Document of The World Bank Report No: 29288 IMPLEMENTATION COMPLETION REPORT (TF-22534 CPL-36810 SCL-3681A SCPD-3681S) ON An IBRD LOAN IN THE AMOUNT OF US$121.89 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A FUJIAN PROVINCIAL HIGHWAY PROJECT June 9, 2004 CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2003) Currency Unit = RMB RMB 1.00 = US$ 0.12082 US$ 1.00 = RMB 8.2769 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS BMS - Bridge Management System CAS - Country Assistance Strategy EDB - Expressway Data Base EAP - Environmental Action Plan E&M - Electrical and Mechanical FEDC - Fujian Expressway Development Company FEPC - Fujian Provincial Transport Department FPECD - Fujian Provincial Expressway Construction Directoration FPEPB - Fujian Provincial Environmental Protection Bureau FPHAB - Fujian Provincail Highway Administration Bureau FQE - Fuzhou-Quanzhou Expressway MIEO - Machinery Import and Export Office MOC - Ministry of Communication PAP - Project Affected People PMS - Pavement Management System QXE - Quangzhou-Xiamen Expressway RAP - Resettlement Action Plan RDB - Road Data Bank RNIP - Road Network Improvement Program SEPA - State Environmental Protection Administration SPC - State Planning Commission Vice President: Jemal-ud-din Kassum, EAPVP Country Director Yukon Huang, EACCF Sector Manager Jitendra N. Bajpai, EASTR Task Team Leader/Task Manager: Supee Teravaninthorn, EASTR CHINA FUJIAN PROVINCIAL HIGHWAY PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 10 6. Sustainability 11 7. Bank and Borrower Performance 12 8. Lessons Learned 13 9. Partner Comments 14 10. Additional Information 22 Annex 1. Key Performance Indicators/Log Frame Matrix 23 Annex 2. Project Costs and Financing 24 Annex 3. Economic Costs and Benefits 27 Annex 4. Bank Inputs 36 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 38 Annex 6. Ratings of Bank and Borrower Performance 39 Annex 7. List of Supporting Documents 40 Project ID: P003626 Project Name: CN-FUJIAN PROV HWY Team Leader: Supee Teravaninthorn TL Unit: EASTR ICR Type: Core ICR Report Date: June 17, 2004 1. Project Data Name: CN-FUJIAN PROV HWY L/C/TF Number: TF-22534; CPL-36810; SCL-3681A; SCPD-3681S Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Roads and highways (99%); Sub-national government administration (1%) Theme: Rural services and infrastructure (P); Municipal governance and institution building (P) KEY DATES Original Revised/Actual PCD: 01/05/1992 Effective: 07/21/1994 07/21/1994 Appraisal: 10/06/1993 MTR: 11/01/2004 Approval: 12/14/1993 Closing: 06/30/2000 12/31/2003 Borrower/Implementing Agency: GOC/FUJIAN PROVINCE Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautum Kaji Country Director: Yukon Huang Shahid Javed Burki Sector Manager: Jitendra N. Bajpai Paul Stott Team Leader at ICR: Supee Teravaninthorn Otto Raggambi ICR Primary Author: Jacques Yenny 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project has been designed to (a) support the continued development of road infrastructure in Fujian Province to facilitate mobility and increase the efficiency of road transport in the interest of stimulating economic activity; (b) develop an action plan for the strengthening of the provincial road construction industry; (c) assist in the development of institutional capabilities for transport planning and investment prioritization; and (d) facilitate the transfer of highway construction and maintenance technology through staff training and the provision of equipment. The project objectives were clear and in line with the Country Assistance Strategy (CAS) presented to the Board in August 1993 and the sector assistance strategy. They were also consistent with the Government request for continuous assistance of the Bank in the highway sub-sector. In February-March 1990, the Bank undertook, jointly with the State Planning Commission (SPC) and the Ministry of Communications (MOC) a screening mission to make preliminary assessment of nine highways which had been proposed for Bank financing. From this pre-selection process, it was concluded that the construction of the Xiamen-Quangzhou expressway, as Phase 1 of the longer-term objective to build a coastal expressway from Fuzhou (the provincial capital) to Zhangzhou, (at the border with Guangdong province), warranted consideration for Bank financing. In terms of priority, it was agreed with the Government that processing the Fujian project would follow preparation of similar projects in Zhejiang, Guangdong, and Henan provinces. The Bank's identification mission visited Fujian in November 1991. 3.2 Revised Objective: The objectives were not revised 3.3 Original Components: The original components of the project were: - Construction of the 81.9 km Quanzhou-Xiamen expressway (QXE), including the electrical and mechanical (E & M) equipment for tolling, traffic monitoring, telecommunications and lighting; - Upgrading of three road sections (58.3 km) and paving of four road sections (200.7 km); - Construction supervision for the expressway and other roads; - Procurement of equipment for operation and maintenance of the QXE, road laboratories and the development and application of a Road Data Bank (RDB) and a Pavement Management System (PMS); - A study of the provincial road construction industry; and - Staff training. 3.4 Revised Components: COMPONENT; COST; RATING CONSTRUCTION OF QXE & FQE; $470,400,000.00; S ROAD NETWORK IMPROVEMENT PROGRAM; $40,300,000.00; S CONSTRUCTION SUPERVISION OF QXE & FQE; $12,100,000.00; S CONSTRUCTION INDUSTRY STUDY; $400,000.00; S PROCUREMENT OF EQUIPMENT; $3,900,000.00; S INST. STRENGTHENING & TRAINING; $1,000,000.00; S ROAD DATA BANK/PAVEMENT MANAGEMENT; $700,000.00; S Due mainly to the devaluation of the RMB in early 1994 and to some lower than expected bid prices - 2 - for all four ICB contracts on QXE, savings of US$47.2 million appeared early during the project execution and were recorded already in 1995 supervision mission reports. After fairly lengthy discussions, the Bank agreed to the province's request, supported by MOC to include a new component in the project. The new component consisted of pavement construction, supply and installation of E & M equipment, and supervision for the Fuzhou-Quangzhou Expressway (FQE). FQE was a logical continuation of the Bank financed QXE. Once completed, the FQE and QXE would link Fuzhou, the provincial capital to Xiamen, the province's most important port. On July 27, 1998, after Board approval, the Loan and Project Agreements were amended to reflect the new components and extend the closing date from June 30, 2000 to December 31, 2003. 3.5 Quality at Entry: Quality at entry is rated satisfactory overall. The assessment is based on: a) the consistency of the project objectives with China's priorities for the sector and of the Bank's strategy for future highway lending in China; b) the importance given to improving the capabilities for transport planning and management of the road network in the province; c) the transfer of highway construction and maintenance technology through training of the local staff both in China and abroad; and d) the attention given to following Bank policy, in particular regarding environmental protection and resettlement. As with most Bank-financed projects at that time, no performance indicators were explicitly developed (no baseline and benchmark figures established). 