China - Guangzhou City Center Transport Project

Document of The World Bank Report No: 17745-CHA PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$200 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE GUANGZHOU CITY CENTER TRANSPORT PROJECT May 4, 1998 Transport Sector Unit East Asia and Pacific Region  CURRENCY EQOUIVALENTS (Exchange Rate Effective February 1998) Currency Unit = RMB RMB 1=US$ 0.12 US$ 1.00 = RMB 8.30 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AWP Annual Work Plan CAS Country Assistance Strategy ERR Economic Rate of Return GCCTP Guangzhou City Center Transport Project GCCTPO Guangzhou City Center Transport Project Office GEPB Guangzhou Environment Protection Bureau GIRR Guangzhou Inner Ring Road GMAB Guangzhou Municipal Administration Bureau GMEDRI Guangzhou Municipal Engineering Design and Research Institute GMEMD Guangzhou Municipal Engineering Maintenance Department GMG Guangzhou Municipal Government GPSB Guangzhou Public Security Bureau GPUB Guangzhou Public Utility Bureau GREEO Guangzhou Road Expansion and Engineering Office GCCTCC Guangzhou City Center Transport Construction Company GTPRI Guangzhou Transport Planning Research Institute GURCC Guangzhou Urban and Rural Construction Commission GUTS Guangzhou Urban Transport Study IRR Internal Rate of Return MVPC Motor V:ehicle Pollution Control PLG Project Leadership Group PO Project Office PIP Project Implementation Plan RSMS Road Surface Management System SAB State Audit Bureau SCATS Sydney-Coordinated Adaptive Traffic System TA Technical Assistance TMS Traffic Management and Safety TPD Traffic Police Detachment Vice President: Jean Michel Severino Country Director: Yukon Huang Sector Director: Jeffrey S. Gutman Task Manager: Richard Scurfield  CHINA GUANGZHOU CITY CENTER TRANSPORT PROJECT CONTENTS Page A. Project Development Objective 1. Project development objectives and key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 5 C. Project Description Summary 1. Project components 9 2. Key policy and institutional reforms supported by the project 9 3. Benefits and target population 10 4. Institutional and implementation arrangements 11 D. Project Rationale 1. Project alternatives considered and reasons for rejection 13 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in proposed project design 14 4. Indications of borrower commitment and ownership 15 5. Value added of Bank support in this project 15 E. Summary Project Analyses 1. Economic 15 2. Financial 16 3. Technical 16 4. Institutional 17 5. Social 17 6. Environmental assessment 18 7. Participatory approach 19 F. Sustainability and Risks 1. Sustainability 20 2. Critical risks 20 3. Possible controversial aspects 21  -ii- G. Main Loan conditions 1. Effectiveness conditions 21 2. Other 21 H. Readiness for Implementation 22 I. Compliance with Bank Policies 22 Annexes Annex 1: Project Design Summary 24 Annex 2: Detailed Project Description 29 Table A: Institutional Arrangements 35 Annex 3: Estimated Project Costs 39 Annex 4: Cost Benefit Analysis Summary 40 Annex 5: Financial Summary 43 Annex 6: Procurement and Disbursement Arrangements 44 Table A: Project Cost by Procurement Arrangements 46 Table Al: Consultant Selection Arrangements 47 Table B: Thresholds for Procurement Method and Prior Review 48 Table C: Allocation of Loan Proceeds 49 Annex 7: Project Processing Budget and Schedule 50 Annex 8: Documents in Project File 51 Annex 9: Statement of Loans and Credits 53 Annex 10: Country at a Glance 56 Optional additional annexes: Letter of Sector Policy, Social and Environmental Analysis, Eligibility Criteria for Beneficiaries and Subprojects, etc. MAP(S) IBRD 29423 Guangzhou City Center Transport Project - Inner Ring Road: Configuration IBRD 29424 Example of Detailed Design of Renmin/Yide Intersection  CHINA Guangzhou City Center Transport Project Project Appraisal Document East Asia and Pacific Region China Country Unit Date: May 4, 1998 Task Team Leader/Task Manager: Richard G. Scurfield Project ID: 3614 Sector Manager/Director: Jeffrey S. Gutman Sector(s): Country Manager/Director: Yukon Huang TU - Urban Transport Lending Instrument: Specific Investment Program Objective Category: Environmentally Sustainable Loan (SIL) Development Program of Targeted Intervention: No Project Financing Data E-l Loan D Credit D Grant ] Guarantee O Other (Specify) For Loans/Credits/Others: Amount (US$m/SDRm): US $200 million Proposed Terms: C: To be defined D Multicurrency El Single currency Cl Standard Variable El Fixed 1l LIBOR-based Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75% Service charge: 0% Financing P1an(US$m): Li To be defied Source Local Foreign Total Government 355.2 30.9 386.1 IBRD 1.1 198.9 200.0 IDA 0.0 0.0 0.0 ,Total: 356.3 229.8 586.1 Borrower: People's Republic of China Guarantor: Responsible agency(ies): GCCTP Project Leading Group (PLG) Address: 1, Fuquian Road, Guangzhou, 510032 Contact: Dai Zhiguo, Vice Mayor, Contact person: Ou Fafan Phone: 020-83189319 Fax 020-83189282 Guangzhou Municipality Urban and Rural Construction Commission (URCC) Address: 1, Fuqian Road, Guangzhou, 510032 Contact: Deng Hanying, Vice Director Phone: 020-8312-4806 Fax:  Page 2 Guangzhou City Center Transport Construction Company (GCCTCC) Address: 5, Floor, 29 Fuqian Road, Guangzhou, 510032 Contact: Xia Chuang Phone: 020-83189303 Fax: 020-83189282 Guangzhou Municipal Engineering Design and Research Institute (GMEDRI) Address: 348 Huanshi Rd. E., Guangzhou, 510060 Contact: Tian Qixiang, Director Phone: 020-838255599 Fax Guangzhou Transport Planning Research Institute (GTPRI) Address: 10 F. 80 Ji Xiang Road, Guangzhou, 510030 Contact: Wang Fan Phone: 020-83198405 Fax: 020-83369251 Guangzhou Road Expansion and Engineering Office (GREEO) Address: #883, Jifang Bi Road, Guangzhou, 510030 Contact: Mai Guozhen Phone: 020-86681181 Fax Traffic Police Detachment of Guangzhou Public Security Bureau (GPSB) Address: #200, Xiyi Road, Guangzhou, 510030 Contact: Xu Yaguo Phone: 020-83118872 Fax Guangzhou Public Utility Bureau (GPUB) Address: 15-1 Zhan Nan Road, Guangzhou, 510010 Contact: Chang Guangjian, Vice director Phone: 020-86678610 Fax: 020-86661862 Guangzhou Environment Protection Bureau (GEPB) Address: #95, Xichang Road, Guangzhou, 510030 Contact: Hu Guiping Phone: 020-83193765 Fax: 020-83334315 Guangzhou Municipal Engineering Maintenance Department (GMEMD) Address: #85, Erma Road, Gaoshotong, Guangzhou 510100 Contact: Guan Shaoqui Phone: 020-83804328 Fax Estimated disbursements (Bank FY/USSM: FY 1999 12000 2001 2002 2003 Annual 18.14 104.24 162.68 10.54 14.4 Cumulative 18.14 122.38 185.06 195.6 200 Project implementation period: 5 years Expectedeffectivenessdate: 07/01/98 Expectedclosingdate: 12/31/2003  Page 3 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The project development objective is to improve the accessibility of the city center of Guangzhou by promoting the efficient use of the urban transport system in an environmentally sustainable way. The following outcomes are the key performance indicators to meet this development objective: * improved level of service and reduced congestion on the City Center road network as a result of: 1. completion of the Guangzhou Inner Ring Road (GIRR); and 2. traffic management * increased throughput (in terms of passengers) of public transport corridors within the City Center as a result of: 1. improved management of bus operations; and 2. development of bus priority lanes; * reduction in relative levels of air pollution as a result of: 1. the introduction of unleaded gasoline; and 2. a vehicle emissions control program; and * reduction in the relative levels of accidents per capita as a result of: 1. the traffic management measures; and 2. improved coordination amongst responsible agencies. * improved effectiveness and efficiency of road maintenance as a result of 1. introduction of modernized road maintenance equipment; 2. development of a road maintenance system. * strengthened management capacity of municipal agencies responsible for urban transport as a result of: 1. technical assistance support and on-the-job training during project implementation; and 2. classroom training and study tours. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): Document number: 16321-CHA Date of latest CAS discussion: 03/18/97 (Note: Updating of the CAS is scheduled for May 28, 1998.) The sector-related Country Assistance Strategy goals of the project are: I. Promote Growth with Economic Stability; II. Alleviate Infrastructure Constraints; and V. Safeguard the Environment. This project will contribute to these goals by increasing transport system capacity and productivity in cost-effective and environmentally sustainable ways. In particular, the project will increase the supply of urban transport infrastructure, promote more efficient use of existing capacity via area traffic management and public transport activities, and contribute to the environmental viability of project activities through maintenance and vehicle emissions control programs. Already, project preparation activities have assisted in achieving some progress toward the CAS goals I. and V. by supporting the introduction of unleaded gas and supporting structural reforms in the private provision of urban public  Page 4 transportation services. 