China Hefei-xian Railway Project

Completion Report

Project Number: 33175 Loan Number: 1748 September 2007

People’s Republic of China: Hefei-Xi’an Railway Project

CURRENCY EQUIVALENTS Currency Unit

CNY1.00 $1.00

= =

–

yuan (CNY)

At Appraisal 21 June 2000 $0.1215 CNY8.2272

At Project Completion 31 October 2005 $0.1236 CNY8.0885

ABBREVIATIONS ADB CDB DMIS EA EIA EIRR FIRR HXR HXRCH ICB LAR LCB M&E MOR PCR PPTA PRC RP RRP RCMC RCSO SEIA SEPA TA WACC

– – – – – – – – – – – – – – – – – – – – – – – – –

Asian Development Bank China Development Bank dispatch management information system executing agency environmental impact assessment economic internal rate of return financial internal rate of return Hefei-Xi’an Railway Hefei-Xi’an Railway Construction Headquarters international competitive bidding land acquisition and resettlement local competitive bidding monitoring and evaluation Ministry of Railways project completion report project preparatory technical assistance People’s Republic of China resettlement plan report and recommendation of the President Railway Construction Management Center Railway Construction Support Office summary environmental impact assessment State Environmental Protection Administration technical assistance weighted average cost of capital WEIGHTS AND MEASURES

km m mu t

– – – –

kilometer meter traditional land area measure ton

NOTES (i) (ii)

The fiscal year (FY) of the Government and its agencies ends on 31 December. In this report, "$" refers to US dollars.

Vice President Director General Director

C. Lawrence Greenwood, Jr., Operations Group 2 H. S. Rao, East Asia Department (EARD) N. C. Rayner, Transport Division, EARD

Team leader Team member

S. H. Yoon, Transport Economist, EARD T. S. Capati, Associate Project Analyst, EARD

CONTENTS Page BASIC DATA MAPS

ii vi

I.

PROJECT DESCRIPTION

1

II.

EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation B. Project Outputs C. Project Costs D. Disbursements E. Project Schedule F. Implementation Arrangements G. Conditions and Covenants H. Consultant Recruitment and Procurement I. Performance of Consultants, Contractors, and Suppliers J. Performance of the Borrower and the Executing Agency K. Performance of the Asian Development Bank

1 1 2 3 4 4 5 6 6 7 7 7

III.

EVALUATION OF PERFORMANCE A. Relevance B. Effectiveness in Achieving Outcome C. Efficiency in Achieving Outcome and Outputs D. Preliminary Assessment of Sustainability E. Impact

7 7 8 9 9 10

IV.

OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment B. Lessons C. Recommendations

12 12 12 13

APPENDIXES 1. Project Framework 2. Chronology of Major Events in the Project’s History 3. Project Cost and Financing Source 4. Projected and Actual Disbursements 5. Planned and Actual Implementation Schedule 6. Organization Chart 7. Evaluation of Land Acquisition and Resettlement Activities 8. Environmental Impact Analysis 9. Compliance with Loan Covenants 10. Contract Packages Financed by the Asian Development Bank 11. Traffic Forecast 12. Financial Reevaluation 13. Economic Reevaluation 14. Social Impact and Poverty Reduction in the Project Area

14 17 20 22 23 24 25 33 36 42 50 52 56 59

BASIC DATA A.

Loan Identification 1. 2. 3. 4. 5. 6. 7.

B.

Country Loan Number Project Title Borrower Executing Agency Amount of Loan Project Completion Report Number

Loan Data 1. Appraisal – Date Started – Date Completed 2.

People’s Republic of China 1748 Hefei-Xi’an Railway Project People’s Republic of China Ministry of Railways $300,000,000 PCR: PRC 991

28 March 2000 11 April 2000

Loan Negotiations – Date Started – Date Completed

19 June 2000 21 June 2000

3.

Date of Board Approval

17 August 2000

4.

Date of Loan Agreement

4 December 2000

5.

Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions

4 March 2001 2 March 2001 none

Closing Date – In Loan Agreement – Actual – Number of Extensions

30 December 2005 28 June 2007 2

6.

7.

Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

8.

Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

Pool-based variable lending rate system for US dollar loans 20 5 Not Applicable

iii 9.

Disbursements a. Dates Initial Disbursement 2 March 2001 Effective Date 2 March 2001 b.

Category or Subloan 1 Civil Works 2 Equipment and Materials 3 Consulting Services 4 Front-End Fee 5 Unallocated Total

Final Disbursement 28 June 2007

Time Interval 76 months

Original Closing Date 30 December 2005

Time Interval 58 months

Amount ($) Original Allocation 76,700,000

Last Revised Allocation 72,000,000

200,620,000

224,800,000

200,000 3,000,000 19,480,000 300,000,000

200,000 3,000,000 0 300,000,000

Net Amount Available 72,000,000

Amount Disbursed 71,813,390

Undisbursed Balance a 186,610

0

224,800,000

215,124,957

9,675,043

0 0 0 0

200,000 3,000,000 0 300,000,000

171,860 3,000,000 0 290,110,207

28,140 0 0 9,889,793

Amount Canceled 0

IDC = interest during construction. a It was cancelled at loan closing on 28 June 2007.

10. C.

Local Costs (ADB-Financed): None

Project Data 1.

Project Cost ($ million)

Cost

Appraisal Estimate

Foreign Exchange Cost Local Currency Cost Total 2.

913.0 1,922.0 2,835.0

844.9 1,771.8 2,616.7

Financing Source ($ million)

Cost

Appraisal Estimate

A. Implementation Costs Borrower Financed ADB Financed Other External Financing Subtotal (A) B. IDC Costs and Front-End Fee Borrower Financed ADB Financed (Front-End Fee only) Other External Financing Subtotal (B) Total

Actual

Actual

2,354.9 297.0 0.0 2,651.9

2,061.8 287.1 0.0 2,348.9

180.1 3.0 0.0 183.1

264.8 3.0 0.0 267.8

2,835.0

2,616.7

ADB = Asian Development Bank, IDC = interest during construction.

iv

3.

Cost Breakdown by Project Component ($ million)

Component Civil Works Equipment and Materials Environmental Protection, Mitigation, and Monitoring Land Acquisition, Compensation, and Resettlement Administration, Consulting Services, and Miscellaneous Costs Contingencies Interest and Other Charges During Construction and Front-End Fee

Appraisal Estimate 1,375.2 611.8 38.5 211.2

Total

4.

122.1 293.1 183.1

146.7 0.0 267.8

2,835.0

2,616.7

Project Schedule

Item

Appraisal Estimate

Date of Contract with Consultants: International (marketing and project management) Domestic (construction supervision) Completion of Engineering Designs Civil Works Contract: Date of Award Completion of Work Equipment and Supplies: First Procurement Last Procurement Completion of Equipment Installation Start of Operations: Completion of Tests and Commissioning Beginning of Start-Up (Trial Operation)

5.

Actual 1,386.1 613.9 55.5 146.7

Actual

October 2000 June 2001

November 2004 December 1999 September 2001

October 2000 June 2005

April 2001 December 2004

November 2000 June 2004 June 2004

May 2001 November 2006 March 2007

June 2005 June 2005

January 2004 January 2004

Project Performance Report Ratings Ratings

Implementation Period From August to December 2000 From January to December 2001 From January to December 2002 From January to December 2003 From January to August 2004 From September to December 2004 From January to December 2005 From January to August 2006 From September to December 2006 From January to March 2007 HS = highly satisfactory, S = satisfactory.

Development Objectives

Implementation Progress

S S S S S S S S S S

S S S S S HS HS HS S S

v

D.

Data on Asian Development Bank Missions

Name of Mission Fact-Finding Appraisal Inception Review 1 Review 2 Review 3 (concurrently with Loan 1850-PRC: Ganzhou-Longyan Railway) Review 4 Review 5 Project Completion Review a

b

Date

No. of Persons

No. of PersonDays

Specialization of Members a

1–18 December 1999 28 March–11 April 2000 7–16 December 2000 19–24 November 2002 21–27 November 2003 7–13 December 2004

6 5 3 3 2 2

90 48 30 18 14 7

a, b, d, f, g, h a, b, c, d, f a, b, j a, e, j e, j e, j

8–12 December 2005 12–15 December 2006 21–30 May 2007

2 2 4

10 8 40

e, j d, j a, d, i, j

a - engineer, b - financial specialist, c - counsel, d - economist, e - transport specialist, f - programs officer, g - environmental specialist, h - social development specialist, i - resettlement specialist, j - project analyst. The project completion report was prepared by Seok-Hyun Yoon, Transport Economist/Mission Leader; and Teresita S. Capati, Associate Project Analyst, assisted by an international consultant (civil engineer) and a domestic consultant (resettlement specialist).

Map 1

I.

PROJECT DESCRIPTION

1. The national economy of the People’s Republic of China (PRC) has been expanding rapidly since the adoption of economic reform measures in 1978. However, the lack of costeffective transportation in the western and central provinces of the PRC has impeded economic development and the people are poor. The Government’s ambitious Railway Development Plan for 1998–2004 gave priority to unserved areas, particularly railway lines that would improve links between the poor inland provinces in the western and central PRC and the more prosperous coastal areas. This plan was focused on (i) expanding the rail network and removing constraints; (ii) encouraging construction of joint venture railways to develop local economies; (iii) improving the efficiency of the existing system by using new technology and modern management tools; (iv) reducing subsidies for infrastructure through appropriate pricing and commercialization of services; (v) implementing institutional and structural reforms to provide autonomy to railway entities by linking responsibility and accountability; and (vi) encouraging nongovernment investment in infrastructure and related services. 1 The Hefei-Xi’an Railway Project (the Project) is a direct outgrowth of these initiatives in an effort to promote economic growth and reduce poverty in the four inland provinces traversed by the Project. 2. The $2.8 billion railway Project links with four north-south railways and traverses 27 counties in four poor interior provinces (Anhui, Henan, Hubei and Shaanxi), including 15 poverty counties (Map 2, page vii). It provides the critical east-west transport corridor linking the central and western areas with the more developed eastern regions. The 27 counties had a population of 22.4 million in 2000, of which 18.4 million (82%), were rural. Over 5.7 million people (31% of the rural population) were living below the international poverty line, 2 a poverty incidence nearly double the national average of 16.5% at the time of appraisal. The principal goal of the Project was to promote economic growth in the poor interior provinces in order to raise living standards and reduce poverty. The Project was classified as an economic growth project. The Project Framework 3 is presented in Appendix 1 and the chronology of major events is in Appendix 2. II. A.

EVALUATION OF DESIGN AND IMPLEMENTATION

Relevance of Design and Formulation

3. At the time of appraisal the Asian Development Bank (ADB) recognized the continuing importance of railways in providing cost-effective transportation of large volumes of goods and people over long distances. ADB’s railway sector strategy was focused on (i) expanding the railway system by constructing new lines, particularly in the poorer areas of inland provinces; (ii) modernizing and increasing capacity on key routes of the national railway system; and (iii) commercializing railway operation. With poverty reduction as ADB's overarching goal, preference was given to projects located in poorer parts of the country and those that connect poor isolated areas to areas in the economic mainstream. The goal is to reduce the costs of transport to and from rural areas and between growth centers, and increase access of the poor

1

2

3

ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Hefei-Xi’an Railway Project. Manila (para. 15, page 6). The commonly used standard for the international poverty line is $1 per capita per day, measured in 1985 international prices and adjusted to local currency using purchasing power parities (PPP). The Project Framework was formulated by the project completion review mission.

2

to employment, markets, education, and health care. The Project was and is fully consistent with that strategy. 4 4. The Project was formulated under a project preparatory technical assistance (PPTA) 5 project that reviewed the Government’s feasibility study, environmental impact assessment and proposed resettlement plan, thereby strengthening the project preparatory work. B.

Project Outputs 1.

Construction of the Hefei to Xi’an Railway

5. The project railway has been effectively integrated into the existing network. In addition to increasing transport capacity in the east-west corridor, the connections between the project railway (Hefei-Xi’an Railway, or HXR) and four major north-south railway lines 6 are helping to improve overall rail efficiency in the central PRC, and are having a significant impact on the poor areas west of Xi'an, particularly in Gansu and Qinghai provinces, and the autonomous regions of Ningxia and Xinjiang. The Project thus supports the Government's strategic objective of accelerating development of the central and western regions of the PRC by improving transportation links to the coastal regions. 6. At appraisal the project scope comprised constructing a 954 kilometer (km) single-track, standard-gauge railway between Hefei and Xi’an. 7 The Project includes 407 major bridges with a total length of about 88 km; 4,732 minor bridges and culverts; and 83 tunnels with a total length of about 81 km. The longest tunnel is 12.3 km through the Qinling Mountains in Shaanxi Province and the longest bridge is the 2.76 km bridge over the Yellow River in Henan Province. Forty-four civil works packages, 8 including earthworks, tunnels, bridges and culverts, were completed by December 2004. Track laying, telecommunications, signaling and electrification were completed by June 2003. Ninety-five stations have been provided along the main railway line; 39 are passing stations only, 52 are passenger stations, and 4 are marshalling yards (24 of the other stations also have freight handling facilities). 7. The technical standard for the project railway followed the Railway Line Design Protocol for class 1 railway 9 of the Ministry of Railways (MOR), with a maximum gradient of 0.6% for single locomotives and 1.3% in mountainous areas for double locomotives, with minimum curve radius of 1,200 meters (m) for normal sections, 600 m for hard sections and 400 m for connecting lines. For train control, a semiautomatic block relay signaling system with electric interlocking and color light signals were used. Bridges and culverts were designed for 100-year 4

5

6

7

8

9

ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Hefei-Xi’an Railway Project. Manila (para. 29, page 9). ADB. 1999. Technical Assistance to the People’s Republic of China for the Hefei-Xi’an railway Project. Manila (TA 3251-PRC, for $665,000, approved on 3 September). Transport and Economic Research Associates, Inc. (TERA), USA in association with Fourth Survey and Design Institute, PRC. The four major north-south railway lines are Taiyuan-Huaihai railway at Nanyang, Beijing-Guangzhou railway at Xinyang, Jing-Jui Railway at Huangchuan, and Shanghai-Guangzhou Railway at Hefei (see Map 1, page vi). The actual completed length was 1,030.2 km, which includes the 70.4 km Lishan-Xiaolin connecting section exclusively financed by the MOR under loan covenants. Eleven contract packages were tendered using international competitive bidding procedures in accordance with ADB guidelines and funded from the loan; 33 packages were tendered under local competitive bidding procedures, funded entirely by the Borrower. Class 1 railways are defined as those that will haul 15 million tons per annum and have a maximum operating speed of 120 km per hour.

3 floods with 300-year floods used for large bridges, based on available data; tunnels were constructed to the standard clearance for national railways. The 407 km Xi’an to Nanyang section was electrified to ensure high operational efficiency given the expected traffic densities and gradients. On this section, electric locomotives are used, while diesel locomotives will work the remaining 547 km Nanyang-Hefei section. 8. The quality of the completed works is high and consistent with international standards. Slopes have been adequately protected with a combination grass planting, retaining walls and arch block slope protection. The spoil from tunnel excavation was used for constructing embankments, leveling areas for relocated housing, flood control dikes and the like. 2.

Service, Access, and Link Roads 10

9. During implementation of the Project about 1,500 km of temporary service roads were constructed to facilitate the construction of the civil works, 298 km of which have been turned over to local authorities to be used for access to the railroad and local villages. Access and link roads were also constructed or upgraded under the Project by provincial authorities to provide wider market access for people living in rural areas, township and village enterprises, and mining activities. 11 3.

Institutional Strengthening

10. Provision was included in the Loan for institutional strengthening in the form of improved marketing and business development to attract industrial development. This initiative was included in the Project because of the changing environment with regard to competition. In the past PRC Railways operated from a virtual monopoly position, while today rail services are provided in an increasingly competitive market. It therefore became necessary to collect statistical data along the railway and provide training to key staff in modern marketing and business development techniques. International consultants were engaged who collected marketing information and other relevant information along the line. Training of key staff was then undertaken, first overseas and finally in the PRC. Eight high-level MOR managers were selected for overseas training in the United Kingdom. For the training in the PRC, 16 delegates who were involved in marketing along the railway line attended a three-day program covering marketing theory, strategy and application of marketing strategy to railway operations. The efforts of the consultants were well received by MOR. C.

Project Costs

11. The actual final cost of the Project was $2,616.7 million, compared with $2,835.0 million estimated at appraisal. Actual final cost comprised $870.6 million in foreign exchange costs ($913.0 million at appraisal) and $1,746.1 million equivalent in local currency cost ($1,922.0 million at appraisal). The actual civil works cost was $1,386.1 million versus $1,375.2 million estimated at appraisal, a difference of less than 1%. 10

Access roads are generally short roads to provide access from villages and/or adjacent highways to the railway stations. Link roads provide access to the railway from other, more distant, population and industrial centers. 11 At appraisal it was envisaged that 51 access roads (totalling 407 km) and 13 link roads (totalling 1,122 km) would be built and/or upgraded to connect the railway with the hinterland. MOR was not directly responsible to ensure that the planned roads were completed and could not provide verification that all the roads were completed as set out at appraisal; however, quarterly progress reports submitted by MOR contained listings of the access and link roads being constructed.

4

12. Actual equipment and materials costs were marginally (less than 1%) higher than estimated ($613.9 million compared with $611.8 million estimated at appraisal). The cost of environmental protection, mitigation and monitoring increased more significantly (from $38.5 million at appraisal to an actual cost of $55.5 million). The increase of about 44% was primarily due to difficult tunnel and bridge construction in the Qinling Mountains in Shaanxi Province that required additional environmental protection. Land acquisition and resettlement costs were significantly less than estimated at appraisal ($211.2 million at appraisal compared to the cost of $146.6 million). The actual costs of land acquisition and resettlement including $60.7 million paid under civil works cost were $207.3 million, which was 5.9% less than estimated at appraisal. Actual expenditures for administration, consulting services and miscellaneous costs were $146.7 million, compared with the appraisal estimate of $122.1 million, an increase of about 20%. 13. The financing plan prepared at appraisal called for ADB to finance 32.9% ($300 million) of the estimated foreign exchange expenditures and 10.6% of the total project cost. The remaining 67.1% of the estimated foreign exchange expenditures ($613 million) was to be financed by MOR ($313 million) and a loan from the China Development Bank (CDB) for $300 million. Local currency expenditures were to be covered by MOR ($1,003 million) and the CDB loan for $921.7 million. ADB actually financed 11.1% ($290.1 million) of the total cost (33.3% of foreign exchange costs). The remaining foreign exchange expenditures ($580.5 million) and the actual local currency expenditures ($1,746.1 million) were financed by MOR ($824.4 million) and the loan from CDB ($921.7 million). Appendix 3 presents a detailed comparison of appraisal estimates with actual costs and the appraisal and actual financing plans. D.

Disbursements

14. Disbursement was generally accomplished through reimbursement, commitment letter and direct payment. An imprest account facility was also used to help reduce the cash flow difficulties in financing project expenditures during implementation. 12 MOR had sufficient accounting capabilities and established adequate internal control, accounting, and auditing procedures to ensure the efficient use of the imprest fund. Disbursement began in March 2001 and was completed in June 2007. Of the $300 million of loan proceeds, $9,889,793 was not utilized and cancelled at loan closing on 28 June 2007. Appendix 4 shows actual annual disbursement during project implementation. E.