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project objectives were substantially met and the overall achievement of the project objectives is assessed as satisfactory. A. Supporting the development of road infrastructure in Fujian Province The two major highways, the Xiamen-Quangzhou Expressway (QXE) and the Fuzhou-Quangzhou Expressway (FQE) were opened to traffic as scheduled, in late 1997 and 1999 respectively. The objective of reducing congestion in the corridor has been met with long distance traffic being diverted to the expressway. However, diversion to the expressway, at about 40% of total traffic, is lower than forecast. This is due in part to the relatively high toll rates (0.55 Yuan/per car-km). The rapid urbanization in the corridor, promoted in part by the improved accessibility provided by the expressway, traffic in the corridor in 2003 matched the forecast after having been lower than it for a few years. On the other hand, the economic benefits are considered sustainable, without any predictable element of risk, as traffic has been growing rapidly since opening. The Road Network Improvement Program (RNIP) has had a very beneficial impact on the local communities served by the upgraded and paved roads. The seven roads in this component were opened to traffic between 1994 and 1997. The upgrading of three higher class roads (the A Group) has reduced congestion, despite the continued rapid traffic increases. On all three roads, the traffic increased faster than forecast immediately after opening. Recently, the traffic on two of the roads decreased somewhat because of the opening of a motorway in one case and of a shorter alternative in an other case. In the case of the four newly paved roads (the B group), improved access and easier transport of local produce have enhanced the living standards of the population served by the roads, according to evidence gathered by the borrower. For example, in one of the road service area, the annual average per capita income increased from 2,123 RMB at project completion (end 1995) to - 3 - 3,864 RMB in early 2001. The rate of school enrollment went from 93.5% to 98.2%, the illiteracy rate fell from 16.1% to 1.1% and the number of health service workers per 100 people increased from 0.16 to 1.2. Along another road, famous local products such as flower wise mushrooms can now be transported quickly and exported to Japan. Other products which can now easily be transported include timber, block stone, bamboo, tea leaves and Chinese medicinal herbs. B. Developing institutional capabilities for transport planning and investment prioritization Institutional capabilities for investment planning prioritization were developed through the introduction of a road data bank (RDB) and pavement and bridge management system programs (PMS and BMS) for the core arterial road network of the province. The province adopted the Chinese RDB, PMS and BMS programs, developed for nationwide application. Both the CPMS99 and CBMS are now available. The CPMS contains data for 2-3,000 km of bituminous roads, although the data dates back to 1999, when MOC required the CPMS to be used by all provinces for a census. The CBMS has some data on about 2,500 of the 3,600 bridges on the main road network. Although available, the CPMS is presently not used for planning, primarily because of the lack of sufficient funding for periodic maintenance. With the current funding levels essentially sufficient only for routine maintenance, there is no incentive to use the CPMS and update its data base. C. Transferring technology of highway construction and maintenance through training and provision of modern equipment The impact of technology transfer through training is not easy to measure due to difficulties in defining baseline parameters. However, the eagerness shown by the leaders of the Fujian Provincial Transport Department (FPTD) to engage their staff in training activities under the project is evidence of the importance they attached to acquiring modern technology. The province requested the Bank to increase the amount of the loan affected to training twice during project execution. The total amount spent on training ended up to be 2.5 times the original allocation. Over 200 staff members from various branches of the FPTD were trained in 14 countries in North America, Europe and Australia. The topics of training included: construction management and supervision, financial control, planning and design, material tests, road data bank, financing activities, E&M works, operational management of roads and expressways, safety, quality control, tunneling, soft soil treatments, environmental protections, human resources development, etc. There was also numerous training courses organized locally, in which trainees returning from abroad lectured on what they had learned. Through overseas training and study tours and participation in studies and supervision during project implementation, the FPTD staff received satisfactory exposure to new concepts and practices in highway management and technology. There were also evident of the effective use of new skills by trained FPTD staff. D. Developing an action plan for the strengthening of the provincial construction industry The Provincial Road Construction Industry Study and Nation Wide Survey were carried out with a TA grant from Japan PHRD Funds. It was completed in 1997 by a team of foreign and Chinese consultants. The Bank reviewers deemed that the study report was well prepared and gave an excellent documentation of the construction industry in China. The Bank found the recommendations generally reasonable, although most of them would have required further detailed work to explore the range of solutions appropriate for Chinese conditions and make specific recommendations. The FPTD staff found that the recommendations were not suitable for China at the time. For instance, one of the recommendations was to establish a construction equipment leasing company. The FPTD had tried this in the early 1990s, but found no takers for the equipment and the company had to be disbanded. - 4 - By the time the study was completed, the State policy of developing infrastructure was having a major impact on civil works construction companies. Fujian province was no exception and soon contractors from outside the province started winning contracts in Fujian. This combined with the policy of commercializing the industry, created pressure on the local construction companies to reform and restructure. New staff and new management were hired and some consolidation took place to create competitive modern companies. While at the time of appraisal, the largest contractor in the province had an average turnover of 6 million Yuan, last year, the turnover of one of the largest local contractor reached 100 million Yuan. With all these development unfolding, the FPTD did not see the necessity of developing any action plan for the industry and the Bank did not pursue the matter. 4.2 Outputs by components: Civil Works. Both the construction of QXE (81.9 km) and the pavement of FQE (154 km) were successfully completed within schedule and works were of good quality. At the beginning, two of the four contracts on QXE fell behind schedule. This was pointed out by a Bank supervision mission in 1996. Following the Bank's mission, the FPTD and the Provincial Government took a variety of measures that greatly improved the situation by early 1997. In particular, the vice-governors of the province met with the contractors impressing them of the importance attached by the provincial government to opening the project on time. New time schedules were defined and more funds were made available to the contractors in the form of advance payments and domestic bank loans, guaranteed by the province. Quality of construction on both expressways was good. A Bank mission driving on the FQE in late 1999 remarked that the expressway appears to be of excellent quality, in fact one of the best the mission could see until then in China. The surface of pavement is very smooth, protection of slopes is well done, obstacles are well protected and the general appearance is very good. Electrical and Mechanical Works (E&M). The two supply and install contracts (QXE and FQE) for these works were delayed by lengthy procurement processes and progress, after contract signature was slower than expected in the case of the QXE, which was the first contract of that type in the province. E & M Works Expressway Bids invited Contract signed Work started Work completed opens QXE 1/1998 10/1996 12/1998 8/1999 7/2001 FQE 1/2000 10/2001 9/2002 10/2002 10/2003 The bidding process for QXE E&M works took two years. Bidding documents were prepared according to the relatively new two stage bidding procurement model established by the Bank for supply and install contracts. In addition, because the procurement involved imported equipment, the province needed the approval of the Machinery Import and Export Office (MIEO). Clearance from MIEO has affected numerous Bank projects, as it usually takes at least 6 months and some times up to one year. Given the rapid pace of technological innovations, such long procurement procedures often create difficulties in acquiring the latest technologies. Installation of the E&M equipment for QXE finally started only in August 1999, almost three years after the start of the bidding process. Completion was postponed by about six months due to delay in importing foreign equipment. Contracting for FQE E&M also took longer than expected despite the experience gained on the previous section QXE. The original plan, reported by the supervision mission of September 2000 was for the installation to be completed by March 2002. Although the procurement process was faster than for QXE, using prequalification rather