2. Main sector issues and Government strategy: Sector Issues The main issues facing the sector stem from increasing motorization of the vehicle fleet, (fueled by rising incomes and industrial policy promoting the development of the domestic auto industry), combined with rapid urbanisation and inefficient public transport. Increasing motor vehicle use is leading to worsening traffic congestion, environmental degradation and increases in accidents in urban areas. Urban traffic congestion is already becoming an important constraint to urban productivity in China, as evidenced by increased travel times and higher vehicle operating costs. Public transit, a potentially more efficient mode of passenger transport, is hindered by lack of capacity and, slow operating speeds and outdated equipment and practices. Air pollution from vehicle emissions is posing serious health threats to the urban population. Use of the bicycle, the traditional mode of transport in urban areas in China, is becoming increasingly restricted and dangerous due to the progressive domination of road space by motor vehicles. The most efficient use is not being made of the existing (albeit limited) road space through traffic management. Although modem traffic management practices are developing in some cities, experience is limited in most areas to traffic signals. The necessary complementary traffic engineering skills to improve traffic flow, reduce conflicts between road users, protect pedestrians and cyclists and give needed priority to buses are often lacking. At the operational level, responsibility for various aspects of traffic management remains fragmented. In addition to better managing the supply of existing infrastructure, investment in new capacity is also needed. Economic growth and resulting productive activity have outpaced investment capacities, in part attributable to the lack of a clearly defined.budget provision for financing of urban transportation expenses (capital and recurrent) in most cities. The road network density (surface area of road space per surface area of development) in China's cities is typically lower than that found for cities with comparable or lower population densities elsewhere. However, simply increasing capacity by only building new roads is not the solution. As intemational experience attests, the supply of new capacity quickly succumbs to motorization unless measures are taken to manage demand. Public transport companies are also encumbered by inefficient management practices as well as non-core obligations. As with other sectors of the economy, state-owned public transport roles are changing, from directly producing services (as an operator) toward enabling their provision (as a franchise manager). Public transport enterprise reform is taking place in various cities in China, increasingly accompanied by the participation of private operators, but not always within an appropriate enabling environment. Finally, transport-related public sector institutions are undergoing change and development. Although institutional mechanisms for the coordination of urban land use and transportation development exist through the "master planning" process, the relationships between these two systems are not well understood. As in other countries in the region, while the capacity to formulate urban transport policies and plans may exist, institutional capacity to implement policies and plans is still developing.  Page 5 Government Strategy In response to the need for a comprehensive treatment of these topics, a symposium was held in Beijing in late 1995, to discuss China's Urban Transport Development Strategy\1, sponsored by the Ministry of Construction, Ministry of Finance, the People's Bank of China, the World Bank and the Asian Development Bank. The concluding statement of the symposium (summarised below) provides the basis for urban transport policy and strategy in China. Two to three years ago, only the very largest municipalities were concerned about urban transport. Water supply and sewage disposal seemed more urgent problems. This has changed for one very clear reason: the rising number of motor vehicles - cars, trucks, taxis and motorcycles - has resulted in a sharp increase in traffic congestion. What can be done about it? Urban transport is complex. Action is needed in many areas at the same time - policy, institutions, management, prices, infrastructure construction and other investments. It does not help to solve one problem if others are ignored. There was considerable agreement among the delegates on the general lines of actions to be taken. These were brought together as five principles, four criteria and eight actions. Theflve principles represent themes that should guide urban transport planning and operations at this time in China's development: 1. Transport is about moving people and goods, not vehicles; 2. Transport prices should reflect full social costs; 3. Transport reforms should deepen to align with socialist market principles so as to increase efficiency; 4. The role of government should be to guide transport development; 5. The role of the private sector in providing transport services should be encouraged. City plans and policies for managing transport should meetfour criteria: 1. Environmental sustainability 2. Economic viability 3. Financial affordability 4. Social acceptability Consistent with these principles and criteria, eight actions are recommended: 1. Reform urban transport administration 2. Upgrade the status of traffic management 3. Prepare a strategy to mitigate motor vehicle air and noise pollution 4. Develop policies to manage traffic demand 5. Develop a strategy for mass transit 6. Reform public transport management and operations 7. Develop a fnancing strategy for the transport sector 8. Strengthen the framework for transport planning and capacity building Agreements reached at the Symposium in conjunction with the CAS for China and local development plans, together provide the Strategic Context for this project. 3. Sector issues to be addressed by the project and strategic choices: Background Guangzhou is the political, economic and cultural hub of Guangdong Province. Situated in the bustling Pearl River Delta Region, the Municipality of Guangzhou comprises the city proper and four suburban counties, with a total urban area of 7,434 square kilometres and a population of 8.36 million in 1997. The  Page 6 city proper covers 1444 square kilometers and has 4.6 million residents. During the past 10 years, Guangzhou has experienced rapid population growth lead by the continuing influx of unregistered populations. Gross population density in the built-up area exceeds 20,000 inhabitants per square kilometre. Owing to its harbour that connects Southern China with the outside world and its close proximity to Hong Kong, Guangzhou has long been regarded as the southern gateway to China. Since the beginning of economic reform in 1978, this role has greatly been consolidated by the export-led economic development around the Pearl River Delta Region . Economic growth in Guangzhou has averaged 12 to 13 percent per year, characterised by structural changes in both employment and production. Between 1978 and 1995, the tertiary sector employment doubled from 0.56 million to 1.50 million, capturing 80 percent of the absolute increase in total employment, and increasing its share of GDP from 30 percent to 47 percent. Many of these jobs are located in the city center. Growth in the secondary and tertiary sectors is expected to expand city proper employment to 3.3 million by 2010. Sector Issues Motorization and pollution. Driven by rapid economic growth, GM has seen rapid increases in motor vehicle ownership and use during recent years. In the eighth Five Year Plan (1991-1995), vehicle ownership increased at an average annual rate of 21.3 percent, within which the rate of increase in motorcycle ownership averaged 30 percent. Motor vehicle pollution in Guangzhou has risen commensurably with the motorization of the vehicle fleet. It is estimated that mobile sources accounted for 79 percent of Nox emissions in Guangzhou in 1994, up from 64 percent in 1988. For CO emissions, the share attributable to motor vehicles rose from 63 percent to 89 percent over the same period. Road network and congestion. From the modem traffic point of view, Guangzhou's road network is deficient in terms of capacity, connectivity, and functional hierarchy. Average road network speed in the old city center area is now 13 kilometres per hour or less. Traffic in many segments of the network experiences chronic congestion, and even gridlock during the peak periods. The peak hour volume-capacity ratios on most of arterial roads are now over 0.8, and in some cases, over 1.0. Moreover, the peak period is prolonged to six hours per day, and the peak hour factor (share of trips occurring in the peak hours) has decreased from 10 percent in 1984 to 7.6 percent in 1992 indicating an alarming trend of peak spreading. Traffic management. Competition for the use of limited road space leads to serious conflicts between bicycles and motor vehicles resulting in low average speeds, increasing accidents, and worsening congestion. Lack of effective, comprehensive traffic management contributes to a very inefficient use of road capacity and a hostile environment for non-motorized travellers. Road safety. The incidence of traffic fatalities in Guangzhou is high. In 1995, some 500 fatalities and 1,850 injuries were registered as occurring on the Guangzhou city proper road network. More alarningly, traffic fatality rates per million population have increased at about 10 percent per year during the last five years. In 1994, 10 percent of the traffic accidents were due to collisions between motor vehicles and bicycles (or pedestrians), another 10 percent between motor vehicles and motorcycles, and 80 percent between motor vehicles. The high rate of fatalities is largely due to the lack of functional road hierarchy, the mixed use of road space by vehicles of different size and speed, large proportion of pedestrians and cyclists at risk in the traffic network and, delays in providing first aid to accident victims. Traffic signs are used extensively throughout the city to regulate traffic movements and promote safety. Unfortunately, their effect is limited by the poor discipline of drivers and other road users. Most signalised intersections require traffic police and traffic warden presence to enforce compliance. There is a serious need for  Page 7 channelization to guide road users at junctions as well as increased traffic safety awareness and road user education. Maintenance/rehabilitation of the 550 kilometre urban road network and 294 bridges in general is well organised and managed. The quality of work performed by GMG's street maintenance forces is good, but quality suffers in some instances, due to inadequate equipment and very rudimentary pavement management systems. Moreover, local maintenance budgets are inadequate for growing needs and local program budgeting lacks mechanisms to provide for maintenance expenses on a long-term basis. Non-motorized transport (NMT). Despite the recent trend in motorization, and like many other large Chinese cities, Guangzhou is still predominantly a walking and cycling city. Bicycle trips as a percentage of all person trips (including walking) remained constant at 34% between 1984 and 1992. Over the same period, motorised trips (by public and private transport) increased from 27% to 36%, while walk trips declined from 39% to 30%. The total number of bicycles in the city proper increased from 0.9 million in 1978 to current 3.1 million by 1995, representing a fleet density of one bicycle for every 1.2 registered residents, which is one of the highest in the world. However, over time, the travelling environment for bicycles and pedestrians has eroded significantly with the motorization of the vehicle fleet, causing a greater incidence and seriousness of accidents. Public Transport. Guangzhou is a leading city in public transit reform in China. A major step