China - Second Railway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5512-CHA STAFF APPRAISAL REPORT CHINA SECOND RAILWAY PROJECT April 22, 1985 Transportation Division I Projects Department, East Asia & Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their offici.l duties. Its cotents may not otherwise be disclosed without World Dank authorization.  CURRENCY EQUIVALENTS Currency - Renminbi (RMB) 1 Yuan CT) = US$0.35 I 2.84 = US$1.00 (as of April 1985) FISCAL YEAR (FY) January 1 to December 31 WEIGHTS AND MEASURES m = meter (= 3.281 feet) sq m = square meter (= 10.764 sqare feet) cu m = cubic meter (= 35.315 cubic feet) km = kilometer (= 0.621 mile) tkm = ton-kilometer (= 0.621 ton-mile) pkm = passenger-kilometer (= 0.621 passenger-mile) mu = 0.1647 acre = 0.0667 hectare (ha) kwh = kilowatt hour (= 860.42 kcals) CTK = Converted ton-km, traffic unit (1 pass-km = 1 ton-km) mt = million tons mtpy = million tons per year PRINCIPAL ABBREVIATIONS AND ACRONYMS USED CIF = Cost, insurance and freight CPCF = Changchun Passenger Coach Factory EAAMS = Economic Analysis of Aluminum Milling in Shanghai ERR = Economic Rate of Return FAS = Free alongside Ship FOB = Free on Board GOC = Government of the People's Republic of China GVIAO = Gross Value of Industrial and Agricultural output ICB = International Competitive Bidding LG = Leading Group (Study Team) MIS = Management Information System MOF = Ministry of Finance MR = Ministry of Railways SAA = State Audit Agency SFYP = Sixth Five-Year Plan SOE = Statement of Expenditure ST = Study Team TOR = Terms of Reference  FOR OCIAL USE ONLY CHINA - SECOND RAILWAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE TRANSPORT SECTOR .................................. 1 II. THE RAILWAY SUBSECTOR ..............................***.. 2 II. THEPROECT ........................ ............. ..... T A. Project Origin and Objectives ........................ 7 B. Project Description Zhengzhou-Wuhan Upgrading and Electrification ...... 8 Changchun Passenger Coach Factory .................. 9 China Academy of Railway Sciences .................. 9 Management Information System Study ................ 10 Education ................................................... 11 Technical Assistance and Training .................. 11 C. Cost Estimates and Financing ......................... 12 D. Project Implementation ........ ......... ....... . ...... 14 E. Procurement ................................................... 14 F. Disbursement ................................................... 15 G. Environment ................................................... 16 IV. ECONOMIC EVALUATION. .................. ............ .. .... 16 A. Main Beefis....................... 16 B. Zhengzhou-Wuhan Upgrading and Electrification 16 C. Changchun Passenger Coach Factory 18 D. China Academy of Railway Sciencs .18 E. Overall Evaluation and Risks 18 V. FINANCIAL EVALUATION. ........ ............ ... .... 19 A. The Railway ..... ......... .................. 19 B. Zhengzhou-Wuhan Upgrading and Electrification........ 20 C. Changchun Passenger Coach Factoc t. ..... 22 D. China Academy of Railway Sciences............. 22 E. Audtu......................... 23 VI. AGREEMENTS REACHED AND RECOMMMATION DA.. ...... 23 This report is based on the findings of an appraisal mission to China in October/November 1984. Mission members included E. Karman (mission leader), P. Levy, L. Uy, M. Lal, H. Sethi and R. Huenemann (consultant). This document has a restricted distribution and may be used by recipients only in the performance of l their offiial duties. Its contents may not otherwise be dissed without World Bank authorization.  - ii- ANNEXES 1. Management InformatLon System Study .................-......... 24 2. Panel of Advisors for MR Universities ................. o........ 27 3. Tentative Training Program ...... .... o..... .................. . 28 4. Economic Evaluation: Zhengzhou-Wuhan Line ..................... 29 5. Economic Evaluation: Changchun Passenger Coach Factory........ 34 6. Documents Available in the Project File ....................... 