than two stage bidding, work only started in October 2002 and the project closing date had to be postponed by one more year to December 31, 2003. Supervision. The construction supervision of the two expressways was satisfactory. It was carried out - 5 - by a joint supervision team of local engineers and international consultants. The joint team approach, with the international engineers playing an advisory and training role proved effective in assuring work quality. It also helped the local counterparts to appreciate the importance of quality control. Supervision costs were substantially higher than estimated, in part because of the added project component. B. Road Network Improvement Program (RNIP) The component included the upgrading of three road sections (58.3 km) and the paving of four road sections totaling 200.7 km. The roads were widely dispersed in the northern and northeastern parts of the province and the works were not suitable for packaging. Therefore, the seven projects were divided into 16 contracts awarded under LCB procedures. All contracts were completed by the end of 1996. A detailed supervision mission carried out in the fall of 1996 inspected all seven projects, traveling almost 3000 km. It concluded that "overall implementation of the 16 contracts has gone rather smoothly, supervision was effective and the quality of construction is satisfactory" However, due to poor upfront design and insufficient planning, particularly of traffic growth expectations on the upgraded roads, extensive variation orders had to be issued. This led to an overall 65% increase over the original contract prices. After reviewing the variations orders, the Bank concluded that two, frequently issued, major changes were clearly outside the original contract size and scope. These were the change in pavement structure from bituminous to concrete and the large increases in width of the road base and pavement. Since the Bank had not been informed in time about these substantial changes and feasibility studies had not been prepared to justify the changes, the Bank could not reimburse the Borrower for works outside the scope of the original contracts. The Bank reimbursed other variations of a "normal and reasonable nature" C. Equipment Equipment to be purchased under the project was for the operation and maintenance of the QXE, for road laboratories and for the development and application of the RDB and PMS. The procurement of equipment went smoothly and was completed by 2000, very much in line with the SAR estimates. Equipment Purchase SAR Actual Maintenance equipment 2,050,400 2,180,000 Testing Equipment 428,395 315,130 PMS equipment 418,660 379,600 TOTAL 2,897,455 2,874,730 D. Road Data Bank, Pavement and Bridge Management Systems The Fujian Provincial Highway Administration Bureau (FPHAB) is in charge of the RDB/PMS for the province and the Fujian Provincial Expressway Construction Directorate (FPECD) for the expressways. By mid-2000 the Expressway Data Base (EDB) had been completed and was functioning well. Regarding regular roads, the FPHAB developed its own GIS based road data bank, with the support of a university in Nanjing. They have also assembled their own road centerline measurement vehicle to provide road alignment data for the RDB. Most equipment is of Chinese origin and the system appears well designed. Alignment data have been collected on about 7,300 km of the 14,171 km national and provincial highway network. The RDB is able to store numeric as well as image data - 6 - (video and digital photographs). However, the FPHAB does not conduct any roughness surveys since they do not have the appropriate equipment. On the other hand, the FPECD imported a road data collection vehicle in 2001 to collect expressway data base including roughness survey. It is estimated by the operator that the vehicle has conducted only some 700 lane-km of surveys since it was commissioned 18 months earlier. Although there are some problems with the vehicle, which the manufacturer still has to correct, the overall system is operational and suitable for road surveys. Some arrangement should be made between FPECD and FPHAB so that the latter can use the vehicle to collect roughness and other data on the general road network to increase the utilization of this expensive equipment. E. Training FPTD gave great importance to the training program included in the project. This project was the first foreign financed road project in the province and unlike other provinces of China, Fujian highway staff had not had any opportunity to receive training abroad. By the end of 1997, some 75 trainees had been abroad to Australia, Britain, Canada, Italy and the USA, and the original allocation of US$600,000 for training had been fully used. The province, with the agreement of MOC, requested to increase the allocation by US$500,000 to continue the program. The new amount was used up again by 2000 and, in 2001, the Bank agreed to a further allocation of US$500,000 for training in 2001 to 2003. Other details on the training program were given in section 4.1.C F. Provincial Road Construction Industry Study As already mentioned the study was carried out satisfactorily and concluded in 1997. The status of the industry since completion of the study has been discussed in section 4.1.D G. Safeguard policy Environmental Protection. The environmental assessment (EA) report specified measures for monitoring and mitigating impact related to social disruption, air quality, control of noise and vibration, water management, cultural/historic locations, soil pollution. The project also included forestation of designated areas. For both the expressways and the RNIP, the routes were chosen among alternatives to avoid environmentally sensitive areas, minimize land acquisition and the negative impact on the local populations. The engineering design and technical specifications incorporated the mitigating measures required to be taken by the contractors during implementation. For the added expressway, the locally prepared EAP was reviewed and updated to Bank standards, to include mitigating measures similar to those applied to the QXE. In April 1997, FPECD with the provincial environmental protection bureau (FPEPB) held a training course in environmental protection with 60 participants from the employer, design institute, contractors and the supervision company. The FPTD submitted regular reports on environmental monitoring on the QXE and FQE. These reports show that the construction had not adversely impacted noise and water quality in the vicinity of the construction sites. The only reported problem was that of dust. Only two of the four contractors were using water sprayers and not that effectively, only one of the trucks transporting construction materials was covered. FPECD although aware of the problems was not enforcing the terms of contract by penalties and/or work stoppages. They did not have enough personnel. No monitoring reports had been prepared by FPHAB for the RNIP roads. An environmental supervision mission in late 1999 reported that: Along FQE the embankments have - 7 - been well protected by stone paving, grass shrubs and plants. The ample vegetation was well cared for and aesthetically pleasing and the excavated and spoil areas were rehabilitated and replanted. Similarly, along the QXE, the grass shrub and plants were well established and tended. 63,300 trees and shrubs were planted.