Project Schedule

15. The loan was approved on 17 August 2000, signed on 4 December 2000 and became effective on 2 March 2001. Advance procurement action was approved by ADB for the procurement of civil works. The advance action involved (i) issuing a general procurement notice, (ii) prequalification of bidders, (iii) issuing invitations to bid, (iv) opening and evaluating bids, and (v) completion of related activities up to the stage of contract award. Land acquisition and resettlement activities began during the period from 2000 to 2001 and were completed in August 2003, about 8 months later than envisaged at appraisal. This delay did not adversely affect project construction. 16. Civil works and buildings were scheduled to start in November 2000, but actually started early, in August 2000 and were completed in December 2004, one year earlier than envisaged 12

An initial advance of $3.0 million was deposited to the imprest account to pay suppliers and contractors for ADB’s share of eligible project expenditures incurred in foreign currency.

5 at commencement. Track laying, which was expected to start in August 2001, actually started about one month late, but was completed on schedule in June 2003. Telecommunications, signaling and electrification started 5 months late in January 2002, but were completed six months early in December 2003. Procurement and installation of the dispatch management information system (DMIS) and axle count systems were scheduled to start in January 2004 but were delayed nearly one year, starting January 2005; they were completed on time in October 2005. 17. Trial operations (freight) were expected to commence in July 2004, but started 5 months early in February 2004; the trials were completed 12 months late, in December 2006. Passenger operation started in April 2006. The purchase of additional traffic safety equipment in order to enhance project benefits was approved in January 2005, through utilization of loan savings; this took place after award of all the material contracts, necessitating extension of the loan closing date to allow for disbursements related to the safety equipment procurement. The Project’s main components were completed well within the schedule prepared at the time of appraisal. The final, full commercial license was granted on 18 May 2007. A graphical comparison of appraisal and actual implementation schedules is presented in Appendix 5. F.

Implementation Arrangements

18. As envisaged and agreed at appraisal, MOR’s Railway Construction Management Center (RCMC) had overall responsibility for Project implementation. To provide continuity, it was agreed at appraisal that MOR would be the Executing Agency for the Project, because the Project traversed four provinces and the operation of the completed railway would be the responsibility of three separate Railway Administrations. 13 MOR, through the Foreign Capital and Technical Import Center, was responsible for procurement and liaison with ADB. For on-site project management, RCMC established the HXR Construction Headquarters in Xi’an in May 2000. The organizational charts for the Project are presented at Appendix 6. 19. Construction supervision and quality control supervision was provided by 17 domestic consulting firms. Altogether, 30 supervision contracts were executed with 850 supervision engineers engaged for the work. Land acquisition and resettlement monitoring was undertaken by the Research Institute of Foreign Capital Utilization in Southwest Jiaotong University. 20. While MOR was responsible, through RCMC, for implementation of land acquisition and resettlement in accordance with the agreed Resettlement Plan (RP), the institutional responsibility actually rested with the provinces, prefectures and counties traversed by the project railway, as is the case for all public sector development projects. Therefore, the detailed land acquisition and resettlement planning and implementation were carried out in accordance with local regulations and standards, which are generally consistent with the agreed RP under the loan agreement. However, the RP did not clearly stipulate compensation rates that were to be adopted, as these were left to each local administration. The resettlement cost included in the RP was simply a feasibility level budget, with estimated unit costs that were much higher than the prevailing compensation rates used by local governments. 21. The amount of land acquired permanently was less than the amount estimated in the RP (59,062 mu 14 vs. 63,071 mu), while the amount of temporarily acquired land was exceeded that 13

The three railway administrations are based in: Zhengzhou, responsible for 700 km of the HXR route; Nanchang, responsible for 100 km; and Shanghai, responsible for 154 km. 14 One mu is equivalent to 0.0667 hectare.

6

estimated in the RP (19,542 mu vs. 16,305 mu). The area of houses demolished (1,108,060 m2) exceeded that set out in the RP (935,889 m2). The total cost of land acquisition and resettlement was CNY 1,823 million, 5.5% lower than the estimated budget in the RP (see Table A7.3). The total compensation actually paid to affected persons was 25.6% lower than budgeted in the RP due to the overestimation of compensation standards in the RP. The number of persons affected by house demolition, however, fell to 19,302 compared with the estimates of 48,720 at appraisal due to estimation errors. 15 A detailed discussion of land acquisition and resettlement activities is given in Appendix 7. 22. Environmental impact and mitigation measures were monitored by the Environment Evaluation and Engineering Center of Scientific Institute of Railway. The project facilities were accepted by the State Environmental Protection Administration (SEPA) in November 2005. Details of environmental impact and mitigation measures are presented in Appendix 8. The Project encountered no significant issues relating to indigenous peoples during implementation. Only 0.68% of all affected people were ethnic minorities, mainly of Hui and Mongolian nationality, who live in the same communities as people of Han ethnicity. Resettlement of ethnic minorities was undertaken in the same way as that of the Han majority, and minorities expressed satisfaction with their resettlement compensation. G.

Conditions and Covenants

23. The status of compliance with major covenants is presented in Appendix 9. Out of the forty one covenants listed, forty that are due have been complied or are being complied with, and one is not yet due. No covenants were modified, suspended or waived during implementation. H

Consultant Recruitment and Procurement

24. The loan included provision for recruitment of international consultants in association with domestic consultants for institutional strengthening to improve marketing and business development so as to attract industrial development along the railway. The consultants were engaged in accordance with ADB’s Guidelines on the Use of Consultants. The consultancy was carried out satisfactorily, including overseas training for key high-level MOR managers and incountry training of key MOR staff involved in business development and marketing along the railway. 25. Domestic consultants were engaged, in accordance with procedures followed in the PRC and acceptable to ADB, for (i) monitoring land acquisition and resettlement, (ii) monitoring environmental and socioeconomic impacts, (iii) technical design, (iv) survey, (v) prequalification of international competitive bidding (ICB) contractors, (vi) tendering, and (vii) construction management and construction supervision. The domestic consultants performing those services were experienced and performed satisfactorily, without any significant problems. 26. For the 11 contracts funded from loan funds, procurement was undertaken in accordance with ADB’s Procurement Guidelines. For the 33 contracts funded form the Borrower’s own resources, procurement was carried out in accordance with local competitive biding (LCB) procedures acceptable to the ADB. As mentioned above, domestic organizations were responsible for carrying out tendering on the Project. No significant problems were 15

The average demolition area per household was 223 m2 compared with estimates of 137 m2 per household in the RP.

7 encountered in the packaging of contracts, preparation of bidding documents or evaluation and award of contracts. The details of contract packages are presented at Appendix 10. I.

Performance of Consultants, Contractors, and Suppliers

27. Civil works contractors performed satisfactorily with all works being completed well before the schedule prepared at the time of appraisal. Also, track laying was completed quite satisfactorily, and on time. Telecommunications, signaling and electrification were also completed satisfactorily, about 6 months ahead of the original schedule. Suppliers of Portland cement, steel, track and other materials presented no problems and such materials were delivered on time. J.

Performance of the Borrower and the Executing Agency

28. MOR, through its RCMC, was designated as the Executing Agency for the Project. The Borrower, represented by the Ministry of Finance (MOF) and MOR/RCMC, performed satisfactorily. During implementation, both the Borrower and MOR/RCMC generally made timely decisions and initiated appropriate actions. MOF also ensured that local counterpart funds were made available on a timely basis. With respect to the physical implementation of the railway facilities, RCMC staff members were well experienced in project implementation and railway operations and management, and were considered reasonably diligent and dedicated to the successful and timely completion of the Project. MOR/RCMC also rationalized the location of stations to facilitate the increased traffic. K.

Performance of the Asian Development Bank

29. An inception mission was undertaken in December 2000 and five review missions were fielded during implementation. The appraisal was well prepared, with traffic projections and the economic assessment carefully prepared and more realistic than has been the case with previous railway projects. All other processing activities were considered satisfactory. The Project was completed on time with no delay in procurement or disbursements. 30. Review missions visited the resettlement sites and relocated housing, and met with affected people to ensure satisfactory implementation, as per ADB’s Involuntary Resettlement Policy. However, the fact that resettlement compensation was considerably less than set forth in the RP was not discovered until late in the project implementation cycle and confirmed by the project completion review mission (the Mission). ADB’s monitoring of resettlement activities should have included a resettlement specialist on review missions. ADB review missions did resolve many problems and difficulties that occurred during project implementation, and the working spirit embodied by ADB’s officials was deeply respected by the executing agency (EA). The ADB encouraged the EA and local governments to implement associated components of the Project to maximize project benefits. Overall, ADB’s performance was considered satisfactory. III. A.

EVALUATION OF PERFORMANCE

Relevance

31. The rationale for the Project is sound given the high priority accorded to development of a more direct and efficient transportation corridor from the four poor interior provinces to the coastal regions. In particular it serves as an efficient outlet for large quantities of high-grade,

8

low-sulfur coal from Shaanxi, helping to reduce environmental emissions from the use of highsulfur coal. The increased transport capacity will encourage development of other natural resources and establishment of new industries, including agroprocessing, in the projectinfluenced area. 32. Without the Project, roads and the overcrowded Xi’an-Lianyungang Railway would have been the only alternative means of transport in the project area. Road upgrading to accommodate the projected freight and passenger loads would have been a massive undertaking. Economic development in the project area would have been much slower or even stifled, and road accidents and deaths would have increased. The Project provides the national railway network with travel time and distance savings by offering shorter travel distances for east-west traffic as well as improved connections for existing north-south lines. Cost-effective transport provided by the Project has induced new industrial and natural resources development that will continue to generate significant economic development in the project area and reduce poverty (para. 40). 33. The Project as formulated anticipated benefits from both freight operations (predominantly coal) and passengers. Early operations show that the volume of freight and passengers is considerably higher that estimated at the time of appraisal (para. 38). Actual freight volumes for 2005 exceed the appraisal estimates by 9.7%. At present, these volumes could be even higher, if not for a shortage of wagons. The daily freight traffic has reached the capacity envisaged for the Project, and Xi’an Railway Administration Bureau is preparing an upgrade plan to be funded from government’s own resources. The Project is rated “highly relevant”. B.

Effectiveness in Achievement Outcome

34. The Project is considered “highly effective” because it (i) provides for added capacity of cost-effective transport for both industrial outputs and people in the project area; (ii) enables the economy to grow and endemic poverty to be reduced through increased employment and higher income levels; (iii) provides for safer transportation of both freight and passengers, particularly in winter; and (iv) facilitates the delivery of health, education, communication, and other public services to the rural poor. 35. The traffic analysis for the project railway is presented in Appendix 11. The traffic growth pattern from 2007 to 2024 is based on (i) actual traffic (2004–2006), (ii) actual and expected industrial and population growth in the project area, (iii) network development, and (iv) expected train scheduling and wagon allocation. The revised forecasts exceed the appraisal estimated for both freight and passengers. Even though initial passenger operation was delayed by nearly one year, the growth has been rapid and passenger volumes are projected to exceed appraisal estimates in 2009. The rapid growth from 2004 for freight and from 2005 for passengers is attributable to the accelerated industrial development in the project area and the increased need for coal transport from the west. Industrial development along the railway includes, (i) iron mining development in Zhashui County of Shaanxi province and Huoqui County of Anhui province; (ii) high-quality coal mine development in Yishang County of Anhui province; (iii) alkali mine development in Tongbai County of Nanyang; (iv) Wanxi power plant development; (v) ethanol production in Nanyang; (vi) mutton and beef processing in Nanyang; and (vii) “industrial town” development at Pingqiao and Minggang, to mention a few. 36. Industrial siding development has been promoted to improve transport efficiency by linking the railway and the premises of larger volume rail customers. MOR has taken steps to

9 encourage shippers to remove the need for additional handling and road transport for local collection and delivery. As of May 2007, eight applications were being processed, including four industrial sidings that were put into operation. Two applications are under consideration. 37. To increase operational efficiency and safety, a DMIS was introduced. DMIS enables marshalling yards to be more efficiently operated, as this modern technology can accommodate the rapid increase in traffic demand that is being experienced. C.

Efficiency in Achieving Outcome and Outputs

38. MOR and the Borrower implemented the Project efficiently and made the necessary counterpart funds available on a timely basis. The planned outputs were completed ahead of schedule or on-time (Appendix 6). The physical facilities were completed and in operation before the original loan closing, although commercial operation was delayed due to prolonged commissioning and trial operation to ensure safe operation. The traffic analysis presented in Appendix 11 shows that freight traffic volumes have already exceeded appraisal estimates; freight volumes reached 86% of capacity in 2006. 39. The financial internal rate of return (FIRR) was recalculated using the major assumptions given in Appendix 12. The recalculated FIRR, in constant prices, is higher than at appraisal (8.1% vs. 7.0%), due to higher tariff rates than anticipated and rapid growth in traffic. The recalculated weighted average cost of capital (WACC), in constant prices, is 4.9%. Importantly, taking into account the fact that traffic trends are improving and economic growth is very solid in the affected region, the Project will undoubtedly facilitate the transport of an increased number of passengers and freight. Against this backdrop, the operating capacity has been strengthened, resulting in improved overall efficiencies. The Mission confirmed that MOR and the associated railway administrations could provide adequate future rail maintenance services, rolling stock and funds. The reevaluation shows that the Project is financially viable, which is confirmed by progressively increasing operational revenues. 40. The economic revaluation contained in Appendix 13 uses the same “with-” and “withoutproject” approach used at appraisal. The economic internal rate of return (EIRR) based on current data is 19.6%, compared with 15.8% at appraisal, due primarily to higher traffic than originally estimated. The economic reevaluation is considered conservative, because benefits arising from project-related access and link roads and the cost savings due to accident avoidance have not been included in the calculations. Time savings from the diversion of freight traffic from other rail lines were not included in the analysis. Cost-effective railway transport has benefited passengers and shippers, as well as producers and consumers of transported goods. EIRR would increase significantly if these additional benefits were included as project-related benefits. The rapid industrial development along the railway will increase the production of minerals, coal, chemicals, iron and steel, and other industrial outputs. On the basis of these analyses, the Project is rated “highly efficient”. D.

Preliminary Assessment of Sustainability

41. The Project is technically and financially sound. Production trends indicate that coal and petroleum production increased significantly. The demand for coal and petroleum will continue, and as the establishment of other industrial operations continues and expands, the demand for rail services in the project area will continue to increase. The railway administrations responsible for the operation of the railway have appropriate, well trained staff capable of efficient operation and maintenance of the facilities. Modern management information systems are in use, up-to-

10

date financial accounting systems are in place, and staff members have been adequately trained in their use. The project railway not only links east and west, but provides critical network connections for north-south traffic, shortening the transport distance from the northwest to central-south and eastern PRC, and from the southwest to the east. 42. Access and link roads constructed under the Project provide transport network continuity in the project area. Of the 1,500 km of temporary service roads constructed to facilitate the construction of the civil works, 298 km have been retained as permanent access roads. All access and link roads have been turned over to provincial and other local authorities for maintenance and public use (para. 9). 43. The financial reevaluation (Appendix 12) highlights the financial sustainability of the Project, particularly with the establishment of freight and passenger tariffs that will allow full cost recovery, and the projected high demand for freight and passenger transport facilities. The projected financial statements (Appendix 12) indicate that tariff revenues will be sufficient to cover operation and maintenance costs, income taxes and debt service to ADB, and to provide a reasonable rate of return over the long term. 44. The demand for and production of coal in Shaanxi Province are expected to continue to rise. Furthermore, the demand for rail services in the project area will continue to increase as other industrial operations continue to expand. Taking into account the fact that the Project is projected to continue to be highly profitable with sufficient volume of passengers and freight, the sustainability of Project is rated “most likely”. E.

Impact

45. The goal of the Project was to promote economic growth in the four poor interior provinces, in order to raise living standards and reduce poverty. During implementation of the Project (2000–2006), per capita incomes in the project area increased by 41% to 78%; the percentage of the rural population living below the poverty level was reduced significantly between 1999 and 2006 (see Table 1, below). The Project has provided better access to: (i) health care; (ii) larger markets; (iii) better employment opportunities; and (iv) safer, low-cost transportation. Appendix 14 presents a detailed review of the social and poverty reduction impact of the Project in the project area. For the main cities 16 along the railway, per capita gross domestic product (GDP) increased an average of 18.2 % from 2004 to 2005, with the highest increase in Hefei (40.9%). Table 1: Percentage of People Below the Poverty Level City Shangluo Nanyang Xinyang Lui’an

1999 38.17

2000

2001

2005

2006 22.46

7.10

10.73 11.19

9.06 12.15

8.71

Sources: Meetings/interviews with local governments during the project completion review mission, Lui’an Statistical Yearbook 2006, and websites of local governments.

46. A total of 306,130 person-months of unskilled laborer services were used; 211,399 person-months were worked by local laborers, of which 151,136 person-months (71.5%) 16

Xi’an, Weinan, Shangluo, Nanyang, Xinyang, Lui’an, and Hefei.

11 involved people living below the poverty line. The average annual net income for urban people increased between from 56% to 81% from 1999 to 2005, and the annual net income for farmers rose between 41% and 53% during the same period. (Appendix 14) Women supplied about 10% of the labor used during construction. 47. To ascertain the economic impact of the project on the affected area, the Mission visited selected sections in the project area (Shangluo, Nanyang, Xinyang and Liu’an) and carried out interviews with various affected people, including local residents and government officials. The Mission noted that local people increased their income through the selling of construction materials, opening restaurants and shops, and renting out spare houses to the contractors (Appendix 14). The Project also caused very rapid growth of tertiary industries, which involve commercial services that distribute goods to final consumers; this demonstrates that affected people have benefited from the Project railway, which is the most important transportation facility in most of the affected areas. The development of manufacturing industries is an effective poverty reduction tool, as it increases the share of the tertiary sector in the whole industry, being accompanied by industrial service sector development. This implies that the railway project has been effective in reducing poverty in the project area. 48. Resettlement was generally implemented satisfactorily according to the local procedures and compensation standards. However, the standards proposed in the RP were not adopted. Instead, the compensation mechanism used by MOR gave comprehensive rates to the four provincial local governments, with local governments determining the final compensation rates in accordance with the related state laws and implementation regulations of the provincial and municipal governments. Therefore, actual compensation rates were different from the planned rates. While compensation was much lower than set out in the RP, there does not seem to be widespread discontent among the affected persons. The actual rates were widely utilized at the time, and were a significant improvement over the rates paid in previous years. For these reasons, most of the affected persons were relatively satisfied. The decision by many local communities to readjust farmland also helped to offset serious impacts on most villages and households. When interviewed by the Mission, the affected people showed their satisfaction with the compensation paid based on the prevailing market rates. In summary, the Mission found that resettlement had been successfully carried out, in conformance with the RP. 49. In April 1999 the First Survey and Design Institute and the Fourth Survey and Design Institute prepared two Environmental Impact Assessments (EIAs); one for the Xi’an to Nanyang section of the railway and one for the Nanyang to Hefei section of the railway. The final alignment of the railway was selected in part to avoid adverse environmental impacts. During implementation the Environment Evaluation and Engineering Center of Scientific Institute of Railway was engaged to carry out environmental sampling and analysis and regularly monitor the mitigation of environmental impacts. Also, the Environmental Assessment and Engineering Center of China Academy of Railway Science made quarterly visits to the Project to assess and monitor the environmental elements of project implementation. 50. The main features of the environmental impact mitigation measures included: (i) use of excavated materials for embankments and station formations; (ii) deposition of excess excavated materials in nearby valleys, with retaining walls to prevent erosion; (iii) unstable slopes were given proper and timely slope treatment to avert landslides and erosion; (iv) construction of appropriately designed drainage ditches and drainage structures; (v) use of lownoise and low-pollution equipment during construction; and (vi) installation of proper ventilation equipment to prevent the buildup of harmful gas in tunnels and use of explosion-proof

12

equipment for tunnel excavation. All environmental mitigation measures were adequately carried out. 51. Overall, the socioeconomic, environmental and other impacts as a result of the Project are rated positively. IV. A.

