China - Sichuan Provincial Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17533 IMPLEMENTATION COMPLETION REPORT CHINA SICHUAN PROVINCIAL HIGHWAY PROJECT (LOAN 2951-CHA/CREDIT 1917-CHA) March 10, 1998 Transportation Sector Unit East Asia and the Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) 1988 (appraisal) $1 = Y 3.72 1989 $1 = Y 3.76 1990 $1 = Y 4.78 1991 $1 = Y 5.32 1992 $1 = Y 5.53 1993 $1 = Y 5.76 1994 $1 = Y 8.60 1995 $1 = Y 8.50 1996 $1 = Y 8.31 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) I kilometer (km) 0.62 mile I square meter (m2) = 10.76 square feet (ft2) I square kilometer (km2) = 0.4 square miles (mi2) I hectare (ha) = 0.01 2.47 acres (ac) = 15 mu km2 1 mu 2666.7 m = 0.667 ha 1 kilogram (kg) 2.2046 pounds (Ibs) 1 metric ton (t) 2,204 pounds (lbs) ABBREVIATIONS AND ACRONYMS AADT - Annualized Average Daily Traffic NTHS - National Trunk Highway System E&M - Electrical, Electronic and Mechanical PMS - Pavement Management System ERR - Economic Rate of Return RDB - Road Data Bank ICB - International Competitive Bidding SAR - Staff Appraisal Report ICR - Implementation Completion Report SDR - Special Drawing Right MOC - Ministry of Communications TOR - Termns of Reference MOF - Ministry of Finance VOC - Vehicle Operating Cost NCB - National Competitive Bidding vpd - Vehicles Per Day Vice President Jean-Michel Severino, EAP Country Director Yukon Huang, EACCF Sector Manager Jeffrey Gutman, EASTR Staff Member Rita Pasi, Financial Analyst, EASPS  FOR OFFICIAL USE ONLY CONTENTS PREFACE ................................. iii EVALUATION SUMMMARY....... v PART I: PROJECT IMPLEMENTATION ASSESSMENT .1 A. Project Objectives and Description .I B. Achievement of Project Objectives .3 C. Implementation Record and Major Factors Affecting the Project .20 D. Project Sustainability .21 E. Bank Performance .21 F. Borrower Performance.24 G. Assessment of Outcome .25 H. Future Operation .26 I. Key Lessons Learned .27 PART II: STATISTICAL TABLES .......................... 30 Table 1: Summary of Assessments ........................................... 30 Table 2: Related Bank Loans/Credits ........................................... 31 Table 3: Project Timetable ........................................... 32 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual ............... 32 Table 5: Key Indicators for Project Implementation ........................................... 33 Table 6: Key Indicators for Project Operations ........................................... 35 Table 7: Studies Included in Project ........................................... 35 Table 8A: Project Costs ........................... 36 Table 8B: Project Costs .37 Table 8C: Project Financing .38 Table 9: Economic Costs and Benefits .38 Table 10: Status of Legal Covenants .39 Table 11: Compliance with Operational Manual Statements .39 Table 12: Bank Resources: Staff Inputs .40 Table 13: Bank Resources: Missions .40 ANNEX 1: ECONOMIC EVALUATION .41 ANNEX 2: BORROWER'S CONTRIBUTION TO THE ICR .61 ANNEX 3: ICR MISSION'S AIDE MEMOIRE .69 MAP 1: Transport Network in Sichuan Province and Chongqing Municipality (IBRD 28877) MAP 2: Sichuan Provincial Highway Project: Project Area (IBRD 28878) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   - Hii - IMPLEMENTATION COMPLETION REPORT CHINA SICHUAN PROVINCIAL HIGHWAY PROJECT (LOAN 2951-CHA/CREDIT 1917-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Sichuan Provincial Highway Project in China, for which Loan 2951-CHA in the amount of $75.0 million equivalent and Credit 1917-CHA in the amount of SDR $36.1 million ($50.0 million equivalent) were approved on June 9, 1988 and made effective on May 31, 1989. The loan and credit were closed on December 31, 1996. The loan and credit are fully disbursed; the last disbursement took place on July 1, 1997. The ICR was prepared by Rita Pasi (Task Manager), Financial Analyst in the Private Sector Development Unit, East Asia and the Pacific Region, and consultants Bavani Krishnamurthi (Economist), and Subhash Seth (Highway Engineer, Infrastructure Sector Unit - Transport 1, Africa Region). The ICR was reviewed by Jeffrey Gutman, Manager, Transportation Sector Unit, East Asia and the Pacific Region. The borrower provided comments that are included as an annex to the ICR. Preparation of this ICR began during a mission in January 1997, with follow-up during field visits in May 1997. The ICR is based on documents in the project file, information collected during missions, and material submitted by the borrower. The borrower also helped prepare the ICR by contributing views reflected in the mission's aide-memoire, preparing its own evaluation of the project's execution and initial preparation, and commenting on the draft ICR.   CHINA SICHUAN PROVINCIAL HIGHWAY PROJECT (LOAN 2951-CHA/CREDIT 1917-CHA) EVALUATION SUMMARY Introduction and Project Objectives 1. Expansion of transport capacity and the removal of infrastructure bottlenecks has been a cornerstone of Chinese development policy since the 1980s. A series of Bank- financed highway projects, approved beginning in 1985, have helped alleviate constraints in the system by supporting expansion of overall road capacity (particularly high-speed routes), institutional development of road agencies, management of major construction projects, and key technical and policy issues in the highway sector. 2. The Sichuan Provincial Highway Project, appraised in 1988, was one of the Bank's first provincial highway projects, designed to expand road capacity through construction of high-speed roads and upgrading of rural roads, and strengthen sector management within provincial road agencies. At the time of project appraisal, Sichuan Province was one of the most populous and least wealthy provinces in China; the provincial road network was congested, in poor condition, and had limited coverage. 3. The Bank-financed project aimed to: expand road capacity between Chengdu, the provincial capital, and Chongqing, the largest commercial center in Sichuan; improve road access in less wealthy areas of the province; carry out highway research; improve road planning and management; train highway personnel; modernize design, construction, materials specifications and contract documentation; and improve road safety. These objectives would be achieved through physical components, including construction of the new 340-km Chengdu-Chongqing Highway and the upgrading of rural roads in two relatively poor prefectures, from Ya'an to Hongya and from Fenggu to Santai. The project also included institutional components for pavement strengthening through the introduction of Road Data Bank and Pavement Management Systems, a staff training program, and a road safety initiative to improve accident analysis and reporting in several Sichuan prefectures. 4. The project's objectives were consistent with the Government's then-prevailing policies for the highway subsector, and supported the Bank's assistance strategy for China. During the period of project implementation, the Bank's broader intervention in the sector began to focus on lending for the development of China's National Trunk Highway System (NTHS). The Sichuan Provincial Highway Project remained consistent  - vi - with these objectives, and includes one of the longest and most critical highways in the national highway network, providing a gateway to China's less-developed western and southwestern regions. Implementation Experience and Results 5. The project's main objective, to increase road capacity in the corridor between the provincial capital of Chengdu and the major industrial center of Chongqinig, was achieved and exceeded: the 340-km, four-lane limited-access, tolled Chengyu Expressway was constructed instead of the predominantly two-lane highway envisaged during appraisal.' The decision to expand capacity of the highway was initially justified as a step in development of the National Trunk Highway System and on the assumpl:ion that corridor traffic was growing more rapidly than estimated during appraisal. In retrospect, traffic growth on the new road did not significantly outpace appraisal estimates, but the early addition of capacity was justifiable based on construction difficulties and road safety implications for the steep, mountainous sections of the route. The substantial physical accomplishment represented by the expressway posed serious technical, financial, and yorganizational challenges in the Sichuan context. Construction of the expressway was completed three years later, and at three times the cost originally planned, mainly due to the higher design standard. The re-evaluated economic rate of return for the expressway is significantly lower than expected, at about 15 percent in the base case versus the appraisal estimate of 27 percent. 6. Additional road capacity will be provided through the upgrading of rural highways from Ya'an to Hongya and from Fenggu to Santai, as appraised. Upgrading of the Ya'an to Hongya highway was completed in 1995, to the appraised technical standard, but three years later than expected and with a 41 percent cost increase and at a slightly lower rate of return than appraised (16 percent versus the appraisal estimate of 17 percent). Upgrading of the Fenggu to Santai highway will not be comp3leted until 1998, reflecting a seven year implementation delay; the highway is expected to be upgraded to a Class I standard instead of the Class III standard appraised, at more than, seven times the original cost estimate. The re-evaluated ERR for the Fenggu-Santai highway upgrading is 18 percent versus the appraisal estimate of 21 percent. The prefectures targeted for rural road upgrading have experienced rapid economic development since appraisal; within five years, both of the rural roads upgraded will link to the high-grade network in .,greater Chengdu. 7. The actual implementation of the project shows that expectations developed during appraisal, both on the part of Chinese authorities and the Bank, were ambitious given the lack of experience and resource constraints in Sichuan. The length of time needed to complete detailed design, estimated at one year, was insufficient, as were the Throughout this report, the term "new Chengdu-Chongqing Highway" refers to the initial design for a new high-speed route between Chengdu and Chongqing. The term "Chengyu Expressway" refers to the higher capacity design which was ultimately implemented.  - vii - contract periods for major civil works, estimated at 36 months. The implementation delays were compounded by procurement difficulties and the limited resources and capacity of contractors to execute the major civil works required for an expressway. The estimates for implementation support and technical assistance required for a project of this complexity were also seriously underestimated, with the result that consultant services financed by the project increased by at least 400 percent in addition to locally- procured or provided design and technical assistance services. 8. In addition to the cost increases resulting from construction delays, quality suffered; there was considerable local pressure to complete works according to the original schedule, and contractors lacked the experience and resources to carry out the major civil works in the project. In addition, certain technical aspects of the project preparation had been inadequately prepared or overlooked altogether, including tunnel design, geological surveys, tunnel ventilation, electrical, electronic, and mechanical works, and cost of land. 9. The implementation of institutional components was less successful than physical components in the project, only partially meeting the objectives set out at appraisal. Of these components, institutional strengthening through staff training and equipment procurement both exceeded the scope as appraised and generally met project objectives: local funds were utilized to procure a wider array and greater volume of goods and services than anticipated. 10. The establishment of road management systems in Sichuan was one of a number of province-based initiatives designed to develop national pavement management systems: the Sichuan activities received strong central and provincial government support and road data bank as well as pavement management systems were effectively initiated, achieving some of the objectives set out at appraisal. However, the amount of work completed on the systems, and the utilization of systems for planning, upgrading, and maintenance budgeting for the network as suggested by the appraisal terms of reference has not yet been achieved. Actual implementation has placed great emphasis on the development of Geographic Information Systems and a detailed road data bank, which have proved hardware- and data-intensive. The pavement management systems developed can only be used on flexible pavements, which comprise only a portion of the road network in Sichuan and Chongqing. The types of technical and budget data produced by the systems are new to the provincial road management agencies, and indicate that the network is in poor condition and in need of financial and technical support far beyond current resources. As such, utilization of the systems for decision- making is proceeding slowly. Further development of the systems requires allocation of human, financial and technical resources, but more important, agencies to house and manage the provincial systems on a permanent basis must be identified and integration of the systems in the planning, programming, and budgeting functions of the provincial and municipal highway agencies is needed.  - viii - 11. Major restructuring of road sector agencies occurred in the mid- to late 1980s, at the central government level, and in the mid-1990s, at the provincial level. The changes have impacted the management of technical and policy issues throughout the sector, with repercussions for Bank project objectives. (a) The 1 980s restructuring separated responsibilities for road safety, resulting in fragmentation of safety functions and making it difficult for the Bank to find an audience for road safety initiatives. A major technical and policy study of road safety in China was prepared as the basis for a road safety component in the Sichuan project. However, the road safety program formulated for the project was not implemented, despite thorough, detailed preparation at both central and provincial government levels and specific targeting on municipalities in Sichuan. The absence of activity is attributable to lack of coordination and ownership on the part of central and provincial government agencies as well as the Bank. (b) Restructuring and realigning of road agencies in Sichuali and Chongqing is occurring among road agencies in Sichuan and Chongqing. The current trends involve reconfiguration of public sector agencies and establishment of public-private agencies for development and management of various classes of roads or portions of the network, refinancing existing infrastructure and modifying funding arrangements for future infrastructure programs, and greater devolution of authority to local road agencies. Private sector development, while not identified as a project objective during appraisal, has emerged as one of the most visible outcomes of the project. The new expressway developed under the project was refinanced and partially privatized in late 1997: it will be operated and maintained by a public-private expressway development company under a 30-year operating concession. 12. From the early stages of preparation and implementation, the project was managed in sections by road agencies in Sichuan Province and Chongqing Municipality; little attention was paid to issues of coordination or the possibility of joint management. Major political changes occurred in Sichuan Province and Chongqing Municipality in mid-1997, resulting in the expansion of territory included in Chongqing and its establishment as a municipality reporting directly to the Chinese central government. While the two sections of the project were never fully-integrated, the political changes ensured a lasting demarcation of project responsibility for each section of the project, raising concerns for management of the national highway system and expressway and traffic movements across provincial boundaries. Also, as mentioned above, the restructuring of Sichuan road agencies has resulted in refinancing and partial privatization of the 226-km western section of the expressway.  -ix - Summary of Findings, Future Operations, and Key Lessons Learned 13. Despite the implementation difficulties and delays encountered in the project, the physical objectives were achieved or exceeded, albeit at a greater cost and a lower ERR than originally expected. The re-evaluated ERR for construction of the Chengyu Expressway is 15 percent; and the ERRs for upgrading of Ya'an-Hongya and Fenggu- Santai rural roads are 16 and 18 percent, respectively. Sustainability of the physical investments, which depends on an adequate program of medium- and long-term maintenance, is considered likely. 14. Future operation of the physical infrastructure developed under this project will involve various public and private sector agencies. The Chengyu Expressway is operated as a restricted-access toll highway (limited to motor vehicle use), including 20 interchanges providing connection with the existing network and several rest and service areas. The Sichuan section of the new Chengyu Expressway will be managed by a public-private expressway development company, which was awarded a 30-year operating concession in 1997. The Chongqing section will continue to be managed by an expressway administration agency which is subordinate to the Chongqing Municipal Highway Construction Directorate. The rural roads identified for upgrading during appraisal will be managed by local municipal or county highway administration bureaus. 15. The institutional strengthening and policy objectives achieved uneven results. The staff training and equipment procurement activities exceeded appraisal expectations, both in scope and institutional impact. The training has benefited a large number of road sector staff, including many who have continued to work on expressway development in Sichuan and Chongqing. The equipment procured exceeded expectations for two reasons; first, the appraisal did not recognize the wide variety and volume of technical equipment needed to develop and manage a major highway. Second, a sizable portion of the funds intended for equipment was later earmarked for financing of an Electrical and Mechanical (E&M) component: ultimately, however, the E&M component progressed much more slowly than expected. 16. Road management systems were successfully initiated and have had demonstrable results as informational tools for the sector and for staff training. However, these systems have not been utilized for network planning, maintenance, and budgeting to the extent envisaged during appraisal. The shortcomings of the systems are due to inherent deficiencies in the system design which permit their use only on a small portion of the network, funding shortfalls, limited technical and human resources, and lack of a national directive on development of pavement management and road data bank systems. It is also recognized that future maintenance or extension of the system will depend on dedication of adequate financial, technical, and human resources to relevant units in Sichuan and Chongqing. 17. Future operations in China's highway sector can benefit from the lessons learned under this project. It is recommended that the Bank and the government jointly prepare  - x - and sponsor seminars or other activities for dissemination of the institutional and project management lessons of the project. 