· Some 1,790 meters of noise barriers were built on both expressways. The same mission, having reviewed reports and noted that lead levels in the soil were below the criteria established by State Environmental Protection Administration (SEPA), suggested that FPECD should discontinue monitoring of lead in soil. Land Acquisition and resettlement. Land acquisition and resettlement proceeded smoothly and followed the principles and criteria for compensation set forth in the Resettlement Action Plan (RAP) for the QXE and the RNIP. For the FQE, land acquisition had already begun before the Bank got involved in the project. Compensation and rehabilitation standards for land acquisition in this section were somewhat below the level agreed with the Bank for the QXE and a remedial plan was developed to cover the difference. With this amendment, the RAP for the FQE, which also described the work already completed, fully satisfied or even exceeded the Bank Guideline requirements. For the QXE, resettlement work began in June 1993 and was completed in December 1997 and for the FQE, started in September 1996 and was completed two years later. Resettlement was closely monitored by the Provincial Resettlement Office together with local Resettlement Offices (RO). In addition, a contract was passed with the Fujian Academy of Social Sciences (FASS) to provide independent monitoring of the RAP. FASS made continuous surveys on the life-stiles of the project affected people (PAP), evaluated the resettlement work and reported issues to the PRO for remedial. The surveys showed a steady increase in the standards of living of affected households both with and without agricultural relocation. For households remaining in agriculture, part of the land compensation fees have been applied to improve the productivity of the land and diversify into higher value crops such as forestry, fruit trees and aquaculture. For households with non-agricultural relocation, local governments provided assistance in developing private businesses and through training for increasing employment opportunities. In some cases, local administrations provided substantial subsidies to the PAPs over and above their entitlement to endure a smooth transition. The expressway fostered industrial development and many farmers moved to either full or part-time employment away from agriculture. Bank supervision mission found that newly established village enterprises were performing well and employed local people at wages well above their previous agricultural incomes. House affected households moved from their previous often poorly constructed and equipped old houses to more comfortable and modern residences, with access to piped water, electricity and telephone. After relocation, the structure of 90% of the houses, of the relocated households, was brick and concrete versus 60% before relocation. Enterprises that were relocated have made an easy transition and have been growing steadily since resettlement. Managers were satisfied with the rates of compensation for their assets. Basic infrastructure in villages and towns along the new expressways has also been upgraded. Finally, sample surveys of affected households after relocation showed that 94% of the households thought that the resettlement was well done. Regarding compensation for land acquisition, only 5% thought that it was too low. - 8 - The impact of the two expressway sections and the RNIP is summarized in the following table. FQE & QXE Expressways RNIP Major Items Planned Actual Planned Actual Land acquisition (mu) 26,197 29,207 1,928 1,489 House demolition (sqm) 485,546 572,778 20,085 19,974 Relocated Household 5,197 6,356 n.a. 989 Project-affected people n.a. 27,968 689 177 Relocated Enterprises 87 87 n.a. 13 Total Resettlement Cost 428 483 19 14 (RMB: million) Source: Planned QXE and RNIP from SAR, FQE from President Memorandum June 15, 1998 Proposed Loan Amendment. Actual (partial) from Internal monitoring report of FEPRO dated February 14, 2000. 4.3 Net Present Value/Economic rate of return: The economic re-evaluation comprised the two expressways and the seven road sections under the RNIP. The Fuzhou-Quanzhou expressway section was added later to the project and was therefore not included in the appraisal economic evaluation. At completion, an economic evaluation was undertaken for this component following as closely as possible the original appraisal procedures and using the most recent data on vehicle operating costs (Annex 3). The re-estimated EIRR for each road section ranges from 15.8% to 38.5%, with an overall weighted EIRR for the project of 17.9% versus 25% estimated in the SAR. The main reason for the lower EIRR (for expressway) at completion is the lower traffic diversion to the expressway than anticipated. While the total traffic in the corridor is as forecast, only 40% of it uses the expressway instead of the forecast 74% (see section 4.1.A). For the RNIP roads, return on the B group roads is somewhat higher than in the SAR and slightly lower for the A group roads. Economic and Financial Evaluation Summary The ICR The SAR EIRR ENPV FIRR FNPV EIRR ENPV FIRR FNPV % 12%, % 4.5%, % 12%, % RMB:m RMB:m RMB:m il il il 1. Fuzhou - Xiamen expressway a. Fuzhou - Quanzhou 15.8 1,685 - - - - - - - - - - - - b. Quanzhou - Xiamen 19.0 1,657 6.5 834 24.3 2,146 - - - - Subtotal 17.1 3,000 - - - - - - - - - - - - 2. RNIP a. Group A (3 roads) 30.5 173 - - - - 26.2 168 - - - - b. Group B (4 roads) 38.5 261 - - - - 40.4 166 - - - - Subtotal 33.2 314 - - - - 31.3 334 - - - - Total 17.9 3,280 - - - - 25.0 2,480 - - - - - 9 - 4.4 Financial rate of return: There was no financial analysis in the SAR. On June 28, 1999, the Province established the Fujian Expressway Development Company (FEDC), by transferring the assets of QXE from FPECD to FEDC on a thirty year concession. After expiration, QXE will revert to FPTD. On February 1, 2001 with a no-objection from the Bank, FEDC issued stock in the form of A-shares on the Shanghai Stock Exchange. The funds generated by the sale of shares were to be entirely reinvested in expressway projects in Fujian Province. Dividends have been paid and the share price has increased since issue. The FQE was also transferred to the FEDC, but so far shares have not been issued for this section. The financial situation of FEDC is presented in Annex 3 and appears sound. Its cash flow was sufficient to fund loan installment. 4.5 Institutional development impact: Within the project, measures were taken to strengthen FPTD and its relevant institutions. The experience with competitive bidding and having works done by contract rather than force account has been successfully integrated and all new construction and major maintenance works in the province are now done by contract. The project introduced the FPTD, FPHAB and the FECD to prequalification of contractors, competitive bidding and good supervision for the first time in the province. Bank's requirements for procurement and supervision of civil works improved the construction quality, cost control and timeliness of contract completion, while reducing opportunities for fraud and corruption. Modern highway planning and management tools (RDB, PMS, BMS) were introduced and provincial staff developed a detailed data base for the road network. The staff training program financed by the project was successful and has been described above. A significant transfer of knowledge and technology took place during project implementation as local experts, together with foreign experts supervised construction of the first expressways in the province. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The devaluation of the Renminbi in 1994 from 5.75 to 8.25 Yuan per US$ resulted in massive loan savings, amounting to one third of the loan amount. The province, with the support of MOC, strongly argued for adding new components to the project, rather than canceling such a high proportion of the loan. There were lengthy discussions with the Bank, which finally agreed to using rather than canceling the remaining funds. A modification of the loan agreement was submitted to the Board in 1998, four years after the devaluation and resulting cost savings. 5.2 Factors generally subject to government control: Project implementation was to be the responsibility of the Fujian Province Transport Department (FPTD), with the FPEDC being the executing agency for the expressway construction and the acquisition of maintenance equipment and FPHAB being the executing agency for the RNIP and acquisition of the RDB and PMS equipment. Because of the importance attached by the province to the construction of its first expressway, the FPEDC was placed under the direction of a leading group headed by the Vice-Governor of the Province. This clearly led to the dominance of the FPEDC over the FPHAB with regards to the implementation of the project and contacts with the Bank. Attempts to include additional roads in the RNIP in 1996 were not pursued and costs savings were affected entirely to completing another expressway. Another costing saving found in late 2000 was cancelled in Oct. 2001 instead of using for further improvement of RNIP. All equipment was procured by FPEDC including for the PMS (see comments in section 4.2 D). 