OVERALL ASSESSMENT AND RECOMMENDATIONS

Overall Assessment

52. The Project has been implemented as planned with no significant changes and on schedule. The Project’s formulation and design were technically sound and highly relevant to the achievement of its development goals at appraisal and at completion. The main outputs have been implemented well and either ahead of schedule or on time. The goal of the Project as stated in the RRP—to promote economic growth in the poor interior provinces, in order to raise living standards and reduce poverty—have been achieved; the proportion of the rural population living below the poverty level has been reduced from 38% before the Project to between 9% and 22% in 2006 (Appendix 14). The project railway has acted as a primary catalyst for improved economic growth in the project area. The Project achieved its main impacts: increasing per capita incomes and reducing the proportion of the population in the project area living below the poverty level. The stated outcome—to develop the rail transport corridor for freight and passengers to help integrate the western and central provinces with the coastal region—was attained. 53. The reevaluation by the Mission showed that the Project remains economically viable, with an EIRR of 19.6%, and financially cost-effective, with an FIRR of 8.1%. Financial sustainability is ensured by setting tariff levels designed to achieve full cost recovery over the long term. The Mission confirmed that tariff revenues will be sufficient to cover operation and maintenance costs, income taxes and debt service to ADB and commercial banks, and to provide a reasonable rate of return over the long term. Although cash flow was vulnerable for the first two years of operation, it is expected to stabilize reflecting the current traffic flows. It is forecast that operating ratio will be 70%, and meet the covenant. MOR is meeting the covenant for the debt service ratio. Overall, the Project was well implemented and is rated “highly successful”. B.

Lessons

54. A general lesson from the Project is that the actual freight traffic in the initial years of operation was much higher than the appraisal estimates, reflecting the strong economic performance in the PRC in general and in the project area in particular. Projections of output levels resulting from development activities that will be catalyzed by the transport investment should be carefully estimated. Development of other transport modes in the project area needs to be carefully reviewed and updated. Traffic forecasting for ADB ongoing projects is improving and needs to be continually strengthened to ensure more realistic assessments. 55. In March 2006, the consultants providing industrial development and marketing assistance pointed out that the railway was unable to meet demand, primarily due to a shortage of wagons. This has been the case for some years, with an estimated shortage of 35% nationwide.

13 56. Though not funded under the Project, access and link roads are critically important to the successful operation of the facility. While the proposed roads were reasonably well defined at appraisal, the monitoring of their construction was not robust (para. 9). The construction and finalization of all access and link roads should have been more closely monitored and evaluated by the EA during implementation and at project completion to ensure better access. C.

Recommendations 1.

General

57. Link and access roads are a critical element to the success of the railway project. It would be useful for MOR to have an effective monitoring system to ensure their completion so that the project benefits can flow as planned, and to closely coordinate with the local governments for adequate funding and maintenance (para. 9). 58. Although the actual compensation rates paid to the affected people were higher than the prevailing rates at that time, the compensation rate paid was lower than the estimated rate in the RP. To avoid such situations, it is recommended that EA, the local government, and ADB carefully assess and reach agreement on the compensation rates in the RP, and more closely monitor the resettlement process to ensure compliance. To improve the implementation of land acquisition and resettlement activities, it is recommended that (i) resettlement plans be updated after the detailed measurement surveys, and (ii) ADB review missions for projects with significant involuntary resettlement impacts monitor resettlement activities more closely to ensure compliance. 2.

Project Related

59. Although the solid economic growth experienced in the project area (due to accelerated industrial development along the project railway) continues to expand the project railway freight volume, the related freight and passenger demands cannot be met due to the shortage of wagons. The MOR and responsible railway administrations should assess passenger demand and increase the number of passenger trains as demand warrants. The MOR should prepare the necessary investment plan and accelerate the manufacture and allocation of wagons and passenger cars to cope with the expected demand, based on relevant demand for wagons. 60. There is strong justification to upgrade the railway from single-track to double-track, because the project railway has already reached 86% capacity, and freight traffic continues to increase, thanks to strong economic growth in the affected region. Double-tracking upgrade plans have been submitted to the MOR. A delay in investing in double-tracking could serve as a hurdle to the region’s sustainable economic growth, and MOR should consider these applications on an urgent and positive basis. 17 61. The railway will have been fully operational for three years by the end of 2009, at which time the project performance evaluation could be undertaken. 17

A recent ADB Operations Evaluation Department study carried out in April 2007 (2007. Sector Assistance Program Evaluation of Asian Development Bank Assistance for Roads and Railways in the People’s Republic of China. Manila) found utilization and productivity of existing railway assets in the PRC to already be among the highest in the world. To mitigate the gap between supply and demand, continuous investment in new infrastructure and equipment was recommended. This includes replication of existing assets, replacement of existing assets with improved technologies and expansion of the existing asset base by adding new assets incorporating new technologies.

14

Appendix 1

PROJECT FRAMEWORK Design Summary Goal Promote economic growth in poor interior provinces to raise living standards and reduce poverty.

Purpose 1. Develop the rail transport corridor for freight and passengers to help integrate the western and central provinces with the coastal region 2. Reduce transportation costs

Outputs 1. Land acquisition and resettlement

2. Construction of the 954 km HXR rail line

Performance Indicators/Targets Appraisal Actual

Monitoring Mechanisms

• Increase per capita income • Reduce the proportion of the population living in poverty.

• Percentage of rural poor in the project has been reduced from 38% in 1999 to 9–22% in 2006.

• Provincial statistics • National statistics

• Planned development of new coal mines in central Shaanxi will eventuate • Industrial development along the HXR route will occur • Infrastructure will be completed on time and within budget • Supportive social programs are in place

• Achieve forecast freight and passenger volumes

• Actual volumes have exceeded forecasts in first years of operation

• Truck freight transportation cost CNY 0.18 per ton-km in 2000

• Train freight tariff CNY 0.11 per ton-km in 2007

• Land acquisition and resettlement to be completed as per agreed resettlement plan

• Carried out and completed by August 2003. • Impacts are within RP estimates. • Compensation rates paid on the basis of prevailing market rates

• Progress reports and monitoring by domestic consultants

• Strong implementation capacity of local governments • Adequate compensation as per agreed resettlement plan • Adequate funds for resettlement

• Start construction mid-2000; construction complete by June 2005

• Construction commenced August 2000 and completed by December 2004 with 954 km of railway completed.

• Progress reports

• Advance action for procurement • Strong implementation capacity of the Railway Construction Management Center • Adequate counterpart funds

Assumptions / Risks

Appendix 1

15

Performance Indicators/Targets Appraisal Actual • To be completed • 298 km of by June 2005 service roads, 407 km of access roads and 1,122 km of link roads turned over to local authorities for operation and maintenance

Monitoring Mechanisms • Progress reports

4. Procurement of equipment for operation and maintenance

• Equipment to be procured by December 2006

• Procurement completed in March 2007 and included communications, signalling, operation and maintenance equipment.

• Progress reports

• Strong implementation capacity of the Railway Construction Management Center • Adequate counterpart funds

5. Minimization of adverse environmental impacts

• Compliance with EIA and SEIA • Completion concurrent with project works, in June 2005

• Mitigation measures adequately carried out and monitored by domestic consultants

• Progress reports • Annual monitoring reports during implementation

• Technical capability of EAC-CARS • Supervision capability of local environmental project bureaus

6. Institutional strengthening

• Development of an effective marketing program to attract new industry along the HXR

• Training provided by international consultants, with 16 delegates attending a 3-day program

• Consultants reports, surveys along the railway and progress reports.

• Suitable consultant input.

7. Additional employment

• Creation of 350,000 personmonths of constructionrelated employment

• 306,130 personmonths of constructionrelated employment, with 211,399 personmonths of local employment, and 151,136 personmonths provided by poor families

• Socioeconomic surveys

• Implementation as per schedule and commitment of local governments.

Design Summary 3. Construction of access roads between HXR stations and townships, link roads and industrial sidings

Assumptions / Risks • Commitment of local governments • Availability of local funds

16

Appendix 1

Activities – Milestones 1.0 Preparatory Activities, 1998–2000

Inputs • Approval of project proposal • Arrangement of counterpart funds • Environmental impact assessment report • Approval of feasibility study • Survey and design • Advance action for procurement

2.0 Land acquisition and resettlement, October 2000–December 2002

• • • •

3.2 Construction of civil works

• • • • • •

3.3 Environmental protection and mitigation measures

•

3.0 Civil works construction and equipment procurement 3.1 Procurement of civil works by June 2003

3.4 Procurement of equipment

4.0 Construction of service, access and link roads

• • • • • • • •

5.0 Institutional Strengthening

• • •

Preliminary survey and design Detailed acquisition plan Acquisition of land and resettlement of affected persons Monitoring by FCUO-SJU Engagement of domestic consultants Prequalification of bidders Invitation to bid Evaluation of bids Award of contracts Implementation according to contract schedules Implementation of mitigation measures recommended by EIA and SEIA Monitoring by EEECSIR ADB approval of bidding documents Bidding and evaluation of bids Award of contracts and approval by ADB Service road construction by contractors; transfer to local governments Commitment of local governments Design and construction of access and link roads by local governments Operation and maintenance by local governments Engagement of international consultants by February 2005 Staff training Implementation of strategic plan

ADB = Asian Development Bank, EIA = environmental impact assessment, EAC-CARS = Environmental Assessment and Engineering Center of China Academy of Railway Sciences, EEECSIR = Environment Evaluation and Engineering Center of Scientific Institute of Railway, FCUO-SJU = Research Institute of Foreign Capital Utilization in Southwest Jiaotong University, HXR = Hefei–Xi’an Railway, km = kilometer, RP = resettlement plan, SEIA = summary environmental impact assessment.

Appendix 2

17

CHRONOLOGY OF MAJOR EVENTS IN THE PROJECT’S HISTORY Date

Project Events

3 September 1999

- TA 3251-PRC: Hefei-Xi’an Railway Project approved by ADB for $665,000

1–18 December 1999

- Fact-finding Mission.

11 March 2000

- Feasibility study for the Project approved by PRC’s State Council.

28 March to 11 April 2000

- Appraisal Mission.

May 2000

- Contract signing of 33 LCB civil works contracts financed by the Borrower.

29 May 2000

- Contract signing of domestic consultants for construction supervision of the 33 LCB civil works contracts financed by the Borrower.

19–21 June 2000

- Loan negotiations

17 August 2000

- Loan approval.

4 December 2000

- Loan Agreement signed.

7–16 December 2000

- Inception Mission.

2 March 2001

- Loan became effective. First disbursement of loan proceeds was made for payment of the front-end fee.

9 March 2001

- ADB approved the award of 11 ICB civil works contracts.

6 April 2001

- Contract signing of 11 ICB civil works contracts.

11 April 2001

- ADB approved award of contracts for rail, turnouts, and scissors crossings.

18 April 2001

- Contract signing of rail, turnouts, and scissors crossings.

26 April 2001

- Contract signing of domestic consultants for construction supervision of the 11 ICB civil works and track laying and bridge erection works contracts financed by the Borrower.

27 April 2001

- ADB approved the award of five ICB contracts for steel casting bearings, and sleepers.

9 May 2001

- Contract signing of five ICB contracts for steel casting bearings, and sleepers.

23 and 28 August 2001

- ADB approved the award of three contracts for operating security and maintenance.

14 September 2001

- ADB approved the award of three more contracts for operating security and maintenance.

18 September 2001

- ADB approved the award of six contracts for signaling equipment.

24 September 2001

- Contract signing of signaling equipment.

16 and 21 October 2001

- Signing of all contracts for operating security and maintenance.

8 November 2001

- ADB approved the award of seven contracts for communications equipment.

13, 18, and 21 December 2001

- ADB approved the procurement of two batches of rail materials.

14, 19, 21, and 26 December 2001

- Contract signing of rail materials.

May 2002

- Completion of delivery of rail, turnouts, and scissors crossings.

June 2002

- Signing of five LCB contracts for track laying and bridge erection works financed by the Borrower.

18

Appendix 2

Date

Project Events

20, 24 June, and 3 July 2002

- ADB approved the award of various contracts for electrification traction substation.

25 June 2002

- ADB approved the award of 11 contracts for power supply equipment.

5, 7 July 2002

- Contract signing of electrification traction substation.

7 July 2002

- Contract signing of power supply equipment.

11 September 2002

- ADB approved the award of five contracts for communications equipment.

November 2002

- Completion of delivery of second batch of rail materials.

15, 21 November 2002

- ADB approved the award of seven contracts for water treatment equipment.

19–24 November 2002

- Review Mission 1.

16 December 2002

- Contract signing of water treatment equipment.

January 2003

- Completion of delivery of five ICB contracts for steel casting, bearings, and sleepers.

26 February 2003

- ADB approved the contract award for hot wheel bearing detectors.

10 March 2003

- Contract signing of hot wheel bearing detectors.

May 2003

- Completion of the 52 new railway stations financed by the Borrower.

June 2003

- Completion of the five LCB contracts for track laying and bridge erection works financed by the Borrower.

August 2003

- Completion of land acquisition and resettlement.

September 2003

- Completion of delivery of the first batch of rail materials.

21–27 November 2003

- Review Mission 2.

December 2003

- Completion of: (i) all equipment contracts for communications, signaling, operating security and maintenance, electrification traction substation, power supply, water treatment, and hot box detecting system financed by ADB; and (ii) the electrification of the 407 km Xi’an-Nanyang section financed by the Borrower.

6 January 2004

- Trial (freight) operation started.

March 2004

- Receipt of the completion report on resettlement.

18 August 2004

- ADB approved the contract award for DMIS equipment.

17 September 2004

- Contract signing of DMIS equipment.

27 October 2004

- ADB approved the recruitment of the international consultant for industrial development and marketing and project management.

11 November 2004

- ADB approved the contract award for section axle-counting and inspecting equipment.

December 2004

- Completion of all civil works contracts.

6 December 2004

- ADB approved the award of six contracts for large track maintenance machinery.

7–13 December 2004

- Review Mission 3.

15–16 December 2004

- Contract signing of four (out of six) contracts for large track maintenance machinery.

22 December 2004

- Contract signing for section axle-counting and inspecting equipment.

6 January 2005

- ADB approved the award of four more contracts for large track maintenance machinery.

Appendix 2

Date

19

Project Events

7 January 2005

- Contract signing of the other six contracts for large track maintenance machinery.

20 January 2005

- Contract signing for the international consultant for industrial development and marketing and project management.

25 January 2005

- ADB approved the utilization and reallocation of surplus loan proceeds for the procurement of safety transport equipment.

17 February 2005

- Commencement of services of the international consultant for industrial development and marketing and project management.

May 2005

- Overseas training for MOR’s transport system was conducted by the international consultant for industrial development and marketing and project management.

8 June 2005

- Completion of services of the international consultant for industrial development and marketing and project management.

October 2005

- Completion of DMIS and axle-counting and inspecting equipment.

8–12 December 2005

- Review Mission 4.

12 January 2006

- First extension of the loan closing date by 12 months, or up to 30 December 2006.

24 March 2006

- Receipt of Final Report and completion of services of the international consultant for industrial development and marketing and project management.

18 April 2006

- Passenger operation started.

June 2006

- Completion of the large track maintenance machinery.

5 October 2006

- ADB approved the contract award for the safety transport equipment.

24 October 2006

- Contract signing of the safety transport equipment.

6 December 2006

- Second extension of the loan closing date by three months, or up to 31 March 2007.

12–15 December 2006

- Review Mission 5.

28 March 2007

- Contract completion and final disbursement of loan proceeds for the safety transport equipment.

31 March 2007

- Loan closing date.

18 May 2007

- Final acceptance of the project.

21–30 May 2007

- Project Completion Review Mission.

28 June 2007

- Effective date of loan closing.

ADB = Asian Development Bank, DMIS = dispatch management information system, EIA = environmental impact assessment, ICB = international competitive bidding, km = kilometer, LCB = local competitive bidding, MOR = Ministry of Railways, PRC = People’s Republic of China, TA = technical assistance Source: Asian Development Bank

20

Appendix 3

PROJECT COST AND FINANCING SOURCE

Table A3.1: Detailed Project Cost and Financing Source ($ million) Appraisal Component

Project Cost Foreign Local

A. Base Cost 1. Civil Works a. MOR-financed b. ADB-financed 2. Buildings and Facilities 3. Railway Trackwork (including rails, sleepers, and ballast) 4. 5. 6. 7. 8.

Signaling, Telecommunications Electrification, Electric Power Operational Equipment Safety Transport Equipment Environmental Protection, Mitigation,and Monitoring 9. Land Acquisition, Compensation, and Resettlement 10. Administration, Consulting Services,and Miscellaneous Subtotal A

311.1 76.7 17.3 150.6

Total

726.0 1,037.1 179.0 255.7 65.1 82.4 120.3 270.9

Actual

Financing Plan ADB MOR / CDB Foreign Foreign Local Total A B

0.0 76.7 0.0 119.6

311.1 0.0 17.3 31.0

Project Cost Total Foreign Local

Total

C = A+B

726.0 1,037.1 1,037.1 179.0 179.0 255.7 65.1 82.4 82.4 120.3 151.3 270.9

327.1 71.8 11.9 145.3

763.3 1,090.4 167.2 239.0 44.9 56.8 126.4 271.7

Financing Plan ADB MOR / CDB Foreign Foreign Local Total A B

0.0 71.8 0.0 112.7

327.1 0.0 11.9 32.6

Total C = A+B

763.3 1,090.4 1,090.4 167.2 167.2 239.0 44.9 56.8 56.8 126.4 158.9 271.7

72.7 85.3 70.2 0.0 6.5

36.6 45.9 30.2 0.0 32.0

109.3 131.2 100.4 0.0 38.5

31.0 25.3 21.3 0.0 3.4

41.7 60.0 48.9 0.0 3.1

36.6 45.9 30.2 0.0 32.0

78.3 105.9 79.1 0.0 35.1

109.3 131.2 100.4 0.0 38.5

63.7 76.5 89.6 7.7 5.7

40.8 45.2 18.8 0.0 49.8

104.5 121.7 108.4 7.7 55.5

17.3 17.4 59.1 7.7 0.8

46.4 59.1 30.5 0.0 4.8

40.8 45.2 18.8 0.0 49.8

87.2 104.2 49.3 0.0 54.7

104.5 121.7 108.4 7.7 55.5

0.0

211.2

211.2

0.0

0.0

211.2

211.2

211.2

0.0

146.6

146.6

0.0

0.0

146.6

146.6

146.6

0.2

121.9

122.1

0.2

0.0

121.9

121.9

122.1

0.2

146.6

146.7

0.2

0.0

146.6

146.6

146.7

790.6 1,568.2 2,358.8

277.5

799.4 1,549.4 2,348.9

287.1

512.3 1,549.4 2,061.8 2,348.9

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 799.4 1,549.4 2,348.9 71.1 196.7 267.8

0.0 0.0 0.0 287.1 3.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 512.3 1,549.4 2,061.8 2,348.9 68.1 196.7 264.8 267.8

870.6 1,746.1 2,616.7

290.1

580.5 1,746.1 2,326.6 2,616.7

513.1 1,568.2 2,081.3 2,358.8

B. Contingencies 1. Physical 45.5 101.5 147.0 11.2 34.3 101.5 135.8 147.0 2. Price 45.0 101.1 146.1 8.3 36.7 101.1 137.8 146.1 Subtotal B 90.5 202.6 293.1 19.5 71.0 202.6 273.6 293.1 Total - Implementation Cost 881.1 1,770.8 2,651.9 297.0 584.1 1,770.8 2,354.9 2,651.9 C. Interest and Other Charges During 31.9 151.2 183.1 3.0 28.9 151.2 180.1 183.1 Construction and Front-End Fee Total - Project Cost 913.0 1,922.0 2,835.0 300.0 613.0 1,922.0 2,535.0 2,835.0 ADB = Asian Development Bank, MOR = Ministry of Railways, CDB = China Development Bank Source: Asian Development Bank.