18. The key lessons learned are as follows: (a) The major changes in scope, cost, and development impact in this project, which began immediately after project approval, should have triggered a serious intervention by the Bank and a change in its style and level of supervision. (i) Project restructuring, a mid-term review, and/or more intensive supervision was needed, supported by clear decisions to restructure or cancel inactive components. (ii) The tools used for project management should have been more realistic and explicit, reflecting changes and implementation difficulties in the project. (iii) Supervision intensity, including the skills and level of staffing needed for effective supervision and the frequency of field supervision, were less than adequate in this project. The technical aspects of expressway design, road management systems, and road safety are all areas which may have benefited from greater assistance by the Bank. (iv) When a project includes activities or entire components which are not financed by the Bank, decisions and greater clarity are needed on whether or how results are linked to project objectives, and the implications for supervision. (b) The development of a major expressway network such as China's NTHS warrants a specific set of technical and institutional arrangements, covering technical and design standards, procurement, financing, and operation. As a financier of the expressway system, the Bank should play a role in developing the project preparation framework for the NTHS, including helping to acquire and disseminate technical knowledge and lessons from implementation. The experience of this project indicates a need to strengthen planning and procurement, particularly for E&M and other technically complex works, as well as design standards, including those which affect safety on the NTHS. Second, while the institutional components included in the original appraisal were not fully implemented, other institutional strengthening relevant to expressway development and management was accomplished. Future projects should include components relevant to development of the NTHS, targeted on expressway agencies which are responsible for segments of the NTHS. (c) The institutional arrangements for implementation of Bank projects, particularly for policy and reform-oriented components, need more careful  - xi - appraisal and design. The lessons from this project are: first, that institutional components require supervision by the Bank; second, that an effective set of working relationships which need to be developed over time, both among Chinese agencies and with the Bank, are fundamental to the success of non-physical components; and third, that greater flexibility is called for in design and implementation of these components, particularly during periods of major sectoral change. (d) The Bank's 1995 review of road data bank and pavement management systems in China has summarized the cumulative implementation experience of Sichuan Province and various other provinces in developing and using the systems under Bank-financed projects. In order to effectively utilize and disseminate the technologies, policy and managerial decisions are now needed, which the Bank should follow up at the central government level in China.. (e) The rapid physical expansion of road infrastructure in China presents major financial challenges; at the same time, transport agencies, like other public sector agencies, are being restructured to respond to the current development challenges. The financial constraints currently faced by China's road agencies, particularly in the less wealthy provinces such as Sichuan, are driving sectoral change. Several lessons have been learned from this project: (i) Sector restructuring affects both central and provincial agencies, with serious implications for Bank involvement in the sector. In order to positively impact sectoral development, the Bank's assistance strategy for the sector should reflect current realities, and would benefit from up-front institutional analysis, clear definition of roles and responsibilities, and ultimately, a regulatory framework. The Bank's involvement in major sector restructuring and private sector development in the Sichuan project was defined, but also limited by, the range and depth of its relationships in the sector and the specific legal agreements for the project. In the future, project descriptions and legal agreements should take into account the potential for privatization and the Bank's role in this process. (ii) Phased construction and upgrading programs are a viable and important form of development, particularly for resource- constrained provinces. This reality should be recognized during future project preparation and implementation, and the attendant risks and implications for economic evaluation and sector development recognized. The Bank's project identification, appraisal, and supervision would benefit from a better understanding of the client's long-term objectives, review of  - xli - financing plans, discussion of project management and operational arrangements, and quantification of risks for project analysis. (f) The ex post facto review of environment and resettlement components in this project led to recognition, both on the part of the Bank and the borrower, of shortcomings in the planning and implementation of remedies to mitigate externalities from highway development; however, the project design and supervision arrangements did not facilitate analysis of underlying problems or remedies. Future Bank operations can build upon the experience in this project by ensuring: first, that there is agreement both on the part of the Bank and the borrower to address issues; second, that mechanisms are built into project design to allow monitoring and evaluation; and third, that detailed findings from reviews are specific enough to be actionable.  CHINA SICHUAN PROVINCIAL HIGHWAY PROJECT (LOAN 2951-CHA/CREDIT 1917-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. The project was designed to provide urgently needed transport capacity in the corridor between Chengdu, the capital of Sichuan Province, and Chongqing, a port city on the Changjiang (Yangtze) River which is the largest economic and trade center in southwest China. The project as appraised included a series of physical investments to significantly increase road transport capacity in interurban and rural corridors, as well as technical and institutional components to strengthen management of the growing road sector. Most of the physical works were to be done under unit-priced civil works contracts, procured under international, local, or limited competitive bidding. An independent construction supervision organization was to be established, comprising foreign and local technical experts. 2. The existing high-speed route in the corridor, the Chengdu-Chongqing Highway (hereafter referred to as the old highway), was a mountainous two-lane, 438-km route of low technical standard, with a pavement that had exceeded its design life. Geographic conditions did not permit major upgrading of the route, and the adjacent areas were densely populated, passing through many market and productive areas. Numerous sections of the route were seriously congested, with speeds ranging from 25-35 km per hour. 3. The provision of additional transport capacity between Chengdu and Chongqing was to be achieved through construction of a major, 340-km highway on new alignment. The sections of the route in Chengdu (59 km) and Chongqing (29 km) were planned as four-lane, divided, grade-separated construction to Class 1 standard. The 252-km mid-section was to be constructed with two-lanes to Class 2 standard. In addition to improved operating conditions associated with the much higher standard of the new road, distance savings were to be achieved through improved alignment and the construction of three major twin tube tunnels and one major bridge. The original design also included 240 smaller bridges (44 large, 54 medium-sized, and 142 small) and 1,689 culverts and passageways. 4. The project also included the upgrading of two unclassified rural highways from Ya'an to Hongya and from Fenggu to Santai (104 km total length) in two "relatively poor" areas of northern Sichuan. Improvement to Class III standard was proposed for both roads. Upgrading of these roads was expected to generate significant benefits to road users, as the existing roads were unpaved or very low standard, with sharp curves and steep grades which contributed to high transport costs and congestion. The project areas included production of iron ore, asbestos, minerals, and agricultural products.  -2 - 5. The construction of a new Chengdu-Chongqing Highway and the rural road upgrading program were expected to have a major impact on transport capacity, utilization patterns, and management of road facilities. Both construction components were expected to generate road safety benefits by segregating motorized and nonmotorized traffic, reducing congestion, and providing improved road facilities. The four-lane sections of the new highway were also contemplated as toll roads, which would have permitted a margin of cost recovery, and effective management of the new highway would be assured through the establishment of a high-speed road management agency. It was expected that the new highway would carry a higher proportion of freight vehicles, includLing vehicles of substantially higher capacity than those in the existing traffic flows. 6. The specific policy and institutional objectives of the project were to: (a) introduce improved road planning techniques by starting preparation of a road data bank; (b) introduce technology to evaluate existing paved roads and to prepare a pavement strengthening program; (c) conduct highway research; (d) carry out staff training; (e) continue assistance in modernizing design, construction, and materials specifications and contract documentation; and (f) improve road safety. 7. The road data bank and pavement management systems to be developed under this project, similar to initiatives under concurrent Bank-financed highway projects, received strong endorsement from the Ministry of Communications (MOC) and several highway technical institutes in China.2 The road data bank system was to meet provincial needs and be compatible with national systems, as a major new area of technical work nandated by the MOC. In Sichuan Province, a computerized road data bank covering an inventory of paved road conditions (including length, type, and bearing capacity of pavements, traffic volumes, material sources and qualities) would be established. 8. The Road Safety Pilot Program was developed based on studies comrrpleted under the Bank's first investment project in China's road sector, Highway Project (Loan 2539-CHA/ Credit 1954-CHA, approved fiscal year 1985). A component of the Highway Project involved upgrading a portion of the Sichuan highway network. A road safety study was included among the project's research activities, and was implemented by China's Beijing-based Highway Science Research Institute3 in conjunction with international road safety consultants. The road safety study covered: (a) a review of the prevailing system of reporting, recording, and analyzing road accident statistics; (b) recommendations for improving data collection, recording, and analysis on road traffic accidents; and (c) identification of a program for reducing accidents. A prefecture in Sichuan Province provided the basis for much of the research and development of the pilot program. The final report was issued in 1988, with agreement that findings would be followed up by the Highway Science Research Institute. 2 An MOC-sponsored conference in Jinan during 1992 also identified Sichuan as one of several provinces which would pilot the China Pavement Management System (CPMS). The implementation of CPMS, to be carried out over a five-year period, included evaluation of the existing road pavements, their bearing capacity, and residual life in relation to present and estimated future traffic. 3 Highway Science Research Institute, one of several major technical and research institutes in China's road sector, is a subsidiary agency of the Ministry of Communications.  -3 - 9. Implementation arrangements included several provincial transport agencies. The expressway construction and all other components (including supervision, equipment, staff training, road management systems, and road safety pilot study) were to be implemented by Sichuan Provincial Transport Department and Chongqing Municipal Transport Bureau. The new Chengdu-Chongqing Highway was to be operated and managed by a special agency, to be established after consultation with the Bank Group. The upgrading of rural roads was to be carried out by provincial and county construction teams under the control of Sichuan Provincial Transport Department. 10. The project was to implemented between 1989 and 1994, with the main component, construction of a new Chengdu-Chongqing Highway, completed between 1989 and 1993. The upgrading of rural roads was to be completed between 1989 and 1992. B. ACHIEVEMENT OF PROJECT OBJECTIVES 1. The project's physical objectives were achieved or exceeded; the institutional strengthening objectives were only partially achieved. The implementation of various project components is discussed below. Chengdu-Chongqing Highway Component 2. The scope and design standards of the Chengdu-Chongqing Highway component evolved considerably during implementation, resulting in the construction of a 340-kilometer limited access facility between Chengdu and Chongqing, the Chengyu Expressway. The original design, for construction of a highway on new alignment, comprised 88 km of highway built to Class 1, four-lane standard and the remaining 252 km built to Class 2, two- lane standard. As constructed, the Chengyu Expressway represents China's longest single expressway in mountainous terrain, and includes some of the largest tunnels constructed in China to date. While a major developmental achievement, the many changes in project scope and design call into question the effectiveness of communication between the Bank and client during project development. 3. The actual construction period for the main component, development of the Chengyu Expressway, was from September 1990 through September 1995, reflecting a two- year implementation delay. Ultimately, the entire 340-km length of the new highway was built to Class 1, four-lane standard; the new highway has 20 interchanges, 21 toll stations, 7 service areas, 5 maintenance depots and 11 administration offices. The facility is operated as a restricted access, motor vehicle only toll expressway with operating speed ranging from 60 to 100 kilometers per hour.4 Design capacity is 40,000 vehicles per day (vpd), but safe operation mandates only 25,000 in certain mountainous sections. 4. The Chengyu Expressway was opened to traffic in stages: in the east section, 5 km of the route were opened by April 1994, 94 km were opened in October 1994, and the remaining 15 km were opened in May 1995. In the west section, 59 km of the route and a 4 The lower operating speeds of 60-80 km are necessary due to the steep, curved mountainous sections of the route and several major tunnels.  -4 - major bridge were opened to traffic in May 1993; the remaining 167 knn were partially opened in July 1995. The expressway was fully opened by September 1995. 5. Project Planning, Feasibility Study, and Design. At the time of project preparation, Sichuan Province possessed no experience in constructing a highway of the scale and complexity required for the Chengdu-Chongqing corridor, including little or no experience in major tunnel design and construction. Accordingly, Chinese authorities planned for eventual upgrading of the new Chengdu-Chongqing Highway to a higher design standard and increased capacity, as warranted by traffic growth, availability of local funds, and technical feasibility. 6. Major changes to the appraised project scope began in the twelve months after loan signing. In January 1992, Sichuan Province formally decided to widen the 252-km middle section of the expressway to four lanes and to upgrade technical standards to achieve a Class I design for the entire highway. The decision was approved by the Ministry of Finance and the Ministry of Communications sometime between January 1992 and June 1993; however, the widening of some sections commenced in 1991. 7. The amount of work actually done on the original, two-lane contracts for the highway was less than 10 percent at the time the changes were adopted. In all cases, widening was accomplished by extending the scope of works of contractors already on site, but delays resulted from the need to complete designs and to acquire land in certain sections of the route. 8. In retrospect, several concerns justified the expansion and increase in standards for the highway: (a) In the early 1990s, the Chengdu-Chongqing Highway was identified as a segment of China's National Trunk Highway System (NTHS), a network of twelve major expressways totaling 30,000 km, all constructed to expressway or Class I standard. Two lateral and two longitudinal routes of the national network were assigned highest priority, for development within the eighth and ninth five year plans. The Chengyu Expressway forms a key link in the Shanghai-Chengdu route, one of the two highest priority lateral routes, and also provides linkage with several key expressways leading to Guiyang, Kunming, and other southwestern cities. (b) The mountainous terrain between Chengdu and Chongqing makes existing road capacity critical for movement of goods and passengers, and major construction seriously reduces overall capacity. The actual construction of the Chengyu Expressway, particularly the middle mountainous section, proved a major challenge given the limited resources and capabilities of domestic contractors. In retrospect, a widening and upgrading program launched after the rest of the highway was open to traffic would have been very complicated and costly. (c) The widened middle section is partially justified in that it provides safer operating conditions through the provision of additional lanes in a steep and curved section of the route.  - 5 - 9. The Bank was not consulted in the decision to modify design of the road, and learned of the change around the time of its May 1992 supervision mission, when the additional works were already underway. During this mission, the possibility of signing separate contracts for the widening works was discussed, but could not be assured because final designs and bills of quantities were not available. Finally, the widening works were classified as outside the scope of the Bank-financed project. Measures were taken to ensure that any additional work quantities associated with the widening of the highway be measured separately and paid by the Province and the Municipality, without Bank financing. 10. Between 1990 and 1992, an electrical, electronic, and mechanical (E&M) component was prepared and added to the project, comprising lighting, communications, traffic control, and tunnel ventilation systems. The additional works were procured under separate supply and install contracts and expected to be completed in time for the expressway opening in 1995. However, the implementation of these works has been delayed, primarily due to procurement difficulties, and is being financed largely without Bank assistance (para. 34). 11. After 1992, additional design changes were adopted to develop a fully modernized, grade-separated expressway facility (paras. 25-27). Much of the additional works were financed through major variation orders (para. 80). 12. The detailed analysis for the expanded scope of the highway was provided in a revised feasibility study prepared in 1992. The Bank did not review this study at the time or recalculate the economic rate of return, but Bank missions visiting Sichuan noted that the change in scope was likely to lower the economic rate of return.5 More fundamentally, the process of obtaining information on the changed scope was difficult for the Bank, including fundamental information such as revised project cost, which was made available in 1994 as a condition to extension of the closing date for the Bank loan and credit. 13. Engineering Design. Engineering design was completed for the Chengdu- Chongqing Highway component and additionally, for tunnel designs, tunnel ventilation systems, and an E&M component. In all cases, engineering design was initiated by Chinese agencies, with international agencies later engaged for design review and specialized design assistance. The Highway Survey and Design Institute of the Sichuan Provincial Transport Department began preparatory work on economic and technical data for the new highway in late 1983; a revised feasibility report was submitted to the Bank in October 1986. Detailed design was done by the Sichuan Provincial Survey and Design Institute and the Second Institute of Design of the Ministry of Railways, both located in Chengdu. 14. The design process was not complete as of the time of project appraisal (1988), and continued for about the first eighteen months of project implementation. Engineering designs and bid documents for the main highway construction were reviewed by a major US 5 The ICR mission reviewed the revised feasibility study, which included a reassessment of traffic on the old highway between the years 1980 and 1990. The study indicated that traffic growth was accelerating on the old highway: the relationship to assumptions made during the Bank's appraisal is not clear. Ultimately, however, traffic growth in the project corridor did not seriously outpace appraisal estimates.  -6 - engineering consulting firm 1989, under the United States Government TDP (grant) program. A delay of about one year resulted for most of the construction contracts. 15. Shortly after the start of implementation, it was recognized that the major tunnels required additional preparation, specialized design services and design review, and substantial assistance from international consultants, particularly for ventilation and control systems: this ultimately proved to be one of the greatest technical challenges in the project. Design and contract documentation was finalized in early 1990: however, province's lack of experience in geological surveying and tunnel design necessitated redesign and led to major implementation delays and quality control problems (paras. 44-49). 16. Specialized services were also retained for design of electrical, electronic, and mechanical systems (E&M systems) which would provide telecommunications, lighting, traffic surveillance and control, automated traffic and toll collection, and tunnel ventilation. However, once procurement began it was discovered that the E&M design for tunnels involved outdated equipment which was unavailable in the international market. Redesign was initiated to ensure reliability of the ventilation systems and to introduce advanced equipment. The remaining E&M systems, covering the highway main alignment, were designed by Chongqing Highway Design Research Institute in 1994. In 1997, the project implementing agencies retained additional local experts to modify the design. 17. The original design for the highway was consistent with Class 1 construction standards. However, in retrospect, the standards which resulted from upgrading the route raised concerns for the ICR mission, particularly as they affect safety on the new expressway. These concerns are relevant for the future development of expressways in China.6 18. Implementation and Construction Supervision. Construction of the Expressway involved a major mobilization of technical, financial, and physical resources. Earth works involved 67.9 million cubic meters. Structures comprised 2,070 drainage and pedestrian culverts, 359 bridges (with total length of 17,592 linear meters, the longest single bridge measuring 14,000 linear meters), and 10 two-lane twin tube tunnels with total length of 13,942 meters.7 The workforce employed for construction included, at peak strength, an estimated 50,000 construction workers and 350 construction supervision personnel. 