5.3 Factors generally subject to implementing agency control: - 10 - Because the implementing agency (FPEDC) focused on the timely completion of the civil works and lacked experience with the type of E&M works required for expressway operation, the formulation and design of this component was delayed. Projects in neighboring provinces of Zhejiang and Guangdong (effective over one year before the Fujian project) experienced the same problems. For instance, in Guangdong, the bidding documents were issued only in November 1996. Had there be better communications and sharing of experience between provinces, the delays in Fujian may have been reduced. Planners for the upgrading of three roads including in the RNIP failed to forecast the rapid economic development and resulting traffic growth. After bids were issued, a decision was taken to widen the roads from 9 to 12 meters. Because of unfamiliarity with Bank rules and pressed by the need to shorten the construction period to minimize the traffic disruption created by the works, FPHAB was unable to claim reimbursement for the large variation orders it had issued, without former Bank approval. 5.4 Costs and financing: At appraisal, the total project cost was estimated at US$528.8 million, of which US$140 million were to be funded by the Bank Loan. The total actual cost of the project, including the added FQE pavement, is now estimated at US$465 million, of which the Bank's share is US$119.9 million. Details are in Annex 2. The borrower cancelled $18.11 million on October 22, 2001, and the remaining US$0.5 million was canceled unilaterally at project closing. Loan disbursements were either in line or ahead of the SAR forecast during construction of the QXE. However, because of the delay in procuring the E&M installation, disbursement slowed down as the project was extended. All project components show some cost overrun, except for Studies and Training and indeed the total project cost exceeds the base cost estimate by over 23%. However, because the contingencies allowance was so large at US$35.9 million for physical and US$104.9 million for price contingencies, the total actual project cost is 12% lower than the estimate. Civil works on the QXE came within 95% of the estimate, but E&M works turned more than twice as expensive as estimated. Supervision also cost more. 6. Sustainability 6.1 Rationale for sustainability rating: The operating rights granted to the public-private expressways development company provide incentives for the provision of a high level of service to road users, including adequate routine and periodic maintenance. The rapidly increasing traffic ensures sustainability of project benefits. The sustainability of the RNIP under the project depends upon subsequent adequate routine and periodic maintenance of the roads. This is unlikely to pose a problem for the three upgraded roads. However, the maintenance of the smaller roads paved under the project is the responsibility of counties that have to rely on local revenues for the additional capital and recurring expenditures for the roads. For instance, one of the roads (B2 subproject) completed in November 1995 was found deteriorated and damaged in 2001, after less than six years of operation. This was caused by the low design standards, poor maintenance of the drainage system and overloading of trucks using the road. Due to the rapid growth of the provincial and regional economy and traffic, the upgrading from class 4 to class 2 has already started with local funds. The equipment for maintenance and operation of expressways procured under the project should provide adequate long-term service, since sufficient stock of spare parts has been purchased and maintenance facilities provided. - 11 - The lessons and knowledge learned from the staff training program have and will continue to be disseminated within the provincial institutions involved and have a long term influence on provincial road administration and management methods and highway specific technology. The methodology and application of the Chinese RDB, PMS and BMS programs is well understood by highway staff in the province. The system being developed will provide the necessary output information to help make better investment decisions for road improvement and maintenance when the funding situation improves. 6.2 Transition arrangement to regular operations: The two expressways started operation promptly at the end of the construction. They were operated in the first three years before the installation of permanent E&M equipment and tolls collected at temporary facilities with paper tickets instead of electronic cards. With the completion of E&M equipment installation, by 2001 for QXE and 2003 for FQE, all mechanical, electrical and electronic facilities are now operated on a permanent basis. Toll revenue leakage in the initial three years after opening of the expressways was reported to have been negligible due to heavy supervision. 7. Bank and Borrower Performance Bank 7.1 Lending: The project was identified by a joint mission of the Government and the Bank and its objectives were consistent with the Government requirements and the Bank strategy for the sector. This was the first foreign financed project in the province and there was no experience with international practices and requirement of foreign lenders. Bank assistance in preparation was highly satisfactory. The Bank team had adequate skill mix, covering the areas of engineering, environment and resettlement, procurement, institutional development, and training. The Bank also arranged to have foreign consultants financed by Consultant Trust Funds (CTF) to provide assistance in the preparation of design, technical specifications and bidding documents. Because problems of soft soils had been identified, a 2.7 km long embankment was constructed ahead of the start of the project to test treatment methodologies that could be employed on the expressway. The main risk had been identified as implementation delay in the construction of the expressway, because of the difficult subsoil conditions and the relatively high number of bridges and tunnels. The lack of previous experience of Fujian province as a first-time borrower also increased the risk of delays. To mitigate this risk, the project was designed with the assistance of foreign experts, prequalification of contractors was made particularly stringent and supervision arrangements were carefully formulated to ensure regular monitoring and effective quality control. 7.2 Supervision: The Bank mounted 16 supervision missions in the 10 year implementation period from 1994 to 2003. This relatively high average of 1.6 missions per year is explained by the need to reappraise a new project component and by the start of a second project in the province, which allowed combined missions. There was a discontinuity of staffing early on as the initial task manager retired and one year passed before a new manager was assigned to the project. Although the previous task manager served as a consultant in the interim, dealing with the matter of cost savings was delayed. There was only one further change in task manager later on and supervision performance was satisfactory. A QAG review also concluded that supervision was satisfactory. Resettlement and environment specialists - 12 - participated in most supervision missions from 1997 onwards and followed the project not only during construction but also during operation of the two expressways. Since those were already opened to traffic in 1998 and late 1999, they had a rare chance to monitor impacts, such as noise and lead in soil for three years until the project closing date. Unlike in the neighboring province of Guangdong, where many variation orders issued for reasons similar to those in Fujian (see 4.2 B) were accepted, the Bank applied its procurement rules rigidly in Fujian. Over US$18 million were cancelled in 2001. The Bank, however, showed flexibility in extending the closing date twice. 7.3 Overall Bank performance: Overall, the Bank's performance was satisfactory. The supervision team paid adequate attention to the borrower's compliance with Bank policies on resettlement and environment. It should be recognized that the Province was a first-time Bank borrower, not familiar with international business practices and FIDIC conditions of contract. Borrower 7.4 Preparation: FPTD preparation of the project was reasonable, considering the limited base of technical and managerial experience in developing large scale complex highway projects. It was also FPTD first experience with a foreign lender and its requirements in terms of project preparation, execution and safeguards. 7.5 Government implementation performance: The Government was fully committed to the project. The provincial authorities quickly intervened when contractors' difficulties affected work progress. Counterpart funds were provided on time. The process of obtaining clearance of bidding documents for the E&M equipment and installation was slower than expected, particularly from the part of MIEO as already mentioned. MOC helped implement capacity building measures by coordinating overseas training activities. 