in public transit reform was the introduction of joint-venture bus companies to the transit market in 1993. There are now six companies, five of which have partners from Hong Kong and Macao. Market competition has led to a substantial overall improvement in public transit services and a reversal of ridership decline. The bus fleet has increased in both size and quality of vehicles. In 1996, Guangzhou's public transit companies carried a total of 869 million passenger trips (which represents a 33 percent increase from the 1993 level) and ridership in 1997 is expected to increase by a further ten percent. However, continuing growth in ridership and operating efficiency is at risk due to declining operating speeds caused by increasing traffic congestion. Strategic Choices No single project can address all the sector issues found in Guangzhou, some of which require provincial or even national policy attention, (e.g. industrial policy pertaining to the automotive industry). Choices were made based on a consideration of the issues which Guangzhou Municipality is already addressing, the most pressing needs, and the areas in which the Bank has a comparative advantage. The city of Guangzhou has recognised the need to take strategic decisions concerning the main sector issues, designing policies and investments for urban development and transport which would allow for socio-economic growth in a decongested and balanced fashion. The city development plan calls for the de-densification of residential space in the city center, city expansion to the north and west, and a revitalised and environmentally sustainable commercial city center, with limited access to motor cars and with priority access for public transit. To achieve this, the city has invested in a mass transit system (the first line of the Guangzhou Metro opened in July 1997), has deregulated bus operations and encouraged private sector bus operation (with noticeable improvements in capacity, affordability, patronage and levels of service) and will invest, through the project, in a high capacity inner ring expressway to "protect" the city center from extraneous "through traffic". Traffic approaching the ring road will, by the design of intersections, be "encouraged" to take the ring road and "discouraged" from entering the city  Page a center. The city has set itself a goal of "traffic restraint" within the inner ring road but has not yet taken the steps to achieve this. A certain degree of restraint will be achieved by the project through the designation for bus use of key sections of city center road network (the allocation of such road space for bus use as "bus lanes" reduces the amount of road space available to cars). The city is looking into various forms of electronic road pricing and on-street parking controls but has not as yet taken any decision on these measures (assistance in assessing their viability is provided in the project). Assistance is provided in the project to study these issues and come up with a recommended strategy and action plan for parking within the city center. Although public transport reforms are benefiting from the performance of Guangzhou's public transport services, a major challenge remains: growing road congestion is seriously reducing bus operating speeds in the city center. The project will address this issue by the provision of bus priority schemes, Intelligent Transport Systems (ITS) technology and assistance in the implementation of reform measures. Improving the environment of the city center is central to Guangzhou's revitalisation strategy. The project will support the introduction of unleaded gasoline (to reduce air pollution from mobile sources), research and development of the vehicle inspection and monitoring system, and the testing of low emission diesel buses. The provision of special facilities for cyclists and pedestrians in the project will encourage walking and cycling within the city center as well as reduce accidents. Finally, the issue of road maintenance is not being ignored in Guangzhou. The project will assist in the establishment of a road maintenance management system which will provide a comprehensive inventory of maintenance requirements for the total "streetscape" (including sidewalks and street furniture as well as the road itself) and enable maintenance expenditure requirements to be determined on a rational basis, linked to the municipal budget process and updated continuously. Thus, this project includes components to address the following sector issues within the context of local priorities and development plans: * supply of new infrastructure to alleviate congestion and provide needed new capacity; * traffic management based on functional hierarchy of roads (including the development of bus priority schemes, bicycle facilities, one-way streets, etc.), and including physical (channelization), operational (area signal control) and regulatory (signs, markings, parking enforcement) aspects; * public transport operating efficiency (bus lanes and associated communications systems); * inadequacies in road maintenance management (road maintenance equipment, pavement management systems); * mitigation of motor vehicle air pollution (emissions control programs); and * institutional strengthening and capacity building. \1 Stares and Zhi, China's Urban Transport Development Strategy: Proceedings of a Symposium in Beijing, November 8-10, 1995, World Bank Discussion Paper No. 352, Washington, D.C., 1996.  Page 9 C. Project Description Summary 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown): Indicative Bank- % of Component Category Costs % of financing Bank- (US$M) Total (US$M) financing A. Inner Ring Road Physical, 504.6 86.1 143.2 28.4 Project management B. Traffic Management & Safety Physical, 33.2 5.7 17.1 51.5 Policy, Institution building, Project management C. Public Transport Physical, 22.1 3.8 14.0 63.3 Policy, Institution building, Project management D. Vehicle Pollution Control Physical, 8.5 1.5 8.3 97.6 Policy, Institution building, Project management E. Road Maintenance Physical, 7.3 1.2 7.1 97.3 Institution building, Project management F. Technical Assistance Policy, 10.4 1.8 10.3 99.0 Institution building, Project ________________________management ______________________________ Total 586.1 100.0 200.0 34.1 2. Key policy and institutional reforms supported by the project: Public transport reforms: The public transport, traffic management and technical assistance components of this project support the key reforms identified in the Guangzhou Public Transport Development Plan (1994 - 2010). The goals of reforms are to: recover public transport's modal shares to 23 percent by the year 2000; raise average operating speeds of buses and trolleys in the central area to 15 km/hr; increase network density and coverage within the urban area; and address inefficiencies in bus  Page 10 operations, maintenance and staffing. As such, the major elements of reform are to: * create a separate administration, planning and regulatory agency (newly created Public Transport Management Departnent); * franchise all operations to autonomous companies; * develop modem operational, planning and management capacities through the adoption of advanced public transport communication and information system technologies; and * strengthen staff capacities through secondment and training. The reform process is ongoing and is focusing on the privatization of the remaining publicly operated services as well as strengthening planning capacities and regulatory policies. The provision, under the project, of technical assistance, bus priority measures, and bus communication and information systems is designed to support these reforms. Demand management reforms: GMG began to implement transportation demand management strategies in the early 1990s. Early regulations sought to restrict traffic in the city center through daytime truck bans and a monthly cap on the number of motorcycle registrations. GMG will soon promulgate new parking regulations and is further considering pricing charges in connection with the inner-ring road. The project supports these reforms through the provision of the parking management sub-component and technical assistance to assist in the further development of a demand management policies. Vehicle emission reductions: In 1996, GMG began to address the deterioration of ambient air quality due to vehicle emissions and issued new regulations which called for the enforcement of vehicle emissions standards, the introduction of unleaded gasoline in conjunction with national plans for the elimination of lead in fuel, and improved management of the vehicle inspection and maintenance system. The project supports this initiative through the Vehicle Emissions Control component which is designed to provide for: * the development of a distribution system for unleaded gasoline at ten refuelling stations; * improvements in the management and technical development of the vehicle inspection and maintenance system; * establishment of the Guangzhou Vehicle Emissions Research Center (GVERC) to serve as a center of expertise and knowledge sharing in vehicle pollution control; and * improved air quality monitoring of mobile-source emissions. 3. Benefits and target population: The project is expected to reduce transport bottlenecks affecting socio-economic development and lower passenger and freight transport costs with resultant benefits in the price of goods and the marketing of products. These will have direct benefits for the travelling public and commercial and industrial producers through improved access to, from and within the commercial city center of Guangzhou. Public transport passengers and non-motorized road users are expected to benefit from bus, bicycle and pedestrian segregation/channelization facilities. This project is designed to achieve more effective management and sustainable maintenance of road assets, including better utilization of existing road capacity, improved value-for-money of public spending on roads, and a better fit between road maintenance activities and municipal budget allocations. The project is expected to contribute toward the improved health and quality of life for the citizens and users of Guangzhou's city center through reductions in motor vehicles emissions.  