but it may include the depreciation of the equipment. By contrast, Guangzhou quoted a figure of RMB 4-7,000 per track-km; this is almost certainly just routine maintenance as most of the catenary is relatively new, and probably also excludes the cost of the substations. Based on experience elsewhere, adjusted to Chinese prices, a 2003 cost of RMB 20,000 per track-km has been used. Table 5 summarise the estimated operating cost benefits in 2003. Table 5 Estimated operating cost benefits 2003 Unit Passenger Freight Unit cost savings Loco maintenance Loco-km 1.59 2.30 Loco capital Loco-km 0.37 -0.24 Fuel 000 gtkm 5.29 5.29 Annual saving per pair of RMB 000 trains Loco maintenance 1034 1494 Loco capital 243 -159 Fuel 3097 9637 Total 4373 10972 Number of pairs 56 50 (average) Annual saving (2003) RMB mill 245 549 The total estimated benefits are RMB 794 million p.a. Penalties incurred by diverted traffic The maximum throughput on the new line occurs during Spring Festival, when CR have operated 130 pairs of passenger trains and 11 pairs of freight trains on the section between Hengyang and Chenzhou, compared to their normal pattern of 63 pairs of passenger trains and 50 pairs of freight trains. This indicates: l A practical capacity of the new section of 148 pairs of passenger trains l A freight train being equivalent to 1.7 passenger trains in terms of its use of capacity (close to the relative speeds of 130 km/hr for passenger and 70-80 km/hr for freight) l A practical utilisation of 88% of the theoretical maximum capacity of 168 pairs/day (21 hours after allowance for maintenance blocks at 7.5 minutes headway) During the 1990's, the capacity of the project corridor was about 140 pairs of trains. The large volumes handled at that time could only be done by having heavily-loaded passenger trains and by having as little difference as possible between their operating speeds and those of the freight trains. However, this strategy has proved no longer tenable in the face of competition and initiatives such as raising the speed of passenger trains and instituting reliable ovemight service between major cities have all tended to increase the capacity required per passenger-kilometre. - 30 -  The net effect is that the project created around ten extra pairs of train paths and these permit the corresponding number of passengers to travel in the corridor compared to the `without-project' case. Those who would have been diverted by rail were given a benefit of RMB 11.30 per passenger, reflecting an average additional distance per passenger of 144 km, at an average cost of RMB 0.08 per passenger-km. Those who would have to suppress or divert to road in the `Without-project' case get rather larger benefits, at around 2-3 fen per pkm. The incremental cost of road construction to handle the passengers diverted to road, is estimated at RMB 370 million; this cost is only incurred once, in the first year of diversion. Economic Rate of Return and Sensitivity Analysis For the economic reevaluation, net benefits are calculated for the 32-year period covering the construction period of 1996-2003 and benefits for the 25 years from 2004 to 2028. to derive estimates of the net present value (at a discount rate of 12%) and the economic internal rate of return (EIRR). As reported in Table 7, the estimated NPV (discounted to 2003) is RMB 254 million and the EIRR is 12.4 percent. Adjustments were made in six of the base case assumptions to test the sensitivity of these results (Table 6). Table 6 Estimated EIRR and NPV EIRR NPV (RMB mill) Base Case 12.4 254 Sensitivity tests Increase share of capex 8.6 -3238 included to 75% Reduce fuel savings by 33% 9.3 -1730 No growth 11.2 -560 No shadow pricing of