7.6 Implementing Agency: Overall project management was satisfactory. FPECD demonstrated strong commitment and effort to open the expressways on schedule. Both the environmental and resettlement action plans were implemented satisfactorily and expeditiously. FPHAB made good progress in developing road management tools and staff training. The coordination between the two implementing agencies could have been improved with stronger leadership from FPTD. 7.7 Overall Borrower performance: Overall, the borrower's performance is rated as satisfactory. The borrower has complied substantially with the conditionality of both the loan and project agreements. The Bank's procedures and requirements were generally followed. The cooperation between the borrower and the Bank was good throughout the preparation, appraisal and implementation of the project. 8. Lessons Learned Coordination between executing agencies. Clearly, the province's priority was the construction of the expressways. The FPECD was placed directly under a Vice-Governor of the province and became de-facto on par with, rather than under, the Provincial Transport Department (FPTD). Typically, the FPECD became the prime correspondent of the Bank and the role of the other executing agency, FPHAB, in the project was minimized. When the use of cost savings was discussed, the only project - 13 - for consideration was another expressway. Attempts by FPHAB to include other roads in the RNIP were not followed-up. In the end, about 15% of the loan amount could not be used, despite the shortage of funds in the road sector of the province. Over US$18 million were cancelled and about 0.5 million remain undisbursed at the closing date. Although Bank supervision team in 2000-2001 had made same efforts to broaden the dialog in the road sector and try to establish more direct relations and access to the provincial transport departments in order to improve coordination between agencies dealing with different classes of roads under the PTDs, the effort came a bit late to change FPTD's decision to cancel the saving cost. However, the effort were not in vain as such required coordination was drastically improved for the remaining work currently ongoing under the Second Fujian Highway Project. Preparation and execution of E&M works for the expressways. The one-year delay in project completion is attributable to the delay in the E&M procurement and works. Similar delays occurred under other Bank-financed projects being implemented in the mid-1990s. In some cases, Bank financing for this component had to be cancelled. The Bank now ensures that the bidding documents and engineering designs for E&M works are completed more or less at the same time as those for the civil works contracts and that tendering activities commence at least two years before civil works are expected to be completed. There should be more exchange of experience in general between provinces facing similar problems in project execution and dealings with the Bank. MOC could assist by disseminating provincial best practices (not limited to E&M works) to save time and avoid going through the same learning process over and over again. Toll rates, traffic diversion and overloading. Toll rates on the project expressways are high. They are comparable to rates charged for instance in France with a much higher level of income than China. As a result, diversion to the expressways is only half as much as forecast, about 40% instead of 74%. This lower than expected diversion is also due to the wide spacing of the interchanges (15 to 18 km). In rapidly urbanizing areas along the expressway such as between Fuzhou and Putian, more interchanges may need to be added to increase usage. Another consequence of the high toll rates is that overloading of trucks is becoming a common means for truckers to bring back their profit margins they lose on high toll cost. So far, weighing stations have not been included in the design of expressways in China, as trucks were smaller than today. The regular inclusion of weighing stations should be included in future projects and legal axle loads would have to be enforced more seriously than at present. 9. Partner Comments (a) Borrower/implementing agency: A. General 1. This report summarizes the experiences learnt during the implementation of the Fujian Provincial Highway Project financed partly by an IBRD loan. B. Project Description 2. Project objectives are to: l give impetus to the communications development as well as improve the efficiency of highway transportation with the purpose of accelerating the economic development by supporting the - 14 - development of the road infrastructure facilities; l formulate an action plan for strengthening Fujian provincial road construction industry; l help develop the capability of the organizational institutions for the traffic planning and optimized investment; l transfer the road construction technology and maintenance techniques via staff training and provision of equipment. 3. The scope to the project includes: l Construction of a grade-separated and access-control four-lane highway between Quanzhou and Xiamen with a total length of 82.3 km; l Road Network Improvement Program (RNIP), including the improvement of highway technical standards, 58.3 km in length, and paving of 4 rural roads; l Construction supervision of the civil works of Quanzhou ­ Xiamen Expressway and sub-projects under RNIP; l Procurement of equipment for the highway operation, maintenance, laboratories, Road Data Bank, and Pavement and Bridge Management System; l Fujian Provincial Road Construction Industry Study; l Staff training; and l Additional civil works, E & M installation and supervision of Fuzhou ­ Quanzhou Expressway C. Achievement of the Objectives 4. The main objectives have been achieved via the successful implementation of various components under the project: l The construction of Quanzhou ­ Xiamen Expressway, Fuzhou ­ Quanzhou Expressway and RNIP, with the main line of the expressways of 236.3 km in length, 25.9 km of link roads and reconstruction and paving of 258.83 km of highways, has come to a successful conclusion. l Since Quanzhou ­ Xiamen Expressway was open to traffic in 1997, the traffic volume on the expressways has been increasing rapidly. The average daily traffic increased from 8,568 vehicles per day (vpd) in 1998 to 13,490 vpd in 2003, a growth rate of over 8% p.a.. In 1998, the toll revenues from Quanzhou ­ Xiamen Expressway amounted to RMB 124.94 million, while in 2002, the toll revenues were RMB 287.09 million an annual average increase of 23.1%. l As for Fuzhou ­ Quanzhou Expressway, since it was open to traffic in late 1999, the average daily traffic volume increased from 7,223 vpd in 2000 to 10,281 vpd in 2003 with a growth rate of over 15%. The main reason for such rapid increase was the obvious advantages of the expressways in the traveling speed and the saving of transportation costs which resulting in a division of traffic on the parallel route, NR324. Congestion problem on NR 324 has also been resolved. The toll revenues for Fuzhou ­ Quanzhou Expressway also increased from RMB 251.84 million in 2000 to RMB 350.70 in 2002, an annual average growth of 18.1%. l On traffic safety issue, before the traffic opening of Quanzhou ­Xiamen Expressway, the casualty rate due to the traffic accidents on NR No. 324 and the economic loss from such accidents increased from 722 people and RMB 4.056 million in 1995 to 1,037 people and RMB 7.553 million in 1997. With the said road open to traffic in 1998, the congestion on the existing road were relieved to some extent, as a result, the casualty rate also dropped. l The construction supervision organization was established in accordance with the requirements set forth in FIDIC's Conditions to exercise control over the rate of progress, quality and costs. With respect to the control of rate of progress, the detailed construction organization plans were formulated to ensure the works to be completed as scheduled by focusing on the - 15 - construction critical path. In the control of quality, a quality inspection system was adopted, supervised by the independent supervision entities and self-inspected by the contractors. In the control of costs, optimized designs and variations were made according to the technical requirements to lower the investment in the works, and at the same time, the strict measurement and payments were made to ensure the smooth implementation of the works. l The completion of the 7 RNIP sub-projects in the poverty-stricken regions obviously improved social and economic conditions of local communities. For example, the per capita annual income increased from RMB 2,000 without project to about RMB 4,000 after the project. Indexes concerning the improvement of the education, medical care and health, living standards, etc. have also been improved to a certain extent. D. Formation and Preparation of the Project 5. The formation and preparation of the Project is regarded as the result of the collaboration in the real sense. From the beginning of the 1990's, many organizational institutions under central government, and entities at provincial and municipality levels participated in the formation and preparation of Fujian Provincial Highway Project. 