19. Construction quality was a major issue highlighted throughout Bank supervision. The surface of the road is asphalt and concrete: about 42.60 km of the expressway are cement 6 The mission's concerns related to: uneven width of roadformation, particularly the shoulder lane, which in some cases was insufficient for emergency stops (In the western section of the expressway, the shoulder lane is 2.25 meters wide, far short of the 3.5 meters required for stopping a vehicle. In the mountainous middle section, lay-byes have been provided at 500-meter intervals to allow for emergency stops. The eastern section of the expressway includes 3.56 meter wide shoulders which are sufficient for stopping.); signing, marking, and safety facilities and patrols; design of drainage systems and retaining walls which allow pedestrians to walk up to and along the main alignment; buses which frequently stop on the main alignment or breakdown lane to pick up or release passengers; and the absence of weigh stations for heavier vehicles or acceleration and deceleration lanes. 7 Two of the twin tube tunnels, the Jinyunshan Tunnel (left tube = 2,582 meters and right tube = 2,478 meters) and the Zhongliangshan Tunnel (left tube = 3,160 meters and right tube = 3,103 meters, plus approaches) are the longest tunnels in China. Both are located in greater Chongqing.  - 7 - concrete and the remaining 297.60 km are asphalt concrete surfacing. Quality problems were also prevalent in the asphalt concrete sections within 18 months of completion of the construction, despite that the expressway traffic levels were not very high. Contractors completed repair works to asphalt and concrete sections, under warranty, during the period September 1995 through September 1996. 20. Concrete surfacing was considered appropriate due to ready availability of materials, high expected traffic volumes and lower maintenance costs associated with concrete pavements. However, major quality problems in construction of the concrete road sections, largely due to labor-based workmanship and time pressure to complete works which led to construction being carried out at night. Findings of the ICR mission indicate additional factors which may have affected quality, including the adequacy of geological investigations, design methodology, quality assurance plans, and supervision, the prequalification criteria used for contractors, and work which exceeded contractors' implementation capacity. 21. The Bank's emphasis on quality control, which began during implementation rather than during preparation, appears to have increased intensity of supervision and helped mobilize additional technical and manpower resources during construction. However, since many of the quality problems stemmed from contractors' fundamental lack of experience and poor performance, or inadequate design, much of the Bank's advice influenced the employer's organization but could not address the root cause of the problems. Construction supervision for the expressway works was provided by joint foreign-local teams, including a major firm of Beijing-based experts. Foreign and local consulting firms helped assemble, train, and manage the supervision teams. The construction supervision inputs were dramatically higher than estimated at appraisal, totaling about 19,500 person-months instead of the 4,800 person- months estimated: supervision contracts were amended to expanded road works and delays in the construction program. Despite the large scale of this project, only three international experts were resident during the construction period: much of their working time was dedicated to processing the hundreds of variation orders and claims for payment associated with highway civil works. 22. From the perspective of provincial road agencies, the experience of using FIDIC conditions for civil works and the establishment of an employer organization has been positive, increasing efficiency in project management. The training provided under supervision contracts was also invaluable to key personnel involved in project management. The province believes that the supervision and training activities are can be replicated, providing institutional benefits beyond the given project. 23. Electrical, Electronic, and Mechanical Works. Following the decisions to expand the new highway to Class 1, four-lane standard and to operate the entire route as a limited access expressway, an electrical, electronic, and mechanical works (E&M) component was added to the project. By 1994, a decision was made to reserve a portion of project funds from the equipment category for E&M works, with a 100 percent disbursement rate to allow utilization by the closing date.8 However, actual implementation of the E&M component was 8 At the time this decision was made, the closing date was December 31, 1994, the original closing date for the project. The closing date was subsequently extended to December 31, 1996.  -8 - delayed by several years due to lengthy procurement procedures (para. 82) technical difficulties, contract negotiations, and the logistics of importing equipment. 24. One of the three contracts, Contract Q3, covering tunnel ventilation and control systems for the two major tunnels in Chongqing, was signed in late 1995: at the end of 1997, however, supply and installation remain stalled due to flaws in power supply and software design for the central control system. The remaining E&M contracts, Ql and Q2, comprise systems for fiber optic telecommunications, automated toll collection, and traffic surveillance systems (sign boards, computer software and hardware for monitoring)9. Throughout the period of design and procurement for the E&M works, technological change has been rapid: both bid packages were redesigned in April 1997 to accommodate changes in the transformation system and capacity. Given the opening of the expressway to traffic nearly two years ago, a portion of the E&M works had to be implemented outside of the major supply and install contracts."1 25. The E&M contract under implementation includes training designed to introduce Chongqing personnel to the new tunnel ventilation and control systems. A portion of the training was completed "on the job" in China through observation as the systems were installed; additional local training covered topics such as ventilation, monitoring, power supply, traffic management, central control, and fire protection. However, some of the most critical training covers day-to-day maintenance and operation of ventilators, monitoring and traffic control systems. This hands-on training should have been completed prior to final commissioning of the E&M systems, but has been delayed due to continued negotiations on the content, size, and cost of the training program. 26. Specialized supervision services were obtained for tunnel ventilation and control systems in the two largest tunnels (Contract Q3), with contracts signed in mid-1996. The supervision team retained has a contract of only 7.5 person-months, with a team of non- resident experts who travel to China to inspect the works at key points during the supply and install process. This arrangement has proved difficult, given the lack of proximity of supervision team to contractor or employer. The reviews and recommendations provided by supervision consultants for the E&M works, covering commercial and technical issues, have not been readily adopted by the employer, contractors, or subcontractors. During implementation, the Bank also dedicated little time to the supervision of E&M works, perhaps because the E&M works were implemented after 1995, when the Bank ceased field supervision of the project. Supervision of the remaining E&M contracts (Contracts Ql and Q2) will be carried out by foreign-local teams, once again including a very small quotient of foreign services. 9 Once completed, the E&M systems will provide emergency phones every 2 km, computerization of toll booths and administrative offices, special phone systems connecting offices on the expressway, telephone exchange centers, traffic counting equipment, surveillance cameras, and wireless telecommunications. 10 Works urgently needed for expressway operation, such as lighting for tunnels, toll stations, major interchanges, and service areas, were procured under local procedures at a value of $6-7 million.  - 9 - 27. Economic Evaluation of Chengyu Expressway." The Expressway investment as a whole is estimated to generate net benefits resulting in an Economic Rate of Return (ERR) of 15 percent, compared to the SAR estimate of 27 percent. The revised estimates are based upon the actual cost incurred to date and estimates of future capital and recurring costs. Benefit flows are based upon the actual corridor traffic during the 1990-95 period, revised traffic projections for 1996 and beyond, and updated vehicle operating costs. 28. The ICR evaluation took into consideration the phased opening of the sections of the new expressway to traffic, and the analyzed corridor traffic as a whole in its evaluation, as compared to the SAR analysis which did not take into account the northern route in the corridor. Other main differences between the ICR and the SAR estimates are due to significant increases in project cost and changes in benefit flows. Construction and project supervision costs in particular were much higher than the appraisal estimates. The higher costs are largely due to design changes which resulted in a higher-standard, widened route (paras. 73-74): this has contributed to relatively lower vehicle operating costs, somewhat improving the net benefits. In the initial years of expressway operation, traffic levels in the Chengdu to Jianyang section (greater Chengdu) were higher than estimated in the SAR; however, traffic in the longest, middle section from Jianyang to Laifengyi was lower than estimated, and traffic in the Laifengyi to Chongqing section was roughly equivalent to SAR estimates. The growth of small vehicle traffic, especially small passenger cars and trucks, has been higher than expected, but the growth of large and articulated truck traffic has been slower than expected. This traffic development pattern has resulted in a lower impact on the benefits stream. 29. Traffic and Toll Operations. The traffic volumes and utilization patterns for the project corridor differ significantly from appraisal estimates. Traffic volumes in 1996 varied between 9,500 and 15,000 vpd as against the SAR projections of between 8,000 and 11,800 vpd for different sections of the corridor. Traffic volume was about twice as much as projected by the SAR on certain old roads in the corridor. 30. The composition of traffic has also not developed as anticipated on appraisal. As is characteristic of other regions of China, most freight is being carried by small freight vehicles rather than the large vehicles anticipated: the proportion of large freight vehicles varies from less than 1 percent to 10 percent of total traffic in different sections of the expressway, as compared with SAR projections of approximately 10 to 30 percent of total expressway traffic. Passenger traffic has grown more rapidly than expected, particularly small passenger vehicle traffic, which equals 200 to 300 percent of appraisal estimates in some sections.'2 31. The project feasibility study, design reviews, and SAR indicated the likelihood of tolling sections of the new highway which offered significant distance savings over the existing route, such as the tunnels and four-lane sections in greater Chengdu and Chongqing. Ultimately, the entire highway was constructed as a four-lane, limited access toll facility, 1 A detailed economic evaluation is presented in Annex 1. 12 Passenger movements in the corridor were further supported by provincial transport department investments in a large fleet of buses, which provide constant transport between the major cities of Chengdu and Chongqing.  -10- resulting in one of the longest toll roads in China. Unlike more recent Bank-financed projects, this project did not include specific activities related to the establishment or management of tolls (such as a study on toll levels); during supervision, toll operations received little emphasis. A manual, prepaid toll collection system is being used for most of the route: completion of the remaining E&M contracts is expected to provide fully automated traffic counting and toll collection systems. 32. A toll standard for the expressway, established in 1995, was revised in 1997: the toll standard is based on several criteria, including affordability, location of toll collection stations, benefits derived from using the new road, underlying debt of the expressway agency, total cost of expressway operations, and government regulations for expressways. Toll sharing arrangements between the east and west sections of the expressway were in place until mid-1997, when the Sichuan section of the expressway was partially privatized (para. 114). The impact of this transfer on sharing of toll revenues and interprovincial traffic movements is not yet known. 33. Environmental Protection. A detailed Environmental Action Plan was not prepared for this project: however, a report prepared by Sichuan Provincial Environmental Bureau on the impacts of constructing the new Chengdu-Chongqing Highway was provided during negotiations and found satisfactory. Environmental protection measures had been addressed by the Sichuan Highway Planning, Survey and Design Institute and the Second Railway Design Institute during the project design phase. Environmental impact reports covering noise, ecological and air quality impacts were prepared and approved by the National Environmental Protection Agency. Geological surveys for the expressway route were prepared by Sichuan Highway Planning and Design Institute, a unit of Sichuan Provincial Transport Department. 34. The assessment as of appraisal, that the project would have no significant environmental impacts, was seriously misinformed given the difficult mountainous terrain, the long tunnels to be constructed, the extensive cultivation of land along the route, and the historical significance of the corridor. In each of these areas, major implementation problems arose, only some of which could be addressed within the project framework. 35. The actual geological conditions for construction on the new alignment, using new techniques and structures, proved much more serious than anticipated. The excavation, filling works, and stabilization resulted in implementation delays of months and years, requiring huge quantities of additional fill materials, extensive slope protection, and remedies for soft soil and landslides. 36. The geological difficulties presented by major tunnel construction were also poorly understood during project preparation. During appraisal, two mines in the vicinity of Chongqing tunnels were identified as potential concerns for environment and resettlement impacts, but proved to pose only minor problems. 13 The general geological conditions of the mountains, in contrast, raised problems of stabilization, ventilation, drainage, and at the extreme, collapse during construction. Controlling the volume and flow of water became a 13 At present, one of the mines is in operation. The second was closed because of tunnel construction.  - I1 - serious challenge during construction and operation, addressed through various trial techniques but not completely solved, as evidenced by leaks and visible damage in the tunnels. 37. One of the benefits of the new highway is improved access to historic areas such as Dazu (site of ancient stone carvings) and Zigong (site of dinosaur remains). Not surprisingly, archaeological remains were discovered during construction, including a large tomb site dating from the Ming Dynasty. These had not been anticipated during project appraisal, but were handled effectively through local regulations which require highway authorities to coordinate with archeological agencies during construction. 38. The main environmental protection measures during construction included planting, slope protection, construction of a car washing station, water leakage and rock collapse resistance in tunnels, drainage systems, routine cleaning, the erection of noise barriers, barriers between the carriageways to improve safety (New Jersey-type barriers or a combination of plants and railings). Environmental conditions are now monitored by local environmental protection agencies on an ad hoc basis. 39. One of the major environmental issues which was not identified during appraisal was air quality, both in tunnels and along the alignment generally. The length of the tunnels on the expressway route required major ventilation systems, in order to avoid poor visibility, rear-end collisions, and possible fire or explosion. The implementation experience shows that local technology proposed for ventilation systems was outdated according to international standards; considerable effort has been spent to design, procure and install appropriate technologies for tunnel ventilation. More generic emission problems such as carbon dioxide emissions from vehicles traveling on the expressway are, as in other regions of China, gaining recognition as a serious problem. Motor vehicle emissions testing is not part of the regular inspection for most vehicles in Sichuan or Chongqing: however, toll collection stations and service areas on the expressway make ad hoc checking and minor repair of vehicles possible. 40. Land Acquisition and Resettlement. The land acquisition and resettlement impact resulting from expressway construction was significantly greater than expected on appraisal, as measured by cost of resettlement. Land acquisition and resettlement cost increased 288 percent over appraisal estimates, due to much higher than expected unit compensation rates for land. The actual number of people affected appears consistent with appraisal estimates, but likely reflects incomplete reporting of resettlement impacts, particularly on the indirectly affected population. 41. In retrospect, the appraisal overestimated the amount of land required for the route, which may have been due to the absence of advanced designs at the time of appraisal and lack of understanding of how the project was planned and managed on the ground. The quantity of land required was slightly higher than expected at the outset of construction due to widening of the middle section of the expressway from two to four lanes. However, the land acquisition for some sections of the route could accommodate the additional two lanes, due either to  - 12 - explicit planning for four lanes or through zoning regulations"4 which made additional land available during the course of implementation. 42. The most substantial follow-up on resettlement occurred in late 1994, when a special mission visited China to ensure that resettlement had been adequately managed in all active transport projects, implying full restitution of assets, including housing and income, for affected groups. The mission spent about two weeks in the Chengdu-Chongqing corridor, contacting township and village authorities along the new Chengyu Expressway alignment and obtaining first-hand information on the impact of resettlement. Despite advance communication between the Bank and borrower and this extensive field review, applying the 1994 standards for analysis and review of resettlement to a project appraised in 1988 was difficult. Data on only one section of the expressway was available to the mission; based on this, an 81 percent increase in the number of people affected by the project and a 281 percent increase in land acquisition and resettlement cost were estimated. Several specific issues on compensation levels, procedures, and local access were also cited. 43. The resettlement review mission correctly perceived that the impact of resettlement was greater than expected on appraisal, and that the absence of reporting and monitoring made it difficult to ensure equitable treatment and addressing of grievances. However, the way in which these findings were handled by the Bank was not effective. First, no specific towns or counties visited were recorded in the report of the resettlement mission: it vvas difficult to assess the degree of coverage (or sampling) achieved by the mission, and there was no clear point of reference for follow-up or remedies. Local implementation would ultimately be critical for following up the Bank's concerns, and had assured a degree of responsiveness to community needs.15 Second, the mission report was not provided to Chinese counterparts until early 1997, more than two years after the original mission, providing little opportunity for discussion or demonstration of how the resettlement issues had been addressed. Rural Road Upgrading Program 44. During negotiations, the Chinese delegation expressed concerns that the technical and commercial documents required for the rural road upgrading program were not ready, and questioned investment priorities among the rural road upgrading projects in the province. The delegation requested exclusion of the roads identified for upgrading in the project, and assistance for construction of rural roads selected at a later date. The terms of onlending also proved to a barrier to Bank financing of the component (para. 75). 45. As implemented, the upgrading program involved neither financing nor supervision from the Bank; however, the program remained in the project description until closing. The ICR mission found that the rural roads had in fact been upgraded, albeit by municipal highway management agencies, rather than the expressway agency implementing the 14 For example, regulations stipulate that no further settlement is allowed within 30 meters of a newly- constructed high-grade highway. 15 For example, the provision of additional pedestrian and vehicular access for local residents was addressed during construction: the number of culverts constructed under the project was increased by at least 100%, and additional contracts for access roads and pedestrian bridges were added to the project.  - 13 - Chengyu Expressway component. The Ya'an-Hongya highway was upgraded to Class 3 standard, as appraised, with upgrading completed in 1995 instead of the original date of 1992. The actual cost of upgrading exceed appraisal estimates by forty-one percent. The Fenggu- Santai highway is being upgraded to Class 1 instead of the Class 3 standard expected on appraisal: the road is being upgraded in stages and the entire program will be completed in 1998, instead the 1992 completion date estimated during appraisal. The current cost estimate for upgrading of the Fenggu-Santai highway is more than seven times the appraisal estimate. 46. The rural highways in this project were selected to improve road access in relatively isolated areas of the province: the economic development potential of these areas is now being realized, and these roads, part of a province-wide upgrading program, will be well- integrated with the Sichuan high-speed network. The Fenggu-Santai highway is located in Mianyang Prefecture, which is expected to be joined to Chengdu via a Class 1 or expressway- standard route within the next five years. The Ya'an-Hongya highway will similarly provide linkages to Class I or Class 2 interurban highways in north central Sichuan. 47. Economic Evaluation of Rural Road Upgrading Program. Re-evaluation of the rural road upgrading indicates an ERR of 16 percent for the Ya'an-Hongya highway (slightly lower than the SAR estimate of 17 percent), and an ERR of the 18 percent for the Fenggu- Santai highway (lower than the SAR estimate of 21 percent). The bulk of the benefits from rural road upgrading are derived from VOC savings in both the ICR and SAR evaluations, arising out of better road conditions, time savings, and generated traffic benefits. The actual cost of the Ya'an-Hongya upgrading was in real terms close to SAR estimates. However, construction as well as operating costs for the Fenggu-Santai upgrading are expected to be much higher than the SAR estimates, due to an increase in technical standard for the road. The analysis done during appraisal assumed 25 percent reduction in accident rates for both rural roads following upgrading: however, the upgraded road conditions do not indicate accident reduction, and accident benefits have not been quantified for the ICR analysis. Road Safety Pilot Program 48. By the time of project negotiations, it had been agreed that the road safety pilot program would be financed strictly with local resources, with the implementation results'6 reported to the Bank by March 1990. However, the road safety pilot program was ultimately not implemented, primarily due to institutional fragmentation, a lack of ownership within China, and a lack of systematic follow-up by the Bank. 49. While the initial road safety study was being prepared, major changes occurred in the institutional responsibility for road safety, affecting the collection and analysis of accident data." However, the Sichuan road safety component had a detailed preparation, and was 16 The road safety pilot program would be implemented in Chengdu, Neijiang, and Chongqing, the three largest prefectures in the project corridor, based on available accident data. A computer program prepared in Ya'an Prefecture during the first highway project was to be utilized for the pilot. 7 At the central government level, road safety responsibilities were transferred from the Ministry of Communications (responsible for overall management of the highway sector) to the Ministry of Public Security (responsible for a variety of police functions).  - 14- targeted on a few municipalities by the time of appraisal. The broader institutional changes could have complicated a policy dialogue on road safety, but do not explain the complete absence of activity on this component. Rather, it appears that there was serious confusion and a lack of clear responsibility for implementation among actors in China, -- provincial authorities, expressway implementing agencies, the Highway Science Research Institute in Beijing, and the municipalities chosen for implementation. 50. The absence of working relationships between the Bank and concerned municipalities and road safety agencies in Sichuan and Beijing was also a factor in the poor outcome of this component. During project implementation, the road safety component remained a part of the project objectives and description, listed consistently in Bank supervision reports but absent from Aide Memoires and written communications with the borrower. The lack of accurate and complete information gave the false impression that the project was tackling road safety in a substantive way. 51. Despite that the road safety program was not implemented, the importance of road safety and its role in sector development is recognized. Road safety measures for the new Chengyu Expressway have been adopted, including patrol, enforcement, improved signing, rescue, and repair stations. Road Management Systems 52. The project included funding for development and implementation of a provincial road data bank and pavement management system (in this case, the China Pavement Management System or CPMS) and acquisition of road data collection equipment."8 The main objectives included: (a) establishing a provincial road data base compatible with national guidelines, comprising an inventory of permanent features and current condition of paved roads; (b) beginning regular monitoring of the current condition of paved roads; (c) identifying pavement overlay and strengthening needs and resource requirements for about 5,000 km of paved roads; and (d) pilot implementation of a maintenance planning and management system, compatible with national guidelines, to enable a systematic approach to maintenance programming. The terms of reference for these activities were ambitious, including four major tasks and six sub-tasks to develop what would ultimately be an integrated road management system. 53. A road data bank has been established, managed by the Chongqing Highway Survey and Design Institute and Sichuan Provincial Highway Bureau, covering three categories of roads: expressway; trunk road; and county and village roads. In Sichuan Province, all national and provincial roads are included in the road data bank. Pavement management systems have also been established, including acquisition of specialized equipment to evaluate pavement condition. The pavement management systems are currently i8 In the SAR, the component is also called referred to as "Sichuan Highway Data Preparation, Pavement Evaluation and Strengthening Program and Maintenance Management Study." Subsequently, the road management system components implemented in Sichuan and numerous other provinces have been generically termed "Road Data Bank and Pavement Management System" (or "RDBIPMS") components.  - 15 - being utilized on the new Chengyu Expressway, with expansion to other high-grade roads planned in the years ahead. 54. Road agencies in Sichuan and Chongqing consider the RDB and PMS systems a valuable addition to institutional resources for the sector. RDB and PMS are expected to be extended to half of the counties and municipalities in Sichuan Province in the coming years, and the program has facilitated several man-years in domestic and international training of many highway personnel. 55. However, the terms of reference for the Road Data Bank and Pavement Management Systems were not fully addressed in Sichuan and Chongqing, both because the scope of work was too ambitious given the resources and prior experience of the provinces, and because specific aspects of the design or application constrain utilization of the systems. In particular, the PMS systems developed could only be used on flexible pavements, limiting its coverage to 60 percent of the Sichuan network and 18 percent of the Chongqing network. Data generated by the system for maintenance planning therefore covers only a portion of the network at present, and is not fully incorporated in the planning, programming and budgeting functions of the provincial and municipal highway agencies: inputs from the traditional planning and budgeting dominate for decision-making. In addition, the PMS system at present appears to not incorporate the influence of budgetary constraints when assessing potential maintenance and upgrading programs. As a result, some of the recommendations produced exceed available resources and are impractical for provincial road management and decision-making. The RDB systems have been constrained by a large amount of detail (at least 700 items) required to be collected for roads included in the data bank. 56. Implementation experience shows that resources required for the development of road data bank and pavement management systems far exceeded estimates: the appraisal anticipated only part of the hardware, software, and technical services needed to set up and maintain the systems and in particular, did not foresee the large amounts of manpower required. The actual manpower"9 well exceeded the total appraisal estimate of 80 person- months: the system was developed over several years, mostly through full-time work by specialized units within the highway agencies. The level of consultant services utilized was lower than appraisal estimates, at 3 to 4 person-months instead of the 12 person-months estimated in the SAR. Implementation experience indicates that the consultant services could have been better structured if, instead of having only up-front training and assistance from consultants, follow-up assistance was provided after the provinces had gained hands-on experience in using the systems. The institutionalization of systems developed, both in terms of organizational responsibility and staffing of RDB/PMS in the future, and the broader integration of systems in the planning, programming, and budgeting processes for the highway sector, are important for sustainability of the component. 19 Including time allocated by Sichuan and Chongqing highway sector personnel as well as specialized technical assistance from consultants.  -16- Staff Training Program 57. The actual staff training completed by staff of Sichuan Provincial Transport Department, Sichuan Provincial Expressway Administration Bureau, and Chongqing Major Highway Construction Directorate far exceeded the estimates and content originally identified for the project. As agreed during negotiations, $140,000 would be spent on equipment, technical books, and the services of foreign lecturers for the provision of training in China. An additional $560,000 would be allocated for 90 person-months of training in project management and technical subjects. 58. Actual implementation resulted in a program of $2.38 million, for training in a wide array of construction, design, project management, finance, and road management topics. The program provided 771 person-months of training. The actual training comprised a combination of central government-managed programs and conferences, courses provided by foreign consultants, and training overseas. Early in the period of implementation for this project, a Technical Coordinating Unit was established in the Ministry of Communications to manage training programs for all World Bank-financed projects. This proved a useful arrangement and was required for the approval and financing of certain training courses, but was less preferable than the Province's own-designed and -managed courses. 59. The training program as designed included mostly classroom training and study tours, but did not incorporate technical, hands-on training required for irmplementation of a modem expressway. In addition to on-the-job training in construction supervision provided during construction, specialized technical training for management of the E&M systems and other aspects of expressway operation is needed.20 The specialized training associated with specific works contracts is necessarily more structured than the other training in the project, and cannot be easily restructured. The experience gained in this project indicates that future training programs should incorporate specialized technical training and include monitoring of training. Equipment Procurement 60. Project appraisal identified operations and maintenance equipment for the new expressway and equipment to support the development of road data base and pavement management systems in Sichuan. The equipment actually procured exceeded the amount estimated on appraisal, and required extensive local funding in addition to the resources available from the Bank loan and credit. As appraised, the project included procurement of $8.22 of equipment; during implementation, $11.61 of equipment was procured. A larger variety of equipment than expected was procured; covering road maintenance, office equipment and road administration, road safety and rescue, facilities maintenance and telecommunications. The equipment component was 70 percent funded i-rom local sources, with Bank funds used for items identified during appraisal. Meanwhile, over 60 percent of the loan/credit amount originally intended for equipment was used to finance E&M works added to the project after approval (para. 33). 20 This training was included as part of the contract Q3, an E&M supply and install contract for tunnel ventilation systems in the east section of the expressway.  - 17 - 61. The laboratory equipment procured is being used in central laboratories in Chengdu and Chongqing. In each city, certain pieces of equipment are unique (for example, bridge testing equipment) and were previously unavailable equipment to road sector agencies. 62. The project also included procurement of Bank-financed maintenance equipment, supplemented by the provinces' own-funded procurement program. The expressway management agencies do not possess the resources for permanent equipment and repair workshops. However, maintenance teams, each assigned a certain portion of the routine maintenance equipment, are situated at 5 sites along the expressway route and mobilized as needed. Project Cost and Financing 63. Project cost increased significantly during implementation, with final total cost of $728.87 million, an 82 percent increase over the appraisal estimate of $399.77 million. In local currency terms, total project cost was Y 4,871.75 million, a 207 percent increase over the appraisal estimate of Y 1,586.15 million, reflecting substantial devaluation of the Chinese yuan during the implementation period. 64. The largest cost increases occurred in the main highway construction component, where civil works cost increased by 234 percent, related costs of construction supervision increased by about 700 percent, and the cost of land acquisition and resettlement increased by 288 percent. Project costs in nearly every category outpaced appraisal estimates. Most of the cost increase resulted from expanded project scope, but underestimation of cost and quantities for key inputs is also evident. 65. Project financing differed significantly from the plan at appraisal. First, during project negotiations, the total value of the loan and credit were reduced by $5.0 million, based on Sichuan's decision not to finance the rural road component from the proceeds of the loan or credit unless there were savings under the main highway civil works contracts. The terms of onlending for rural roads contributed to this decision: funds for construction of the expressway were onlent at a 4 percent interest rate, but for the rural roads, would have been onlent at 12.75 percent (paras. 54-55). Ultimately, there were no savings in the project and the rural road upgrading was financed by municipalities and villages in the immediate project areas. 66. Second, the expansion of project scope and major cost overruns necessitated mobilization of additional funding sources. The original financing plan comprised 56 percent of funding from provincial sources, 13 percent of funding from central government, and the remaining 31 percent of funding from the World Bank Group. During implementation, the central government provided a much larger than expected proportion of funding in line with the increases in scope of the main highway construction component; the World Bank Group's fixed pool of funds covered little of the largely expanded project budget. The actual composition of funding for the project comprised 47 percent from provincial sources, 36 percent from central government, and the remaining 17 percent from the World Bank Group.  - 18- 67. In late 1997, Sichuan Province refinanced its section of the project by establishing a shareholding company which would manage its section of the Chengyu Expressway under a 30-year operating concession (para. 114). Procurement and Contract Management 68. The project preparation underestimated the complexity and challenges presented by procurement and contract management for major civil works, and did not recognize China's very limited experience with international procurement and major changes to design and technical specifications. As appraised, the bulk of the highway construction works would be procured under 12 unit-priced International Competitive Bidding (ICB) contracts, with small- scale, advance construction or tunnel works to be completed under 5 National Competitive Bidding (NCB) or force account contracts. As implemented, the expressway component involved 39 contracts: 17 ICB and 5 NCB contracts for construction of nnain alignment, 3 supply and install contracts for E&M works, 10 direct contracts for widening of the mid- section from 2 to 4 lanes, and 4 direct contracts for construction of access or adjacent local roads. Additional NCB works contracts were implemented for upgrading of the rural roads. Equipment and consultant services were procured according to the methods agreed during appraisal for Bank-financed goods and services; however, in both the goods and services categories, project needs far exceeded the list of items included in the Bank project. Shopping or direct award were used for much of the additional procurement. 69. The early years of implementation revealed that most local construction firms lacked the manpower, financial resources, and equipment to execute the size contracts envisioned for ICB procurement.21 By 1990, it was agreed between Sichuan authorities and the Bank to divide several of the ICB contract sections into two, and to re-qualify contractors. 70. The major design changes introduced between 1991 and 1995 required additional procurement for widening and upgrading of the new highway, provision of E&M systems, and construction of access roads and other local infrastructure. The manpower, technical, and financial constraints of contractors were recognized in 1990: contract sections were halved and additional contractors retained, resulting in a more appropriate scale of work for each firm. Subsequently, widening works were assigned to the same contractors who were constructing the adjacent two-lane contracts to avoid the complications of two independent contractors working simultaneously on a single road section. However, the contractors' lack of resources continued to be a serious constraint, contributing to delays of about two years in completion of construction and impacting quality of the final product. The Class 1 standard adopted for the route also required the addition of multiple interchanges, medians, and road firniture, affecting procurement for the project. Most of the additions were achieved through variation orders on the main construction contracts financed by the Bank, in many cases amounting to well over 50 percent of contract value. - 71. The amount of time required for technical preparation, procurement, and start-up of works and supporting services was underestimated during appraisal: is was impossible to begin construction within a year after appraisal, as expected, given the lack of final designs or 21 The initial procurement packaging assumed construction lengths of 42 to 60 km per contract.  - 19- bid documentation for civil works. The contracting process moved smoothly, however, once specialized international expertise was obtained to finalize the bidding documentation. 72. Institutional arrangements and procedures for procurement were also more complicated than anticipated on appraisal. Review and award for NCB contracts was done by provincial authorities, including a bid evaluation leading group. Review and award for ICB civil works contracts was carried out by highway agencies in Chengdu and Chongqing together with the International Tendering Company in Beijing. Procurement for E&M supply and install contracts, involving reviews and recommendations by provincial authorities followed by approval of a central government committee, were extremely slow, suffering from a lack of consensus in valuation. The bid validity period for each E&M contract was extended by months: the period of bid evaluation and award stretched to two or three years. Ultimately, only one of the three E&M contracts, Contract Q3 for tunnel ventilation and communications in greater Chongqing, was signed during the project implementation period. A second contract, Q2, for communications, traffic control, lighting, and toll collection systems in the east section of the expressway, will shortly be negotiated: a similar contract for the west section of the expressway, Contract Q1, remains under evaluation.22 Project Organization and Management 73. The implementation arrangements as described in the SAR focused mainly on management of the main investment component, construction of the new Chengdu-Chongqing Highway. Two major sections were defined based on the boundary of Chongqing Municipality: a 226-km "west section" managed by the Sichuan Provincial Transport Department, and a 114-km "east section" managed by the Chongqing Municipal Transport Bureau. However, the construction and operation of the expressway was ultimately managed by specialized, subordinate expressway development agencies: the Sichuan Provincial Expressway Administration Bureau (west section); and the Chongqing Municipal Highway Management Department (east section). The Bank's appraisal did not conceive of such public sector expressway development agencies, which subsequently came to characterize most Bank-financed projects in the sector, or their potential role. 74. For most years of project implementation, there were no completed expressway projects in China which could lend perspective for the development occurring in Sichuan, requiring a coordinated approach to technical planning, project management, technical quality, pricing, and expressway operations. Subsequent Bank operations in the sector have placed increasing emphasis on institutional arrangements for expressway development, including structure of implementing agencies and independent supervision teams, qualification of contractors and contract management, E&M systems, pricing rationale (toll levels), and maintenance arrangements. 