labor 13.0 642 Time savings included at 14.7 1829 average values Time savings included at actual 15.9 2898 values The base case includes 51% of the capital expenditure attributed to the project. Taking an upper limit of what might be attributed as about 75%, the NPV falls to RMB -3.2 billion and the EIRR declines to 8.6 percent. The largest element of operating cost savings is fuel savings. If world diesel fuel prices fall, and the fuel saving from electrification falls by 33%, the NPV falls to RMB -1.7 billion and the EIRR to 9.3 percent. The evaluation has benefits both from the existing traffic and from future traffic growth which can, wit the project, be handled by rail in this corridor. If there is no growth in traffic, the benefits only accrue to the existing traffic. In this case, the NPV falls to Yuna -560 million and the EIRR to 11.2 per cent. The original PAD evaluation shadow-priced labor using a factor of 1.6; this adjustment seems unjustified given the current strength of the Chinese economy, especially in the region of the project, and removing this adjustment increases the EIRR to 13.0 percent. - 31 -  Although the base case attributed all time savings to increases in the maximum line speed created by the non-electrification works, which would be independent of traction type, in practice some savings would arise from the faster acceleration of electric rather than diesel locomotives. Allowing one-third of the passenger time savings to be due to electrification increases the EIRR to 14.7 percent; this is based on an assumed mix of 80% leisure passengers and 20% business. The valuation of time savings is generally directly related to income level; the initial sensitivity test assumed that train passengers have the average incomes for the corridor; however, in practice many passengers will be from the middle-income levels and their value of time will accordingly be higher than the average; assuming their incomes to be twice the average increases the EIRR further to 15.9 percent. These results are all much lower than those estimated at appraisal. However, the project is a very large investment in one of the most important rail corridors in China and the benefits will endure for much, if not all, of the current century. The EIRR is comparable to the rates of return historically earned by similar major projects and almost certainly are closer to the true rate of return than the very high rate estimated at appraisal. Table 7 Corridor traffic forecasts - with and without project Without project With project Passenger Freight Passenger Freight Pkm (mill) Ntkm (mill) Pkm (mill) Ntkm (mill) 2001 39412 52770 39412 52770 2002 43032 53321 43032 53321 2003 46985 53879 46985 53879 2004 45905 54687 49334 54687 2005 44809 55507 48238 55507 2006 43696 56340 47125 56340 2007 42567 57185 45996 57185 2008 41421 58043 44850 58043 2009 40257 58914 43686 58914 2010 39076 59797 42505 59797 2011 37878 60694 41307 60694 2012 36661 61605 40090 61605 2013 35426 62529 38855 62529 2014 34173 63467 37602 63467 2015 32901 64419 36330 64419 2016 31609 65385 35039 65385 2017 30299 66366 33728 66366 2018 28968 67361 32398 67361 2019 27618 68372 31047 68372 2020 26248 69397 29677 69397 2021 24857 70438 28286 70438 2022 23445 71495 26874 71495 2023 22012 72567 25441 72567 2024 20557 73656 23986 73656 2025 19081 74761 22510 74761 2026 17582 75882 21011 75882 2027 16061 77020 19490 77020 2028 14517 78175 17946 78175 - 32 -  Table 8 Corridor Economic Rate of Return Calculation (RMB 2003 million) Capacity-related benefits Operating cost-related benefits Capital Total Rail Road Suppress Road Subtotal Passenge Freight Power Subtotal expend- diversio diversio ed capacity r supply-r iture n n avoided