6. The preparation work for Quanzhou ­ Xiamen Expressway started internally within the Fujian Communications Department in 1989. In November, 1991, the project proposal was formally approved by the State Planning Commission in its official documents with the reference number of JIJIAOTONG(1991) 1816. In February 1993, the State Planning Commission gave its approval to the Feasibility Study Report for Quanzhou - Xiamen Expressway in its official document with the reference number of JIJIAOTONG (1993) 340. In May 1993, the preliminary design of Quanzhou ­ Xiamen Expressway was approved Ministry of Communications (MOC) in its official documents with reference number of JIAOGONGFA (1993) 484 and in December 1993, the detailed design was completed. 7. Parallelly, the World Bank was involved in the project started with its project selection mission in February 1990, project investigation mission in May 1991, and finally project identification mission in Nov. 1991. All required preparation process followed in 1992. The project was ready for Bank appraisal in July 1993. The loan was negotiated in October 1993 in Washington D.C. The Loan Agreement and Project Agreement for US$140 million was signed in April, 1994. 8. Due to the change of exchange rate, the low bidding price of civil works and the high contingencies provided under the unallocated category, a loan saving of US$ 47.52 million was identified early on in 1998. With approval of the Bank and the central government, Fujian decided to use the saving for additional works on Fuzhou ­ Quanzhou Expressway. E. Project Implementation 9. Design. The Quanzhou ­ Xiamen Expressway was designed by Fujian Provincial Communications Planning and Design Institute at the design speed of 120 km / per hour. During the construction, the said institute sent the design group to the construction sites to be responsible for the variations and perfection of the drawings. The seven subprojects under RNIP were designed by the prefectures and municipalities where the subprojects were situated. 10. Construction. Quanzhou ­Xiamen Expressway is 82.291 km in length, divided into four contract packages. The contractors were selected on ICB basis. One soft subsoil treatment trial section, 2.7 km - 16 - in length, need to start ahead of other contracts and thus was financed by counterpart funds. All contracts were commenced in July 1994 and completed in December 1997. Accepted by the completion acceptance commission, the Project was ranked as Qualified. 11. Supervision l Quanzhou ­ Xiamen Expressway is the first expressway constructed in Fujian and is also the first World Bank financed project in the province. In accordance with the requirements set forth by the World Bank and the international practice, the FIDIC's Conditions were adopted for the management of the construction. l The joint supervision team of foreign engineers were used to supervise the construction. The foreign supervision engineers were selected according to the Bank's consultant selection guidelines and on the basis of ICB. The successful bidder was Kampsax International A/S and Danish Road Directorate (DRD). As for the domestic team, the job was directly entrusted to the Fujian Communications Construction Engineering Supervision and Consulting Company, Ltd.. l The three-tier structure was adopted by the supervision organization, i.e. the Representative Office of Chief Engineer, the Office of Senior Resident Engineers, and Resident Engineer Office in various Contracts under the control of a chief engineer. l During the whole process of supervision, the control over the quality, costs and construction period was exercised. 12. Monitoring, Assessment and Acceptance of the Environment. Great attention was attached to the monitoring of the environment during construction and later at operation stage. During project construction period, monitoring of fume from the asphalt mixing plants, and dust form construction activities were done periodically. Effective measures were taken promptly to ensure that all environmental indicators are within acceptable level. After the expressways was opened to traffic, monitoring of noise level have been performed on a semi-annual basis. 13. Environmental acceptance inspection were performed at project completion by the State Environmental Protection Agency in June 1999 and February 2001 for Quanzhou ­ Xiamen Expressway and Fuzhou ­ Quanzhou Expressway, respectively. Results of the acceptance inspection were satisfactory. The expressway projects could meet all conditions required by state environmental regulation. The whole process of environmental protection activities enabled staff of Fujian Communications Department to heighten their environment consciousness, learn environmental protection knowledge, and formulate a team capable to perform works to satisfy the requirements of environmental protection for the expressway projects. The expressways have been equipped with all necessary environmental protection facilities. A total investment of RMB 82.04 million was made in the environmental protection for Quanzhou ­Xiamen Expressway, accounting for 2.95% of the general estimate of RMB 2.78557 billion of its total physical investment cost. Under Fuzhou ­ Quanzhou Expressway Project, investment in the environmental protection amounted to RMB 214.332 million, accounting for 4.43% of its total physical investment cost of RMB 4.838 billion. 14. Environmental Impact Statement (EIS). The environmental assessment for the Quanzhou ­ Xiamen Expressway was made by Fujian Provincial Environmental Protection Scientific and Research Institute. The organization began its work when the reconnaissance survey was carried out in 1990. In February 1992, the Environmental Assessment Outline for Quanzhou ­ Xiamen Expressway passed the review of the experts organized by the State Environmental Protection Agency and in May 1992. Based on the approved EA outline, a full EIS data compilation was completed in December 1992. In April 1993, Fujian Provincial Expressway Construction Directorate prepared the Environmental - 17 - Action Plan for Quanzhou ­ Xiamen Expressway, which was submitted and finally approved by the Bank. 15. The EIS for Fuzhou ­ Quanzhou Expressway Project was mainly carried out by Xi'an Communications University and assisted by Fujian Provincial Environmental Protection Scientific and Research Institute. The environmental assessment was divided into two phases. The first phase is related to the approval by the domestic organizations, the Outline of EIS was approved by the State Environmental Protection Agency in October 1993 in its official document with the reference number of HUANJIANJIAN (1993) 255, while the State Environmental Protection Agency granted its approval to the EIS in the document with the reference number of HAUNJIAN(1995) 014 in January, 1995. The second phase of work is associated to the review and approval of the domestic organizations and the World Bank. Since the subgrade construction of Fuzhou ­ Quanzhou Expressway was financed by domestic sources prior to Bank involvement at a later stage, the EIS for Fuzhou ­ Quanzhou Expressway was done twice. Based on the first EIS, it was revised in 1997 to be in line with the requirements of the State and the World Bank. 16. Equipment Procurement. The equipment procurement under Fujian Provincial Highway Project is divided into three lots. The first lot is the procurement of the laboratory instruments for highway construction quality control costing US$315,130. The second lot was for maintenance equipment costing US$2,180,000. The third lot of procurement was for detecting devices (one set of multi-purpose road data detecting vehicle), costing US$379,600. The first lot of equipment was procured using International Shopping method while the latter two lots were done on the basis of ICB. 17. E & M Tunnel Ventilation and Lighting Works. The E & M Tunnel Ventilation and Lighting for Quanzhou ­Xiamen Expressway was jointly designed by Highway Scientific and Research Institute of MOC and the Fujian Provincial Communications Planning and Design Institute. The bidding was carried out on the basis of ICB in two steps. The first step of bidding started in November 1996, during which a total of 14 suppliers submitted their bids and 5 bidders successfully passed the review and evaluation in December 1997. The second step of bidding began in February 1998, with 3 bidders submitting their bids. After the evaluation and review, SBH Electricity Company from Germany was the successful bidding. Its contract was reviewed and approved by the World Bank in August 1998 and was signed in December 1998. The E&M installation was started in August 1999. The system was put into operation in August 2000 for which test run and modification of the system continued into 2001 and 2002. In December 2002, the works was finally accepted and handoverred. Supervision of E & M work was done jointly by Beijing Xingtong Traffic Engineering Supervision Company, Ltd. and Kampsax International A/S. Currently the system is running in good condition. 