37 SUPPORTING TABLES Table 1.1: Investment in the Transport Sector Table 2.1: Railway Selected Operational Statistics, 1970-198'. Table 2.2: Freight Traffic Performance Table 2.3: Originating Freight Trafic Table 2.4: Freight Traffic Average Distance Table 2.5: Passenger Traffic Composition and Cost Estimates: Table 3-1: Zhengzhou-Xinyang Section Table 3.2: Mengmiao-Pingdingshan Section Table 3.3: Xinyang-Jiangan West Section Table 3.4: Jiangan West - Wuchang South Section Table 3.5: Zhengzhou-Wuhan Line (four sections) Table 3.6: Xinyang Marshalling Yard Table 3.7: Jiangan West Marshalling Yard Table 3.8: Wuchang South Marshalling Yard Table 3-9: Marshalling Yards (three yards) Table 3.10: Changchun Passenger Coach Factory Table 3.11: China Academy of Railway Sciences Table 3.12: Management Information System Study Table 3.13: Total Project (Yuan) Table 3.14: Total Project (US$) Table 3.15: List of Goods Table 3.16: Implementation Schedule, Zhengzhou-Wuhan Line Table 3.17: Implementation Schedule, Changchun Factory Table 3.18: Implementation Schedule, Academy Table 3.19: Disbursement Schedule Table 4.1: Freight Traffic on the Zhengzhou-Wuchang Line Table 4.2: Projected Traffic Levels and Required Investment in Coal Mining Table 4.3: Zhengzhou-Wuhan Electrification: Rate of Return Calculation Table 4.4: Comparative Traction Costs, by Type of Locomotives Table 4.5: Changchun Passenger Coach Factory Modernization: Rate of Return Calculation Table 5.1: MR - Income Statement, 1981-1985 Table 5.2: Zhengzhou Subadministration and Line Operating Costs in 1983 Table 5.3: Wuhan Subadministration and Line Operating Costs in 1983 Table 5.4: Fixed Assets Allocation for Line Sections, Zhengzhou Subadministration Table 5.5: Fixed Assets Allocation for Line Sections, Wuhan Subadministration Table 5.6: Zhengzhou-Wuhan Line Costs, 1983  - iii - Table 5.7: Line Fixed Assets and Depreciation, 1991 and 1995 Table 5.8: 1991 Line Gross Operating Revenues and Costs, with and without the Project Table 5.9: 1995 Line Gross Operating Revenues and Costs with the Project Table 5.10: Changchun Passenger Coach Factory, Consolidated Income Statement Table 5.11: Changchun Passenger Coach factory, Unit Costs, Semi-cushioned Coach (CCK33), 1984-1989 Table 5.12: Changchun Passenger Coach factory, Unit Costs, New Generation Semi-cushioned Coach, 1987-1991 MAPS IBRD 18673 - China Railway Network IBRD 18674 - Zhengzhou-Wuhan Line  - iv - CHINA SECOND RAILWAY PROJECT Loan and Project Summary Borrower: People's Republic of China. Beneficiary: Ministry of Railways. Amount: US$235.0 million equivalent. Terms: 20 years including 5 years of grace; standard variable interest rate. Project Description: This will be the second Bank Group's involvement in the railway subsector. The proposed project would make a direct contribution to the Government's objectives of increasing railway capacity to support economic growth and of modernizing railways management. The project con- sists of five components: (a) upgrading and electrifica- tion of the line between Zhengzhou and Wuhan, a 547 km central section of the Beijing-Guangzhou main line, and a 72 km feeder line to the large coal mines at Pingding- shan; (b) the first stage of a modernization program of the passenger coach factory at Changchun, which would provide technical assistance necessary to increase the quantity and improve the quality of current production and determine the investment needed for production of a new coach design of 1,500 per year; (c) assistance to new laboratories and staff training at the China Academy of Railway Sciences; (d) a Management Information System study to lay the basis for improving the railwayts man- agerial and operational efficiency; and (e) assistance to the railway universities in updating their curricula. The project has no particular risk as the Ministry of Railways has successfully completed similar projects in the past and the demand for both freight and passenger transport is increasing rapidly as a result of economic reforms being implemented by the Government.  -v - Project Costs: Local Foreign Total