Appendix 3

Table A3.2: Summary Financing Source ($ million) Appraisal Foreign

Actual

Local

Total

MOR

313.0

1,000.3

1,313.3

%

46.3

Foreign

280.5

Local

824.4

1,104.9

Total

%

42.2

CDB

300.0

921.7

1,221.7

43.1

300.0

921.7

1,221.7

46.7

ADB

300.0

0.0

300.0

10.6

290.1

0.0

290.1

11.1

Total 913.0 1,922.0 2,835.0 870.6 1,746.1 2,616.7 100.0 100.0 ADB = Asian Development Bank, MOR = Ministry of Railways, CDB = China Development Bank Source: Asian Development Bank.

21

Appendix 4

PROJECTED AND ACTUAL DISBURSEMENTS

Table A4: Disbursement Schedule ($ million) Cumulative

Year

Projected a

Actual

56.6 174.7 275.9 300.0

54.7 159.0 223.7 245.8 273.1 283.3 290.1 290.1

2001 2002 2003 2004 2005 2006 2007 Total

300.0

a

Annual projected plus cumulative disbursements of previous year. Source: Asian Development Bank.

Figure A4: Cumulative Disbursement 350 300 250 $ million

22

200 150 100 50 0 2001

2002

2003

2004

Projected Source: Asian Development Bank.

2005 Actual

2006

2007 Year

Appendix 5

23

PLANNED AND ACTUAL IMPLEMENTATION SCHEDULE 2000

2001

2002

2003

2004

2005

2006

2007

Item J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAM J Detailed Planning, Engineening, and Document Preparation Prequalification and Bidding

Land Acquisition and Resettlement

Civil Works and Buildings

Rail Laying

Telecommunication, Signaling, and Electrification DMIS and Axle Counting and Inspecting TA: Industrial Development and Marketing and Project Management Operation, Safety Inspection and Maintenance Equipments

Trial Operation

State Acceptance

Planned

DMIS = dispatch management information system, TA = technical assistance Sources: Asian Development Bank and Ministry of Railways

Actual

24

Appendix 6

ORGARNIZATION CHART (Hefei-Xi’an Railway Project) Figure A6.1: Ministry of Railways Hefei-Xi'an Railway Project Construction Management Committee Chair: Vice Minister of MOR

Hefei-Xi'an Railway Project Communication Office Planning and Design Institute/ Development Bureau Economy and Program of MOR Institute of MOR

Railway Construction Management Center of MOR

Foreign Capital Technical & Import Center

Railway Construction Support Office and Environmental Protection Bureau of Henan Province/Anhui Province and Local Government

Railway Construction Support Office and Environmental Protection Bureau of Shaanxi Province/Hubei Province and Local Government

Environmental Monitoring: Beijing OASIS Environmental Protection Technology Co. Ltd.

Financial Bureau of MOR

Land Acquisition and Resettlement Supervision: Southwest Communication University

Hefei-Xi'an Railway Construction Headquarter

Construction Contractor MOR = Ministry of Railways Source: MOR.

Figure A6.2: Project Management Organization Chart Railway Engineering Management Center of MOR

Xi'an-Nanjing Railway Construction Headquarters

Office

Contract and Financial Department

MOR = Ministry of Railways Source: MOR.

Engineering Design Department

Engineering Supervision Department

Construction Coordination Department

Material and Equipment Department

Appendix 7

25

EVALUATION OF LAND ACQUISITION AND RESETTLEMENT ACTIVITIES A.

Background

1. In March 2000, a Resettlement Plan (RP) for the Project was prepared in accordance with related Chinese laws and regulations and ADB’s Involuntary Resettlement Policy (1995). The affected areas traversed by the 954 kilometer (km) railway (in which the 52 new railway stations are located) include Xi’an City (Lintong District, Lantian County), Weinan City (Linwei District, Hua County), and Shangluo City (Shangzhou District, Danfeng County, Shangnan County) in Shaanxi Province; Nanyang City (Xixia County, Neixiang County, Zhenping County, Wolong District, Wancheng District, Tanghe County, Tongbai County), and Xinyang City (Pingqiao District, Shihe District, Luoshan District, Guangshan County, Xi County, Huangchuan County, Shangcheng County, Gushi County) in Henan Province; and Liu’an City (Huoqiu County, Yeji County, Jinzhai County, Yu’an District, Jin’an District), and Hefei City (Feixi County, Feidong County) in Anhui Province. In total 7 prefectural-level cities, 27 counties/districts, 133 townships, and 409 villages are affected. This was the longest railway financed by ADB since ADB’s Involuntary Resettlement Policy was approved in 1995, and the magnitude of resettlement impacts was very large. 2. Between 23 and 25 May 2007, the project completion review mission (the Mission) visited four villages affected by railway stations in Shaanxi, Henan and Anhui provinces, and four village leaders and four farmers were interviewed. Although the Mission included a national resettlement consultant, due to the length of the railway and the limited budget, this evaluation had to rely heavily upon three external monitoring and evaluation (M&E) reports prepared by the Research Institute of Foreign Capital Utilization of Southwest Jiaotang University, the external monitor. Therefore, the Mission focused on verification of the external monitor’s findings and conclusion rather than carrying out a detailed investigation. B.

Scope of Land Acquisition and Resettlement

3. At appraisal, it was estimated that about 63,071 mu 1 of land would be acquired for the construction of the railway and 16,305 mu for temporary land occupation. By project completion, 59,062 mu of land was permanently acquired, a decrease of 6.3% due to alignment changes in some railway sections. However, the amount of farmland affected increased by 6.7%. It is unknown whether this was due to alignment changes or simply a revised classification of land types; if the latter, it could mean that affected persons negotiated better compensation for their lands. The area of houses demolished increased by 18.4% to 1,108,060 square meters (m2), compared with 935,889 m2 of houses in RP. The main reason for the increase in the house area demolished was the lack of accuracy of the RP, which was based on feasibility level estimates. Also, during construction projects of this type it is common to relocate some houses that are close to the alignment and would be affected by railway noise and/or vibrations. However, the number of persons affected by house demolition fell to 19,302 compared with the estimates of 48,720 at appraisal. The reason is due to estimation errors (e.g., the average demolition area per household was 223 m2 compared with estimates of 137 m2 per household in the RP). Such variations in estimates of affected persons are common at the feasibility stage for linear projects. 2 Table A7.1 compares the planned and actual resettlement activities. 1 2

One mu is equivalent to 0.0667 hectare. The railway alignment causes a linear impact on land ranging from 5% to 30% loss of cultivated land at the village level. The railway stations and marshalling yards cause more concentrated impacts ranging from 30% to 70% or more loss of cultivated land. Of the 409 affected villages, 60% had less than 10% land loss, 20% had 10% to 30% land loss, 10% had 10% to 30% land loss, 7% had 10% to 30% land loss, and 3% had 100% land loss.

26

Appendix 7

Table A7.1: Resettlement Plan and Implementation Compared Impact of Resettlement

RP (A)

Actual (B)

1. Land acquisition (mu) (i) Total permanent land acquisition - farmland (ii) Temporary land use 2. House demolition (m2) 3. People affected (i) By house demolition/relocation (ii) By permanent land acquisition a

63,071 55,026 16,305 935,889 76,500 48,720 53,278

59,062 58,699 19,542 1,108,060 — 19,302 45,746

Difference (C = B–A)

C / A (%)

(4,009) 3,673 3,237 172,171

(6.3) 6.7 19.9 18.4

(29,418) (7,532)

(60.4) (14.1)

( ) = negative, — = not applicable. a This is a theoretical calculation based on 100% land loss; in reality, the average loss of loss is about 20%, which means the number of partially affected persons is 5 times greater. Sources: Resettlement Plan, Ministry of Railway’s Completion Report, 2003 and Post-evaluation of Resettlement Report, Southwest Jiaotong University, 2006.

C.

Applied Laws and Regulations

4. The Project’s land acquisition and resettlement (LAR) was implemented according to the following laws and regulations, which were referenced in the RP. (i)

The Land Administration Law of the People’s Republic of China (revised by the 4th session of the 9th National Congress in August 1998, it came into effect from 1 January 1999).

(ii)

Implementation Regulations for Land Administration Law of the Peoples Republic of China (promulgated by Order No.256 of the State Council of the Peoples Republic of China on 27 December 1998, and effective as of 1 January 1999).

5. In the RP, it was mentioned that resettlement should strictly follow the provincial-level implementation regulations of the State Land Law. Since all of the above-mentioned provincial regulations were issued in 1999, there were no differences between the regulations referenced in the RP and those in effect during implementation in three of the affected provinces. However, different compensation rates for land acquisition were found in the neighboring cities within Henan Province. 3 D.

Resettlement Organizations and Funding

6. Following the practice common in previous railway projects, the Ministry of Railways (MOR) entrusted the four provincial governments with implementation of resettlement, and signed contracts with each that specified (i) that each provincial government was responsible for all LAR work for the Project under its jurisdiction, and (ii) the budgeted funding from MOR was fixed, with any additional LAR costs to be borne by the local governments. 7. MOR signed the land acquisition and house relocation contracts with each province in 2000. According to the agreements, MOR paid compensation to the provinces for land acquisition at a fixed rate of CNY 11,780 per mu in Henan and Anhui Provinces, and CNY 3

The Mission field visit found that in Henan Province compensation rates were not based on provincial regulations but on the decisions of the county level governments. This has been observed in other ADB projects in Henan.

Appendix 7

27

10,780 per mu in Shaanxi province (this compensation rate was lower because the affected area is in the very remote and hilly Qinling mountains). The fixed rate for houses paid by MOR to the provinces was CNY 250 per m2, except for Shaanxi Province, where it was CNY 230 per m2. These comprehensive agreements represented MOR’s contribution to the LAR costs, with the exception of infrastructure restoration costs which are included in the Project civil works. 8. As project owner, the Hefei-Xi’an Railway Construction Headquarters established a coordination department to take charge of the resettlement work. The local resettlement leading groups and offices were set up at four levels (provincial, prefectural, county and township levels). The main responsibilities of city resettlement officers were coordination and administration of LAR. The county (district) resettlement offices were to carry out the resettlement. Each county (district) resettlement office administrated affected townships and each township administrated villages. The government staff included: (i) 6 to 10 staff in each of the four leading groups, (ii) 5 to 8 staff in each of the eight prefecture level Railway Construction Support Offices (RCSOs), (iii) 5 to 10 staff in each of the 27 county RCSOs, and (iv) 2 to 5 staff in each of the 133 town level RCSOs. Also, all the leaders in the affected villages and village groups participated in the related resettlement activities. E.

Compensation Standards, Payments, and Resettlement Cost

9. The compensation rates in the RP (see Table A7.2) were based on a consultant’s economic assessment of the average annual output value of various types of land use and were also used as the basis for the resettlement cost estimate in the RP. However, these rates were not consistent with local regulations, and were not endorsed by local governments. According to the related provincial and local regulations, each county/district decided the compensation rates for different types of land and different house structures in Shaanxi, Henan, and Hubei Provinces. In Anhui Province, the compensation rates were decided at the provincial level. Table A7.2 shows the estimated and actual compensation rates in the counties/districts visited by the Mission; the actual compensation rates were significantly lower than those estimated for the RP budget. Table A7.2: Compensation Rates Comparison between RP and Actual Item Irrigated Land Dry Land Slope Land Brick-Concrete House Brick-Timber House Earth-Timber House

Unit

RP (average)

CNY/mu CNY/mu CNY/mu CNY/m2 CNY/m2 CNY/m2

15,000 9,000 5,000 277 250 250

Actual Danfeng County, Shaanxi 7,700 5,800 4,500 240 160 100

Actual Xixia County, Henan 10,000 8,000 — 250 200 155

Actual Pingqiao District, Henan 8,000 4,000 — 240 190 150

Actual Yu’an District, Anhui 6,800 6,800 6,800 260 180 140

— = not available, RP = resettlement plan. Note: The rates in the table exclude all the taxes and administrative fees. Actual costs are based on the M&E reports. Sources: RP and Post-evaluation of Resettlement Report, Southwest Jiaotong University, 2006.

10. The compensation and disbursement procedures were different from county/district to village group (for land) and individual (for private assets). In some counties/districts compensation was paid directly to the affected persons, while in others compensation was paid via townships and administrative villages. In the latter case, some villages decided to reallocate farmland among the affected village groups, whereby some compensation was retained for

28

Appendix 7

collective investments (e.g., land improvements and irrigation), with the remaining amount paid to villagers equally. Compensation for land and housing was normally paid in two installments, with the final payment made when the land or house is transferred to the project. For housing, the external monitor recommended one lump sum payment, so affected households had sufficient cash to rebuild their new homes in a timely manner. 11. The external monitor made annual assessments of the actual compensation standards during implementation (2001 to 2003) which indicated that farmers were generally satisfied with the compensation standards. The reasons stemmed from the recently mandated higher land compensation, as per the Land Law which became effective in 1999. Also, the house compensation was basically equivalent to replacement value, and farmers were pleased with the ability to get cash to build better houses. The affected urban residents were less satisfied with the compensation standards because market prices for land and housing were higher than replacement value. In the case of Nanyang City, the local government agreed to increase the housing standard to 400 CNY/m2, which satisfied the affected households. From these findings, it is clear that the estimated standards in the RP were unrealistically high and were simply the desired rates that local government hoped to negotiate with MOR. Since the funding negotiated with MOR was fixed, the local governments had to implement based on their local standards. However, in special cases, the local governments invested additional funds to satisfy the demands of the affected persons. 12. The actual cost of land compensation, house relocation and resettlement was estimated to be CNY 1,823 million, 5.5% lower than the estimated budget in the RP (see Table A7.3). The total compensation actually paid to affected persons was 25.6% lower than budgeted in the RP due to the overestimation of compensation standards in the RP. The amount of funding paid by MOR to the provincial governments, as per their agreements, was CNY 1,257 million, of which CNY 881.6 million was for land acquisition (including green crops, temporary land occupation and land taxes/fees), CNY 257.6 million was for house demolition/relocation, and CNY 117.9 million was for enterprise and institutional relocation. MOR also paid the cost of infrastructure restoration but this was part of the cost of civil works (i.e., these funds were not disbursed to provincial governments). In addition, the local governments used some of their own budgets to enhance resettlement, including the provision of infrastructure at resettlement sites, increasing housing standards for urban residents, and expansion of reconstructed schools. Table A7.3: RP Budget and Actual Costs (CNY million) Item 1. Land acquisition 2. House demolition and relocation a Subtotal (1+2) 3. Temporary land use 4. Infrastructure restoration b 5. Land and forestry taxes/fees 6. Contingency Total

RP (A)

Actual (B)

798 365 1,163 88 503 0 175 1,929

490 257 865 170 503 285 0 1,823

Difference (C = B–A) (308) 10 (298) 82 0 285 (175) (106)

C / A (%) (38.6) 2.7 (25.6) 92.8 0.0 — — (5.5)

( ) = negative, — = not applicable, RP = resettlement plan. a Costs of factory and institution relocation are included. b These costs were included in the cost of civil works, and are assumed to be the same as the RP estimate. Sources: RP, Post-Evaluation of Resettlement Report, Southwest Jiaotong University, 2006 and Asian Development Bank estimates.

Appendix 7

F.

29

Resettlement Implementation

13. Land acquisition and house relocation were mainly carried out during 2000–2001. The resettlement activities for land acquisition were implemented at village and village group level. According to the monitoring reports, about 80% of the affected village groups redistributed farmland after land acquisition, while other village groups provided affected persons reserve (non-contracted) farmland, or gave them cash compensation. The reallocation of farmland helped minimize the losses of affected persons, by sharing the burden with the entire village group. This approach is very common even today in these provinces. 14. Commencement of house demolition and reconstruction was almost simultaneous with land acquisition. House compensation was usually paid to the affected households as a lump sum or as two installments. Field investigations revealed that in Xixia County, Henan Province, the new houses were finished before the old ones were demolished. However, in other areas, the affected people experienced about a 6 month transitional period to build their new houses. The villagers usually built larger and better houses by using additional funds, either from the compensation they received for land acquisition or by borrowing money from relatives. G.

Assessment of the Quality of Resettlement and Rehabilitation

15. The main strategy to mitigate land loss was to redistribute the remaining farmland and the compensation funds were used to improve irrigation, expand animal husbandry, construct greenhouses, plant orchards, start small businesses, expand markets, rebuild public works, or were paid as cash compensation to all villagers. For villages that did not redistribute farmland, the cash compensation was paid directly to the affected households. Due to the land acquisition for the Project and other development projects, the local per capita cultivated land holdings have been decreasing. Work done outside the villages has become the most important source of income for villagers. Since the serious impacts wear near urban areas, affected persons could use the cash to invest in small businesses and relied on local employment opportunities created by the new railway stations and related urban development. In several towns, concentrated relocation sites were constructed near the railway station in a unified manner, including the development of a market street for shops on the first floor and residential units on the second floor. 16. The redistribution of farmland helped prevent serious loss of income. In addition, many people benefited from wage income during the railway construction, either as direct laborers or by providing materials, food services, transport and renting houses to the contractors. In the urban areas, the availability of construction jobs continued after project completion due to ongoing urban development. In the rural areas, villagers also benefited from the ability to market their cash crops due to the railway and related businesses. 17. In 2000, the external monitor, Research Institute of Foreign Capital Utilization of Southwest Jiaotang University, conducted a baseline survey of 1,000 households, but no systematic tracer surveys were undertaken of those households. The external monitor did conduct a limited number of household surveys and provided findings in each monitoring report, but this information was anecdotal (i.e., it only provides some “typical” examples). Investigations of “typical” villages were also conducted which indicated that income levels of farmers had steadily improved, especially for poverty villages because the railway construction created new economic development. This trend was confirmed from the official statistical data, whereby the average annual net income per farmer in the four seriously affected cities increased more than 40% from 2000 (1999) to 2005. However, without a systematic assessment of the Project’s

30

Appendix 7

impacts on the income levels of affected persons, it is not possible to determine whether all households have been fully restored; this would require much larger surveys and would be costly to conduct for a project of this magnitude. 18. Regarding vulnerable groups, the following special measures were taken: free labor for house construction, preferential house sites, guaranteed replacement land, cash subsidies, control of material costs and humanitarian care. The most vulnerable households are taken care of directly by the local government agencies for their house relocation and welfare. 19. Generally, the affected households were relocated within their original village groups or the same villages to keep social and economic relationships intact. The new houses were generally better in style and quality than the old houses, resulting in an improvement in the living conditions of those relocated. Closer to urban centers, the amount of house relocation was greater; in these cases, new concentrated resettlement sites were established in a unified manner with the station area and surrounding urban development. This approach has helped the affected households to avoid impoverishment risks and to enhance their economic opportunities and incomes. 20. During the Project civil work, construction contractors provided affected farmers employment opportunities for low-skilled labor such as earth works. According to MOR’s completion report, local non-skilled laborers were employed for 211,399 person-months (71.49% of which was supplied by people below the poverty line). On average, their daily wage was about CNY 20. This construction employment helped to increase the income of the affected persons, although the data collected were not segregated in this manner. During resettlement implementation, local governments organized many training programs, especially in agricultural technology and manual jobs such as bricklaying. However, these programs were aimed at the entire area, and no special training programs for seriously affected villages were held according to the Mission’s findings. 21. The monitoring reports concluded that affected persons were generally satisfied with the compensation standards, because they were higher than the previous compensation rates applied in 1998, prior to the new Land Law. The relocated households were satisfied with the resettlement implementation. During the Mission’s field visit, all the interviewed village leaders and villagers also expressed their satisfaction with the land acquisition and house relocation. In terms of housing, the relocated families have benefited from modern housing in areas with better environmental and economic conditions. In terms of incomes, the land losses were mainly shared amongst the villages, which reduced the degree of impacts on households and enabled them to gain from new economic opportunities during and after project construction. In some areas, the resettlement was difficult but local government provided good support to ensure that resettlement was accomplished in a timely and successful manner. H.