75. The implementation of other investment components, such as the equipment, road management systems, and E&M works, resided either with the expressway development agencies, parent agencies, or a municipal or provincial highway agency. However, some 22 Contracts QI and Q2 are expected to be completed by the end of 1998. Contract Q3 was expected to be fully commissioned by the end of 1997.  - 20 - components in the project, most notably the institutional components for road safety and staff training, the rural road upgrading component, and environment and resettlement activities, did not fall within the domain of the expressway agencies, and suffered from a lack of ownership. Over the years, the Bank's relationships in the highway sector centered around expressway development agencies, with minimal information flow to the Bank on components not directly related to the expressway.23 C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 76. Factors not generally subject to government control. One of the main factors affecting achievement of project objectives was the quality and intensity of Bank preparation and supervision (paras. 95-103), which was not sufficient for a project of this complexity and duration. 77. Factors generally subject to government control. The main factors affecting implementation were govermment commitment, which affected oversight and follow-up of the road safety initiatives, and administrative procedures related to project formulation for expansion and upgrading of the new highway (paras. 15-27 and 58-61) and procurement processes which led to implementation delays in the project (paras. 78-82). A road sector restructuring in Sichuan Province in mid-1997 has supported the partial privatization of one section of the expressway, and will eventually affect the management of other project components in Sichuan Province (paras. 112-116). Also in mid-1997, the recognition of Chongqing as a municipality reporting directly to central government created clear distinction between the two sections of the new expressway (para. 112). 78. Factors generally subject to implementing agency control. The main factors related to implementation delays or difficulties resulting from the implementing agencies' procedures or limited experience, technical assistance which was utilized in a limited fashion (paras. 104-108), and limited monitoring and evaluation in the project design (paras. 48, 53, and 102). 79. The project experienced major cost changes during implementation, amounting to a 207 percent total cost increase in local terms. The cost increase is primarily attributable to the decision to significantly expand scope and upgrade the standard of the new highway being constructed (paras. 15-22): for the main highway construction contracts in the project, 73 percent of the cost increase is attributable to variation orders24 and contractor claims, and 27 percent of the cost increase is attributable to inflation. Other contributing factors were underestimation of the base cost of land (para. 50) and of the physical quantities required to mitigate serious geological conditions along the route (paras. 45-46). 80. Implementation delays in the project were significant: the number of years estimated in the SAR from project launch to physical completion was five years, but the latest estimate of the elapsed period is ten years. The delays are attributable to unrealistic 23 During the ICR preparation process, basic information has been collected on these additional components to provide a full summary of implementation results. 24 Associated with widening and upgrading the route to a Class I standard.  - 21 - implementation schedule, particularly the duration of construction contracts; unexpected technical difficulties including incomplete or insufficient designs, geological complications, and poor performance of individual contractors; major expansion ofproject scope to construct a full expressway instead of the highway appraised; inefficient procurement, particularly affecting the E&M works; and natural disasters such as tunnel collapse and landslide. D. PROJECT SUSTAINABILITY 81. During project implementation, problems of construction quality for the expressway works were noted, and to some extent, rectified. However, an earlier-than- expected pavement overlay will be needed, along with a program of routine and periodic maintenance, to ensure sustainability of the expressway investment. The preparation of a maintenance plan for the main alignment and the tunnels on the expressway did not receive sufficient attention during implementation, and remains to be done. The expressway is operated as a toll road, with sections managed under a public-private concession and a public expressway authority: these arrangements provide incentives for provision of a reasonable level of service to road users, including adequate routine and periodic maintenance. 82. The equipment procured for maintenance and operation of the highway has proven appropriate and, many cases, the first of its kind introduced to Sichuan Province and Chongqing Municipality. The project implementing agencies have expressed some concern about maintenance of the equipment in the medium- and long-term, due to scarcity of spare parts on the local market. However, the equipment fleet is needed, fully utilized and likely to be maintained. 83. The RDB/PMS systems require a series of policy, resource allocation, and project management decisions to be made in the short- to medium-term, if the system is to become fully functional and self-sustaining. The decisions of central government agencies such as the Ministry of Communications regarding the integration of RDB data and the further extension of RDB and PMS are fundamental to sustainability of the numerous systems piloted nationwide. At the provincial level, given the changes in project management for the project (paras. 113-115), ownership and further development of RDB/PMS systems, which are tools for management of the whole road network, is at issue. 84. The sustainability of rural road investments under the project depend upon adequate quality of the remaining construction works and subsequently, adequate routine and periodic maintenance of the roads. The management of maintenance for these roads is the responsibility of municipalities or counties who have to rely on local revenues for the additional capital and recurring expenditures for the roads. E. BANK PERFORMANCE 85. As designed, the project was consistent with Bank involvement in China's highway sector by helping to build physical and institutional capacity, modernizing road agency operations, introducing new methods of project management, and addressing the critical policy issues for future development of the sector (in this case, road safety). Limited  -22 - experience was available to inform the Bank's work, since this was one of the earliest Bank- financed highway projects in China. However, the Bank's appraisal was also weak in recognizing project risks and key variables, and underestimated the resources, technical knowledge, and time required to develop a complex highway project. As implemented, the project achieved many of its physical objectives, but provided limited opportunity to address institutional and sectoral issues. 86. The assessment of borrower and implementing agency capacity for and commitment to physical components proved reasonable for the project scope as appraised, but not for what was implemented. The Bank fundamentally did not understand the Chinese vision for development of the corridor, including the very real options of accelerating the addition of capacity through expanded construction and upgrading programs. The Bank's appraisal of implementing agency capacity for and commitment to policy and institutional components of the project was far less accurate. The initial assumption was too broad, that subsidiary agencies or affiliates of the provincial transport departments would implement various components, including coordinating their work across organizational or even provincial boundaries. In actuality, the sectoral agencies, reporting responsibilities, and political affiliations were more complex than the Bank realized, and coordination could not be assurned. 87. The low intensity of Bank resources did not permit the Bank's involvement in major changes in project design, formulation of institutional components, changes in sector management, and future operation of the project components. The intensity of Bank resources during preparation was low; in total, less than forty person-days were spent on field preparation (missions) from identification through appraisal stages of the project. The project was supervised in the field every eight months during -the first few years, and subsequently about once a year: the intensity of field supervision decreased as implementation difficulties mounted, with the lowest supervision intensity during the critical periods of heavy construction, E&M works, completion and commissioning of the expressway, and the subsequent sector restructuring and privatization in Sichuan. The last field supervision occurred in July 1995, eighteen months prior to loan closing. The choices made by the Bank regarding supervision had costs in terms of the Bank's development role, providing little opportunity to inform or help implement the decisions made regarding the expressway or the larger road network. 88. Continuity of staffing on the project was achieved, but skills mix was limited: the project was primarily supervised using highway engineering skills and field supervision was often carried out by the engineer alone, with the bulk of time consumed by inspection of the large project construction sites. Specialized reviews were provided by resettlement experts and pavement management consultants, but in each case, on only one occasion during supervision. 89. The Bank's reaction to the early design changes resulted in comrpartmentalization of issues related to the project, which characterized supervision of the project and the relationship with the borrower. When the Bank realized that the scope of the project had increased from a two- to four-lane highway, it required that Bank funds not be used for the additional works and that separate records and reports be kept for the Bank-financed and non-  - 23 - Bank-financed works, but did not reassess economic or financial viability of the project. This decision was unrealistic and inflexible, given that the design changes and additional procurement were already under implementation at the time of the Bank's decision. In addition, supervising only two lanes of a four-lane road, while consistent with the original project description, did not address the likely development impact of the project. 90. Subsequent technical changes, such as modification of tunnel design, further upgrading of the highway standard to construct a limited-access expressway, and the decision to toll the entire expressway and provide rest and service facilities appear to have not been discussed with the Bank, nor did the Bank offer advice and assistance to the government in establishing priorities among the additional investments under consideration. The Bank assisted the borrower with certain technical aspects of the redesign, such as the tunnel ventilation and E&M design, and encouraged strengthening supervision teams for the additional works. However, critical institutional aspects of expressway development and operation were not pursued, such as interprovincial traffic movement, toll operations, and adequate safety facilities. 91. The rural road upgrading and road safety pilot programs, both providing strong rationale for the Bank's involvement in the Chinese road sector at the time of Board approval, subsequently received no contribution of financial assistance or advice from the Bank, with no information collected until ICR preparation. In the case of the rural road upgrading, road improvements were completed outside the context of the Bank project. The Bank effectively assisted the borrower to prepare the road safety component, including introducing highly specialized consulting expertise to the sector; however, the road safety initiatives were neither implemented nor followed up by the Bank at the level of project implementing agency (in Sichuan) or central government technical institute or ministry (in Beijing) and there was no continuity of road safety expertise in the project. More active Bank involvement could have influenced implementation of the road safety component, whether to accurately understand the institutional aspects of road safety for future Bank projects, or to redesign the component into one more relevant for the revised project scope, such as an expressway safety component. 92. Project reporting was sustained throughout implementation, but its content did not evolve along with the changes in project scope: the project description as of approval remained largely intact in the Bank's supervision reporting, despite changes in project scope and the several components which were neither financed nor supervised by the Bank. The Bank's review of audit reports and progress reports was minimal during supervision, with little or no feedback to the project implementing agencies, despite that the scope of the reports did not consistently cover all project components. The appraisal included an implementation plan and performance indicators covering the main physical investments: while effectively implemented, these measures provided little information on policy and institutional performance. Under these circumstances, the relevance of reports for overall management of the project was minimal. 93. The Bank's financial package turned out to be inadequate for the expanded scope of the project, resulting in a 17 percent financing share instead of the 31 percent expected at appraisal (paras. 75-76). The timing of Bank funding did not coincide well with project  - 24 - implementation, due to delayed technical preparation and slow start-up of project activities, particularly E&M activities. This resulted in extension of the loan closing date from December 31, 1994 to December 31, 1996: however, even at closing, project investment remained incomplete with the E&M works largely under preparation. Utilization of the Bank funds clearly focused on financing major contracts in the expressway component and the foreign costs of other components. This had negative implications on the Bank's financing of institutional and policy components and likely contributed to a lack of supervision or follow- up by the Bank. F. BORROWER PERFORMANCE 94. Sichuan Provincial Transport Department gained experience in implementing Bank-financed projects during implementation of a rural road upgrading component under the Highway Project, the first Bank-financed project in China's highway sector. In retrospect, this initial implementation experience had limited relevance for the current project. First, the new project involved sub-agencies of the provincial transport departments, the Sichuan Provincial Expressway Administration Bureau and the Chongqing Municipal Highway Construction Directorate, agencies which became increasingly specialized and autonomous during implementation. Second, the current project involved activities which had no linkage to the first project, including construction of the Province's first major expressway, international competitive bidding procedures for civil works and supply and installation, modem project management systems, and significant policy and institutional strengthening for the road sector. 95. In retrospect, the borrower's preparation of the project was reasonable, considering the extremely limited base of technical and managerial experience in developing large-scale, high-grade highway projects. The experience under this project highlighted several deficiencies in the Chinese planning and preparation process, such as not sufficiently identifying the needs and demands of the sector when initially designing the highway; failing to recognize the technical complexity of the infrastructure needed; and not anticipating the difficulties of procuring major works in China. 96. The borrower's performance during project implementation varied among components. The provinces demonstrated strong commitment and effort to the revised project scope, both physical objectives such as construction of the new expressway, and institutional development in establishing and equipping expressway management agencies in Chengdu and Chongqing. The road management, staff training, and equipment components in the project, also managed by provincial transport agencies (parent agencies to the expressway implementing agencies), experienced strong commitment and allocation of additional resources as necessary. Commitment to the rural road upgrading is difficult to assess, as the component was implemented by local agencies with which the Bank had little contact. Commitment to institutional objectives such as road safety was weak;, leading to non- implementation of the road safety component. 97. The borrower's performance in technical aspects of implementation demonstrated initiative but highlighted many weaknesses in capacity, interagency coordination, and project  -25 - management. The procurement processes, particularly the role of prequalification and the evaluation of supply and install contracts, were weak and did not improve substantially during implementation. The geological preparation and detailed design for tunnels and ventilation systems also proved to be areas of technical weakness and inexperience. The technical assistance provided for construction supervision, supervision of E&M works, and road management systems was adequate, albeit far in excess of appraisal estimates. It is clear that Sichuan and Chongqing counterparts valued technical contributions by experts, particularly when those translated to training and development of local capacity. However, the effectiveness of independent supervision services appears only moderate, due to a low intensity of services procured, the structure of contracts and services (particularly assistance from consultants based abroad), and insufficient integration of consultant recommendations in ongoing works. 98. The series of changes to project scope and design were, in the early years, perhaps misunderstood by the Bank to reflect intervention by provincial government. In retrospect, it is clear that the design changes resulted from a series of technical and economic planning decisions (paras. 15-22), but the Bank was not informed of these in advance and had limited opportunity to inform or react to the decisions made. Despite the frustration this caused during supervision, these actions had no repercussions as regards legal covenants or Bank financing. The adequacy of counterpart funding was high, including a major funding contribution from the Ministry of Communications to finance the upgrading and design changes for the Chengyu Expressway. G. ASSESSMENT OF OUTCOME 99. Despite some of the shortcomings of implementation, the project is considered satisfactory due to the major physical achievements and contribution to transport network development in Sichuan. The main developmental objective of increasing high-speed transport capacity was achieved and exceeded: the stream of economic benefits is sustainable, assuming adequate planning and allocation of resources for maintenance and reconstruction. The provision of road access to local communities is also expected to be fully achieved and sustained, albeit through local implementation and without Bank assistance. 100. The impact of the project on sector developmental objectives was mixed. A key institutional component for improved road safety conditions was not implemented and the outcome is unsatisfactory. The development of road management systems has been partially successful, but requires greater resources, guidance, and ownership for full effectiveness and sustainability. Institutional strengthening of highway agencies through training, acquisition of equipment, and modernizing design, contract documentation and other technical aspects of highway development are considered successful. 101. A broader analysis of the institutional impacts of the project should also recognize the experience gained by the provinces in implementing their first major expressway project, which has contributed to sectoral development and road agency capacity building (paras. 104, 113-114). The benefits of this experience are being realized in the rapidly expanding  -26 - expressway development program in both provinces, covering urban and interurban roads to be constructed with local and international financing. The project has also provided assets which facilitated private participation in the road sector. While this institutional development was not explicitly cited during Bank appraisal or supervision, it reflects positive impacts of project development. H. FUTURE OPERATION 102. Throughout project implementation, separate agencies in Chengdu and Chongqing assumed responsibility for construction of the east and west sections of the expressway (para. 82). Initially, this division was natural, given the large geographic area covered by the project: the distinction has become even more significant during operation of the expressway and following political changes in Sichuan Province and Chongqing Municipality in mid- 1997. This created greater distinction between the management of east and west sections of the Chengdu-Chongqing Expressway and ensures separate operation of the two expressway sections. 