Page I 1 4. Institutional and implementation arrangements: Institutional Arrangements: Guangzhou Municipal Government (GMG) is the Executing Agency for the Project. A Project Leading Group (PLG), composed of the leadership of project implementing agencies and headed by a Vice-Mayor of GMG, has overall responsibility for project coordination. The Project Office (PO) is responsible to the PLG for the organization and management of the implementation of the whole project. The principal implementing agency is the Guangzhou City Center Transport Construction Company (GCCTCC), a new entity which has been established to manage the construction and implementation of the GIRR. The roles of the GCCTCC and other implementing agencies are summarized in Annex 2(a). Implementation Arrangements The project will be implemented over a five year period, from July 1, 1998 to June 30, 2003. The loan will close on December'31, 2003. The Project Implementation Plan (PIP) is a technical working document prepared by GMG for use in the management of the project. The PIP includes the implementation schedule, procurement plan, disbursement schedule, performance indicators and monitoring for the overall project and for project component activities. A copy of the PIP is available in the Project File. Annual Work Program (AWP) will be drawn up by the implementing agencies, based on the technical framework in the PIP, the progress achieved in the preceding year, and availability of counterpart funds. It will be the responsibility of the PSO to assemble these AWP into a single document for discussion during the Annual Review of the project. The Annual Review of the project will provide the opportunity to review implementation progress, to take actions to address emerging problems and to agree the AWP for the following year. The review will take place by October 31 of each year starting in 1999, to ensure appropriate provision is made for counterpart funds in G0MG budgets. The review will focus on (a) the evaluation of progress for the preceding fiscal year; (b) the implementation schedule and commitments of resources proposed for the following fiscal year in the AWP; and (c) the status of the project (and project components) in terms of the performance indicators. World Bank Supervision Arrangements For supervision, responsibility for Task Team Leadership has been decentralized to the RMC field office. A team consisting of HQ and field office staff will conduct supervision of the project. Three missions a year are planned, including an annual review mission on the anniversary of project effectiveness. Between missions, field based staff will maintain regular contact with the PO. All missions will comprise the task team leader, an operations officer from RMC, and technical and procurement specialists from HQ or RMC as required by the issues to be addressed. The annual review mission will comprise, in addition, enviromnental, resettlement and financial specialists. It is expected that a greater supervision effort will be provided during the first two years of the project then in later years. A Mid-Term Review of the project is scheduled for January 2001. This will provide an opportunity for a more in depth review of the project and evaluation of progress towards achievement of project objectives.  Page 12 Financing Arrangements The Ministry of Finance will on-lend World Bank loan funds to the Guangdong Provincial Government, and Guangdong Province Government will in turn on-lend funds to the Guangzhou Municipal Government. There will be no subsidiary loans to any entity beyond the municipality. On-lending terms will be the same as the Bank's with the exception of the interest waiver and the possible exception of the commitment fee waiver. Procurement Arrangements Procurement arrangements are described in Annex 6. Contracts subject to prior review by the Bank will be: (a) Civil Works contracts, both ICB and NCB, valued at US$2 million and above; (b) contracts for the procurement of Goods valued at US$0.25 million and above; and (c) Consultant Services contracts employing (i) firms, valued at US$0.1 million and above and (ii) individuals, valued at US$0.05 million and above. Disbursement Arrangements Disbursement arrangements are described in Annex 6, Table C. A Special Account will be established in the amount of US$12 million. SOEs will be used for all contracts under US$2 million equivalent for Civil Works, US$0.25 million for Goods, US$0.1 million for consulting firms and US$0.05 million for individual consultants and training contracts. Accounting, Financial Reporting and Auditing Arrangements The Project Office will have overall responsibility for establishing and monitoring the use of a uniform project accounting system. Accounting, financial reporting and auditing arrangements for the PO (which has already been established, is operational, and has been budgeted) have been found to be satisfactory by the project team. Financial records and accounts, in a format suggested by the Bank will be retained by the relevant agencies concerned with component funding, payment and disbursement. The PO comptroller will consolidate all project financial statements from the project implementing agencies into a single project financial report on a quarterly basis for monitoring purposes, and annually for audit purposes. Guangdong Provincial Finance Department (GPFD), the PO and all implementing agencies will be subject to external audit by the State Audit Bureau (SAB). SAB will delegate the audit to the Guangdong Audit Bureau. Work to refine the project accounting and reporting system will be continued during implementation. Monitoring and Evaluation Monitoring of all aspects of project implementation activities including performance indicators, will be the responsibility of the PO. Monthly reports, to be provided by the implementing agencies, will provide the basis for monitoring. Progress on the project will be communicated to the Bank by means of quarterly progress reports which will include both consolidated information for the total project and individual reports on each component. Every year, as the basis for the annual review, the PO will collect project progress and impact data and record actual performance against agreed indicator targets (see Annex I and PIP). During implementation, these indicators will be reviewed by the government and the Bank. Areas for improvement will be identified and measures to achieve them will be proposed. Special assessments will be carried out at the time of mid-term review and project completion. The PO will prepare a detailed  Page 13 project completion report and submit it to the Bank not later than three months after the loan closing date, so that the ICR can be issued within six months of the latter date. D: Project Rationale 1. Project alternatives considered and reasonsfor rejection: A wide range of basic alternatives for the project were examined as part of an urban transport strategic planning study undertaken prior to project identification. The study entitled the Guangzhou Urban Transport Study GUTS) commenced in March 1993 and was completed in July 1994. The Study examined a wide range of policy, travel demand and investment options. The results showed that: * within the central area, even an expanded road network cannot accommodate forecast traffic resulting from unconstrained travel demand by cars and motorcycles in 2010; * outside the central area, the highway network would generally accommodate unconstrained travel demand; * the two planned metro lines should attract sufficient ridership to cover their operating costs from revenue; * the most cost-effective means of ensuring mobility in the central area is to control the use of cars, motorcycles and taxis and to enhance the speed and capacity of public transport by giving priority to buses; * within the central area an option with emphasis on traffic management and bus priority performed better in overall economic terms than an option based only on highway development; and e improved bus speeds attract many passengers to buses from taxis and bicycles. From these results, a "preferred option" emerged that resulted in the formulation of the recommended strategy. The results were reviewed by a peer review group comprising both domestic and foreign experts. The final report was completed in March 1995. The transport strategy recommended by the study was endorsed by GMG and was incorporated into the revised Guangzhou Urban Master Plan. The transport strategy provided the framework for the identification of the project. Preparation of the project was carried out through a follow on study (GUTS-2) and detailed planning by project implementing agencies. During the course of project preparation, various project design alternatives were discussed and rejected as follows: * Public Transport Component: Although the project concept originally included the provision of public transport buses, these were subsequently excluded as they were provided by private operators who entered the service market in 1995. * GIRR Tolling: Local officials continue to discuss options for road pricing as a means to facilitate cost-recovery. At this time, it is proposed to levy a GCCTP Surcharge in the form a levy on annual vehicle inspections. The GIRR design can also be retrofitted for electronic tolling of the facility, another longer-term option under consideration. These options will be studied further in a demand management study to be undertaken under the technical assistance component of the project.  