Consultation, Monitoring, and Evaluation

22. In 2000, mobilization campaigns were held in all affected villages and village groups. Prior to land acquisition, the land compensation amounts, allocation and utilization were determined through consultation with the affected village leaders and villagers. Resettlement sites and methods of resettling relocated residents were identified after consultation with affected households, village leaders and local officials. 23. In accordance with ADB requirements, MOR entrusted an independent monitoring agency—the Research Institute of Foreign Capital Introduction & Utilization of Southwest

Appendix 7

31

Jiaotong University (the external monitor)—to undertake the external resettlement and social M&E work. As agreed with ADB, two external M&E reports on resettlement, two evaluation reports on social development and gender, one completion report on resettlement, and one post-evaluation report for both resettlement and social impact were finished and submitted. Those reports described the resettlement organizations, compensation standards, resettlement implementation, as well as social and gender issues, especially the detailed records of the field investigation. Unfortunately, much of the reporting was quite anecdotal and did not include a systematic analysis of resettlement impacts, implementation issues and results, as required by ADB. Part of this problem stems from the long length of the alignment and the very small budget for M&E paid by MOR. Despite the shortcomings with the external analysis, the documentation provided by the external monitor was a significant improvement from earlier transport projects in the PRC. I.

Conclusions and Lessons Learned

24. Resettlement was generally implemented satisfactorily according to the local procedures and compensation standards. However, the standards proposed in the RP were not adopted. Instead, agreements entered into by MOR and the provinces had fixed the resettlement budget, which meant local governments implemented LAR largely based on local regulations. The actual rates were widely utilized at the time, and were a significant improvement over the rate paid in previous years. For these reasons, most of the affected persons were relatively satisfied. The decision by many local communities to readjust farmland also helped to offset serious impacts on most households. Villages that were more seriously affected benefited from station area development and economic opportunities in nearby urban centers. 25. The level of compensation was stipulated by local governments, and paid to the affected parties (both collectively and individually) in a timely manner. All households affected by the house relocation who wished to build new houses did so in a timely manner (either before demolition or with 6 months). However, transition allowances were not always paid, which would have assisted affected persons in moving. The affected facilities and infrastructure have been rehabilitated or reconstructed. There were numerous small problems relating to construction impacts (i.e., disruption of irrigation channels and congestion on roads) but these were eventually solved with the support of the RCSOs. 26. The resettlement activities were carried out by a well-established resettlement organization system at all levels (i.e., the RCSOs). The system closely linked resettlement to Project construction, and the agencies involved in resettlement operated well. According to both the monitoring reports and the Mission field visit, affected persons were satisfied with the resettlement implementation. 27.

For the project owner, the main lessons from the Project are as follows: (i)

The project owner should remain fully responsible for not only resettlement planning but also resettlement implementation and monitoring. Contracting with local government entities, which devolved MOR of direct responsibility, was a factor that resulted in lack of attention to implementation problems. Fortunately, these were managed by the RCSOs.

(ii)

For a project involving more than one province, better effort should be made and coordination undertaken to establish similar resettlement policies and resolve important resettlement issues across the whole project. However, this remains

32

Appendix 7

problematic, because local implementation. 28.

governments

are

ultimately

responsible

for

For ADB, the main lessons from the Project are as follows: (i)

Taking into account the fact that The RP was not adequately detailed, the RP should be updated after the detailed measurement survey to ensure a good baseline and confirm the actual compensation rates to be used.

(ii)

Detailed resettlement data should be collected immediately after land acquisition and house relocation is finished, as it is difficult to collect those data at the project completion review stage.

(iii)

ADB review missions should include a resettlement specialist at critical stages of the project to assess resettlement implementation and to ensure timely, corrective actions to problems.

(iv)

An adequate budget for M&E must provided to allow for tracer surveys of a representative sample of affected households, including an assessment of household incomes, expenditures, assets and savings before and after the project. In this way, the project completion review mission can properly assess whether the Involuntary Resettlement Policy objectives have been achieved.

Appendix 8

33

ENVIRONMENTAL IMPACT ANALYSIS A.

Introduction

1. The Hefei-Xi’an Railway Project (the Project) traverses 27 counties/districts in four interior provinces (Shaanxi, Henan, Hubei, and Anhui). The Project is classified as Asian Development Bank (ADB) environmental category A. The overall conclusion of the environmental impact assessment (EIA) was that the adverse environmental impacts arising from the construction and operation of the Project could be mitigated to acceptable levels by implementing a set of clearly identified mitigation measures. 2. In April 2000, a summary EIA (SEIA) was prepared by the project preparatory technical assistance (PPTA) consultants, circulated to ADB’s Board of Directors, and made public. The EIA was approved by the State Environmental Protection Administration (SEPA) in June 2000. The final alignment was selected to minimize construction costs, resettlement costs, and adverse environmental impact. B.

Environmental Protection and Management

3. While finalizing the railway alignment, further efforts was made by adopting appropriate engineering designs to minimize environmental impacts. The Hefei-Xi’an Railway Construction Headquarters (HXRCH) was responsible for environmental management and supervision for the Project. During construction, the designated personnel, with the help of the environmental consultants, were in charge of the mitigation measures set out in the EIA. The personnel reviewed the environmental monitoring reports, responded to any adverse environmental impacts, supervised the contractors and construction supervision companies, and reported to the relevant agencies and ADB. All important environmental matters and decisions were referred directly to the top management of HXRCH and the Ministry of Railways (MOR). At the request of HXRCH, each contractor and construction supervision company designated staff from the site management team to deal with environmental issues. 4. At appraisal, it was estimated that the total cost of environmental protection and mitigation measures would be about $38.5 million. According to MOR’s completion report, the actual total investment for environmental protection and afforestation was $55.49 million. C.

Environmental Monitoring

5. Environmental monitoring took place at two levels: daily environmental monitoring by the contractors and construction supervision companies on the site, and periodic environmental monitoring by specialist staff, who took samples for analysis in accordance with the monitoring procedures and guidelines. 6. The Environment Evaluation and Engineering Center of Scientific Institute of Railway was assigned to carry out the environmental sampling and analysis, and perform environmental monitoring. The Environment Evaluation and Engineering Center monitored noise pollution, ambient air quality, surface water quality, and the ecological environment, verified the EIA evaluation, and implemented the mitigation plan. Environment Evaluation and Engineering Center staff visited the site for periodic environmental monitoring and inspection, gave guidance and advice on environmental monitoring, trained project staff, planned the implementation of mitigation measures, and reported their findings. Between 2001 and 2005, they prepared 26 monitoring reports for MOR and ADB.

34

D.

Appendix 8

Implementation of Mitigation Measures

7. During implementation, the environmental monitoring and mitigation measures were carried out according to the EIA and SEIA. The following primary measures have been taken to minimize adverse environmental effects: (i) using spoils from tunnels and other excavations in building embankments or railway stations, and moving the unused spoils into nearby valleys with retaining walls to prevent them from being dumped into rivers; (ii) dealing promptly with unstable slopes to avert landslides and erosion; (iii) planting protection forest along the two sides of the railway; (iv) growing plants on the embankment slopes and in the railway station areas; (v) building ditches or conduits to drain waste water; (vi) using low-noise and lowpollution machines; (vii) limiting working time at construction sites near villages or other inhabited areas; and (viii) further revising and perfecting the design of culverts and other drainage structures to avoid damaging the local drainage systems. E.

Environmental Impact 1.

Noise

8. The contractors adopted noise mitigation measures to reduce noise at sensitive locations mentioned in the EIA. Those locations where noise reduction measures had already been implemented met the class III standard (GB 3096-1993: Standard of environmental noise of urban area). The present equivalent sound level of the railway was monitored at residential locations within the 30 meters of the centerline of the outer track of the railway and was found to meet the standard GB 12525-90. 2.

Environmental Air

9. During operation, the primary air pollution sources were the waste gas discharged by locomotives and various boilers. According to the monitoring results in 2005, the values for sulfur dioxide, nitrogen oxides, and smoke could meet the Class II emission standard for air pollutants for coal-burning, oil-burning and gas-fired boilers (GB13271-91). 3.

Surface Water

10. During operation, the primary water pollutants comprised live sewage from the large railway stations. The water quality monitoring results showed the discharged sewage during both construction and operation stages met the Class I standard for integrated wastewater discharge (GB8978-88 and GB8978-1996). 4.

Ecological Environment

11. During construction, the contractors carried out the environmental protection provisions in their contracts; soil erosion in waste disposal areas was controlled by building appropriate retaining walls before accumulating waste, which prevented construction activities from adversely affecting the surrounding environment. 12. Possible ecological problems in the project areas during railway operation—such as water and soil erosion, landslip, and mud-rock flow—have been controlled through appropriate design and management. There have been no significant changes in the five main indices of environmental quality (i.e., the area of forest cover, the extent of water and soil erosion, paddy

Appendix 8

35

fields as a percentage of cultivated land, the percentage of steep slopes, and the percentage of bare land). F.

Conclusions

13. During construction, all the contractors fulfilled their obligation to protect the environment and to implement mitigation measures in their construction schemes. The adverse effects of the project construction on the surrounding environment were thus minimized. 14. According to the monitoring results, the railway operation has not affected the habitat of any protected species. The noise level and environmental air quality meet the Government’s regulatory standards, and there is no significant impact on the water quality of receiving rivers. The Project has met its objective of environmental protection.

36

Appendix 9

COMPLIANCE WITH LOAN COVENANTS Covenant

Reference to Loan Agreement

Status of Compliance

1

MOR shall be the Executing Agency responsible for overall implementation of the Project.

Schedule 6, para. 1

Complied.

2

RCMC to implement the Project and to set up offices along the Project route to carry out onsite supervision. FCTIC to undertake procurement of ADB-financed components and to monitor the utilization of loan proceeds and maintain liaison with ADB.

Schedule 6, para. 2

Complied.

3

The Borrower shall set up a steering committee comprising members from MOR, RCMC, FCTIC, Anhui, Henan, Hubei, and Shaanxi Provinces, concerned railway administrations and other agencies as necessary, for central coordination and resolution of any conflicts between the various agencies involved in Project implementation.

Schedule 6, para. 3

Complied.

4

Construction Quality. The Borrower shall ensure that the Project is constructed in accordance with the national technical standards, and that construction supervision, quality control, and contract management are performed satisfactorily.

Schedule 6, para. 4

Complied.

5

Connecting Railway Lines. The Borrower shall ensure that the connecting railway lines, including the Xi’an-Ankang Railway and the Lishan-Xiaolin Railway, as well as marshalling yards, shall be built, and the capacity constraints in Xi’an area will be alleviated in a timely manner.

Schedule 6, para. 5

Complied.

6

Industrial Sidings. The Borrower shall ensure that potential major shippers along the Project will be encouraged and assistance be provided as necessary to construct and operate industrial sidings.

Schedule 6, para. 6

Complied.

7

Access and Link Roads. The Borrower shall cause Anhui, Henan, Hubei, and Shaanxi Provinces to take all measures to construct the access and link roads in a timely manner to maximize the benefits of economic transport to the poor people.

Schedule 6, para. 7

Complied.

Appendix 9

Covenant Financial Performance and Tariff

Reference to Loan Agreement

Status of Compliance

Schedule 6, para. 8

Not yet due.

8

The Borrower shall cause MOR to monitor the operational and financial performance of the Project and to ensure that proforma financial statements of the Project for the first five full years of its operation shall be provided to ADB within nine months after the end of the fiscal year.

9

The Borrower shall cause MOR to maintain for the Project, for each of its fiscal years after its fiscal year ending on 31 December 2005, a ratio of total operating expenses to total operating revenues not higher than 70 percent.

Schedule 6, para. 9(a)

Being complied.

10

Before 31 December in each of its fiscal years, MOR shall, on the basis of forecasts prepared by MOR and satisfactory to ADB, ascertain whether the Project would meet the requirements in para. 9 above and furnish to ADB the results of such review upon completion.

Schedule 6, para. 9(b)

Being complied.

11

If any review shows that the Project would not meet the requirements set forth in para. 9 above, MOR shall promptly take all necessary measures (including, but not limited to, adjustments of the structure or levels of its tariffs) in order to meet such requirements.

Schedule 6, para. 9(c)

Being complied.

12

Tariff. The Borrower shall, and shall cause MOR to, ensure that tariffs are set at levels sufficient to ensure full cost recovery, including operation and maintenance costs, depreciation, debt service in excess of depreciation, taxes, and a reasonable profit. Six months prior to opening of the Project for commercial traffic, the Borrower shall cause MOR to carry out a tariff study to determine the tariff structure and levels to be applied and provide the study to ADB for comments.

Schedule 6, para. 10.

Complied.

13

Railway Operation. The Borrower shall cause MOR through relevant regional railway administrations to ensure (a) an efficient and economic management, day-to-day operation, and repair and maintenance of the Project, (b) the provision of adequate trained staff to meet the Project’s operational needs, (c) the provision of sufficient quantity of rolling stock (locomotives, freight wagons and passenger cars) to meet the demand for transportation on the Project.

Schedule 6, para. 11.

Complied.

14

The Borrower shall ensure the safety of passengers and freight.

Schedule 6, para. 11.

Complied

37

38

Appendix 9

Covenant 15

To familiarize people living along the Project’s route with safety issues related to operation of the electric railway, the Borrower shall cause MOR to devise and implement appropriate public safety campaigns through media, public announcements, household contacts, and schools; and erect prominent advance warning signs at all intersections.

Reference to Loan Agreement

Status of Compliance

Schedule 6, para. 11.

Complied.

Environment.

16

The Borrower shall ensure, through MOR, that the Project is constructed and operated in accordance with the national laws and regulations.

Schedule 6, para. 12.

Complied.

17

The Borrower shall ensure, through MOR, that any adverse environmental impacts arising from construction and operation of the Project shall be minimized by implementing the mitigation measures, environmental monitoring program, and other recommendations presented in the Environmental Impact Assessment dated April/May 1999 (EIA).

Schedule 6, para. 12.

Complied.

18

The Borrower shall cause MOR, together with the concerned provincial and county Environment Protection Bureaus ensure that the connecting railway lines and access and link roads are constructed in accordance with the appropriate national and local government environmental procedures and guidelines.

Schedule 6, para. 13.

Complied.

19

The Borrower shall ensure, through MOR, that the Environmental Assessment Center of the China Academy of Railway Sciences shall carry out environmental monitoring in accordance with the EIA and ensure that the results of environmental monitoring shall be reported by MOR to ADB through the quarterly progress reports on project implementation, annual reports on environmental monitoring, and an evaluation report one year after completion of construction.

Schedule 6, para. 14.

Complied.

20

The Borrower shall ensure, through Anhui, Henan, Hubei and Shaanxi Provinces, that any Project-induced economic activities, particularly mining and industrial developments, shall undergo appropriate environmental assessment and review under the national and provincial regulations to ensure minimal adverse environmental impact.

Schedule 6, para. 14.

Complied.

Appendix 9

Covenant

Reference to Loan Agreement

Status of Compliance

21

Gender and Development. The Borrower shall ensure that MOR through RCMC, Anhui, Henan, Hubei, and Shaanxi Provinces shall follow the ADB’s Policy on Gender and Development during the implementation of the Project, and shall take all necessary actions to encourage women living in the Project area to participate in planning and implementing of the Project.

Schedule 6, para. 15

Complied.

22

The Borrower shall cause MOR, with the assistance of the Research Institute of FCUOSJU, to monitor effects on women during Project implementation, through genderdisaggregated data in the resettlement plan and the Project performance monitoring system, in consultation with the All China Women’s Federation at various concerned provincial and local levels.

Schedule 6, para. 15

Complied.

Land Acquisition and Resettlement

Schedule 6, para. 16.

Complied.

23

The Borrower shall ensure that MOR shall assume the lead responsibility for implementing the Resettlement Plan (RP) through RCMC.

24

The Borrower shall ensure that the institutional responsibility for implementation of land acquisition and resettlement rest with the provinces, prefectures and counties traversed by the Project, on the basis of prior arrangements with MOR, which include, among others, setting up of railway construction support offices in the concerned provinces, prefectures and counties.

Schedule 6, para. 16.

Complied.

25

The Borrower shall ensure that all land and rights of way for the Project are made available in a timely manner.

Schedule 6, para. 17.

Complied.

26

The Borrower shall ensure, through Anhui, Henan, Hubei, and Shaanxi Provinces, that the RP agreed with ADB is carried out promptly and efficiently in line with the Borrower’s Land Administration Law, the provincial guidelines, other relevant regulations, and ADB’s Policy on Involuntary Resettlement.

Schedule 6, para. 17.

Complied.

27

The Borrower shall ensure, through MOR, that all persons affected by the Project are compensated and assisted prior to displacement from their houses, land and assets in accordance with the RP such that they are at least as well off as they would have been in the absence of the Project.

Schedule 6, para. 18.

Complied.

39

40

Appendix 9

Covenant

Reference to Loan Agreement

Status of Compliance

28

The Borrower shall ensure, through Anhui, Henan, Hubei and Shaanxi Provinces, that, for the connecting railway lines and access and link roads, these Provinces shall provide the same compensation and assistance as set out in the RP.

Schedule 6, para. 19.

Complied.

29

The Borrower shall ensure that funds for land acquisition and resettlement are provided as scheduled in the RP and meet any obligations in excess of the cost estimate to meet the RP objectives.

Schedule 6, para. 20.

Complied.

30

The Borrower shall ensure, through MOR, that the Research Institute of FCUO-SJU carries out independent monitoring and regular reporting during resettlement implementation and evaluates resettlement achievement two years after completion of resettlement, and that such independent monitoring shall include a baseline socioeconomic survey of households before the land is acquired, and annual survey updates during resettlement implementation as required in the RP.

Schedule 6, para. 21

Complied.

31

The Borrower shall cause MOR to report to ADB on the progress of land acquisition and resettlement through the quarterly progress reports, and a report to be submitted on completion of the resettlement and an evaluation report to be submitted two years thereafter.

Schedule 6, para. 21

Complied.

Monitoring and Evaluation.

32

The Borrower shall monitor and evaluate Project impacts through a Project performance management system to ensure that the Project facilities are managed effectively and the benefits are maximized.

Schedule 6, para. 22.

Being complied.

33

The Borrower shall collect data agreed with ADB prior to implementation, at completion of the Project, and one year and five years after the completion.

Schedule 6, para. 22.

Being complied

34

Poverty Reduction. The Borrower shall ensure, through RCMC, that local poor persons fill half of the unskilled labor jobs required for Project construction.

Schedule 6, para. 23

Complied.

35

For the remaining jobs, the Borrower shall ensure that MOR, through RCMC, follow a propoor policy for the engagement of workers subject to poor workers meeting the job and efficiency requirements and ensure that such workers will be provided on-the-job training.

Schedule 6, para. 23

Complied.

Appendix 9

Covenant

Reference to Loan Agreement

Status of Compliance

36

The Borrower shall cause Anhui, Henan, Hubei, and Shaanxi Provinces to extend the quality and coverage of public utilities, basic health, basic education, and agricultural extension in the Project area to maximize the poverty reduction impacts.