103. The transition from project development to commissioning and. operation was one of the most important aspects of project implementation in Sichuan. For the first three years of expressway operation, the implementing agencies functioned as semi-autonomous entities with broad responsibility for development and management of the new expressway, including toll collection, maintenance and road safety.25 Integrated financial management, including the matching of revenues and expenditures for the expressway had not developed; finances were managed through transfers to and from the provincial road agencies and finance bureaus in Sichuan and Chongqing. The revenue collected during the first several years of operation were insufficient to cover full operating, maintenance and financing costs of the expressway. 104. Several important changes in project ownership and management occurred in 1997, including partial privatization as part of a larger sector restructuring.26 As of October 1997, operating rights for the west section of the expressway (managed by Sichuan Province) had been granted to an public-private expressway development company which planned to issue shares on the Hong Kong exchange. The proceeds of share issuance will be used for additional investments in the Chengyu Expressway and adjacent high-speed roads: the shareholding company will own control or minority shares in at least six additional expressway projects, some adjacent to the Chengyu Expressway. Similar restructuring of the Chongqing section of the expressway is expected. These changes in project management will expand the pool of resources available for highway development; however, because regulatory issues such as competition, pricing, and impact on road sector management and 25 A regulatory framework for management of the new Chengdu-Chongqing Expressway was developed in 1995, involving three public notices and two official documents. A handbook describing regulations and guidelines for road users and administrative units, prepared by the expressway bureaus, was also approved by provincial authorities. Much of the equipment procured under the project is managed by the expressway agencies, at maintenance depots and service areas along the route. 26 The partial privatization of the Sichuan project is one of several similar transactions involving Bank- financed highway projects in China.  - 27 - development have not yet been addressed, the transaction also poses risks to effective sector management. 105. The Ya'an-Hongya and Fenggu-Santai highways upgraded under the project are expected to remain under the control of provincial and county highway agencies in Sichuan Province. Within five years, both of these highways will adjoin expressways linking Mianyang Prefecture with Chengdu Municipality. The recent restructuring of road management agencies in Sichuan Province is expected to have an impact on these highways, as yet unknown. 106. The investment in equipment associated with this project is being utilized for development and management of other portions of the network. The central laboratory in Chongqing, for example, has become a materials testing site for various classes of roads throughout the municipality. In Chongqing, the 300 pieces of equipment procured for the central laboratory in this project, including bridge inspection and pavement evaluation equipment, have been converted to a quality testing station for the entire Chongqing highway network. The quality testing station works on construction and major rehabilitation projects, mainly for high-grade highways; the station is involved in the certification process for construction work as well as testing the quality of construction materials. I. KEY LESSONS LEARNED 107. The major changes in scope, cost, and development impact in this project, which began immediately after project approval, should have triggered a serious intervention by the Bank and a change in its style and level of supervision. (a) A restructuring of the project was warranted, as was a mid-term review, and given the delays in project implementation, field supervision should have continued until project closing. For components which could not be launched, even after an elapse of one or two years, a decision should have been taken to restructure or cancel the components. (b) The tools used for project management, including supervision reports, progress and audit reporting, and procurement tracking, should have been more realistic and explicit, reflecting changes and implementation difficulties in the project. (c) Supervision intensity, including the skills and level of staffing needed for effective supervision and the frequency of field supervision, were less than adequate in this project. The technical aspects of expressway design, road management systems, and road safety are all areas which may have benefited from greater assistance by the Bank. (d) When a project includes activities or entire components which are not financed by the Bank, decisions must be made on whether or how results are linked to project objectives, and the implications for supervision. In the absence of clarity, the effectiveness of Bank intervention cannot be ascertained. The experience from this project shows that some non-Bank  -28 - financed activities which were critical to project success, such as widening works, should have been supervised by the Bank, as they directly affected Bank-financed works. Other non-Bank-financed components, such as rural road upgrading, which achieved results and addressed development objectives without Bank assistance, should be attributed to the borrower's capabilities and commitment, rather than Bank's involvement. 108. The development of a major expressway network such as China's NTHS warrants a specific set of technical and institutional arrangements, covering technical and design standards, procurement, financing, and operation. As a financier of the expressway system, the Bank should play a role in developing the project preparation framework for the NTHS, including helping to acquire and disseminate technical knowledge and lessons from implementation. First, the experience of this project shows that planning and procurement, particularly for E&M and other technically complex works, need strengthening. Second, several aspects of design standards, including those which affect safety on the NTHS should be reviewed and standardized. Third, the project also shows that, while the institutional components included in the original appraisal were not fully implemented, other institutional strengthening relevant to expressway development and management was accomplished. The Bank's future projects should include components relevant to development of the NTHS, targeted on expressway agencies which are responsible for segments of the NTHS. At the same time, in order to have a role in development of the NTHS, a greater focus on central planning and approval processes is needed from the Bank. 109. The institutional arrangements for implementation of Bank projects, particularly for policy and reform-oriented components, need more careful appraisal and design. The lessons from this project are; first, that institutional components require supervision by the Bank; second, that an effective set of working relationships which need to be developed over time, both among Chinese agencies and with the Bank, are fundamental to the success of non- physical components; and third, that greater flexibility is called for in design and implementation of these components, particularly during periods of major sectoral change. In this project, institutional and policy components related to expressway development and management could have increased effectiveness of Bank involvement and borrower ownership; consideration should have been given to modify existing components in this direction. 110. The Bank's 1995 review of road data bank and pavement management systems in China has summarized the cumulative implementation experience of Sichuan Province and various other provinces in developing and using the systems under Bank-fmanced projects. In order to effectively utilize and disseminate the technologies, policy and managerial decisions are now needed. The Bank should assist the government in formulation of a strategy for further development of the systems and tailoring to local conditions; for provinces which have systems in operation (such as Sichuan), the Bank should focus on ownership, maintenance of the system, and integration with sectoral planning and allocation of resources. 111. The rapid physical expansion of road infrastructure in China presents major financial challenges; at the same time, transport agencies, like other public sector agencies, are being restructured to respond to the current development challenges. The financial  - 29 - constraints currently faced by China's road agencies, particularly in the less wealthy provinces such as Sichuan, are driving sectoral change. Several lessons have been learned from this project: (a) Sector restructuring affects both central and provincial agencies, with serious implications for Bank involvement in the sector. In order to positively impact sectoral development, the Bank's assistance strategy for the sector must reflect current realities. The Bank's role would benefit from up-front institutional analysis, clear definition of roles and responsibilities, and ultimately, a regulatory framework. The Bank's involvement in major sector restructuring and private sector development in the Sichuan project was defined, but also limited by, the range and depth of its relationships in the sector and the specific legal agreements for the project. In the future, project descriptions and legal agreements should take into account the potential for privatization and the Bank's role in this process. (b) Phased construction and upgrading programs are a viable and important form of development, particularly for resource-constrained provinces. This reality should be recognized during future project preparation and implementation, and the attendant risks and implications for economic evaluation and sector development recognized. The utilization of road infrastructure and specific investments made during a broad upgrading program or privatization program cannot be assured during appraisal. However, project evaluation, analysis, and supervision would benefit from a better understanding of the client's long-term objectives, review of financing plans, discussion of project management and operational arrangements, and discussion of long-term development programs or scenarios. The economic re-evaluation of this project shows that quantification of certain risks has a place in project analysis. 112. The ex post facto review of environment and resettlement components in this project led to recognition, both on the part of the Bank and the borrower, of shortcomings in the planning and implementation of remedies to mitigate externalities from highway development. However, because the original project design did not include monitoring arrangements and the supervision did not emphasize environmnental or resettlement issues, follow-up of specific issues was difficult. Future Bank operations which aim to supervise the environment and resettlement components should ensure first, that there is agreement both on the part of the Bank and the borrower to address issues, second, that mechanisms are built into project design to allow monitoring and evaluation, and third, that detailed findings from reviews are specific enough to be actionable.  - 30 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Partial Negligible Not Applicable Macroeconomic policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender issues x Other social objectives x Environmental objectives x Public sector management x Private sector development x B. Project Sustainability Likely Unlikely Uncertain Physical investments Expressway construction x Expressway communications x Rural road upgrading x Equipment x Institutional objectives Project management and supervision x Road Data Bank and x Pavement Management Systems Road Safety Pilot Program x Staff Training x C. Bank Performance Highly Satisfactory Satisfactory Deficient Identification x Preparation assistance x Appraisal x Supervision x D. Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation x Implementation x Covenant compliance x Operation (if applicable) x E. Assessment of Outcome Highly Highly Satisfactory Satisfactory Unsatisfactory Unsatisfactory x  - 31 - TABLE 2: RELATED BANK LoANS/CREDITS Year of Loan/Credit Title Purpose approval Status Preceding Operations I. Highway Project Provincial road network FY85 Completed Loan 2539-CHA/Credit 1954-CHA expansion/improvement 2. Beijing-Tianjin-Tanggu Expressway Project See footnote /a FY87 Completed Loan 281 1-CHA/Credit 1792-CHA Subsequent Operations 1. Shaanxi Provincial Highway Project See footnote /a FY88 Completed Loan 2952-CHA 2. Jiangxi Provincial Highway Project See footnote /a FY89 Completed Credit 1984-CHA 3. Shandong Provincial Highway Project See footnote /a FY89 Completed Loan 3073-CHA/Credit 2025-CHA 4. Jiangsu Provincial Transport Project See footnote /a FY91 Completed Loan 3316-CHA/Credit 2226-CHA 5. Zhejiang Provincial Highway Project See footnote /a FY92 Ongoing Loan 347 1-CHA 6. Henan Provincial Highway Project See footnote /a FY93 Ongoing Loan 3531 -CHA 7. Guangdong Provincial Highway Project See footnote /a FY93 Ongoing Loan 3530-CHA 8. Fujian Provincial Highway Project See footnote /a FY94 Ongoing Loan 3681-CHA 9. Hebei/Henan National Highway Project See footnote /a FY94 Ongoing Loan 3748-CHA 10. Xinjiang Highway Project See footnote /a FY95 Ongoing Loan 3787-CHA 11. Shanghai-Zhejiang Highway Project See footnote /a FY96 Ongoing Loan 3929-CHA 12. Second Shaanxi Provincial Highway Project See footnote /a FY96 Ongoing Loan 3986-CHA 13. Second Henan Provincial Highway Project See footnote /a FY96 Ongoing Loan 4027-CHA 14. Second Xinjiang Highway Project See footnote /a FY97 Ongoing Loan 3643-CHA 15. Second National Highway Project See footnote /a FY97 Ongoing Loan 3654-CHA /a These highway projects have typically included the following components: (1) construction of a major expressway; (2) improvement of secondary or rural roads; (3) procurement of road maintenance equipment; and (4) institutional development components, such as RDB and PMS programs, staff training and selected subsector-oriented studies.  - 32 - TABLE 3: PROJECT TIMETABLE Steps in Project Cycle Date Planned Date Actual Identification (Executive Project Summary) N/A 06/87 Preparation 10/87 Appraisal 01/88 Negotiations 04/88 04/88 Board presentation 06/88 06/88 Signing 02/89 Effectiveness 09/88 05/89 Project completion 06/94 06/97 Loan closing 12/94 12/96 TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMULATIVE ESTIMATE AND ACTUAL ($ million) FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 Appraisal estimate 8.00 17.00 65.00 100.00 112.00 122.00 125.00 Actual 0.00 6.35 22.68 39.47 66.03 91.83 116.07 123.44 124.24 Actual as % of appraisal estimate 0.00 37.35 34.89 39.48 58.96 75.28 92.86 Yearlydistributionin% 0.00 5.11 18.26 31.77 53.15 73.91 93.42 99.35 100.00 Date of final disbursement July 1, 1997  - 33 - TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Estimated Actual Key implementation indicators in SAR Start Complete Start Complete Part A - Highway Construction Prequalification of contractors including Bank review 06/01/88 08/30/88 05/20/88 04/25/89 Bid period First phase 09/01/88 11/30/88 05/25/89 01/03/90 Second phase 10/01/89 12/30/89 05/28/90 01/04/91 Third phase 01/01/90 03/30/90 02/28/94 --- Receive and open bids, evaluation and receipt by Bank of copy of Evaluation Report and Government recommendations First phase 12/01/88 01/31/89 10/20/89 12/08/89 Second phase 01/01/90 03/30/90 08/28/90 11/13/90 Third phase 04/01/90 05/30/90 Appoint supervision staff First phase 06/30/90 04/01/90 11/01/94 Second and third phase - 03/01/91 12/31/96 Select consultants for organization of supervision of works and award 10/30/88 03/30/89 02/22/90 contracts Construction of highway First phase 03/01/89 02/28/94 05/01/90 05/01/93 Second and third phase 09/01/90 02/28/94 04/01/91 09/21/95 Establish ad-hoc highway organization 12/30/91 05/01/87 01/01/88 Part B - Provision of Specialized Equipment for Pavement Evaluation Prepare, with consultant assistance, equipment lists, specifications and bid documents for Bank review 12/30/92 09/09/94 10/09/94 Invite bids 01/15/93 11/30/94 12/30/94 Evaluate bids 04/01/93 04/30/93 04/15/95 05/22/95 Review by Bank of evaluation report and recommendations for award 05/01/93 05/30/93 11/20/94 05/20/95 Award contracts 06/30/93 08/08/95 09/20/95 Delivery of equipment 12/03/93 11/03/95 01/20/96 ... Continued  - 34 - TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION (CONTINUED) Estimated Actual Key implementation indicators in SAR Start Complete Start Complete Part C - Provision of Equipment for Paved Road Strengthening and Betterment Program Prepare, with consultant assistance, equipment lists, specifications and bid documents for Bank review 12/30/92 Invite bids 01/15/93 Evaluate bids 04/01/93 04/30/93 Review by Bank of evaluation report and recommendations for award 05/01/93 05/30/93 Award contracts 06/30/93 Delivery of equipment 12/30/93 Part D - Road Data Bank Preparation of system 12/30/90 01/17/90 10/30/90 Collection of data 12/30/90 05/30/90 05/30/92 Preparation of software 12/30/90 07/18/93 Preparation of specifications and bid documents for computer systems 01/01/91 06/30/91 07/01/93 02/01/94 Invite bids 07/15/91 10/20/93 12/30/93 Evaluate bids 10/01/91 11/15/91 10/01/94 11/20/94 Review by Bank 11/16/91 12/16/91 11/30/94 12/15/94 Award contracts 01/30/92 12/15/94 12/30/94 Testing and delivery 07/30/92 12/01/95 Part E - Consulting Services Assistance in supervision and training for construction supervision 12/30/88 06/30/94 09/01/89 11/01/92 Assistance in pavement evaluation and preparation of a pavement strengthening and betterment program 06/01/89 06/01/92 07/01/96 including equipment procurement Assistance in setting up a road data bank including equipment procurement 06/01/89 06/01/92 07/01/96 Assistance in training Sichuan Provincial Transport Department staff via studies, seminars and workshops Part F - Staff Training Selection of trainees 12/30/93 05/01/90 12/30/96 Placement of trainees 12/30/93 07/20/90 03/15/97  - 35 - TABLE 6: KEY INDICATORS FOR PROJECT OPERATIONS Length (cm) Traffic (1996 AADT) Estimated Actual Estimated Actual Expressway Construction Section 1: ChengdutoJianyang 58.50 58.50 6,855 9,579 Section 2: Jianyang to Laifengyi 245.55 245.55 5,177 5,168 Section 3: Laifengyi to Chongqing 36.50 36.50 9,144 9,874 340.55 340.55 Sources: Estimates based on data provided in the Staff Appraisal Report. Actual data provided by the ICR mission. TABLE 7: STUDIES INCLUDED IN PROJECT A road safety pilot study was included in the project as developed and appraised. This was one of a series of policy components included in the group of highway projects approved by the Bank in the late 1980s and early 1990s, whereby each project addressed a specific policy issue. The road safety pilot study was to be based on a major technical assistance effort conducted in 1986 under the first Bank-financed highway project in China (China: Highway Project, Loan 2539-CHA/Credit 1954-CHA). The technical assistance included analysis of the cost of accidents in China, based largely on data collected in Sichuan Province, and a detailed coding manual for accidents to be implemented in several Sichuan prefectures. The broad study of road safety was managed by the Highway Science Research Institute in Beijing, a technical institute of the Ministry of Communications. The study was to be implemented by the Sichuan Provincial Transport Department with the assistance of municipal highway bureaus. During the process of loan preparation and negotiation, the Chinese government decided to fund the program solely with its own resources. The pilot study was never implemented in the Sichuan municipalities, as expected, and appears to have suffered from a lack of ownership. Follow-up by the Bank was also poor: while the component remained in the project description throughout implementation, no reporting, communications, or field visits by the Bank took place.  -36 - TABLE 8A: PROJECT COSTS/a (Y million) Appraisal estimate at January 1, 1988 Actual at December 31, 1996 Item Local Foreign Total Local Foreign Total Chengyu Expressway Works Expressway construction 488.80 551.20 1,040.00 2,255.67 994.56 3,250.24 E&M --- --- -- 126.43 96.37 222.80 Consultant Services for Supervision andProjectManagement 5.18 4.44 9.62 52.39 25.35 77.44 RuralRoadUpgrading 53.35 35.56 88.91 440.21 0.00 440.21 Staff Training 0.00 2.60 2.60 11.32 4.78 16.11 Road Data Bank/ Pavement Management System 0.00 .2.92 2.92 0.00 13.61 13.61 Equipment/b Asphaltic Concrete Testing 4.00 0.74 4.74 - - - Road Maintenance 0.00 22.70 22.70 9.77 23.38 33.15 Highway Administration - - - 13.89 0.00 13.89 Expressway Safety and Facilities --- ---5.32 17.68 23.00 Telecommunications --- - --- 5.61 0.00 5.61 Project Management and Development --- -- --- 259.73 1.27.93 387.66 Physical Contingencies 55.13 62.02 117.15 -- - - Price Contingencies 9328 104.31 197.59 -- - - Subtotal 699.74 786.41 1,486.15 2,832.11 1,303.66 4,135.77 Land Acquisition and Resettlement 100.00 --- 100.00 387.74 - 387.74 Total 799.94 786.41 1,586.15 3,568.09 1,303.66 4,871.75 /a Costs were converted at average exchange rates prevailing during implementation, unless otherwise noted. The average exchange rates for conversion are 6.6533 for conversion of yuan-denominated costs to dollars and 7.1057 for conversion of dollar-denominated costs to yuan. /b Costs converted at exchange rates prevailing during the years of procurement.  - 37 - TABLE 8B: PROJECT COSTS/a ($ million) Appraisal estimate at January 1, 1988 Actual at December 31, 1996 Item Local Foreign Total Local Foreign Total Chengyu Expressway Works Expressway construction 132.11 148.96 281.07 339.03 149.48 488.51 E&M --- -- 19.00 14.48 33.49 Consultant Services for Supervision and Project Management 1.40 120 2.60 7.87 3.53 11.40 Rural Road Upgrading 14.42 9.60 24.02 66.16 0.00 66.16 Staff Training 0.00 0.70 0.70 1.70 0.67 2.38 Road Data Bank/ Pavement Management System 0.00 0.80 0.80 0.00 1.58 1.58 Equipment)b Asphaltic Concrete Testing 1.08 0.20 1.28 - - -- Road Maintenance 0.00 6.14 6.14 1.47 2.75 4.22 Highway Administration -- --- - 2.09 0.00 2.09 Expressway Safety and Facilities - -- -- 0.80 2.08 2.88 Telecommunications - - - 0.84 0.00 0.84 Project Management and Development - -- - 39.04 18.00 57.04 Physical Contingencies 14.90 16.75 31.65 - - - Price Contingencies 11.59 12.93 24.52 - - - Subtotal 175.50 197.24 372.74 478.01 192.58 670.59 Land Acquisition and Resettlement 27.03 -- 27.03 58.28 - 58.28 Total 202.53 197.24 399.77 536.29 192.58 728.87 /a Costs were converted at average exchange rates prevailing during implementation, unless otherwise noted. The average exchange rates for conversion are 6.6533 for conversion of yuan-denominated costs to dollars and 7.1057 for conversion of dollar-denominated costs to yuan. /b Costs converted at exchange rates prevailing during the years of procurement.  -38 - TABLE 8c: PROJECT FINANCING ($ million) Appraisal Estimates Actual Government Government World World Bank Bank Component Provincial Central Group Total Provincial Central Group Total Construction of Chengyu Expressway 146.30 50.00 84.80 281.10 145.78 259.17 117.05 522.00 Rural Road Upgrading Program 15.30 0.00 8.70 24.00 66.16 0.00 0.00 66.16 Implementation Support 0.00 0.00 2.60 2.60 7.51 0.00 3.89 11.40 Equipment 0.00 0.00 8.20 8.20 8.05 0.00 3.56 11.61 Staff Training 0.00 0.00 0.70 0.70 1.88 0.00 0.50 2.38 Land Acquisition and Resettlement 27.00 0.00 0.00 27.00 58.28 0.00 0.00 58.28 Contingencies 36.20 0.00 20.00 56.20 0.00 0.00 0.00 0.00 Project Development and Management 0.00 0.00 0.00 0.00 57.04 0.00 0.00 57.04 Total 224.80 50.00 125.00 399.80 344.70 259.17 125.00 728.87 TABLE 9: ECONOMIC COSTS AND BENEFITS (Y million, 1996 prices) Net Present Costs /a Benefits /b Value@ 12% ERR(%) Construction of Chengyu Expressway ICR 8,195 27,634 1,117 15.47 SAR 1,830 27,251 2,552 26.60 Upgrading of Ya'an-Hongya Highway ICR 76 314 16 15.65 SAR 70 251 19 16.69 Upgrading of Fenggu-Santai Highway ICR 406 1,442 78 17.97 SAR 98 457 56 21.08 /a Sum of undiscounted cost stream; costs include investments and operations. /b Sum of undiscounted benefit stream.  - 39 - TABLE 10: STATUS OF LEGAL COVENANTS Cove- Original Revised Agree- nant Present fulfillment fulfillment ment Section class Status date date Description of covenant Comments Credit 3.01 (a) 5 C Commitment to project objectives and meeting obligations by Beneficiaiy under the Project Agreement 3.01 (b) 3 C Satisfactory onlending to Beneficiary 3.03 5 CD Meeting requirements of General Conditions, Sections 9.03 - 9.05 4.01 1 CD Maintaining adequate financial recording and auditing reporting requirement Project 2.01 5 C Commitment to project objectives and meeting obligations by Beneficiary under the Project Agreement 2.02 5 CD Compliance with Schedule 3 of Development Credit Agreement 2.04 (a) 9 C Exchange of view with the Bank 2.04 (b) 9 C Information on interference with project implementation 2.04 (c) 7 C Carry out resettlement actions as agreed 3.01 (a) I CP Maintaining adequate financial recording and auditing requirement 5.02 5 C Authorization of personnel of the Beneficiary 5.03 (a) 9 CP Commitment of providing information to the Bank Covenant Class: Status: I = Accounts/audits 8 = Indigenous people C = covenant complied with 2 = Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay generation from beneficiaries 10 = Project implementation not CP = complied with partially 3 = Flow and utilization of project covered by categories 1-9 funds 11 = Sectoral or cross-sectoral 4 = Counterpart funding budgetary or other resources 5 = Management aspects ofthe allocation project or executing agency 12 = Sectoral or cross-sectoral policy/ 6 = Environmental covenants regulatory/institutional action 7 = Involuntary resettlement 13 = Other TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS There was no significant lack of compliance with an applicable Bank Operational Manual Statement (OD or OP/BP).  -40 - TABLE 12: BANK RESOURCES: STAFF INPUTS (Staff Weeks) FY 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Total Preappraisal 7.9 8.8 16.7 Appraisal 7.4 7.4 Negotiations 7.9 7.9 Supervision 0.4 2.3 8.4 7.6 7.0 5.0 8.0 16.9 5.3 4.6 65.5 Completion 15.1 20.5 35.6 Total 7.9 24.5 2.3 8.4 7.6 7.0 5.0 8.0 16.9 5.3 19.7 20.5 133.1 TABLE 13: BANK RESOURCES: MISSIONS /a Performance rating Imple- Develop- Month Number Days Specialized menta- ment and of in Staff Skills tion Objec- Stage of Project Cycle Year Persons Field Represented /b Status /c tives Types of Problems Preidentification -- -- -- Identification and Preparation 10/86 4 N/A ECO, ENG, OO Preappraisal 7/87 2 7 ECO, ENG Preappraisal Follow-Up 10/87 2 3 ENG, ECO Appraisal 1/88 2 8 ENG, ECO Negotiation 4/88 --- -- Board Approval 6/88 -- Signing 2/89 --- Effectiveness 5/89 --- -- Supervision 1 3/89 2 3 ENG I I Supervision 2 11/89 3 4 ENG, TRG 2 1 Construction delays Supervision 3 7/90 1 6 - ENG 2 1 Construction and procurement delays, design changes, adequacy of supervision Supervision 4 4/91 3 6 ENG, 00 2 1 Contractor resources, design, geological difficulties Supervision 5 11/91 2 6 ENG 2 1 Procurement, construction delays, quality control, supervision Supervision 6 5/92 3 8 ENG, 00 2 1 Tunnel design, construction delays, contractor performance Supervision 7 3/93 2 6 ENG, CIS 2 1 Construction quality, procurement, contractor resources and performance Supervision 8 4/94 1 6 ENG 2 1 Procurement, supervision arrangements, construction quality Supervision 9 11/94 1 8 ENG U S Safety, construction quality, resettlement Supervision 10 7/95 1 7 ENG S S Completion 1 1/97 3 11 FA, ENG, 00 S S Completion 2 5/97 1 12 FA S S Sources: Bank supervision reports, quarterly progress reports, and communications in project file. /a This summary does not include: (i) a thematic resettlement review mission which visited transport projects in Sichuan, Chongqing, and other provinces in late 1994; (ii) a specialized mission for review of Road Data Bank/Pavement Management Systems components in China in mid-1995; and (iii) missions for preparation of the China Road Safety Pilot Study in Sichuan in 1986-87. lb CIS: Construction Industry Specialist; ECO: Economist; ENG: Engineer; FA: Financial Analyst; 00: Operations Officer; TRG: Training Specialist. /c 1: Highly satisfactory; 2: Satisfactory; S: Satisfactory; U: Unsatisfactory. N/A indicates data not available.  -41- ANNEX 1 ANNEX 1: ECONOMIC EVALUATION Preface 1. The Staff Appraisal Report (SAR) for the Sichuan Provincial Highway Project (Report No. 7168-CHA) presents economic evaluation results for (i) the construction of a 340-km rural highway connecting Chengdu, the capital of Sichuan, with Chongqing, one of the most densely populated municipalities in Sichuan and the largest industrial trade center in southwest China; and (ii) the improvement of rural roads between Ya'an and Hongya and between Fenggu and Santai from unclassified to Class III standards. 2. The actual implementation of both road construction components deviated from the project design as appraised. The new Chengdu-Chongqing Highway was originally planned predominantly as a Class 2, two-lane rural highway with Class 1, four-lane tolled sections in the urban areas of Chengdu and Chongqing, but underwent major design changes. The resulting Chengdu-Chongqing Highway, now called the Chengyu Expressway, was constructed as a Class 1, four-lane divided highway throughout its length, operated as a limited access (auto-only) toll expressway. 3. The economic analysis presented in this ICR utilizes updated data on traffic, vehicle operating cost (VOC), economic cost and road user benefits, taking into account revised assumptions regarding future traffic growth. The ICR analysis takes into account the entire road corridor between Chengdu and Chongqing in its evaluation, while the SAR analysis did not take into account the shorter northern route which is part of the corridor. The methodology used in the economic analysis for this ICR is similar to that used in the SAR and incorporates the following assumptions: (a) Capital investment and maintenance costs have been revised to reflect December 1996 prices and included in the cost stream; (b) The benefit stream, also reflecting December 1996 prices, has been revised, and consists of savings in VOC, reduced traffic congestion on the existing roads, and time savings; (c) A project life of twenty-five years (1989-2013) has been assumed; implementation delays of two years for the expressway component and four to seven years for the rural road components are reflected in the timing of costs and benefits; (d) The capital investment period for the Expressway is from 1988 through 1999, the bulk of which is incurred between 1989 and 1995;  -42 - ANNEX I (e) The capital investment periods for upgrading works for the Ya'an-Hongya and Fenggu-Santai rural highways are from 1992 through 1995 and from 1995 through 1998, respectively; (f) Based on the progress of construction of the Chengyu Expressway, partial benefits began to accrue when sections around Chengdu were opened to traffic in 1993; other sections were opened during 1994 and 1995. A substantially higher level of benefits is assumed for the period following full opening of the Expressway to traffic in 1995. (g) Investments in the years following opening of the Expressway to traffic comprise E&M works for lighting communication and traffic: control and will result in a modem expressway facility. Benefits accruing from improved service levels are not quantified. (h) Full benefits from the upgrading of rural roads accrue from 1996 onwards for the Ya'an-Hongya highway and, for the Fenggu-Santai highway, benefit flow begins in 1999 when its upgrading is expected to be completed. 4. The Expressway was divided into three sections for the purposes of economic evaluation in the ICR: Section 1 from Chengdu to Jianyang (58.5 km); Section 2 from Jianyang to Laifengyi (245 km); and Section 3 from Laifengyi to Chongqing (36.5 km). Cost and benefit analyses were carried out separately for each section, and for the Expressway as a whole. 5. Both in the case of the main highway construction and rural road upgrading components, the scope of works actually completed exceeded appraisal expectations. As appraised, the main highway component comprised construction of a new Chengdu- Chongqing Highway with predominantly two-lane, Class 2 standards (252 km) and four- lane, Class 1 standards used at the urban endpoints (totaling 88 km). In actuality, a 340.2 km four-lane Class 1 highway (the Chengyu Expressway) was constructed; the new highway is operated as a limited access toll facility. The rural road upgrading component ultimately involved a Class 3 standard Ya'an-Hongya Highway, as appraised, but a higher, Class 1 standard was adopted for the Fenggu-Santai Highway. 6. Cost and benefit analyses were carried out separately for each of the rural roads upgraded under the project. Corridor Traffic 7. The 1996 corridor traffic and its distribution between the old roads in the highway corridor and the new Chengyu Expressway is presented in the following table.  - 43 - ANNEX 1 CHENGDU-CHONGQING HIGHWAY CORRIDOR NUMBER OF MOTORIZED VEHICLES PER DAY (AADT) FOR 1996 The Old Chengyu Present Diversion Corridor Expressway Corridor Factor (DF) (1) (2) (3)=(1)+(2) (4)=(2)/(3) SAR: Section 1 1,934 6,855 8,789 78.00% Section 2 2,775 5,177 7,933 65.27% Section 3 2,646 9,144 11,789 77.56% Actual: Section 1 2,619 9,579 12,198 78.53% Section 2 4,331 5,168 9,499 54.41% Section 3 5,159 9,874 15,033 65.68% Actual/ SAR Ratios: Section 1 135.44% 139.73% 138.79% - Section 2 157.19% 99.82% 119.74% Section 3 195.01% 107.98% 127.51% Sources: Sichuan Provincial Expressway Administration Bureau, Chongqing Major Highway Construction Directorate, and World Bank missions. 8. Comparisons between the SAR and ICR traffic data must be qualified as follows: (a) The traffic estimates prepared for the SAR included the old (existing) Chengdu-Chongqing Highway (438 km) and the new Expressway, but did not include other major highways in the corridor, such as the northern route from Chengdu to Chongqing via Bishan (314 kIn). (b) The SAR traffic estimates presumed construction of a rural highway of four-lane width at either end (totaling 88 km) and a two-lane mid-section (totaling 252 Iam). While early design reviews and the SAR acknowledged the possibility of tolling the four-lane sections, it is not clear whether the SAR economic evaluation incorporated this provision. (c) The ICR analysis attempts to include actual traffic data for all major roads in the corridor, recognizing that the population density and economic activities  44- ANNEX 1 along other routes is significant. At the same time, the major design changes in the project have dramatically increased capacity of the facility, doubling the capacity of the longest, middle section of the route. For these reasons, the SAR and ICR traffic data are not directly comparable. (d) As shown above, the 1996 corridor traffic (i.e., the sum of traffic on the Expressway and parallel sections of the old roads, including the Chengdu- Chongqing Highway and the shorter northern route via Bishan) was much higher than the SAR estimates. The SAR did not explicitly project traffic on the parallel northern route and did not anticipate the diversion of traffic due to construction and upgrading. (e) The actual diversion of traffic to the Expressway has been at a lower rate than the SAR estimates for Sections 2 and 3, or at about the same rate (Section 1). At the same time, the actual traffic in the old highway and other parallel roads has been significantly higher than SAR estimates (for example, more than 50 percent higher in Section 2 and almost double in Section 3). The overall increase in corridor traffic over and above SAR expectations explains the higher than anticipated traffic volume on the Expressway in 1996. Traffic Projection 9. In the SAR, the annual traffic growth rate for the new Expressway was assumed to be 8 percent per annum for freight traffic and 9.5 percent per annum for passenger traffic. The generated traffic was assumed to be 10 percent to 30 percent. It was further assumed in the SAR that a portion of railway traffic, both passenger and freight, would divert to the Expressway. 10. The ICR traffic projections for each of the three sections of the Expressway are made taking into account, inter alia, the current patterns of traffic on the Expressway as summarized below: (a) There has been a rapid buildup of traffic since expressway opening, particularly in the road sections near the major cities of Chengdu and Chongqing, in response to pent-up road transport demand; (b) Traffic in the middle, rural section (Section 2) of the Expressway has increased at a relatively lower rate since its opening in 1994; (c) While the overall volume of traffic for the Expressway has been higher than the SAR projections, diversions for Sections 2 and 3 from parallel routes in the corridor, -- the old Chengdu-Chongqing Highway and the northern route -- are still below SAR projections; (d) The distance and time savings between some of the parallel sections of the Expressway and the existing arterial roads, particularly the short northern  -45 - ANNEX 1 route, may not be large enough to assume higher diversion rates from the old arterial roads to some sections of the Expressway; (e) Further economic development and trade along the parallel arterial roads is expected to generate local traffic growth which could limit the rate of corridor traffic diversion to the Expressway in the future; and (f) The potential rail freight and passenger traffic growth, which cannot be handled by the railway because of full capacity utilization, is included in the ICR passenger and freight traffic projections, taking into account overall economic activity, transport costs, distance and time savings. 11. The projected traffic including diverted traffic and generated traffic for the three sections of the Expressway for the period 1993-2015, by vehicle type, is detailed in Table Al of this annex. Actual traffic data has been used for the period 1993-1996. The generated traffic is assuined to be 15 percent of the traffic in each of the Expressway sections. Growth assumptions for freight and passenger traffic in subsequent years and the resulting traffic volumes on each of the three sections of the Expressway are as follows: CHENGYU EXPRESSWAY TRAFFIC GROWTH RATE ASSUMPTIONS FOR THE PERIOD 1996-2015 Section 1 Section 2 Section 3 Years Passenger Freight Passenger Freight Passenger Freight 1995-2000 11.37% 11.97% 11.60% 12.21% 9.07% 9.52% 2000-2015 10.23% 10.77% 10.44% 11.00% 8.16% 8.57% Sources: Sichuan Provincial Transport Department and Chongqing Major Highway Construction Directorate.  -46 - ANNEX 1 COMPARISON OF SAR AND ICR TRAFFIC FORECASTS FOR SECTIONS OF THE NEW CHENGYU EXPRESSWAY (AADT) Section 1 Section 2 Section 3 Chengdu Jianyang Laifengyi to to to Jianyang Laifengyi Chongqing SAR 1993 5,368 4,038 7,142 1994 1995 1996 6,855 5,177 9,144 2000 9,498 7,212 12,712 ICR 1993 2,937 0 0 1994 5,268 345 2,625 1995 8,458 4,504 8,403 1996 9,579 5,168 9,874 2000 14,880 8,108 14,041 2005 24,484 13,501 20,898 2010 40,309 22,486 31,102 Economic Costs 12. Financial costs have been converted to economic costs (Tables A2 and A3) by applying shadow prices shown in Table A4. The overall effect of the revised financial costs and shadow prices is that the total economic cost of construction is about 200 percent higher than the SAR estimate, at constant December 1996 prices. The economic vehicle operating costs are given in Table A5. COMPARISON OF ECONOMIC COST FOR CONSTRUCTION OF CHENGYU EXPRESSWAY (Y million) SAR December ICR 1996 December ICR/ SAR May 1988 equivalent 1996 (in%) Total Construction Cost 1,132 1,830 5,469 299  -47 - ANNEX I Economic Benefits 13. The economic analysis includes the benefits derived from: (a) VOC savings for both basic and generated traffic; (b) relieved congestion on the existing road; and (c) time savings (Tables A6 to A9). 14. Based on the actual traffic performance, it is estimated that between 54 and 78 percent of corridor traffic has diverted to the new expressway. As a result, lower traffic levels are assumed on the existing arterial roads, reducing congestion and VOCs. It is estimated that on average, VOC is reduced by 29 to 34 percent in Section 1, 7 to 13 percent in Section 2, and 22 to 33 percent in Section 3 for different types of vehicles. However, after the year 2000, traffic progressively increases and VOC would increase much faster than the vehicle traffic capacity ratio. The ICR analysis recognizes this and costs are accordingly adjusted to reflect the increasing congestion both in the old roads and on the new Expressway. 15. The SAR assumed that there would be some reduction in accidents in the old highway and the northern route following the opening of the Expressway to traffic. Benefits valued at Y 2.2 million per year were originally assumed based on reduced accident costs. However, given the complexity of the current corridor traffic and the multiple alternative routes, an analysis of corridor safety is needed to quantify such benefits. The accident data for Sichuan Province and Chongqing Municipality do not support this corridor analysis, due to fractured or overly generalized reporting. Since the opening of the road to traffic, there appears to have been a reduction in the severity of accidents, due to driver education or engineering improvements (for example, improved ventilation systems in tunnels and signing for reduced speeds). The ICR analysis does not assume that this trend can be sustained over time, and takes a conservative view by not quantifying accident reduction benefits in the evaluation. Overall Economic Evaluation 16. The overall ERR on the expressway component is estimated to be 15 percent versus the SAR estimate of 27 percent (Table A6). Total costs and benefits streams, Economic Rate of Return (ERR) and Net Present Value (NPV) for each section of the Expressway are presented in Tables A7 to A9 and summarized as follows: SAR ICR Best estimate of rate of return 27% 15% NPV (12%, Y million) NA 876 17. It may be seen from the sensitivity analysis (Table A6) that in future: (i) an increase of 100 percent, or doubling, of the operating costs would lead to reduction in ERR to 13.2 percent; (ii) lower traffic growth would increase congestion savings but depress VOC benefits, and reduce the overall ERR to 13.8 percent; (iii) poor maintenance practices and consequent road deterioration would increase VOC costs and result in an ERR of 13.2  - 48 - ANNEX 1 percent; and (iv) a combination of higher operating costs and lower traffic growth would depress the ERR further to 12.2 percent. Economic Evaluation of Rural Roads Component 18. The ICR estimates that the Ya'an-Hongya road upgrading would yield an ERR of 15.7 percent, slightly lower than the SAR estimate of 17 percent (Table AlO). ICR costs are about 109 percent of the SAR estimates in constant 1996 prices. Compared to the other investment components in the project, the SAR estimates are relatively closer to the ICR estimates based on actual performance. On the benefits side, the bulk of the benefits are derived from VOC savings. The project appraisal overestimated the traffic; only a little over 70 percent of the traffic forecast by the SAR actually materialized in 1995. This might have been due to occasional closing of sections of the road while the upgrading works were being done. There has been no evidence of reduction in the accident rate on this road, hence the accident reduction savings envisaged in the SAR have not been quantified or included in the ICR evaluation. 