Page 14 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Sector Issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Urban transport improvement First and Second Shanghai S S Metropolitan Transport Projects Public transport reform Medium-Sized Cities S S Development Project Urban transport improvement Liaoning Urban S S Infrastructure Project Urban transport improvement Tianjin Urban Development S S and Environment Project Other development agencies Traffic management European Union grant financing for Beijing 2nd and 3rd Ring Road Intelligent Transport Systems Motor vehicle emission control UNDP grant financing of Beijing vehicle emissions inspection program 1P/D0 Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Lessons learnt from the implementation of the two Shanghai Metropolitan Transport Projects concern the need to link major infrastructure investment with implementation of improved traffic management and public transport operations. In Shanghai, an elevated ring road was constructed on schedule and within budget but the supporting traffic management and public transport facilities have so far seen only limited implementation. Weak implementation of these components is partly due to lack of ownership of designs produced largely by foreign consultant assistance and partly due to the fragmentation of responsibility across agencies. For this project, detailed designs have been prepared for the first phase of traffic management and bus priority facilities within the city center. These designs although assisted by international consultant inputs, have been prepared by staff of the local agencies concerned (the Public Security Bureau and Public Utility Bureau), thereby enjoying substantial borrower ownership. Proposed conditionality also ensures delivery of demand management studies and progress on implementation of the traffic management component (see Section G). Experience from previous highway projects in China emphasizes the importance of rigorous, early preparation for major civil and ancillary works and for procurement processes, where tendering often takes longer than expected. Advance preparation of bidding documentation and independent design reviews have also fostered smooth implementation and have helped reduce variations during the  Page 15 implementation period. This process has been followed in preparing this project. Land acquisition and resettlement of affected people has also led to implementation difficulties, including delays, in Chinese highway projects. Under the proposed project, resettlement has received considerable' attention. The Resettlement Action Plan incorporates all knowledge gained on earlier highway projects. Experience in the environmental area in China has generally been favorable. However, more attention should be paid to environmental supervision during construction, training of environmental personnel, and environmental monitoring during both the construction and operation phases. This has been provided for in various project components. Bank experience emphasizes the importance of adequate construction quality of roads. Poorly constructed roads lower economic benefits and vehicle-operating cost savings. Higher costs also result from premature deterioration, where corrective actions in the form of increased maintenance and/or rehabilitation are required. Effective remedial actions include stringent contractor prequalification, careful formulation of supervision arrangements, including engagement of international experts, training of local supervision staff and equipping the supervision teams. These are built-in to the proposed project. Based on the Banlk's experience with institutional and policy aspects of highway projects, the phasing of studies and technical assistance and the intensity of Bank supervision are important for positive, sustainable outcomes. The annual review process and the requirement to produce AWPs are designed to ensure that institutional development and other technical assistance are undertaken when needed. 4. Indications of borrower commitment and ownership: GMG has already initiated substantial reforms in public transport and has started construction of the GIRR. Resettlement activities have commenced, especially the construction of new housing units and ancillary facilities. Some 40 percent of the GIRR is being financed by GMG without Bank participation. Traffic management plans are well-advanced. 5. Value added of Bank support in this project: The Bank assisted Guangzhou in developing a comprehensive urban transport strategy for the city through the Guangzhou Urban Transport Study (GUTS-1). The transport strategy recommended by the study was endorsed in principle by the GMG and was incorporated into the revision of the Guangzhou Urban Master Plan. Follow on work, including GUTS-2, also served as the basis for Bank participation. By supporting the project, the Bank will demonstrate the value it places on project design based on international good practice. Value added Bank support in project implementation is expected in traffic management, public transport priority and ITS, motor vehicle demand management and pollution control and the phasing of these with GIRR construction and operation. The Task Team will bring the knowledge of the Bank at large on experience with the progressive introduction of these measures and the comparison of Guangzhou's performance with other cities world wide, particularly cities in which the Bank has projects with similar components. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): El Cost-Benefit Analysis: NPV=US$2600 million; ERR = 34.1 % C1 Cost Effectiveness Analysis O Other  Page 16 2. Financial (see Annex 5): NPV=US$ million; FRR = % Fiscal Impact: Analysis of the fiscal impact of the GCCTP includes consideration of GMG's financial capacity to meet implementation cost (including debt finance and ongoing maintenance costs), taking into account positive longer term effects of the project on urban development. For example, financial projections for this analysis assume an annual average GDP growth rate of 13 percent, a rate facilitated, in part, by implementation of the GCCTP. GCCTP project financing is aggregated within a larger city construction budget. Based on a review of the 1992-2002 city construction budget, the combination of budgetary and extra-budgetary resources dedicated to the project, net of the 1997 - 2002 city construction expenditure program, is found to provide sufficiently for project costs during the implementation period. Projected resources are also found to adequately cover debt service costs during the operating period, with payment of principal and financing charges peaking at 9% of cumulative revenues in the year 2003. 3. Technical: The technical basis for this project derives from comprehensive transportation planning studies undertaken in the Guangzhou Urban Transport Study (GUTS) and a follow-on study GUTS-2, from 1993-95 (see general description in Section D. Project Rationale above). Technical specifications for all project components were later developed through detailed studies (see various feasibility studies included in Annex 8: "Documents Available in the Project Files"). The Guangzhou Inner Ring Road (GIRR): The design of the GIRR lane capacity, interchanges and access ramps is based on extensive traffic forecast analysis undertaken initially in GUTS and subsequently refined. The Preliminary Engineering Design documents for the GIRR have been prepared with sound design principles and to an adequate depth of detail, and comply with national design standards. The design review found them to be acceptable. Traffic Management and Safety (TMS): The proposed designs and specifications included in the Stage I TMS program for junction improvements, channelization, pedestrian crossings, sidewalks, bus lanes, bicycle routes and traffic signal control equipment and installation conform to international good practice. In the case of channelization and pedestrian refuges, they represent a major advance in traffic engineering design and making efficient use of roadspace in Chinese cities. The controllers for the traffic signal sub-component will be purchased from the supplier of the current Australian area traffic control equipment and will conform to the Sydney-Coordinated Adaptive Traffic System (SCATS) specifications of this system (given the proprietary nature of this equipment, it is included in the project but excluded from Bank financing). Public Transport: The proposed institutional and fare collection reforms conform to best practice in the sector. The development of bus monitoring and communications systems accords with initiatives by public transport providers world wide. The technologies to be proposed for bus monitoring and communication will be determined only after study and research of the technical performance and cost-effectiveness of such technologies in operation elsewhere. The project will provide Technical Assistance to assist in the design of appropriate specifications for Guangzhou. Only at this point, and in agreement with Bank, will such technology be provided under the project as a first stage in the development of a city wide program.  Page 17 Vehicle Pollution Control: The approaches adopted for inclusion in the project are examples of good practice and will assist in the development of a wider acceptance of unleaded gasoline by users and the public at large. Research, management and information systems will be developed to improve the existing vehicle emissions monitoring system. - Road Maintenance: The project will advance modem road maintenance practice through the use of modem road maintenance equipment and development of road maintenance management systems drawing on international good practice. 4. Institutional: a. Executing agencies: In general, existing institutions have undertaken the planning and design of project activities. These institutions will also be the implementing agencies and have, in most cases, undertaken work similar in scope to the project components. Local capacity within these implementing agencies will continue to be developed through their respective technical assistance programs. In order to strengthen arrangements for project delivery, a number of institutional development initiatives were undertaken during project preparation. The Project Leading Group was established to undertake overall project coordination. The PLG is assisted by the Project Office, (formerly Guangzhou City Center Transport Project Office) which is given the responsibility of organizing and managing implementation of the whole project. Next, Guangzhou City Center Transport Construction Company was established to manage the GIRR component of the project, modelled on a similar arrangement used to f acilitate the Guangzhou metro construction. In the area of traffic management [the responsibility of the Traffic Detachment of the Guangzhou Public Security Bureau, but also involving other road and public transport agencies] project activities will be coordinated by the PO. Finally, in public transport, the project continues to support the transition of the Public Utilities Bureau from a producer of services to a provider of services, including the further development of an enabling environment for private participation. b. Project management: The proposed project management arrangements result from discussions between the Bank and the Guangzhou Municipal Government (GMG). They incorporate lessons from implementation of similar projects in the region, particularly the first and second Shanghai Metropolitan Transport Projects. They are designed to give equal emphasis in project implementation to each component. A description of project implementing arrangements and agencies appears in Annex 2 (a). 