Schedule 6, para. 23

Complied.

37

The Borrower shall, through MOR, monitor the impacts on poverty with the assistance of the Research Institute of FCUO-SJU.

Schedule 6, para. 23

Complied.

38

The Borrower shall provide annual monitoring reports to ADB and submit to ADB an evaluation report one year after the start of operation of the Project facilities.

Schedule 6, para. 23

Being complied.

39

Worker Safety and Health. The Borrower shall cause the MOR, through RCMC, to ensure that measures are taken to ensure the safety of workers during construction, and contractors disseminating information on the risks of socially transmitted diseases to those employed during construction.

Schedule 6, para. 24.

Complied.

40

Audit Report. The Borrower shall (i) maintain separate accounts for the Project; financial statements (income statements, balance sheets, cash flow statements) for MOR’s overall operations; and pro forma financial statements for the operation of the Hefei-Xi’an Railway; (ii) have such accounts and related financial statements (except the pro forma financial statements) audited annually; (iii) furnish to ADB not later than nine months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the loan proceeds and compliance with the covenants of the Loan Agreement, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Section 4.06(b)

Being complied.

41

Borrower’s Project Completion Report. Promptly after physical completion of the Project, but not later than three months thereafter, the Borrower shall prepare and furnish to ADB a report on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under the Loan Agreement, and the accomplishment of the purposes of the loan.

Section 4.07(c)

Complied.

41

42

Appendix 10

CONTRACT PACKAGES FINANCED BY THE ASIAN DEVELOPMENT BANK No.

Contract Description

Approved

Contract Contract Signing Completion

Contractor/Supplier/Consultant

Final Contract Cost

ADB Financing ($ Equivalent)

ADB-Financed Contracts 1. Civil Works W1

DK573+800 - DK613+030

Mar-01

Apr-01

Dec-03

The 11th Engineering Bureau of China Railway CNY

240,221,935

8,711,683

W2

DK613+030 - DK633+300

Mar-01

Apr-01

Dec-03

China Railway the 13th Engineering Bureau

CNY

181,358,522

6,580,545

W3

DK633+300 - DK659+113

Mar-01

Apr-01

Dec-03

CNY

193,658,264

7,028,879

W4

DK659+113 - DK677+033.4

Mar-01

Apr-01

Dec-03

The 12th Engineering Bureau Bloc of Co. Ltd. of MOR The 17th Engineering Bureau of CRCC

CNY

159,201,636

5,776,958

W5

DK677+033.4 - DK706+200

Mar-01

Apr-01

Dec-03

The 17th Engineering Bureau of CRCC

CNY

238,593,948

8,658,855

W6 W7 W8 W9

DK854+900 - DK883+350 DK883+350 - DK919+200 DK919+200 - DK952+200 DK952+200 - DK987+100

Mar-01 Mar-01 Mar-01 Mar-01

Apr-01 Apr-01 Apr-01 Apr-01

Dec-03 Dec-03 Dec-03 Dec-03

CNY CNY CNY CNY

142,802,123 162,591,639 192,116,802 212,769,450

5,183,829 5,901,625 6,974,593 7,722,390

W10

DK987+100 - DK1021+600

Mar-01

Apr-01

Dec-03

CNY

138,507,355

5,034,523

W11

DK1021+600 - DK1055+056.70

Mar-01

Apr-01

Dec-03

Major Bridge Engineering Bureau of MOR Major Bridge Engineering Bureau of MOR Tunnel Engineering Bureau of MOR The Third Engineering Goup Co., Ltd. of China Railway Fuzhou Engineering Corp. of Shanghai Railway Bureau Fuzhou Engineering Corp. of Shanghai Railway Bureau Total - Civil Works

CNY

116,689,375

4,239,505

CNY

1,978,511,049

71,813,390

2. Materials Steel Casting, Bearings, and Sleepers Lot 101

Steel Castings Bearings

Apr-01

May-01

Jan-03

Shanhaiguan Bridge Works

$

338,058

338,058

Lot 201

Concrete Sleeper

Apr-01

May-01

Jan-03

CITIC Development Co. Ltd.

$

2,331,065

2,331,065

Lot 202 Lot 301

Concrete Sleeper Wooden Sleeper

Apr-01 Apr-01

May-01 May-01

Jan-03 Jan-03

$ $

1,294,359 827,545

1,294,359 827,545

Lot 302

Wooden Sleeper

Apr-01

May-01

Jan-03

CITIC Development Co. Ltd. China National General Machinery Engineering Corp. China National General Machinery Engineering Corp. Subtotal

$

448,527

448,527

$

5,239,555

5,239,555

Pangang Group International Economic and Trading Corp. Pangang Group International Economic and Trading Corp.

$

11,624,355

11,624,355

$

6,418,574

6,418,574

First Procurement of Rail Materials Lot 101 Lot 102

Whole-Length Quenched Rail and Fish Plate Whole-Length Quenched Rail and Fish Plate

Apr-02

Apr-02

Sep-03

Apr-02

Apr-02

Sep-03

Appendix 10

No.

Contract Contract Signing Completion

Final Contract Cost

ADB Financing ($ Equivalent)

$

6,976,711

6,976,711

Paryorient International Co. Ltd./PRC

$

7,269,466

7,269,466

$

6,617,201

6,617,201

Sep-03

China Machine-Building International Corp./PRC CITIC International Cooperation Co. Ltd./PRC

$

6,556,697

6,556,697

Dec-01

Sep-03

CITIC International Cooperation Co. Ltd./PRC

$

6,673,484

6,673,484

Dec-01

Dec-01

Sep-03

CITIC International Cooperation Co. Ltd./PRC

$

3,992,076

3,992,076

Rail (43 kg/m) and Fish Plate (43 kg/m)

Dec-01

Dec-01

Sep-03

Transgoods America Inc./USA

$

1,557,886

1,557,886

Turnout, 402 sets; Transition Rail, 590 pcs. Turnout, Transition Rail, and Transition Rail with Fish Plate

Dec-01

Dec-01

Sep-03

$

5,161,600

5,161,600

Dec-01

Dec-01

Sep-03

China Railway Shanhaiguan Bridge Group Co. Ltd./PRC China Railway Turnout Bridge Inc./PRC

$

4,459,334

4,459,334

$

67,307,385

67,307,385

Contract Description

Approved Dec-01

Dec-01

Sep-03

Shenzhen Sunray Group Corp./PRC

Apr-02

Apr-02

Sep-03

Lot 105

Whole-Length Quenched Rail and Fish Plate Whole-Length Quenched Rail and Fish Plate Rail (60 kg/m), 16,854.12T

Apr-02

Apr-02

Sep-03

Lot 106

Rail (60 kg/m), 16,259.48T

Apr-02

Apr-02

Lot 107

Rail (50 kg/m) and Fish Plate (50 kg/m)

Dec-01

Lot 108

Rail (50 kg/m) and Fish Plate (50 kg/m)

Lot 109 Lot 201

Lot 103 Lot 104

Lot 202

Contractor/Supplier/Consultant

Subtotal Second Procurement of Rail Materials Lot 101

Lot 201

Casting Steel Bearing of Railway Bridge, 429 span Casting Steel Bearing of Railway Bridge, 488 span Casting Steel Bearing of Railway Bridge, 736.5 span Casting Steel Bearing of Railway Bridge, 800 span Casting Steel Bearing of Railway Bridge, 478 span Concrete Sleeper, 485,262 pcs.

Dec-01

Dec-01

Jun-02

Shenzhen Sunray Group Co. Ltd./PRC

$

401,535

401,535

Dec-01

Dec-01

Jun-02

CITIC International Cooperation Co. Ltd./PRC

$

730,819

730,819

Dec-01

Dec-01

Jun-02

Shenzhen Sunray Group Co. Ltd./PRC

$

749,043

749,043

Dec-01

Dec-01

Jun-02

$

1,030,575

1,030,575

Dec-01

Dec-01

Jun-02

China National General Machinery Eng. Corp./PRC Shenzhen Sunray Group Co. Ltd./PRC

$

532,760

532,760

Dec-01

Dec-01

Nov-02

CITIC International Cooperation Co. Ltd./PRC

$

4,505,654

4,505,654

Lot 202

Concrete Sleeper, 533,099 pcs.

Dec-01

Dec-01

Nov-02

Hainan Flywheel Industries Trading Co./PRC

$

4,975,404

4,975,404

Lot 203

Concrete Sleeper, 807,084 pcs.

Dec-01

Dec-01

Nov-02

Hainan Flywheel Industries Trading Co./PRC

$

7,164,653

7,164,653

Lot 204

Concrete Sleeper, 264,830 pcs.

Dec-01

Dec-01

Nov-02

Hainan Flywheel Industries Trading Co./PRC

$

2,685,509

2,685,509

Lot 301

Wooden Sleeper, 6,434.88 m

Dec-01

Dec-01

Nov-02

Shenzhen Sunray Group Co. Ltd./PRC

$

1,353,277

1,353,277

Lot 102 Lot 103 Lot 104 Lot 105

4

43

44

Appendix 10 No.

Contract Description

Lot 302

Wooden Sleeper, 5,339.843 m

5

Approved Dec-01

Contract Contract Signing Completion Dec-01

Nov-02

Final Contract Cost

ADB Financing ($ Equivalent)

$

496,257

496,257

$

24,625,487

24,625,487

Contractor/Supplier/Consultant Shenzhen Sunray Group Co. Ltd./PRC Subtotal

Rail, Turnouts, and Scissors Crossings Lot 101

May-01

May-01

May-02

Minmetals Traading Company Ltd./PRC

$

4,394,387

4,394,387

Apr-01

Apr-01

May-02

2,889,026

2,889,026

Apr-01

Apr-01

May-02

$

3,433,936

3,433,936

Lot 104

Rail and Fish Plate, 43kg/m

Apr-01

Apr-01

May-02

$

1,699,088

1,699,088

Lot 105

Turnout, Nanyang East

Apr-01

Apr-01

May-02

China Electric Power Technology I/E Corp./PRC China Electric Power Technology I/E Corp./PRC Pangang Group Intl. Economic and Trading Corp./PRC Minmetals Traading Company Ltd./PRC

$

Lot 103

Rail and Fish Plate, 60 kg/m (Nanyang East) Rail and Fish Plate, 60 kg/m (Nanyang West) Rail and Fish Plate, 50kg/m

$

1,558,108

1,558,108

Lot 106

Turnout, Nanyang West

May-01

May-01

May-02

Shanhaiguan Bridge Works/PRC

$

1,587,244

1,587,244

$

15,561,789

15,561,789

Lot 102

Subtotal Total - Materials

112,734,216

3. Equipment Communications Equipment Lot 101

Program Control Exchange, 6 sets

Nov-01

Dec-01

Dec-03

China United Electric I/E Corp./PRC

$

845,347

845,347

Lot 102

Digital Transmission System, 2 units

Nov-01

Dec-01

Dec-03

$

1,335,902

1,335,902

Lot 103-1

Communication Power Supply, 112 sets

Nov-01

Dec-01

Dec-03

$

348,872

348,872

Lot 103-2

Communication Power Supply, 123 sets

Nov-01

Dec-01

Dec-03

Shanghai Marconi Communications Equipment Co. Ltd./PRC Shandong Machinery and Equipment I/E Group Corp./PRC CITIC International Cooperation Co., Ltd./PRC

$

72,563

72,563

Lot 104

Radio Communication Dispatch System

Dec-01

Dec-01

Dec-03

CITIC International Cooperation Co., Ltd./PRC

$

3,191,323

3,191,323

Lot 106

Long Distance Communication Symmetrical Cable Lot 107-1 Optic Fibre Cable, 482 km

Nov-01

Dec-01

Dec-03

CITIC Development Co., Ltd./PRC

$

1,055,817

1,055,817

Nov-01

Dec-01

Dec-03

Yangtze Optical Fiber and Cable Co. Ltd./PRC

$

482,964

482,964

Lot 107-2

Nov-01

Dec-01

Dec-03

Yangtze Optical Fiber and Cable Co. Ltd./PRC

$

716,004

716,004

Sep-02

Sep-02

Dec-03

China United Electric I/E Corp./PRC

$

264,679

264,679

Sep-02

Sep-02

Dec-03

CCECC International Trading Co.

$

431,425

431,425

Sep-02

Sep-02

Dec-03

CCECC International Trading Co.

$

88,501

88,501

Lot 108-1

Optic Fibre Cable, 717.1 km

OTDR, Portable OTDR, Handheld Optical Multimeter Lot 108-2 SDH Digital Transmission Analyzer, SDH, Handheld Digital Transmission Analyzer Lot 108-3 Optical Fibre Fuse Splicer

Appendix 10

No.

Contract Description

Lot 108-4 PCM Channel Performance Tester, Voice Channel Performance Tester, 2Mb/s Bid Error Tester Lot 108-5 Cable Fault Tester

Approved

Contract Signing

Contract Completion

Sep-02

Sep-02

Dec-03

New Cosmos (HK) Ltd.

Sep-02

Sep-02

Dec-03

New Cosmos (HK) Ltd.

Contractor/Supplier/Consultant $

Subtotal

45

Final Contract Cost

ADB Financing ($ Equivalent)

249,998

249,998

$

98,442

98,442

$

9,181,837

9,181,837

Signalling Equipment Lot 101

Lot 103

Composite Sheath Signaling Cable, 1,083.43 km Aluminum Sheath Signaling Cable, 423.06 km Computer Interlocking System, 11 unit

Sep-01

Sep-01

Dec-03

Shenzhen Sunray Group Co., Ltd./PRC

$

1,136,798

1,136,798

Sep-01

Sep-01

Dec-03

CITIC International Corp. Co., Ltd./PRC

$

910,307

910,307

Sep-01

Sep-01

Dec-03

Xi'an Electric Machinery I/E Corp./PRC

$

2,831,833

2,831,833

Lot 104

Switcher, 1,883 sets

Sep-01

Sep-01

Dec-03

China United Electric I/E Corp./PRC

$

2,216,820

2,216,820

Lot 105

Automatic Hump Control System, 1 unit

Sep-01

Sep-01

Dec-03

Xi'an Electric Machinery I/E Corp./PRC

$

492,323

492,323

Lot 106

Hump Yard Computer Process Control System, 2 units

Sep-01

Sep-01

Dec-03

China United Electric I/E Corp./PRC

$

492,298

492,298

Lot 102

Subtotal

8,080,379

Operational Equipment: Operating Security and Maintenance Lot 101

On-Track Full Section Undercutting Ballast Cleaning Machine, 4 sets Track-Lifting Lining LevellingandTamping Machine, 3 sets

Sep-01

Oct-01

Dec-03

Kunming Machinery Factory/PRC

$

10,721,987

10,721,987

Sep-01

Oct-01

Dec-03

Kunming Machinery Factory/PRC

$

3,210,579

3,210,579

Lot 103

Dynamic Track Stabilizer, 4 sets

Sep-01

Oct-01

Dec-03

Kunming Machinery Factory/PRC

$

3,840,558

3,840,558

Lot 104

Ballast Regulating Machine, 2 sets

Aug-01

Oct-01

Dec-03

Kunming Machinery Factory/PRC

$

660,125

660,125

Lot 105

Rail Flaw Detection Vehicle, 1 set

Aug-01

Oct-01

Dec-03

Yardway Ltd./Hongkong

$

1,660,888

1,660,888

Lot 106

Rail Welding Machine, 1 set

Aug-01

Oct-01

Dec-03

H.A. Schlatter AG/Switzerland

SWF

1,985,336

1,309,686

Lot 102

Subtotal

21,403,824

Electrification Traction Substation Lot 101 Lot 102 Lot 103 Lot 104 Lot 105

Three-Phase Traction Transformer, 2 t Three-Two Phase Balancing Traction Transformer Power Transformer and Substation Transformer Current Transformer and Voltage Transformer 110 kv Electric Disconnector, 36 sets

Jun-02

Jul-02

Dec-03

China National Heavy Machinery Corp.

$

208,830

208,830

Jun-02

Jul-02

Dec-03

China National Heavy Machinery Corp.

$

1,956,280

1,956,280

Jun-02

Jul-02

Dec-03

CCECC International Trading Co.

CNY

2,166,935

261,854

Jun-02

Jul-02

Dec-03

CCECC International Trading Co.

CNY

2,375,641

287,070

Jul-02

Jul-02

Dec-03

L. Geismar, France

Euro

481,169

552,678

46

Appendix 10 Contract Contract Signing Completion

No.

Contract Description

Approved

Lot 106

27.5 kv and 35 kv Electric Disconnector, 99 sets 110 kv and 27.5 kv Manual Disconnector, 195 sets 110 kv Circuit Breaker, 24 sets

Jul-02

Jul-02

Dec-03

L. Geismar, France

Jun-02

Jul-02

Dec-03

Minmetals Trading Co. Ltd.

Lot 107 Lot 108 Lot 109 Lot 110

27.5kv Vacuum Circuit Breaker, 145 t Lighting Arrestor and Antistatic

Final Contract Cost

ADB Financing ($ Equivalent)

Euro

528,651

608,631

$

101,013

101,013

Contractor/Supplier/Consultant

Jul-02

Jul-02

Dec-03

ABB High Voltage Switchgear Co. Ltd.

$

714,296

714,296

Jun-02

Jul-02

Dec-03

China United Electric Import and Export Corp.

$

504,743

504,743

Jun-02

Jul-02

Dec-03

Jiangxi Machinery and Equipment Import/Export Corp.

$

129,662

129,662

Jul-02

Dec-03

XJ Group Corporation

$

988,831

988,831

Arrestor, 276 sets Lot 111

Switch Board, 286 panel

Jun-02

Lot 112

AC and DC System, 26 panels + 12 t kv Vacuum Load Switch, 10 sets 27.5

Jun-02

Jul-02

Dec-03

Shenzhen Sunray Group Co. Ltd.

$

234,759

234,759

Jun-02

Jul-02

Dec-03

China Electro-Ceramic Import/Export Allied Corp. China Electric Power Technology Import and Export Corp.

$

151,880

151,880

$

185,468

185,468

$

908,460

908,460

CNY

4,783,590

578,043

CNY

1,518,900

183,791

$

159,129

159,129

CNY $

1,074,099 63,520.00

129,969 63,520

Lot 113 Lot 114

Fault Point Locating Panel of Overhead Contact System, 12 panels

Jun-02

Jul-02

Dec-03

Lot 115

Remote Control System, 2 sets

Jun-02

Jul-02

Dec-03

Lot 116

High-voltage Line Fault Identification Device, 23sets Auto-throw and Cut Device of Parallel Capacitance Compensation Device, 1 set Parallet Capacitor, 26 sets

Jun-02

Jul-02

Dec-03

China Electric Power Technology Import and Export Corp. CCECC International Trading Co.

Jun-02

Jul-02

Dec-03

China National Electric Equipment Corp.

Jun-02

Jul-02

Dec-03

Jul-02 Jun-02

Jul-02 Jul-02

Dec-03 Dec-03

China Electric Power Technology Import and Export Corp. CCECC International Trading Co. China National Heavy Machinery Corp.

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equip. Imp./Exp. Group Corp.

$

1,443,601.24

1,443,601

Jun-02

Jul-02

Dec-03

Shenzhen Zhong Tie Equipment Trade Co. Ltd.

$

333,782.19

333,782

Lot 117

Lot 118 Lot 119 Lot 201

Serial Reactor, 26 sets Section Insulator and Phase Break, 112 sets

Lot 202

Trolley Wire of Copper Alloy (120mm ), 546T

Lot 203

Trolley Wire of Copper (85mm ), 144T

Lot 204

Copper Alloy Stranded Wires (95mm ), 47T Aluminum-coated Steel-cored Stranded Wires (185/30mm2), 356T

Jun-02

Jul-02

Dec-03

Shenzhen Zhong Tie Equipment Trade Co. Ltd.