19. The ICR estimates that the ERR of Fenggu-Santai road upgrading is 18 percent, as compared with the appraisal estimate of 21 percent (Table Al 1). The construction and operating cost estimates are much higher than the SAR estimates, as the road is now being upgraded to a full Class 1 standard. SAR projections had underestimated the traffic on this road: the SAR forecast for 1995 was 30 percent less than the actual motorized traffic in 1995 in terms of annual average daily traffic (vpd). Over 80 percent of benefits derive from VOC savings. As in the case of the other investment components, for want of evidence, accident reduction benefits have not been considered in the evaluation.  TABLE Al: CHENGYU EXPRESSWAY TRAFFIC SUMMARY (AADT) Small Truck Medium Truck Large Truck Tractor-Trailer Small Passenger Vehicle Medium Bus Large Bus All Traffic (AADT) Without Without Without Without Without Without Without Without With Project Project - With Project Project - With Project Project - With Project Project - With Project Project - With Project Project - With Project Project - With Project Project - Old Project Old Old Project Old Old Project Old Old Project Old Old Project Old Old Project Old Old Project Old Old Project Old Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Corridor Road Corridor Section I 1990 704 0 704 993 0 993 97 97 80 0 80 816 0 816 297 0 297 37 0 37 3,357 0 3,357 1991 810 0 810 1,143 0 1,143 112 112 92 0 92 939 0 939 342 0 342 42 0 42 3,865 0 3,865 I"2 933 0 933 1,316 0 1,316 129 129 106 0 106 1,081 0 1,081 393 0 393 49 0 49 4,450 0 4,450 1993 692 577 1,154 877 768 1,491 .91 6 141 58 64 109 633 806 1,278 230 293 464 28 366 58 2,869 2,937 5,219 1994 560 1,165 1,492 739 1,317 1,793 69 11 159 40 94 115 520 1,419 1,655 189 516 602 23 645 75 2,353 5,268 6,567 1995 654 1,764 2.065 690 1,872 2,188 58 15 185 35 13 45 540 2,558 2,586 196 930 940 24 1,162 1,17 2,419 8,458 9,185 1996 706 1,412 1,836 752 2,219 2,527 63 65 584 38 26 59 583 2,899 2,902 212 1,054 1,055 26 1,318 1,31 2,619 9,579 10,282 2000 930 2,219 2,317 991 3,488 3,191 83 1,02 737 50 41 74 796 4,460 3,664 290 1,621 1,332 36 2,028 1,66 3,502 14,88 12,981 2005 1,249 3,701 2,819 1,330 5,817 3,882 III t,70 897 67 68 90 I,111 7,258 4,458 404 2,634 1,621 50 3,300 2,02 4,777 24,48 15,793 2010 1,677 6,173 3,190 1,786 9,700 4,392 150 2,84 1,015 90 114 102 1,551 11,812 5,044 564 4,294 1,834 70 5,370 2,29 6,523 40,30 17,869 20t5 2,252 10,294 3,609 2,398 16,177 4,969 201 4,74 1,148 121 190 116 2,164 19,223 5,706 787 6,989 2,075 98 8,739 2,59 8,906 66,35 20,217 Section 2 1990 1,086 0 1,086 1,261 0 1,261 274 274 186 0 186 960 0 960 240 0 240 33 0 33 4,337 0 4,337 1991 1,175 0 1,175 1,346 0 1,346 298 298 212 0 212 1,044 0 1,044 266 0 266 36 0 36 4,700 0 4,700 1992 1,271 0 1,271 1,437 0 1,437 324 324 244 0 244 1,135 0 1,135 295 0 295 39 0 39 5,098 0 5,098 1993 1,391 0 1,391 1,666 0 1,666 372 372 279 0 279 1,311 0 1,311 350 0 350 44 0 44 5,817 0 5,817 1994 1,390 72 1,448 1,390 27 1,412 328 3 355 326 1 327 1,123 116 1,216 425 42 459 52 53 57 5,510 345 5,786 1995 1,050 988 1,840 1,136 888 1,846 380 42 718 217 2 219 760 1,242 1,754 292 448 650 45 513 86 4,290 4,504 7,893 1996 1,119 1,227 2,101 1,121 990 1,913 301 44 659 142 26 163 886 1,468 2,060 316 477 698 44 532 87 4,331 5,168 8,465 2000 1,504 1,945 2,652 1,509 1,570 2,415 403 71 832 189 41 206 1,209 2,277 2,601 432 740 881 60 825 1,10 5,853 8,108 10,687 2005 2,099 3,277 3,227 2,072 2,645 2,938 550 1,19 1,013 257 69 250 1,686 3,741 3,165 601 1,216 1,072 84 1,356 1,33 8,109 13,50 13,003 2010 2,930 5,522 3,651 2,846 4,457 3,324 751 2,01 1,146 350 117 283 2,351 6J147 3,581 837 1,998 1,212 1,17 2,228 1,51 11,239 22,48 14,712 2015 4,091 9,305 4,130 3,909 7,510 3,761 1,024 3,39 1,297 475 197 320 3,378 10,399 4,051 1,166 3,282 1,372 1,66 3,660 1,71 15,705 37,75 16,645 Section 3 1990 1,025 0 1,025 1,423 0 1,423 339 339 337 0 337 763 0 763 361 0 361 38 0 38 4,631 0 4,631 1991 1,006 0 1,006 1,447 0 1,447 397 397 314 0 314 837 0 837 377 0 377 42 0 42 4,799 0 4,799 1992 988 0 988 1,522 0 1,522 469 469 295 0 295 921 0 921 421 0 421 47 0 47 5,088 0 5,088 1993 1,491 0 1,491 1,422 0 1,422 333 333 385 0 385 1,367 0 1,367 627 0 627 89 0 89 6,517 0 6,517 I994 1,571 398 1,889 1,134 199 1,293 999 18 1,149 348 8 354 3,283 992 4,077 1,219 372 1,517 1,59 468 1,96 10,148 2,625 12,248 1995 890 1,418 2,024 652 505 1,056 650 48 1,035 453 10 461 1,484 3,533 4,310 571 1,258 1,577 60 1,198 1,56 5,305 8,403 12,027 1996 1,036 1,932 2,582 591 499 990 379 39 695 275 7 281 1,891 4,814 5,742 557 1,242 1,551 43 985 1,21 5,159 9,874 13,058 2000 1,348 2,780 3,259 764 718 1,250 491 56 877 355 10 354 2,505 6,813 7,249 736 1,758 1,958 56 1,394 1,53 6,768 14,04 16,486 2005 1,785 4,193 3,965 1,006 1,083 1,521 647 85 1,068 464 15 431 3,381 10,085 8,820 993 2,602 2,382 76 2,063 1,87 9,043 20,89 20,057 2010 2,365 6,325 4,486 1,324 1,634 1,721 853 1,29 1,208 609 17 488 4,565 14,928 9,979 1,338 3,851 2,695 1,03 3,054 2,11 12,089 31,10 22,693 - 2015 3,133 9,542 5,076 1,742 2,464 1,947 1,123 1,95 1,367 798 25 552 6,163 22,097 11,290 1,804 5,701 3,049 1,39 4,520 2,39 16,158 46,30 25,675 Sources: Sichuan Provincial Expressway Administration Bureau, Chongqing Major Highway Construction Directorate, and World Bank missions.  TABLE A2: SUMMARY OF FINANCIAL AND ECONOMIC COSTS FOR CONSTRUCTION OF THE CHENGYU EXPRESSWAY (Y million) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total Financial Costs (Current) Section 1: Chengdu-Jianyang 0.000 49.285 103.654 125.483 131.036 92.124 8.103 13.023 0.686 12.500 48.084 0.042 0.000 584.021 Section 2: Jianyang-Laifengyi 0.000 34.955 67.520 373.789 670.077 642.681 477.078 239.492 2.931 11.134 36.360 0.180 0.000 2,556.195 Section 3: Laifengyi-Chongqing 2.804 12.090 99.415 172.635 199.391 163.047 81.257 39.270 60.967 42.417 0.444 0.222 0.000 873.960 Total 2.804 96.329 270.589 671.907 1,000.504 897.852 566.438 291.785 64.585 66.051 84.888 0.444 0.000 4,014.175 Economic Costs (December 1996 Prices) Section 1: Chengdu - Jianyang 0.000 83.727 165.594 190.315 187.830 120.684 9.806 12.876 0.667 0.486 0.083 0.041 0.000 772.108 Section 2: Jianyang - Laifengyi 0.000 70.476 125.838 605.957 1,015.060 868.783 537.751 236.270 2.900 2.114 0.361 0.180 0.000 3,465.691 Section 3: Laifengyi - Chongqing 5.711 23.820 176.669 289.837 315.268 227.457 93.576 39.517 57.484 1.221 0.444 0.222 0.000 1,231.225 Total 5.711 178.023 468.102 1,086.109 1,518.158: 1,216.924 641.133 288.663 61.051 3.821 0.888 0.444 0.000 5,469.025  - 5 1 - ANNEX 1 TABLE A3: COMPONENTS OF TOTAL PROJECT COST /a (Y million, in current prices) Construction of Chengyu Expressway /b Civil Works Main alignment and widening 2,687.317 Bridges and tunnels 405.373 Access and local roads 157.549 E&M Supply and Installation Toll facilities, traffic control, and communications - main alignment 105.000 Tunnel ventilation 117.800 Land acquisition and resettlement 387.744 Implementation support 77.743 Equipment for central laboratory, maintenance, administration, and expressway management 75.649 4,014.175 Rural Road Upgrading Program /c 91.970 Road Data Bank/Pavement Management Systems 13.605 Staff Training Program 16.106 Engineering design and project management 387.660 Total 4,523.517 /a Reflects total financial costs at December 31, 1996. /b Unadjusted financial costs included in economic evaluation of Chengyu Expressway. Ic Unadjusted financial costs included in economic evaluation of Ya'an-Hongya and Fenggu-Santai rural highway upgrading.  TABLE A4: SHADOW PRICE CALCULATION (Y million, December 1996 prices) Chengdu - Jibnyang Jianyang - Shanjiapo Shanjiapo - Laifengyi Laifengyl - Chongqing Financial Financial Financial Financial Conversion Eco- Eco- Eco- Eco- Total Factor Local Foreign Total nomic Local Foreign Total nomic Local Foreign Total nomic Local Foreign Total nomic Project Land 1.00 43.36 0.00 43.36 43.36 151.5 0.00 151.59 151.59 56.7 0.00 56.79 56.79 83.93 0.00 83.93 83.93 Ltbor: tlnskilled 1.00 8.67 0.00 8.67 8.67 36.0 0.00 36.05 36.05 12.4 0.00 12.49 12.49 18.46 0.00 18.46 18.46 Semiskilled/ 0.67 58.60 0.00 58.60 39.26 222.1 0.00 222.14 148.84 53.4 0.00 53.47 35.83 79.03 0.00 79.03 52.95 Technician Supervisor 2.00 16.98 3.08 20.05 37.03 64.3 8.92 73.30 137.67 19.4 5.48 24.96 44.44 28.80 7:09 35.88 64.68 Materials: Steel 1.00 19.21 1.90 21.12 21.12 71.7 5.52 77.28 77.28 31.8 0.00 31.87 31.87 47.10 0.00 47.10 47.10 Timber 1.00 9.58 0.00 9.58 9.58 35.8 0.00 35.88 35.88 1.2 0.00 1.24 1.24 1.84 0.00 1.84 1.84 Cement 1.00 24.24 0.00 24.24 24.24 77.4 0.00 77.42 77.42 33.8 0.00 33.89 33.89 50.09 0.00 50.09 50.09 Sand 0.80 118.12 0.00 118.12 94.50 439.9 0.00 439.99 351.99 122.2 0.00 122.28 97.82 180.74 0.00 180.74 144.59 Bitumen 1.00 17.66 20.17 37.83 37.83 79.4 64.15 143.63 143.63 18.7 15.39 34.15 34.15 27.72 19.89 47.61 47.61 Other 0.80 13.46 0.41 13.88 11.19 51.8 1.20 53.04 42.68 39.0 0.00 39.02 31.21 57.67 0.00 57.67 46.13 Fuel: Diesel 1.00 13.24 0.00 13.24 13.24 51.5 0.00 51.50 51.50 28.6 0.00 28.65 28.65 42.35 0.00 42.35 42.35 Gasoline 1.00 0.91 0.00 0.91 0.91 3.4 0.00 3.43 3.43 11.2 0.00 11.24 11.24 16.62 0.00 16.62 16.62 Heavy oil 1.00 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.1 0.00 0.10 0.10 0.15 0.00 0.15 0.15 Others 1.00 0.46 0.00 0.46 0.46 1.7 0.00 1.72 1.72 0.0 0.00 0.05 0.05 0.08 0.00 0.08 0.08 Water 0.80 0.27 0.00 0.27 0.22 1.2 0.00 1.20 0.96 1.5 0.00 1.55 1.24 2.30 0.00 2.30 1.84 Electricity 1.50 2.83 0.00 2.83 4.24 9.9 0.00 9.96 14.94 19.1 0.00 19.12 28.68 28.26 0.00 28.26 42.39 Construction 1.00 5.02. 0.00 5.02 5.02 17.0 0.00 17.00 17.00 6.5 0.00 6.53 6.53 9.65 0.00 9.65 9.65 Mechanical 1.00 42.54 63.66 106.20 106.20 159.4 42.01 201.49 201.49 49.6 33.95 83.64 83.64 73.44 170.14 243.58 243.58 equipment Other 0.80 61.25 83.59 144.84 132.59 241.8 96.32 338.20 289.82 11.9 47.59 59.51 57.12 17.61 61.53 79.15 75.62 456.41 172.81 629.22 589.66 1,716.7 218.11 1,934.821,783.89 518.1 102.41 620.55 596.98 765.83 258.65 1,024.48 989.66 Overall conversion factor 0.94 0.92 0.96 0.97 0.94 Note: All figures are rounded. Shadow exchange rate = I.0.  TABLE A5: ECONOMIC VEHICLE OPERATING COSTS (Y per km, December 1996 prices) Road Condition and Terrain Good Fair Poor Flat Mountain- Flat Mountain- Flat Mountain- Rolling Hilly ous Rolling Hilly ous Rolling Hilly ous Four-lane road Small car 0.929 0.970 1.000 1.041 1.082 1.113 1.348 1.388 1.419 Small bus 0.993 1.178 1.329 1.144 1.329 1.481 1.464 1.632 1.784 Medium bus 1.565 1.818 2.036 1.851 2.120 2.339 2.440 2.676 2.895 Large bus 3.335 4.067 4.718 3.715 4.474 5.098 4.501 5.233 5.857 Small truck 0.834 1.043 1.199 0.939 1.147 1.304 1.147 1.330 1.512 Medium truck 1.332 1.641 1.951 1.487 1.827 2.137 1.796 2.137 2.478 Large truck 1.787 2.190 2.593 1.989 2.416 2.794 2.366 2.794 3.197 Tractor/trailer 3.737 4.928 5.959 4.059 5.283 6.314 4.832 5.991 7.054 Two-lane road Small car 1.033 1.078 1.112 1.158 1.203 1.237 1.498 1.544 1.578 Small bus 1.131 1.342 1.515 1.304 1.515 1.688 1.668 1.860 2.033 Medium bus 1.783 2.071 2.320 2.109 2.416 2.666 2.781 3.049 3.298 Large bus 3.602 4.392 5.095 4.012 4.832 5.505 4.861 5.651 6.325 Small truck 0.945 1.182 1.359 1.063 1.300 1.477 1.300 1.507 1.713 Medium truck 1.537 1.894 2.252 1.716 2.109 2.466 2.073 2.466 2.859 Large truck 2.063 2.527 2.992 2.295 2.789 3.225 2.731 3.225 3.689 Tractor/trailer 4.108 5.419 6.552 4.463 5.808 6.942 5.313 6.588 7.756 Source: Mission estimates based on Chinese data and Yangtze Economic Zone Transport Study.  TABLE A6: OVERALL ECONOMIC EVALUATION FOR THE CHENGYU EXPRESSWAY (Y million, December 1996 prices) Base Case Sensitivity Analyses - Net Benefits Assuming Costs Benefits 100% Operating cost Reduced increase in Poor mainte- increases and Construc- Operations and VOC Time Congestion Generated Total Net operating Low traffic nance and road low traffic Year tion Maintenance Total Savings Savings Benefits Traffic Benefits Benefits costs growth deterioration growth 1989 183.73 0.00 183.73 0.00 0.00 0.00 0.00 0.00 (183.73) (183.73) (183.73) (183.73) (183.73) 1990 468.10 0.00 468.10 0.00 0.00 0.00 0.00 0.00 (468.10) (468.10) (468.10) (468.10) (468.10) 1991 1,086.11 0.00 1,086.11 0.00 0.00 0.00 0.00 0.00 (1,086.11) (1,086.11) (1,086,11) (1,086.11) (1,086.11) 1992 1,518.16 0.00 1,518.16 0.00 0.00 0.00 0.00 0.00 (1,518.16) (1,518.16) (1,518.16) (1,518.16) (1,518.16) 1993 1,216.92 1.41 1,218.33 21.11 19.98 232.51 1.86 275.46 (942.88) (942.88) (942.88) (942.88) (942.88) 1994 641.13 13.90 655.04 68.96 76.12 244.97 5.54 395.59 (259.45) (259.45) (259.45) (259.45) (259.45) 1995 288.66 35.03 323.69 263.26 249.22 177.73 24.12 114.32 390.63 390.63 390.63 390.63 390.63 1996 61.05 68.76 129.81 296.09 260.01 175.97 27.18 759.25 629.44 629.44 629.44 629.44 629.44 1997 3.82 129.25 133.07 329.06 287.76 189.36 30.29 836.47 703.40 574.15 642.27 757.90 513.02 1998 0.89 129.25 130.14 365.73 318.51 203.78 33.76 921.77 791.63 662.38 723.66 833.96 594.41 1999 0.44 129.25 129.69 441.15 385.62 228.26 40.90 1,095.92 966.23 836.98 883.99 991.09 754.74 2000 0.00 375.89 375.89 440.31 378.55 208.78 40.82 1,068.46 692.57 316.68 610.80 828.82 234.91 2001 0.00 129.25 129.25 480.45 411.30 217.71 44.85 1,154.31 1,025.06 895.81 935.62 1,005.91 806.37 2002 0.00 129.25 129.25 523.26 446.89 226.90 49.11 1,246.17 1,116.92 987.67 1,019.30 1,060.96 890.05 2003 0.00 129.25 129.25 571.29 485.56 236.22 53.78 1,346.84 1,217.59 1,088.34 1,110.97 1,119.31 981.72 2004 0.00 129.25 129.25 623.73 527.57 245.98 58.89 1,456.17 1,326.92 1,197.67 1,210.47 1,180.19 1,081.22 2005 0.00 375.89 375.89 681.01 573.21 256.02 64.49 1,574.74 1,198.85 822.96 1,071.65 1,082.04 695.76 2006 0.00 129.25 129.25 734.67 613.73 260.78 69.80 1,678.98 1,549.73 1,420.48 1,412.51 1,208.19 1,283.26 2007 0.00 129.25 129.25 791.82 656.73 265.89 75.46 1,789.90 1,660.65 1,531.40 1,512.76 1,205.69 1,383.51 2008 0.00 129.25 129.25 853.10 702.33 270.15 81.55 1,907.13 1,777.88 1,648.63 1,618.55 1,196.62 1,489.30 2009 0.00 129.25 129.25 918.75 750.63 272.09 88.11 2,029.57 1,900.32 1,771.07 1,728.74 1,179.40 1,599.49 2010 0.00 568.48 568.48 987.38 801.70 274.58 95.15 2,158.82 1,590.34 1,021.87 1,405.74 830.11 837.26 2011 0.00 129.25 129.25 910.99 745.53 248.84 88.30 1,993.65 1,864.40 1,735.15 1,693.28 771.56 1,564.03 2012 0.00 129.25 129.25 815.08 677.74 217.84 80.25 1,790.92 1,661.67 1,532.42 1,506.77 426.59 1,377.52 2013 (2,306.65) 129.25 (2,177.40) 684.36 504.39 183.24 67.48 1,439.47 3,616.87 3,487.62 3,489.94 2,375.68 3,360.69 NPV 876.17 368.98 577.17 354.76 69.98 ERR 14.62% 13.16% 13.79% 13.24% 12.23% Note: Construction salvage value at 50% of original cost is assumed in year 2013. Total economic cost = Y 8,194.81 million. Total economic cost of expressway construction = Y 5,469.02 million. First year benefit ratio = 13.10%.  TABLE A7: ECONOMIC EVALUATION FOR SECTION 1 (CHENGDU-JIANYANG) (Y million, December 1996 prices) Costs Benefits Operations Reduced and VOC Time Congestion Generated Total Year Construction Maintenance Total Savings Savings Benefits Traffic Benefits Net Benefits 1989 83.73 0.00 83.73 0.00 0.00 0.00 0.00 0.00 (83.73) 1990 165.59 0.00 165.59 0.00 0.00 0.00 0.00 0.00 (165.59) 1991 190.32 0.00 190.32 0.00 0.00 0.00 0.00 0.00 (190.32) 1992 187.83 0.00 187.83 0.00 0.00 0.00 0.00 0.00 (187.83) 1993 120.68 0.00 120.68 21.11 19.98 20.49 1.86 63.44 (57.25) 1994 9.81 2.34 12.15 37.32 35.19 16.76 3.28 92.55 80.40 1995 12.88 3.48 16.36 59.91 63.41 16.84 5.18 145.34 128.98 1996 0.67 8.23 8.89 70.63 71.90 18.24 6.11 166.89 158.00 1997 0.49 15.66 16.15 78.83 80.08 19.62 6.82 185.35 169.21 1998 0.08 15.66 15.74 87.98 89.18 21.10 7.62 205.88 190.14 (,, 1999 0.04 15.66 15.70 107.29 109.19 23.86 9.29 249.63 233.93 2000 0.00 51.28 51.28 103.54 104.52 22.36 8.80 239.23 187.95 2001 0.00 15.66 15.66 112.30 113.13 23.13 9.72 258.29 242.63 2002 0.00 15.66 15.66 120.48 122.42 24.15 10.54 277.59 261.93 2003 0.00 15.66 15.66 130.56 132.42 25.03 11.43 299.44 283.78 2004 0.00 15.66 15.66 141.43 143.19 26.11 12.38 323.11 307.45 2005 0.00 51.28 51.28 153.15 154.78 27.22 13.41 348.55 297.28 2006 0.00 15.66 15.66 161.01 161.97 27.85 14.06 364.89 349.23 2007 0.00 15.66 15.66 168.85 169.01 29.24 14.70 381.80 366.14 2008 0.00 15.66 15.66 176.57 175.79 30.27 15.32 397.95 382.29 2009 0.00 15.66 15.66 184.07 182.19 29.54 15.91 411.71 396.05 2010 0.00 94.91 94.91 189.57 188.05 30.01 16.45 424.08 329.17 2011 0.00 15.66 15.66 188.90 207.29 32.01 16.48 444.68 429.02 2012 0.00 15.66 15.66 212.62 235.10 33.03 20.07 500.81 485.15 2013 (327.56) 15.66 (311.90) 233.47 180.77 35.16 22.17 471.57 783.47 NPV 462.16 ERR 19.04% - Note: Construction salvage value at 50% of original cost is assumed in year 2013.  TABLE A8: ECONOMIC EVALUATION FOR SECTION 2 (JIANYANG-LAIFENGYI) (Y million, December 1996 prices) Costs Benefits Operations Reduced and VOC Time Congestion Generated Total Net Year Construction Maintenance Total Savings Savings Benefits Traffic Benefits Benefits 1989 70.48 0.00 70.48 0.00 0.00 0.00 0.00 0.00 (70.48) 1990 125.84 0.00 125.84 0.00 0.00 0.00 0.00 0.00 (125.84) 1991 605.96 0.00 605.96 0.00 0.00 0.00 0.00 0.00 (605.96) 1992 1,015.06 0.00 1,015.06 0.00 0.00 0.00 0.00 0.00 (1,015.06) 1993 868.78 0.83 869.61 0.00 0.00 155.80 0.00 155.80 (713.81) 1994 537.75 4.39 542.14 8.53 9.26 141.70 1.00 160.48 (381.66) 1995 236.27 23.11 259.38 133.83 93.41 112.97 15.22 355.43 96.05 1996 2.90 45.25 48.15 150.78 99.50 115.97 17.18 383.42 335.27 1997 2.11 87.46 89.58 168.68 111.03 125.07 19.22 424.01 334.43 1998 0.36 87.46 87.82 188.72 123.91 134.89 21.50 469.02 381.20 1999 0.18 87.46 87.64 229.88 152.33 150.72 26.18 559.11 471.47 CN 2000 0.00 244.84 244.84 234.05 152.66 139.67 26.67 553.05 308.21 2001 0.00 87.46 87.46 257.84 167.96 146.39 29.39 601.57 514.11 2002 0.00 87.46 87.46 284.33 184.79 153.11 32.41 654.63 567.17 2003 0.00 87.46 87.46 313.54 203.30 160.09 35.74 712.66 625.20 2004 0.00 87.46 87.46 345.75 223.66 167.31 39.41 776.13 688.67 2005 0.00 244.84 244.84 381.26 246.06 174.79 43.46 845.57 600.73 2006 0.00 87.46 87.46 417.91 268.79 178.87 47.64 913.22 825.76 2007 0.00 87.46 87.46 457.57 293.59 182.72 52.17 986.06 898.60 2008 0.00 87.46 87.46 500.94 320.64 186.30 57.12 1,064.99 977.53 2009 0.00 87.46 87.46 548.35 350.14 189.54 62.52 1,150.55 1,063.09 2010 0.00 388.72 388.72 600.17 382.30 192.39 68.44 1,243.30 854.59 2011 0.00 87.46 87.46 550.90 338.06 172.60 62.93 1,124.50 1,037.04 2012 0.00 87.46 87.46 463.46 280.26 149.68 52.97 946.37 858.91 2013 (1,425.37) 87.46 (1,337.91) 350.56 206.52 123.27 40.11 720.46 2,058.37 z NPV 83.00 ERR 12.43% - Note: Construction salvage value at 50% of original cost is assumed in year 2013.  TABLE A9: ECONOMIC EVALUATION FOR SECTION 3 (LAIFENGYI-CHONGQING) (Y million, December 1996 prices) Costs Benefits Operations Reduced and VOC Time Congestion Generated Total Net Year Construction Maintenance Total Savings Savings Benefits Traffic Benefits Benefits 1989 29.53 0.00 29.53 0.00 0.00 0.00 0.00 0.00 (29.53) 1990 176.67 0.00 176.67 0.00 0.00 0.00 0.00 0.00 (176.67) 1991 289.84 0.00 289.84 0.00 0.00 0.00 0.00 0.00 (289.84) 1992 315.27 0.00 315.27 0.00 0.00 0.00 0.00 0.00 (315.27) 1993 227.46 0.58 228.04 0.00 0.00 56.22 0.00 56.22 (171.82) 1994 93.58 7.17 100.75 23.11 31.67 86.52 1.26 142.55 41.80 1995 39.52 8.44 47.95 69.52 92.40 47.92 3.72 213.55 165.60 1996 57.48 15.29 72.77 74.68 88.61 41.76 3.89 208.94 136.17 1997 1.22 26.13 27.35 81.54 96.65 44.67 4.25 227.11 199.76 1998 0.44 26.13 26.57 89.03 105.42 47.79 4.63 246.87 220.30 1999 0.22 26.13 26.35 103.98 124.10 53.67 5.43 287.18 260.83 2000 0.00 79.77 79.77 102.72 121.37 46.75 5.35 276.18 196.41 2001 0.00 26.13 26.13 110.31 130.21 48.19 5.74 294.45 268.32 2002 0.00 26.13 26.13 118.45 139.69 49.64 6.16 313.94 287.81 2003 0.00 26.13 26.13 127.19 149.84 51.10 6.61 334.74 308.61 2004 0.00 26.13 26.13 136.56 160.72 52.56 7.10 356.93 330.80 2005 0.00 79.77 79.77 146.61 172.38 54.01 7.62 380.61 300.84 2006 0.00 26.13 26.13 155.75 182.96 54.05 8.09 400.86 374.73 2007 0.00 26.13 26.13 165.40 194.13 53.92 8.59 422.04 395.91 2008 0.00 26.13 26.13 175.58 205.90 53.58 9.12 444.19 418.06 2009 0.00 26.13 26.13 186.32 218.30 53.01 9.68 467.31 441.18 2010 0.00 84.85 84.85 197.64 231.35 52.18 10.26 491.44 406.59 2011 0.00 26.13 26.13 171.19 200.19 44.22 8.89 424.48 398.35 2012 0.00 26.13 26.13 139.00 162.39 35.13 7.21 343.74 317.61 2013 (553.72) 26.13 (527.59) 100.33 117.09 24.81 5.21 247.44 775.03 NPV 331.01 ERR 16.30% Note: Construction salvage value at 50% of original cost is assumed in year 2013.  TABLE AIO: ECONOMIC EVALUATION OF YA'AN-HONGYA ROAD UPGRADING (Y thousand, December 1996 prices) Traffic Volume in Converted Units Costs Benefits Sensitivity Analyses Low Gen Traffic, Op Non- Cost lncr of motorized Operations Generated Operating Total 100%, and All & and VOC Traffic Cost Benefits Other Traffic Tractors Construc- Mainte- Net Generated Time Total Net Decreases of Increase of Reduced by Benefits Year (AADT) (AADT) tion nance Total Savings Traffic Savings Benefits Benefits 50% 100% 20% Dccr by 20% 1990 624 184 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1991 704 192 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1992 799 203 22,400.00 0.00 22,400.00 0.00 0.00 0.00 0.00 (22,400.00) (22,400.00) (22,400.00) (22,400.00) (22,400.00) 1993 914 219 19,718.00 0.00 19,718.00 0.00 0.00 0.00 0.00 (19,718.00) (19,718.00) (19,718.00) (19,718.00) (19,718.00) 1994 1,053 243 16,202.00 0.00 16,202.00 0.00 0.00 0.00 0.00 (16,202.00) (16,202.00) (16,202.00) (16,202.00) (16,202.00) 1995 1,224 280 14,114.00 0.00 14,114.00 0.00 0.00 0.00 0.00 (14,114.00) (14,114.00) (14,114.00) (14,114.00) (14,114.00) J) 1996 1,285 294 0.00 184.00 184.00 11,173.00 363.00 569.00 12,105.00 11,921.00 11,921.00 11,921.00 11,921.00 9,572.60