5. Social: Land Acquisition and Resettlement: The development of the Inner Ring Road sub-project in the congested city center will involve land acquisition and the resettlement of people, businesses, enterprises and public facilities. The resettlement activities have been divided into four phases following the phases of road construction (1997, 1998, 1999 and 2000). Census and socio-economic surveys have been conducted for all phases. Census for all phases will be updated prior to construction of the respective phases. The GIRR will be 26.7 km in length and the estimated amount of total land acquisition (floor area demolished) will be about 440,143 m2 involving the resettlement of 32,089 persons. Resettlement Action Plan (RAP): A RAP has been developed to mitigate the adverse impacts of land acquisition and also to implement the resettlement activities as an urban development program. The RAP  Page 18 will provide the guiding principles for all phases of the project whether Bank financed or otherwise. The Guangzhou Road Expansion and Engineering Office (GREEO) under the direction of the Urban and Rural Construction Commission and GCCTP Project Office, prepared the RAP and has been tasked with the responsibility of implementing its resettlement policy and action plans for the project. For the Longxi Bus Maintenance Depot, the PO and GREEO will be responsible for the coordination and monitoring of the resettlement while the Public Utility Bureau will be responsible for the implementation of resettlement. Costs and Financing: The cost for the RAP implementation will be part of the overall budget of the GCCTP. It will be financed from counterpart funding from the project and will come from the Guangzhou Urban and Rural Construction Commission under the Municipal Government. The total estimated cost for the four phases of GCCTP resettlement is 1.4 billion yuan (US$ 169.1 million). Monitoring and Evaluation: In order to ensure that the implementation of resettlement and rehabilitation will be carried out in accordance with the provisions of the RAP, internal as well as an independent monitoring will be carried out. The internal monitoring will be undertaken by the PO, f ollowing a set of indicators, to ensure that all the responsible units follow the schedule and comply with the provisions of the RAP. An independent monitoring group from the Guangzhou Academy of Social Sciences will monitor and assist the responsible resettlement organizations in achieving the objectives of the RAP as well as to ensure that the Project Affected Persons take an active part in the process of their own rehabilitation. 6. Environmental assessment: Environment Category 1 A C B 3 C The project is classified as a Category A project as per the World Bank's Environmental Assessment OD 4.01. Environmental Assessments (EA) were carried out for both the GIRR and the Longxi Maintenance Depot, and were reviewed by both the Chinese National Environmental Protection Agency (NEPA) and the World Bank. Inner Ring Road The EIA for the IRR concludes that the proposed GIRR project will assist in providing a long-term solution to traffic congestion in the city center, improve the quality of urban life and stimulate economic development. The EA also notes that the project will result in degradation of environmental quality to some extent in the immediate vicinity but will make a positive contribution to pollution control in the overall urban area, especially in the city center. A number of potentially sensitive receptors (educational, medical, recreational, institutional, etc.) have been identified along the alignment of the GIRR. These, together with the proximity of the viaduct to the buildings, present a challenge for effective mitigation of the potential impacts. To mitigate the environmental problems and pollution caused by the construction of the GIRR, as a first step, the proposed alignment was analyzed. Where necessary, the least problematic horizontal and vertical alternatives were selected. Use of multi level interchanges is restricted to key intersections. To minimnize the impact of the decrease in sunshine levels, a 5 m minimum setback between the right of way of the GIRR and the adjacent buildings will be maintained. To minimize and mitigate noise problems, the detailed design includes: * extensive use of porous concrete and asphalt at noise sensitive locations for smoother and quieter riding surface (leading to about 5 dB(A) reduction in noise level); * use of longer and larger prefabricated structures to minimize the number ofjoints; * use of flexible joints and flexible supports to buffer vibration and reduce noise levels; etc.  Page 19 Noise barriers with different shapes, heights and materials with absorptive rating of 25-35 dB(A) will be used as the primary mitigation measure, supplemented where necessary by other measures such as increase in the height of road dividers, road side planting etc. In the newly developed areas and old city areas currently undergoing rebuilding, the first row of the buildings will be designated for commercial facilities, parking lots and other non-sensitive uses under the Guangzhou Overall Development Plan and enforced by the Guangzhou Urban Planning Bureau. For other sensitive users where the above measures are not adequate or appropriate and who cannot be relocated (e.g. schools, hospitals, residents of high rises, etc.), double-glazed windows in combination with air conditioning will be provided. Since it is not possible to mitigate the deterioration in air quality only along the GIRR alignment, a Motor Vehicle Emission Control component is built into the project. The objective is to develop strategies and provide a strong foundation for a research program to address the problem of increasing air pollution from mobile sources. The program will address the introduction of unleaded gasoline in Guangzhou, establish a vehicle Inspection and Maintenance (I/M) system, establish Guangzhou Vehicle Emission Research Center and expand the automated monitoring network in Guangzhou to monitor air pollution. The project includes environmental monitoring and training components to evaluate the effectiveness of mitigation measures, to respond to unanticipated environmental impacts during construction, and to provide supporting information for formulating regulations and improving traffic management and environmental controls, based on monitoring data. Longxi Maintenance Depot The Longxi Maintenance Depot will be constructed in the Fancun District, and will provide first, second and third class repairs and maintenance to a fleet of 620 buses serving the southwest of Guangzhou. The depot will comprise a maintenance workshop, auxiliary workshop, materials warehouse, testing workshop, storage area, cleaning workshop, refueling station, a multi-use building and garage. The Environmental Impact Assessment (EIA) for Longxi Maintenance Depot concludes that construction of the Depot will significantly reduce the driving distance of the buses (currently, buses are maintained near the city center) thereby improving the condition of the fleet serving the Fancun area as well as reducing congestion in the city center. Based on analysis undertaken in the EIA, it was determined that the major potential impacts associated with the project are related to air emissions, wastewater disposal and noise. Mitigation measures for these and other concerns were documented in the assessment report and further defined in the Environmental Action Plan (EAP). In particular, the EAP notes that wastewater discharged from the project will first receive on-site primary treatment and then will be further treated on-site in a custom designed and built wastewater treatment plant using a biological contact oxidation process. Treated effluent from the on-site plant will meet the first standard of the Guangzhou Discharge Sewage Standard. 7. Participatory Approach: a. Primary beneficiaries and other affected groups: Participation of affected groups has been ensured through environmental and social evaluations of the project. Neighborhood groups were also consulted during project planning. Public participation of road users and the general population will continue to be facilitated through television, radio and newspaper announcements during project implementation. In particular, the Traffic Detachment of the Public Security Bureau will set up a project "hotline" in order to collect public views on the project. Furthermore, during construction of the IRR, contractors will establish traffic management working  Page 20 groups to assist the traffic police in traffic diversion. These groups will also record public concerns and opinions on traffic issues during the construction and convey these views to the Traffic Detachment of the Public Security Bureau for their information and action. Project affected people will be consulted and encouraged to participate in the process of the project-related resettlement. Affected people living along the proposed GIRR route and in the vicinity of the proposed depot were informed about the project at an early stage. They have or will participate in census surveys and standard of living surveys to be undertaken by the Guangzhou Academy of Social Sciences. Prior to negotiation and signing of the GIRR contracts for moving, people will be invited to visit the resettlement sites and select from several options. No major grievance issues are expected to arise due to widespread activities of participation and consultation during the entire project period. However, to more adequately protect the legal rights of the PAPs, a grievance mechanism will be set up so that they will have avenues for redressing their grievances related to any aspect of the resettlement. The detailed procedures for redress of grievances and the appeal process have been developed and will be widely publicized during the GIRR participation and consultation meetings and included in the resettlement information brochure to be distributed to all affected persons before the move. b. Other key stakeholders: Education of road users is provided under the project. In particular, the project will develop educational text books for kindergarten level class use as well as a "Road User Handbook" for dissemination to the general population. F: Sustainability and Risks 1. Sustainability: Project sustainability will be a function of the success with which all project components are implemented, monitored and operated, in particular the public transport, traffic management, maintenance, vehicle emissions and technical assistance components. Sustainability will also depend in part upon local land use planning and pricing policies, which are outside of the project's direct scope. Continued reforms in public transit, traffic management (including user charges) and institutional coordination amongst all project agencies will also be needed in order to ensure long-term benefits of the project. Thus, local government policy and financial support for project implementation is the critical factor for sustainability. 