$

182,999.20

182,999

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equipment Import/Export Group Corp.

$

852,798.00

852,798

Aluminum-coated Steel-stranded wires 2 (70mm ), 68T

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equipment Import/Export Group Corp.

$

143,888.00

143,888

Lot 205 Lot 206

2

2

2

Appendix 10

No. Lot 207

Lot 208

Lot 209 Lot 210

Lot 211

Contract Description Aluminum-coated Steel-cored Aluminum Stranded Wires 2 (150/20mm ), 217T Aluminum-coated Steel-cored 2 Aluminum Stranded Wires (70/10mm ), 15T Galvanized Steel Pillars, 1,319 strand Cone-casing Anchor-fixing Linear Clamp at Contact Wire Terminals, 38,170 sets Linear Clamps of Electrically Connected Contact Wire, 2,861 sets

Approved

Contract Contract Signing Completion

Contractor/Supplier/Consultant

47

Final Contract Cost

ADB Financing ($ Equivalent)

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equipment Import/Export Group Corp.

$

501,270.00

501,270

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equipment Import/Export Group Corp.

$

34,500.00

34,500

Jun-02

Jul-02

Dec-03

CCECC International Trading Co. Ltd.

CNY

3,260,575.00

394,006

Jun-02

Jul-02

Dec-03

Jiangxi Machinery and Equipment Import/Export Corp.

$

249,808.70

249,809

Jun-02

Jul-02

Dec-03

China United Electric Import and Export Corp.

$

18,066.40

18,066

Lot 212

Steady Arm and Limit Multifunctional Steady Arm, 8,221 sets

Jun-02

Jul-02

Dec-03

CITIC Development Co. Ltd.

$

57,249.09

57,249

Lot 213

Steady Clamp, Transverse Carrying Cable Clamp, 26,809 sets Pulley Assembly for Anchor, 892 sets

Jun-02

Jul-02

Dec-03

$

103,150.60

103,151

Jul-02

Jul-02

Dec-03

$

282,639.12

282,639

Jun-02

Jul-02

Dec-03

CNY

159,100.00

19,251

Lot 216

Single Pole Manual Disconnector, 82 t Porcelain Suspension Insulator, 60,571

Jiangxi Machinery and Equipment Import/Export Corp. Shenzhen Zhong Tie Equipment Trade Co. Ltd. CCECC International Trading Co. Ltd.

Jun-02

Jul-02

Dec-03

$

245,703.71

245,704

Lot 217

sets Stem Insulator, 9,823 sets

Lot 214 Lot 215

Lot 218

Lot 219 Lot 220 Lot 221

Lot 222

Jun-02

Dec-02

Dec-03

Shenzhen Zhong Tie Equipment Trade Co. Ltd. China National Heavy Machinery Corp.

$

175,446.50

175,447

Jun-02

Jul-02

Dec-03

LORIC Import and Export Corp. Ltd.

$

1,356,739.80

1,356,740

Jun-02

Jul-02

Dec-03

China United Electric Import and Export Corp.

$

207,655.50

207,656

Steel Pillars of Overhead Contact Line Equipment, 244 strands Aluminum-Coated Steel Stranded Wires and Aluminum-Coated Steelcored Aluminum Stranded Wires, 29T

Jun-02

Jul-02

Dec-03

Henan Desen Industrial Co.

$

88,064.76

88,065

Jun-02

Jul-02

Dec-03

Shandong Machinery and Equipment Import/Export Group Corp.

$

68,583.90

68,584

Steel-Cored Aluminum Stranded Wire, 27.4T

Jun-02

Jul-02

Dec-03

Deyang Cable Stock Co. Ltd.

CNY

298,359.00

36,101

Working Car for Checking and Repairing Overhead Contact Line Equipment, 13 each Rail Flatcar, 13 each

Subtotal

15,704,211

48

Appendix 10

No.

Contract Description

Approved

Contract Contract Signing Completion

Contractor/Supplier/Consultant

Final Contract Cost

ADB Financing ($ Equivalent)

Power Supply Equipment Lot 301

Electric Testing Car, 2 sets

Jun-02

Jul-02

Dec-03

Henan Desen Industrial Co.

$

449,442.00

449,442

Lot 302

Inspection Car for Substation Secondary Side, 1 set Truck, 1 set

Jun-02

Jul-02

Dec-03

Henan Desen Industrial Co.

$

114,169.00

114,169

Jun-02

Jul-02

Dec-03

China Great Wall Industry Corp.

$

24,809.62

24,810

Jun-02 Jun-02

Jul-02 Jul-02

Dec-03 Dec-03

China Great Wall Industry Corp. Dragon Rich Development Ltd., Hongkong

$ $

67,515.00 119,655.09

67,515 119,655

Jun-02

Jul-02

Dec-03

Dragon Rich Development Ltd., Hongkong

$

38,680.50

38,681

Lot 303 Lot 304 Lot 401

Jun-02

Jul-02

Dec-03

China United Electric Import and Export Corp.

$

38,973.93

38,974

Lot 404

Passenger-Cargo Tool Car, 3 sets Three Phase Power Transformer, 117 sets Single Phase Power Transformer, 63 sets On-load Tap-changing Transformer, 8 sets High-Voltage Switch Cabinet, 144 sets

Jun-02

Jul-02

Dec-03

$

307,132.11

307,132

Lot 405

Low-Voltage Switch Cabinet, 14 sets

Jun-02

Jul-02

Dec-03

$

61,840.76

61,841

Lot 406

Computer Protection Device, 8 sets

Jun-02

Jul-02

Dec-03

Hubei Provincial Jiaxin Machinery Import/Export Corp. China Electric Power Technology Import/Export Corp. Dragon Rich Development Ltd., Hongkong

$

225,790.84

225,791

Lot 407

High Voltage Power Cable, 34.5 km

Jun-02

Jul-02

Dec-03

Deyang Cable Stock Co. Ltd.

CNY

2,303,116.00

278,659

Lot 402 Lot 403

Subtotal

1,726,668

Water Treatment Equipment 101-1

Aerator with Rotation Brushes, 6 sets

Nov-02

Dec-02

Dec-03

Beijing Huafeng Trading Co. Ltd.

$

127,802.39

127,802

101-2

Nov-02

Dec-02

Dec-03

Beijing Huafeng Trading Co. Ltd.

$

134,581.65

134,582

101-3

Sediment Trap and Submersible Propeller, 3 sets each Various

Nov-02

Dec-02

Dec-03

China United Electric Import and Export Corp.

$

100,579.92

100,580

101-4

Various

Nov-02

Dec-02

Dec-03

Xi'an Machinery Import and Export Corp.

$

244,096.50

244,097

101-5

Submersible Sewage Pump, 21 sets

Nov-02

Dec-02

Dec-03

Jiang Shu Jinling Pump Making Co., Ltd.

CNY

268,015.00

32,431

101-6

Water Supply Centralized Control System, 1 set; and Sewage ChemicalBiological Processing Control System, 3 t Protection Barrier, 1,030m2 Sound

Nov-02

Dec-02

Dec-03

Hubei Provincial Jiaxin Machinery I/E Co. Ltd.

$

151,562.40

151,562

Nov-02

Dec-02

Dec-03

CandJ Construction Material (Beijing) Ltd.

$

45,220.50

45,221

102

Subtotal

836,274

Appendix 10

No.

Contract Description

Hot Box Detecting System Hot Wheel Bearing Detectors DMIS and Section Axle-Counting Equipment Lot 101 Section Axle-Counting and Inspecting Equipment Lot 102 DMIS Equipment

Large Track Maintenance Machinery Lot 1 Track Lifting Lining Leveling and Tamping Machine Lot 2 Continuous Action Track Lifing Lining Leveling and Tamping Level, 5 sets

Approved

Feb-03

Contract Signing

Contract Completion

Mar-03

Dec-03

Shan He Machinery Equipment Co. Ltd.

Nov-04

Dec-04

Oct-05

Aug-04

Sep-04

Oct-05

Jan-05

Jan-05

Jun-06

Jan-05

Jan-05

Jun-06

49

Final Contract Cost

ADB Financing ($ Equivalent)

$

2,915,648

2,915,648

China United Electric Import and Export Corp./PRC Beijing Hua-Tie Information Technology Development Co./PRC Subtotal

$

1,587,062

1,587,062

$

1,715,971

1,715,971

China Railway Large Maintenance Machinery Co./PRC China Railway Large Maintenance Machinery Co., Kunming/PRC

$

4,320,000

4,320,000

$

8,100,000

8,100,000

Contractor/Supplier/Consultant

3,303,033

Lot 3

Heavy Duty Switch Lifing Lining Leveling and Tamping Machine, 4 sets

Jan-05

Jan-05

Jun-06

China Railway Large Maintenance Machinery Co., Kunming/PRC

$

7,920,000

7,920,000

Lot 4

Dynamic Track Stabilizer, 3 sets

Dec-04

Dec-04

Jun-06

2,940,000

2,940,000

Lot 5

Ballast Regulating Machine, 3 sets

Dec-04

Dec-04

Jun-06

1,071,231

1,071,231

Lot 6 Lot 7

Fixed Rail Welding Machine, 1 set Test Equipment for Heavy Machine Sensors, 8 sets Automatic Testing System for Electronic Plug-In Unit in Large Track Maintenance Machine, 8 sets On-Track Ballast Shoulder Cleaning Machine, 1 set Switch Welding Machine, 29 sets

Dec-04 Dec-04

Jan-05 Dec-04

Jun-06 Jun-06

1,932,000 3,022,864

1,495,009 373,970

Dec-04

Dec-04

Jun-06

China Railway Large Maintenance Machinery $ Co./PRC China Railway Large Maintenance Machinery $ Co./PRC H.A. Schlatter AG/SWITZERLAND Swf Beijing Dongqiao Mechanical Electrical and CNY Chemical Equipment Co., Ltd./PRC China National Precision Machinery Import and $ Export Corp.,/PRC

602,670

602,670

Jan-05

Jan-05

Jun-06

Plasser and Theurer/AUSTRIA

Euro

2,489,435

3,114,332

Dec-04

Jan-05

Jun-06

Yardway Ltd,,/HONGKONG

Euro

1,298,474

1,553,390

Lot 8

Lot 9 Lot 10

Subtotal

31,490,602

Safety Transport Equipment Lot 1

Trackside Acoustic Detecting System

Oct-06

Oct-06

Mar-07

Harbin Veic Technology Co. Ltd.

CNY

59,900,000

Total - Equipment 4. International Consultant Industrial Development and Marketing and Project Management

Oct-04

Jan-05

Mar-06

Scott Wilson Ltd.

7,748,268 102,390,744

$

171,860

171,860

50

Appendix 11

TRAFFIC FORECAST 1. Actual freight volumes in 2004 and 2005 on the railway constructed by the Hefei-Xi’an Railway Project (the Project) have been higher than those forecast at appraisal. As shown in Table A10, total freight volume reported in the project completion report of the Ministry of Railways was 20.5 million tons in 2005, which was 9.7% higher than the appraisal estimates of 19.0 million tons. The rapid growth from 2004 for freight and from 2005 for passengers is attributable to the accelerated industrial development in the project area and the increased need for coal transport from the west to the major growth centers in the east. The coal freight volume from Shaanxi Province (which accounted for more than 50% of total freight volume) rose significantly, reflecting the strong economic growth and the growing demand for coal by newly constructed power plants in the People’s Republic of China. Industrial development along the railway includes (i) iron mining in Zhashui County of Shaanxi province and Huoqui County of Anhui province; (ii) high-quality coal mine development in Yishang County of Anhui province; (iii) alkali mine development in Tongbai County of Nanyang; (iv) Wanxi power plant development; (v) ethanol production in Nanyang; (vi) mutton and beef processing in Nanyang; and (vii) “industrial town” development at Pingqiao and Minggang 2. The traffic growth pattern from 2007 to 2024 is based on (i) actual traffic (2004–2006), (ii) actual and expected industrial and population growth in the project area, (iii) network development, and (iv) expected train scheduling and wagon allocation. The revised forecasts exceed the appraisal estimated for both freight and passengers. Even though initial passenger operation was delayed by nearly one year, the growth has been rapid and passenger volumes are projected to exceed appraisal estimates in 2009. 3. The growth in freight traffic volume is forecast to continue to be more rapid than that of passenger volume, considering that the Project is serving as an efficient outlet for large quantities of high-grade coal from Shaanxi, and the demand for and production of coal in Shaanxi Province are expected to continue to rise. Since the demand for freight transport is high and will keep growing, the proportion of the total traffic volume made up by passenger traffic is expected to decrease further in the future.

Appendix 11

51

Table A11: Traffic Forecast (million) Item A. Appraisal Freight (tons) Annual Average Growth(%) Freight (ton-km) Annual Average Growth(%) Passengers (number) Annual Average Growth(%) Passenger-km Annual Average Growth(%)

2004

2005

2006

2007

2009

2014

0 18.733 19.389 20.106 21.736 33.057 41.061 3.5 3.7 4.0 8.7 4.4 0 19,546 20,232 20,978 22,679 34,492 42,843 3.5 3.7 4.0 8.7 4.4 0 14.910 16.923 18.937 22.940 39.309 43.097 13.5 11.9 10.1 11.4 1.9 0 4,266 4,841 5,415 6,565 11,251 12,649 13.5 11.9 10.1 11.4 2.4

B. Actual (2004–2006) + Forecast (2007–2024) Freight (tons) 14.404 20.545 24.786 26.318 29.827 50.781 Annual Average Growth(%) 42.6 20.6 6.2 6.5 11.2 Freight (ton-km) 14,774 18,989 23,466 27,461 30,643 50,271 Annual Average Growth(%) 28.5 23.6 5.3 5.6 10.4 Passengers (number) 0 0 3.339 8.944 23.053 44.106 Annual Average Growth(%) 100.9 60.5 13.9 Passenger-km 0 0 966 2,587 6,666 12,302 Annual Average Growth(%) 167.9 60.5 13.0 C. Net Changes ( B – A ) Freight (tons) Change (%) Freight (ton-km) Change (%) Passengers (number) Change (%) Passenger-km Change (%)

2019

14.404 1.812 5.397 — 9.7 27.8 14,774 -557 3,234 — -2.8 16.0 0 -14.910 -13.584 — — -80.3 0 -4,266 -3,875 — — -80.1

— = not applicable Source: Asian Development Bank estimates.

6.212 30.9 6,483 30.9 -9.992 -52.8 -2,828 -52.2

70.939 6.9 67,565 6.1 54.543 4.3 14,989 4.0

2024

42.405 0.6 44,246 0.6 47.250 1.9 14,219 2.4

82.753 3.1 75,724 2.3 67.450 4.3 18,260 4.0

8.091 17.724 29.878 40.348 37.2 53.6 72.8 95.2 7,964 15,779 24,722 31,478 35.1 45.7 57.7 71.1 0.113 4.797 11.446 20.200 0.5 12.2 26.6 42.8 101 1,051 2,340 4,041 1.5 9.3 18.5 28.4

52

Appendix 12

FINANCIAL REEVALUATION

A.

Financial Internal Rate of Return

1. The financial internal rate of return (FIRR) was reevaluated using the same methodology used at appraisal. The FIRR is based on the traffic forecasts prepared by the project completion review mission for the Hefei-Xi’an Railway (HXR) Project (the Project), in consultation with the Ministry of Railways (MOR). The major assumptions were as follows: (i)

FIRR calculations were in constant 2000 prices and covered the period from 2000 to 2024.

(ii)

Capital costs were based on the actual project costs, but excluded interest and other charges during construction.

(iii)

At the beginning of the operation in January 2004, the tariff was set at CNY0.09 per ton-km. The National Development Review Committee (NDRC) approved a benchmark tariff of CNY0.12 per ton-km, which allowed MOR flexibility to adjust the new tariff within ±20 percent of the benchmark; MOR subsequently adjusted the tariff for the project line to CNY0.11 per ton-km in April 2006. The tariff was assumed to increase at a rate of 1% annually thereafter, with tariff adjustments taking place every 5 years.

(iv)

The operating costs included only incremental costs incurred in operation and excluded provisions for depreciation.

(v)

The residual value was estimated on the basis of assets having an average economic life of 35 years

2. The estimated weighted average cost of capital (WACC), after-tax, in real terms was calculated using actual capital mix and cost of funds. Costs have been considered as follows: (i) the estimated interest rate of 6.12% per annum is used for China Development Bank (CDB), and (ii) the opportunity cost of equity capital was assumed to be 8%. The cost of debt is also adjusted to reflect the impact of an income tax rate of 33%. The nominal cost is converted to real cost by applying domestic long-term inflation rates. WACC at the point of project completion equaled 4.9. 4. The FIRR for the Project, computed on an after-tax basis, is 8.1% (Table A12.1), which exceeds the WACC. The Project is considered both financially viable and sustainable. The recalculated FIRR, in constant prices, is higher than that calculated at appraisal (8.1% vs. 7.0%), due to higher than anticipated tariff rates and rapid growth in traffic. The FIRR sensitivity tests indicate that conditions causing the Project's viability to fall below the WACC are unlikely to occur. The sensitivity of the Project's financial indicators to cost and revenue variations is shown in Table A12.2.

Appendix 12

Table A12.1: Financial Internal Rate of Return (CNY million) Net Cash Flow PCR RRP 2000 2,497 0 0 0 0 (2,497) (2,805) 2001 3,226 0 0 0 0 (3,226) (3,790) 2002 3,911 0 0 0 0 (3,911) (4,527) 2003 6,007 0 0 0 0 (6,007) (6,694) 2004 3,420 0 0 84 0 (3,336) (4,172) 2005 27 2,885 3,285 0 106 266 1,749 2006 259 2,873 3,685 0 119 433 2,111 2007 62 2,837 4,819 0 134 1,786 2,165 2008 0 2,777 5,159 0 197 2,185 2,215 2009 476 2,685 5,274 0 255 1,859 1,811 2010 461 2,566 5,783 0 431 2,325 1,904 2011 2,816 2,451 6,173 0 572 334 (246) 2012 5,377 2,697 6,622 0 629 (2,081) (2,562) 2013 5,274 3,088 7,136 1 663 (1,888) (2,247) 2014 3,380 3,837 7,723 11 618 (101) (153) 2015 0 4,030 8,890 4 891 3,974 3,411 2016 0 4,107 9,088 5 925 4,061 3,556 2017 0 4,155 9,310 4 973 4,185 3,683 2018 0 4,275 9,539 6 1,004 4,267 3,814 2019 0 4,365 9,796 5 1,051 4,386 3,956 2020 1,701 4,365 10,865 0 1,350 3,448 2,448 2021 (66) 4,365 10,922 0 1,366 5,258 4,258 2022 0 4,365 10,988 0 1,384 5,239 4,261 2023 0 4,365 11,063 0 1,405 5,292 4,332 2024 (17,891) 4,365 11,147 0 1,429 23,244 22,850 FIRR = 8.1% 7.0% FIRR = financial internal rate of return, PCR = project completion report, RRP = report and recommendation of the President. Source: Asian Development Bank estimates. Year

Capital Cost

Operating Cost

Gross Revenue

Working Capital

Taxes Paid

Table A12.2: Sensitivity Analysis FIRR (%) PCR RRP 1. Decrease in freight traffic by 10% 7.2 6.3 2. Decrease in passenger traffic by 10% 8.0 6.9 3. (1) + (2) 7.1 6.2 4. Operating cost increase by 10% 7.0 6.4 5. Devaluation of CNY by 10% 7.9 6.8 6. (3) + (4) + (5) 5.9 5.5 FIRR = financial internal rate of return, PCR = project completion report, RRP = report and recommendation of the President. Source: Asian Development Bank estimates. Item

53

54

B.