elated 1996 5 -5 1997 27 -27 1998 647 -647 1999 1342 -1342 2000 1379 -1379 2001 930 -930 2002 748 -748 2003 245 549 -18 798 184 591 2004 18 5 1 166 190 239 557 -18 992 44 925 2005 18 13 3 0 34 234 565 -18 839 816 2006 18 20 5 0 43 228 574 -18 852 827 2007 18 26 6 0 51 222 582 -18 863 838 2008 18 31 8 0 57 216 591 -18 873 847 2009 18 36 9 0 63 210 600 -18 882 856 2010 18 40 10 0 68 204 609 -18 891 864 2011 18 43 11 0 72 197 618 -18 898 870 2012 18 45 11 0 75 191 627 -18 905 876 2013 18 48 12 0 78 185 637 -18 912 882 2014 18 50 12 0 81 178 646 -18 918 888 2015 18 52 13 0 83 171 656 -18 925 894 2016 18 54 13 0 86 165 666 -18 931 899 2017 18 56 14 0 88 158 676 -18 937 905 2018 18 57 14 0 90 151 686 -18 944 910 2019 18 59 15 0 92 144 696 -18 950 915 2020 18 60 15 0 94 137 707 -18 956 920 2021 18 62 15 0 95 130 717 -18 962 925 2022 18 63 16 0 97 122 728 -18 967 930 2023 18 64 16 0 98 115 739 -18 973 935 2024 18 65 16 0 100 107 750 -18 979 940 2025 18 66 17 0 101 99 761 -18 985 945 2026 18 67 17 0 102 92 773 -18 991 950 2027 18 68 17 0 104 84 784 -18 997 954 2028 18 69 17 0 105 76 796 -18 1002 -1061 2021 - 33 -  Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 06/15/1993 11 TM, REn(2), IS, SaS, RS(2), LS(2), ComS, FA; 09/20/1993 12 TM, RS(2), Mec S, FA(2), REn, IS, LS(3), SaS; 03/16/1994 20 TM, RS(2), FA(3), RRS, LS(2), REn(3), IS, LS(3), ES(2), REc, SS; 06/28/2004 15 TM, FA(3), RS(2), ResS, TeleS, LS(2), REn, IS(2), ES, REc; Appraisal/Negotiation 10/18/1994 14 TM, RS(2), FA(3), TeleS, LS(2), REn, IS, ResS, REc, ES; Supervision 08/17/1995 1 TM; HS HS 11/19/1995 3 TM, TS, REn; S S 03/23/1996 4 TM, REc, TS, REn; S S 06/28/1996 5 TM, Tele.S, REc, TS, REn; S S 11/04/1996 2 ResS. REn; S S 01/06/1997 2 TM, REc; S S 04/22/1997 1 REn; S S 05/27/1997 2 TM, REc; U U 10/19/1997 6 TM, RRS, TS, REc, ResS, SM; U U 04/06/1998 12 TM, REc, ResS, PS(2), REn, EE, U U TS, RS(3), TA ; 09/23/1998 1 Tele.S U U 11/09/1998 10 TM, RS, SS, PS(2), FMS(2), ES, S S ResS, REc; 03/31/1999 1 TM; S S 05/09/1999 1 ES; S S 09/24/1999 5 TM, RRS, RS, FMS, Tele.S; S S 04/28/2000 2 REn, RS ; S S 12/18/2000 4 TM, REn, RS, TA ; S S 06/25/2001 1 ES; S S 08/24/2001 1 REn; S S 11/28/2001 3 TM, ResS, SS; S S 03/26/2002 3 TM, RS, REn; S S 11/22/2002 3 TM, REn, ResS; S S 06/02/2003 2 TM, REn; S S 10/13/2003 3 TM, TS, REn; S S 06/02/2004 3 TM, ES, REn; S S ICR - 34 -  08/26/2004 5 TM, TS(2), REn, REc; S S 11/05/2004 3 TS, REn, REc S S ComS=Communication Specialist, ES=Environmental Specialist, FA=Financial Analyst, FMS=Financial Management Specialist, LS=Logistics Specialist, IS=Information Specialist, PS=Procurement Specialist, RS=Railway Specialist, REc=Railway Economist, REn=Railway Engineer, ResS=Resettlement Specialist, RRS=Railway Reform Specialist, SS=Social Scientist, SaS=Safety Specialist, SM=Sector Manager, TS=Transport Specialist, Tele. S=Telecommunication Specialist, TA=Team Assistant, TM=Task Manager. (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 138 525.8 Appraisal/Negotiation 70.5 255.5 Supervision 232.9 876.5 ICR 5.9 34.9 Total 445.7 1,687.0 - 35 -  Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 36 -  Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 37 -  Annex 7. List of Supporting Documents The World Bank, Staff Appraisal Report, China Seventh Railway Project, April 14, 1995. The World Bank, Proposed Restructuring and Amendment to Loan Agreement, China Seventh Railway Project, January 13, 1999. The World Bank, China an Evaluation of World Bank Assistance, OED Advance Copy, 2004 The World Bank, No 1 to No 26 Project Status Reports for the Seventh Railway Project, from 1995 to 2004 The World Bank, Working Papers 7, 13, 24, 25 and 27 for the Seventh Railway Project - 38 -  - 39 -