2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1): Risk Risk Rating Risk Minimization Measure From Outputs to Objective GIRR diverts enough traffic from city N 1. Computerized "Area Traffic Control" center to reduce city center congestion. system programmed to divert traffic to GIRR and away from city center. Future congestion is not mitigated by M Traffic management measures are demand management measures. implemented according to covenanted AWP and enforced. Covenant on demand management study will promote policy framework to protect against generated traffic.  Page 21 Traffic management system not enforced. M Institutional integration of traffic management programs through the PO. Road user response to traffic management N Neighborhood committees involved in is not favorable. project planning. Public education and participation through local media. Bus operators do make enough use of N Bus companies to be involved in design communications and information systems of systems and measures. Bus priority and priority measures to improve services. facilities will be enforced by traffic police. Vehicle emissions research and pilot M Research results to be evaluated and activities do not shape policies and actions. disseminated through Vehicle Emissions Research Center. Staff knowledge gained not adopted into N TA and training schedules are designed professional practice at municipal agencies. so that staff can provide inputs to implementation of project components. Agencies' information systems will institutionalize knowledge management. From Components to Outputs Co-operation of project and non-project N Overall management responsibility for municipal agencies falters. the project rests with municipal government via the Project Leading Group. Local government support for any project Annual review and mid-term review activity erodes. provides opportunity to discuss project issues. Overall Risk Rating _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None likely. G: Main Loan Conditions 1. Effectiveness Conditions Standard conditions for effectiveness. 2. Other [classify according to covenant types used in the Legal Agreements.] Dated covenants Require that GMG produce, by March 31, 2000, an agreed policy document on "traffic demand management" and thereafter take appropriate steps to implement the policy recommendations.  Page 22 Require that GMG cause the parking study to be undertaken and completed, March 31, 2000, and that the recommendations of said study concerning pricing and control of spaces be reviewed by GMG within a reasonable time and then implemented in accordance with an action plan acceptable to the Bank. By December 31, 1999 completion of (a) traffic management improvements comprising (i) the bicycle routes along Gangfu Road and Zhihang Road ; and (ii) channelization improvements at Zho ngshan Road/Jiefang Road, Beijing Road/Huifu Road and along Renming Road are implemented in accordance with designs agreed at appraisal and in a manner acceptable to the Bank; and (b) bus priority facilities comprising bus lanes along Renming Road are implemented in a manner acceptable to the Bank. By October 31 of each year, furnish and implement, subject to the Bank's review and comments, an annual work plan covering the following twelve months. Also, to prepare quarterly reports, annual reports and a mid-term report integrating the results of project monitoring activities. H. Readiness for Implementation X 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. II 1. b) Not applicable. 1 2. The procurement documents for the first years activities are complete and ready for the start of project implementation. 1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 1 4. The following items are lacking and are discussed under loan conditions (Section G): * An agreed GMG policy document on "demand management" to be produced, March 31, 2000; * GMG cause a parking study to be undertaken and completed, March 31, 2000, and that the recommendations of said study concerning pricing and control of spaces be reviewed by GMG within a reasonable time and then implemented in accordance with an action plan acceptable to the Bank. I. Compliance with Bank Policies E 1. This project complies with all applicable Bank policies. O 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies.  Page 23 Task Teamn MLeaa Je y Gtmard Scurfield Sector Ma6ng: Jeffrey Gutman  Page 24 ANNEX 1 Annex 1: Project Design Summary Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation Sector-related CAS Goal: (Goal to Bank Mission) Increase transport 1.1 Progressive increases * Occasional Bank * Increased capacity system capacity and in infrastructure system urban and transport and productivity of productivity by capacity and productivity sector reports; infrastructure reduces improving the above baseline levels. * Bank urban transport the cost of living in performance of urban supervision missions. urban areas. transport system in cost-effective and sustainable ways. Project Development (Objective to Goal) Objective: 1.1 Improved level of * Annual project 1. Improve the service and reduced reports with * City center continues accessibility of the city congestion of the city performance to be a major center by promoting the center road network indicators. generator of GDP and efficient use of urban 1.2 Increased throughput of employment; transport system in an public transport * Annual Review * Good accessibility is environmentally corridors. critical to city center sustainable way. 1.3 Reduction in relative * Mid-term Review sustainability; levels of mobile-source 0 Land use and pricing air pollution. * Implementation policies are 1.4 Reduction in accidents Completion Report complementary with per capita. transport policies and 1.5 Improved efficiency investments; and effectiveness of road * Effective maintenance programs. management and 1.6 Strengthened financing continue management capacity of beyond project municipal agencies implementation into responsible for urban operational phase. transport  Page 25 ANNEX I Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation Outputs: Relative to "no project" (Outputs to Objective) scenario: 1. Inner Ring Road 1.1 Increased passenger and 0 PO to monitor project * GIRR diverts enough operational and freight throughput. progress and submit traffic from city alleviating congestion quarterly progress center to reduce within the city center. reports. congestion and promote accessibility. * Bank to conduct * Future congestion regular supervision mitigated by parking 2. Traffic management and 2.1 Reduced journey times missions. and demand safety program along major corridors management. operational and 2.2 Reduced per-capita * Joint review of * Traffic management maintaining acceptable accident rates. project progress to regulations, including levels of service. take place annually those affecting bus and at the project priority facilities, are 3.1 Increased average bus mid-term. enforced. 3. Public transit operating speeds, ridership and * Road user response to at improved levels of modal share. traffic management service program is favorable. * Public transit 4.1 Reduced tailpipe corridors and 4. Unleaded gasoline emissions information systems introduced, inspection are used by operators. and maintenance system 4.2 Increased sales of * Vehicle emissions operational along with unleaded gasoline. research and pilot improved monitoring. activities shape policies and actions. 5. Road maintenance 5.1 Reduced unit costs of 0 Staff knowledge program based on road maintenance gained is management system. 5.2 Increased % of roads in incorporated into good condition professional practice at municipal agencies 6. Technical assistance 6.1 Project agencies' program enhancing local satisfaction with training capacities. and services received. 6.2 Improved efficiency and effectiveness of public service delivery.  Page 26 ANNEX 1 Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation Project Components / Inputs: (budget for each (Components to Outputs) Sub-components: component) 1. Inner Ring Road 1. US$504.63 million * PO maintains * Cooperation of i) land acquisition/ monthly progress project and relevant resettlement reports non-project municipal ii) viaduct and road agencies is ensured. engineering * PO provides Bank iii) other civil works with quarterly * Continued local and environmental progress reports support for all project monitoring which compare components. iv) equipment and planned and actual materials progress for each v) construction project component in management terms of cost and 2. Traffic Management and 2. US$33.20 million physical works Safety i) traffic management * Monthly ii) traffic signs and disbursement reports signals which compare iii) road safety planned with actual iv) IRR traffic disbursements for management each component v) parking control i) project management 3. Public Transport 3. US$22.08 million i) institutional reform ii) maintenance depot iii) maintenance equipment iv) bus demonstration program v) project management 4. Motor Vehicle Emission 4. US$8.53 million Control i) intro. unleaded fuel ii) vehicle inspection and maintenance program iii) motor vehicle pollution monitoring iv) Vehicle Emission Research Center v) project management 5. Road Maintenance 5. US$7.28 million i) equipment ii) road Maintenance System iii) project management I  Page 27 ANNEX 1 Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation 6. Institutional 6. US$10.35 million Strengthening i) IRR (MEDRI) ii) environmental protection (GESRI) iii) traffic management and safety (TCSRI) iv) public transport (PUB) v) MV emissions control (EPB) vi) road maintenance (GMEMD) vii) resettlement (GREEO) viii) transport planning and engineering (TPRI) ix) project management (PO) __ Key Performance and Monitoring Indicators (see PIP for Baseline values and targets) Overall traffic conditions in the central area: e Average Traffic Speeds. Measurements of general traffic journey times (and thus speeds) will be undertaken by "Moving Observer" methods on two routes (to be determined) within the GIRR. These will be undertaken annually during both peak and off-peak periods (morning and evening peaks will be measured separately). At least three round-trips will be completed on each route during each measurement. * Traffic Volumes. A program of classified traffic counts will be established at a "cordon" around the City Center (corresponding approximately with the GIRR) and traffic volumes crossing this "cordon" to and from the City Center will be measured and classified into the following groups: bicycle, motorcycle, car, taxi, van, bus, and truck. The count surveys will be undertaken on an annual basis and will cover a 16 hour period (6am- 1Opm) at each site. At least two control sites will be established to provide data on daily, weekly and monthly variations. Sample checks on vehicle occupancy (by vehicle type) will also be made; these checks will include buses (see below). * Improved Condition of Roads and Efficiency of Road Maintenance. Data on pavement condition will be collected on a systematic basis throughout the municipal area using equipment to be procured under the project. Performance Indicators in relation to overall pavement condition will be developed as part of the TA associated with the project. Although a program of manual/visual inspections of the network is currently undertaken, the future monitoring should be based on the International Roughness Index using data collected using the equipment purchased under the loan. Average cost of road maintenance will also be monitored in anticipation of efficiencies gained by greater use of mechanized equipment.  