Appendix 12

Financial Performance

5. The projected financial statement of HXR was prepared based on the following assumption. (i)

Operating revenues were derived from freight and passenger transport businesses. A total of 3.24% of business and other taxes/levies were imposed on aggregate revenues.

(ii)

The revenue rates of passenger and freight transport are assumed to be CNY900 per 10,000 person-km and CNY1,500 per 10,000 ton-km, respectively.

(iii)

The balance of receivables was 1.5 months of the gross revenues, whereas payables and inventory were 2 months and 0.5 month of the total working expenses, respectively.

(iv)

Depreciation is calculated on a straight line method with an average life of 65 years for the main railway structures, 10 years for track, 45 years for buildings, and 20 years for signaling, communications, safety, and other equipment and/or facilities.

(v)

The acceptance and takeover of the assets occurs every year during the construction period.

8. Projected financial statements and indicators are presented in Table A12.3. The projected financial statements indicate that the forecast revenue under the base assumptions is sufficient to cover annual recurrent costs, depreciation, debt repayments on ADB and CDB, and generate reasonable profits.

Appendix 12

55

Table A12.3: Projected Financial Statement of HXR (CNY million) Item 2005 2006 2007 2008 Proforma Balance Sheet 1. Assets 25,057 24,299 23,577 22,864 Current Assets 840 840 840 840 Rolling Stocks and Locomotives 1,982 2,101 2,224 2,380 Fixed Asset (Construction) 22,730 21,832 20,934 20,036 2. Liabilities and Capital 25,057 24,299 23,577 22,864 Current Liabilities 0 0 0 0 Long-term Loans 11,450 10,075 8,273 5,941 Paid in Capital 13,380 13,380 13,380 13,380 Retained Earnings 226 844 1,924 3,543 Proforma Income Statement 1. Transport Revenue 3,285 3,685 4,134 4,640 2. Tax and Surcharge 106 119 134 150 3. Operating Expense 2,885 2,873 2,837 2,777 4. Non-Operating Expense 66 74 84 94 5. Total Profit (1 - 2 - 3 - 4) 226 618 1,080 1,619 Proforma Cash Flow Statement 1. Cash Inflow 3,285 3,685 4,134 4,640 Transport Revenue 3,285 3,685 4,134 4,640 Scrap Value of Fixed Asset 0 0 0 0 2. Cash Outflow 1,298 1,392 1,525 1,646 Procurement of Fixed Assets 261 283 335 364 Operational Expense 865 916 973 1,037 3. Net Cash Inflow (1 - 2) 1,986 2,292 2,609 2,995 4. Accumulated Net Cash Inflow -20,940 -18,648 -16,039 -13,044 Loan and Debt Service Estimates Accumulated Loans (as of 12,440 11,450 10,075 8,273 Beginning) Debt Service of Current Year 1,986 2,292 2,609 2,995 Capital Used in Repaying Debt i. Profit 226 618 1,080 1,619 ii. Basic Depreciation 1,024 1,040 1,057 1,077 HXR = Hefei-Xi’an Railway Sources: Asian Development Bank and Ministry of Railways estimates.

2013

2018

2023

34,515 2,189 3,797 22,667 34,515 205 0 13,380 19,707

57,951 30,105 3,732 23,771 57,951 22 0 13,380 43,154

89,316 68,798 4,277 16,241 89,316 25 0 13,380 71,379

8,008 259 3,088 165 4,495

10,734 348 4,275 223 5,889

11,235 364 4,365 233 6,272

8,008 8,008 0 7,824 5,862 1,535 184 -4,459

10,734 10,734 0 3,219 344 2,298 7,515 26,063

31,779 11,235 20,424 2,965 283 2,368 28,814 85,394

0

0

0

25

0

0

4,495 1,527

5,889 1,975

6,272 1,996

56

Appendix 13

ECONOMIC REEVALUATION A.

Background

1. This economic analysis was based on actual costs of the Hefei-Xi’an Railway Project (the Project) and updated traffic data collected during the project completion review mission (the Mission). The economic reevaluation followed the same methodology used in the economic analysis at appraisal, by using the domestic price numeraire and comparing the project’s net benefits under with- and without-project situations. All costs and benefits were estimated in constant 2000 prices. In order to be consistent with the analysis in the report and recommendation of the President (RRP), the study period (2000–2024) includes five years of the construction period and the subsequent 20 years of operation, as did the RRP. B.

Cost-Benefit Analysis

2. The Project’s actual final cost was $2,616.66 million, compared with $2,835.0 million estimated at appraisal. Considering that most of savings were attributed to the unused contingency allowance, the difference is less than one percent. Financial costs were converted to economic costs by dividing goods and services into tradables and nontradables. By following the assumptions in the RRP, a standard conversion factor of 0.9 was used to derive the economic costs of nontradables. 3. Consistent with the RRP, economic benefits include (i) the net economic value added, which is based on the economic value per additional ton of coal produced in the vicinity of and within the project area; (ii) cost savings in freight transportation, which were estimated by comparing the freight transport cost by the project railway and by road; and (iii) cost savings in passenger transportation. The expected economic internal rate of return (EIRR) is 19.6%. The detailed EIRR calculation is given in Table A13.1. The EIRR of 19.6% is much higher than the 15.8% calculated at appraisal, due primarily to higher traffic than originally estimated. The economic reevaluation is considered conservative, because benefits arising from project-related access and link roads and the cost savings due to accident avoidance have not been included in the calculations. Time savings from the diversion of freight traffic from other rail lines were not included in the analysis. The availability of cost-effective railway transport has benefited passengers and shippers, as well as producers and consumers of transport goods, and the EIRR would increase significantly if these additional benefits were included as project-related benefits. The rapid industrial development along the railway will increase the production of minerals, coal, chemicals, iron and steel, and other industrial outputs. 4. A sensitivity analysis, conducted by testing key variables, shows that the result is robust (Table A13.2). The sensitivity analysis indicates that a decrease of 34% in total benefits would be needed to reach the cutoff EIRR of 12%. A change of this magnitude is considered unlikely given Ministry of Railways (MOR)’s experience in railway operation and the conservative nature of the benefit estimation.

Appendix 13

Table A13.1: Economic Internal Rate of Return (CNY million) Costs

Net Benefits Benefits Net Passenger Freight Avoided Passenger EnvironFreight Year Project Economic Transport Total Transport Operating Total Railway PCR RRP mental Time Time Investment Value Benefits Cost Costs Costs Cost Investment Savings Benefits Savings Added Savings Savings 2000 2,027 63 2,090 0 0 0 0 0 0 0 0 (2,090) (2,264) 2001 3,331 95 3,426 0 0 0 0 0 0 0 0 (3,426) (3,712) 2002 4,511 91 4,602 0 0 0 0 0 0 0 0 (4,602) (4,986) 2003 5,831 92 5,924 0 0 0 0 0 0 0 0 (5,924) (6,418) 2004 5,609 93 5,702 0 0 0 0 0 0 0 0 (5,702) (6,544) 2005 26 959 985 1,141 2,783 1,157 138 0 0 123 5,342 4,357 5,612 2006 252 1,068 1,320 2,283 3,653 1,410 167 245 10 128 7,896 6,576 5,976 2007 60 1,097 1,157 1,255 3,997 1,496 175 274 11 136 7,345 6,188 4,298 2008 0 1,129 1,129 0 4,376 1,590 185 540 23 151 6,865 5,736 4,736 2009 475 1,161 1,636 0 4,794 1,692 196 589 25 175 7,470 5,834 4,757 2010 461 1,220 1,681 0 5,255 1,803 207 657 27 223 8,172 6,491 5,316 2011 2,676 1,304 3,980 0 5,386 1,896 242 1,017 42 228 8,811 4,831 3,318 2012 5,108 1,393 6,501 0 5,522 1,943 275 1,133 47 232 9,152 2,651 1,120 2013 5,010 1,487 6,497 0 5,664 1,993 315 1,257 53 236 9,518 3,021 1,407 2014 3,211 1,589 4,800 0 5,807 2,045 361 1,385 59 240 9,896 5,096 3,356 2015 0 1,659 1,659 0 5,954 2,259 448 1,413 60 244 10,379 8,720 6,661 2016 0 1,681 1,681 0 6,090 2,299 461 1,138 48 249 10,285 8,604 6,821 2017 0 1,704 1,704 0 6,234 2,342 475 1,161 50 253 10,515 8,811 6,988 2018 0 1,728 1,728 0 6,374 2,379 489 1,188 51 257 10,738 9,010 7,149 2019 0 1,754 1,754 0 6,523 2,421 504 1,213 52 261 10,974 9,220 7,318 2020 1,701 1,782 3,483 0 6,677 2,463 519 1,241 53 265 11,218 7,735 5,831 2021 (66) 1,783 1,717 0 6,677 2,715 573 1,320 57 269 11,609 9,892 7,583 2022 0 1,784 1,784 0 6,677 2,715 573 1,352 58 273 11,647 9,863 7,547 2023 0 1,785 1,785 0 6,677 2,715 573 1,379 59 277 11,679 9,894 7,573 2024 (14,504) 1,787 (12,717) 0 6,677 2,715 573 1,412 60 281 11,717 24,434 22,650 EIRR = 19.6% 15.8% ( ) = negative, EIRR = economic internal rate of return, PCR = project completion report, RRP = report and recommendation of the President. Source: Asian Development Bank estimates.

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Appendix 13

Table A13.2: Sensitivity Analysis Scenario

EIRR (%)

1. Base Case

19.6

2. Increase in Operating Cost by 10%

19.3

3. Decrease in Total Benefit by 10%

17.6

34.0

4. Decrease in Total Traffic by 10%

17.9

38.6

5. Increase in Total Traffic by 10%

20.7

6. Decrease in Net Economic Value Added by 10%

18.5

7. Increase in Net Economic Value Added by 10%

20.7

8. Combine 4 and 6

16.7

9. Combine 5 and 7

21.7

EIRR = economic internal rate of return. Source: Asian Development Bank estimates.

Switching Value (%)

58.7

23.3

Appendix 14

59

SOCIAL IMPACT AND POVERTY REDUCTION IN THE PROJECT AREA A.

Introduction

1. The Hefei-Xi’an Railway Project (the Project) areas include 27 counties/districts of 7 prefectural-level cities in Shaanxi, Henan, Hubei, and Anhui Provinces. Among the seven prefectural-level cities affected, Shangluo City, Nanyang City, Xinyang City, and Liu’an City include the majority of the remote and poor counties/districts that the Project railway traverses. Therefore, the social analysis is concentrated on those four cities. For details, please refer to the following table: Table A14.1: Project-Affected Area and Poverty Counties Province

City

County

Shaanxi Province

Xi’an Weinan Shangluo

Lintong District,a Lantian Countya Linwei District, Hua Countya Shangzhou District,a Danfeng County,a Shangnan Countya Xixia County,a Neixiang County,a Zhenping County,a Wolong District,a Wancheng District,a Tanghe County, Tongbai Countya Pingqiao District,a Shihe District,a Luoshan District,a Guangshan County,a Xi County,b Huangchuan County,b Shangcheng County,a Gushi Countya Huoqiu County,a Yeji County, Jinzhai County,a Yu’an District,a Jin’an District a Feixi County, Feidong County

Nanyang Henan Province

Anhui Province

Xinyang Liu’an Hefei

Total

Poverty Counties 1 3 1 7 3 15

a

Nationally designated key poverty county. b Provincial designated poverty county. Notes: Xixia County is actually not a poverty county, although it is considered a national-level poverty county in the report and recommendation of the President. Sources: Ministry of Railway’s completion report, Research Institute of Foreign Capital Introduction & Utilization in Southwest Jiaotong University’s post evaluation report, and website of the State Council Leading Group Office of Poverty Alleviation and Reduction.

B.

Stakeholder Analysis

2. Urban people unaffected by resettlement. The Project provides convenient access to link towns, counties and cities, and fosters both passenger and freight movement. Railway transport costs are lower and it provides more comfortable and safer services. Along with the improved investment environment, the local economy has achieved higher growth. Urban residents, therefore, have gained more employment opportunities, and earned more income. The statistical data indicate that the average annual net income per urban person in the four cities increased by 36% to 78% between 2000 and 2005 (Table A14.2). Table A14.2: Increase of Average Annual Net Income Per Urban Person City Shangluo Nanyang Xinyang Liu’an

1999 3,950

2000 4,430 4,037 4,305

2005 7,038 6,919 6,784 7,810

Increase 78% 56% 68% 81%

Sources: Shangluo Statistical Yearbook 2006, Nanyang Economic Statistical Yearbook 2002, Nanyang Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks 2001 and 2006, and meetings with local governments during the project completion review mission.

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Appendix 14

3. Rural people unaffected by resettlement. The Project has provided cheaper and safer transportation, especially during the snowy winter season. Better transport has in turn provided more opportunities to grow and sell cash crops, thus improving farmers’ incomes. It has also improved information exchanges and the rational flow of personnel. An increasing number of farmers work manual jobs and off-farm employment during off-farm season, and their income increases yearly. The statistical data indicate that the average annual net income per farmer in the four cities increased by 41% to 53% from 2000 (1999) to 2005. Table A14.3: Increase of Average Annual Net Income Per Farmer City Shangluo Nanyang Xinyang Liu’an

1999 1,023

2000 1,889 1,916 1,571

2005 1,513 2,894 2,708 2,255

Increase 48% 53% 41% 44%

Sources: Shangluo Statistical Yearbook 2006, Nanyang Economic Statistical Yearbook 2002, Nanyang Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks 2001 and 2006, and meetings with local governments during the project completion review mission.

4. People affected by land acquisition, house relocation or both. Affected people have been compensated and resettled through implementation of the resettlement plan. During project construction, they obtained more employment opportunities because they lived close to the railway. Their living conditions have been improved through house relocation. The Project has increased market opportunities for agricultural products and part-time jobs. Better transportation has provided them with more income-earning opportunities. C.

Gender Analysis

5. Before the Project, women in the project area mostly did household and farm work and had limited opportunities to find employment elsewhere. At that time some young males sought work opportunities outside their home village, but women remained at home to work on the farm and look after their families and houses. Their farm work is almost the same as that of men, involving tilling, seeding, carrying fertilizer, harvesting, and raising livestock. However, with better transport, many women, especially younger women, are now seeking employment outside their villages. The Project provided them with new income-generating opportunities. According to the Research Institute of Foreign Capital Introduction & Utilization in Southwest Jiaotong University’s post evaluation report, during civil construction of the Project, about 10% of local laborers employed by the contractors were women; among the farmers working outside as temporarily employed laborers, about 25% were women. D.

Poverty Reduction

6. The construction of the Project provided local people with more job opportunities, and brought more demands for construction materials and services. According to the Ministry of Railway’s completion report, during the railway civil work, 211,399 person-months were worked by local laborers, with 71.49% of labor supplied by people living below the poverty line. Their average daily wage for the civil work was CNY 20, much higher than their income from farming. Local people also profited through selling construction materials, opening restaurants and shops and, renting out spare houses to the contractors. The Report also stated that the project construction used CNY 2 billion of local construction materials.

Appendix 14

61

7. About 1,500 km of service roads were built during the civil works phase. Many bridges were also built to provide access for the contractors. Many of these roads and bridges have been transferred at no cost to the local villages for their use. 8. The Project has supported poverty reduction in the project areas. In the remote and mountainous areas of Shangluo City, the proportion of the population with annual income per capita incomes below CNY 865 decreased from 38.17% in 1999 to 22.46% in 2006. The following table shows the poverty reduction percentages in the four cities before and after the Project. Table A14.4: Poor People Distribution in Main Project Area before and after the Project City Shangluo Nanyang Xinyang Liu’an

1999 38.17%

2000

2001

10.73% 11.19%

2005

2006 22.46%

7.10% 9.06% 12.15%

8.71%

Sources: Meetings with local governments during the project completion review mission, Liu’an Statistical Yearbook 2006, and websites of local governments.

E.

Socioeconomic Development

9. Comparing the socioeconomic indicators of the four cities in 2000 with 2005, there has been a rapid improvement in socioeconomic conditions in the project areas in those 5 years. The rate of growth for the tertiary sector in each city was relative higher. Since the tertiary sector involves the commercial services that distribute goods to final consumers, it is obvious that the affected people have benefited from the Project railway, which is the most important transportation facility in most of the affected areas. Development of manufacturing industries is an effective poverty reduction tool, as it is accompanied by the development of the services sector, and increases the tertiary sector’s share of the overall industrial sector. This implies that railway project in the Project area has been effective in promoting poverty reduction. The details are presented in Table A14.5. 10. In the project-affected mountainous and poor areas, significant poverty reduction impacts have been achieved. The Project has contributed to socioeconomic development in the project areas by providing cheaper, safer, and more comfortable access to markets, employment opportunities, and social services. After the completion of the Project, railway transportation has stimulated the local economy, especially the secondary and tertiary sector, and provided better access to employment opportunities and social services. Therefore, the socioeconomic conditions in the Project areas have improved and the Project’s poverty reduction objectives have been met.

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Appendix 14

Table A14.5: Socioeconomic Condition Changes in the Project Area Indicator

Year/Change

2000 Total Population ('000) 2005 Change (%) 2000 Agricultural Population ('000) 2005 Change (%) 2000 GDP (CNY million) 2005 Change (%) 2000 Primary Sector (CNY million) 2005 Change (%) 2000 Secondary Sector (CNY million) 2005 Change (%) 2000 Tertiary Sector (CNY million) 2005 Change (%) 2000 GDP Per Capita (CNY) 2005 Change (%) 2000 Cultivated Land ('000 mu) 2005 Change (%) 2000 Cultivated Land Per Farmer 2005 (mu) Change (%) 2000 Paddy and Irrigated Land 2005 ('000 mu) Change (%) 2000 Paddy and Irrigated Land Per 2005 Farmer (mu) Change (%) 2000 Average Income Per Farmer 2005 (CNY) Change (%)

Shangluo City 2,367 2,420 2.24 2,072 2,056 -0.77% 5,627 10,016 78.00 1,666 2,461 47.72 2,011 3,528 75.44 1,961 4,027 105.35 2,348 4,151 76.79 2,197 1,939 -11.74 1.06 0.94 -11.05 500 459 -8.11 0.24 0.22 -7.39 1,128 1,513 34.13

Nanyang City 10,490 10,746 2.44 9,012 9,017 0.06 51,966 105,343 102.72 15,370 27,576 79.41 23,766 52,799 122.16 12,830 24,968 94.61 4,963 9,826 97.99 13,116 14,087 7.40 1.46 1.56 7.34 926 602 -34.93 0.10 0.07 -34.97 1,889 2,894 53.20

Xinyang City 7,876

26,105 50,856 94.81 9,208 15,042 63.36 8,945 19,348 116.30 7,953 16,467 107.05 6,473

8,519

1,916 2,708 41.34

Liu’an City 6,621 6,810 2.85 5,670 5,817 2.59 17,862 31,282 75.13 6,447 8,321 29.07 5,250 10,493 99.87 6,164 12,468 102.27 2,698 4,594 70.27 6,525 6,300 -3.44 1.15 1.08 -5.89 5,115 5,295 3.52 0.90 0.91 0.90 1,571 2,255 43.54

GDP = gross domestic product, mu = traditional land area measure. Sources: Shangluo statistical yearbooks 2001 and 2006, Nanyang Economic Statistical Yearbook 2002, Nanyang Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks 2001 and 2006, meetings with local governments during project completion review mission, and websites of local governments.