Page 28 ANNEX 1 Public transport performance (including overall mode share): * Bus Speeds. Bus speeds and peak and off-peak journey times will be measured along specific corridors (to be determined but including sections with proposed bus lanes and other priority measures) within the City Center by placing observers on selected vehicles. These data will be compared with the base-line surveys undertaken in May 1997. * Bus Passenger Volumes. Overall average daily ridership (number of passenger boardings) will be monitored on an annual basis, for each bus company (entity) and route type (e.g. urban, suburban, air-conditioned, long distance, etc. Metro ridership (average daily passenger boardings) will also be monitored on an annual basis. Bus passenger volumes on individual corridors approaching the city centre will be calculated from the traffic counts and occupancy surveys defined above. * Bus Fleet. Details of the growth in the overall number of buses by type and ownership will be assembled on an annual basis. v Public Transport Mode Share. The overall public transport share for trips to the City Center will be calculated from the above data, based on the numbers of vehicles (and vehicle occupancy) entering the City Center. Environment and safety: e Air Pollution. Air quality will be measured on an annual basis by GEMC to assess the levels of harmful gases and particulate matters in relation to average daily traffic flow at locations (to be determined) in the City Center. e Noise. Noise levels are monitored at a total of 405 sites throughout Guangzhou and these data will continue to be obtained on an annual basis, specifically within the City Center and at locations where project components are implemented. This indicator will be a monitoring indicator only. * Road Safety. Traffic accident data will continue to be maintained by the GPSB and data in regard to accidents within the three districts which broadly represent the area inside the GIRR will be abstracted, with particular reference to accidents involving pedestrians and cyclists.  Page 29 ANNEX 2 Annex 2: Project Description By Component: Project Component 1 - US$504.63 million Inner Ring Road * A.1: Land Acquisition/Resettlement (US$ 161.38 million): The construction of the Guangzhou Inner Ring Road (GIRR) in the congested city center will involve land acquisition and the resettlement of people, businesses, enterprises and public facilities. The project has a resettlement policy which will guide the preparation of annual resettlement implementation plans for all phases of the project (whether Bank financed or otherwise). This component will finance some 4 40,143 square meters of floor area land acquisition and the resettlement of 32,089 project affected persons (PAPs) as an urban development program. Resettlement activities will take place in several phases in anticipation of the road construction schedule (1997, 1998, 1999 and 2000). * A.2: Viaduct and Road Construction (US$287.96 million): The project will finance the construction of 15.5 kilometers of the 26.7 kilometer GIRR including traffic diversion during construction (temporary engineering, traffic signs and associated facilities). The 15.5 kilometer section of the GIRR comprises an elevated highway 14.9 kilometers in length (of which 6.8 kilometers will be four lanes in width and 8.1 kilometers will be six lanes in width) and an at-grade section 600 meters in length. There will be eight grade separated interchanges with primary roads and 38 access ramps to the street network. The elevated GIRR will have a design speed of 50-60 kilometers per hour. * A.3: Other Works (US$23.60 million): This sub-component includes the supply and installation of noise barriers and lighting; traffic engineering and management of existing at-grade roadspace under the GIRR elevated sections; and enviromnental monitoring of GIRR construction. * A.4: Materials (US$9.65 million): These include supply and installation of expansion joints and bridge bearings and provision of bitumen for the GIRR. * A.5: Construction Management and Supervision (US$22.03 million): The project includes provision of consultant assistance in construction management to the Guangzhou City Center Transport Construction Company, administrative costs of GCCTCC and PO, and GIRR engineering design costs. Project Component 2 - US$33.2 million Traffic Management and Safety This component is designed to make efficient use of the road network within the city center and to manage the use of the network in such a way as to provide priority for public transport and facilitate pedestrian and non-motorized travel within the area bounded by the GIRR. This will be achieved through implementation of the following sub components: * B.1: Traffic Management (US$18.39 million): Bus priority facilities: the development of a bus lane network within the two major city center public transport corridors comprising the provision of 5.4 kilometers of bus lanes (2.7  Page 30 ANNEX 2 kilometers in each direction) providing priority for an estimated 200-250 buses per hour per direction. Pedestrian facilities: the provision of 1.9 kilometers of sidewalks and footpaths serving some 75,000 pedestrians per day and the provision of 30 pedestrian crossings equipped with pedestrian island refuges, signal control and special facilities for the disabled and infirm. Non-motorized travel facilities: the provision of 2.4 kilometers of segregated bicycle routes serving some 13,000 bicycles per day. Road user education: the development of a road user education program through technical assistance. Geographic Information System: the use of GIS systems to improve traffic management analysis and planning. * B.2: Traffic signs and traffic signals (US$10.11 million): The project provides for the installation of traffic signals and signal controllers (some of which are replacements of old or non-functioning equipment). The project also provides for the improvement and expansion of the computerized traffic signal control system to manage the changes in traffic flow which will result from the introduction of channelization and junction improvements, bus priority lanes and bicycle routes, and the Inner Ring Road. * B3: Road Safety (US$0.76 million): The road safety component comprises three phases: (a) the updating of accident management computer software; (b) a review of traffic accident information collection procedures and analysis of accident causes; and (c) implementation of accident reduction measures resulting from the analytical review. * B.4: GIRR Traffic Monitoring and Management (US$0.94 million): Traffic control equipment for the GIRR and its integration with the city center traffic control system is provided in the project. * B.5: Parking Control (US$2.77 million): The parking control component includes investments to support new government policies in parking management. These include designation of on-street and off-street parking areas and their enforcement, including signs and equipment to direct traffic to designated areas. * B.6: Project Management (US$0.24): Administrative costs of service provided by implementing agencies and PO. Project Component 3 - US$ 22.08 million Public Transport The public transport component is an important element of the Guangzhou Public Transport Development Plan (1994-20 10). Its objective is to support institutional reform of the sector and improve the performance of transit operations via: * C.1: Institutional Reform (US$ 5.06 million): This component will assist the recently established public transport management agency to further study and develop two information systems to improve bus operations and management: 1) Automatic Vehicle Location System (AVLS) and 2) Bus Passenger Computer Management System (BPCMS). AVLS facilitates automatic vehicle location and identification for operational control and service planning. BPCMS strengthens service planning, fnancial control and regulatory management. Initial  Page 31 ANNEX 2 system technology and architecture will be determined as a result of technical assistance under the project. Thereafter, the project will finance the establishment of a pilot system for approximately 400 buses, including the establishment of a control center and associated satellite links (the ultimate system would be designed for up to 4000 buses but this subsequent expansion would be financed by GMG resources). Related bus priority systems may also be identified as a result of this technical assistance and, if justified, these would be integrated with the bus priority schemes introduced in the Traffic Management and Safety Component. * C.2: Maintenance Depot (US$12.95 million): The Longxi Maintenance Depot will be constructed in the Fancun District, and will provide first, second and third class repairs and maintenance to a fleet of 620 buses serving the southwest of Guangzhou. The depot will comprise a maintenance workshop, auxiliary workshop, materials warehouse, testing workshop, storage area, cleaning workshop, refueling station, a multi-use building and garage. * C.3: Public Transport Equipment (US$ 3.49 million): Equipment for bus operation and maintenance facilities will be provided under the project. CA.4: Bus Demonstration Program (US$ 0.44 million): To test selected buses with more advanced and environmentally benign specifications and carry out the trial operations on the main bus routes in the central area of Guangzhou. The selected buses will be evaluated on their adaptability to local road conditions, their environmental performance (air and noise pollution) and meeting passenger comfort requirement to provide recommendations on the most suitable type of buses to be operated in Guangzhou.