18. Training l Under Quanzhou ­Xiamen Expressway Project, a total of 206 man-month of overseas study tours and training courses were organized by Fujian Provincial Expressway Construction Directorate with a training cost of US$ 1.6 million, which was found to be within the budget. The main training courses were related to the expressway construction and management, financial management, planning and design, material tests, road data bank, financing, traffic engineering, operation and management, safety, quality control, tunneling, human resources development, soft subsoil treatment, environmental protection, post-appraisal of projects, etc.. l Supervision Service and Training. The consulting agency of Quanzhou ­ Xiamen Expressway Project is responsible for the construction supervision of the civil works and traffic engineering works. The Danish Road Directorate provided 179 man-month of consulting service, among which, the foreign experts spent 11 man-month in the training of domestic supervision - 18 - engineers, including a group of overseas supervision training, 150 man-month in total. l Environmental Protection Training and Monitoring. Fujian authorities considered the environmental protection an important aspect in its expressway development. A special training on environmental related subject was carried out to benefit 15 staff of FPCD. 19. Scientific Study and Research. The following five scientific and research studies were conducted under the project: (1) Utilization of the Excessive Moisture Soil; (2) Soft Subsoil Treatment; (3) Settlement of the Embankment at the Bridge Head; (4) Joint of Simple Supported Continuous T- Beam; (5) New Austrian Tunneling Method in the Tunnel Construction Those were done with effective collaboration of various institution including: (1) Fujian Provincial Communications Planning and Design Institute; (2) Overseas Chinese University; (3) The Highway Scientific Research Institute, MOC; and (4) Fujian Provincial Expressway Construction Directorate. 20. Land Acquisition and Resettlement. Land acquisition and resettlement were completed successfully. In accordance with the RAP, the external monitoring was executed by Fujian Provincial Academy of Social Science. Various levels of local governments attached great concerns over the resettlement issue resulting in a smooth implementation of the resettlement plans. Hence, the living standards of the PAPs were restored quickly and enhanced yearly. The inspections and supervision made by the World Bank's experts indicated that the implementation of the land acquisition and resettlement were satisfactory. Along Fuzhou ­ Xiamen Expressway, a total of 1,947.1 hectares (29,206.06 mu) of land were acquired, 5,722,778 sq. m. of various types of houses were demolished with 28,510 people in 6,237 households resettled. Also 87 enterprises and institutions were relocated, 33,803 tombs were removed, 354,000 fruit trees were cut down. Under the Project, the compensation for the land acquisition and resettlement amounted to RMB 482.7 million, among which the compensation made by Fuzhou was RMB 168.90489 million, RMB 89.35323 million of compensation was made by Putian, RMB 162.97692 million was compensated by Quanzhou (including the compensation for Quanzhou ­Xiamen Expressway) while Xiamen made the compensation of RMB 61.46571 million, 12.7% higher than the original RAP estimate of RMB 428.26 million stated in the RAP. 21. Construction Industry Study. A Fujian Provincial Construction Industry Study Report was completed in September 1997 and submitted to the World Bank. The report not only gave an impetus to the improvement and perfection of the organizational structures of Fujian's construction enterprises, its the efficiency and quality, but also increased the competitiveness of construction industry in Fujian Province. 22. Road Network Improvement Program (RNIP). The RNIP component consisted of 3 new construction subprojects (58.1 km in length) and 4 paving subprojects (200.73 km long). The sixteen contracts of civil works started in 1994 and completed in 1996. After having been opened to traffic for a few years, the RNIP subprojects were in good operation condition with stable increase of traffic at about 4-18% growth rates depending on the sections. 23. Closing Date. The original closing date was June 30th, 2000. The closing date was extended - 19 - twice to June 30, 2002 and to December 30, 2003. The first extension was done to accommodate the inclusion of additional investment of Fuzhou-Quanzhou Expressway. The second extension was to accommodate the unexpected delay in the internal approval of E&M design and procurement. 24. Implementation Entities. In order to build the first expressway, Quanzhou ­ Xiamen Expressway, in Fujian Province, which is also the first foreign project financed project, Fujian Provincial Expressway Construction Leading Group was established in June 1991 to be responsible for its preparation. The Fuzhou ­ Xiamen ­ Zhangzhou Expressway Construction Directorate was established by the Fujian Provincial People's Government to replace the original Fujian Provincial Expressway Construction Office. The new entity has direct responsibility for the execution of Fuzhou ­ Xiamen ­ Zhangzhou Expressway. The Administrative Service, Engineering Department, Financial Department, Material and Machinery Department and Planning Department were set up to work on procurement, review of substantial design variations and claims, land acquisition and resettlement, measurements and payments confirmed by the supervision team etc. In August 1995, in order to meet the requirements of expressway construction in Fujian, Fujian Provincial People's Government renamed Fuzhou ­ Xiamen ­ Zhangzhou Expressway Construction Directorate as Fujian Provincial Expressway Construction Directorate. It was given the responsibility to plan and execute expressway construction in the entire province of Fujian. 25. Main Problems and Suggestions: l High contingency allocation resulting in unnecessarily large amount of loan savings. There were a loan saving of about US$ 47.5 million identified in 1998. The saving was applied to an additional component i.e. Fuzhou ­ Quanzhou Expressway. However, due to low bid price, there still was a loan saving of about US$18.11 million which was finally cancelled. This led to a waste of certain amount of front-end fees and commitment charge. In view of this, Fujian authorities would like to suggest that the World Bank's loan agreement allow a floating withdrawal percentage system with an agreeable band of disbursement percentage. During the project implementation, especially at the end of project construction, on the understanding that there is a loan saving, the client should be allowed to withdraw the loan proceeds at a higher withdrawal percentage within the allowable band. l Unnecessary study imposed on Fujian COmmunications Department. FPCD was asked to carry out some studies under the project. The practice showed that some studies were necessary and effective. However, some studies, such as the Highway Construction Industry, and the Highway Maintnenance Study, produced little effect leading to the waste of money, human resources and time. In consideration of this, it is suggested that the Bank take full considertation of the actual situation both in China and Fujian as well as local opinions to select useful study topics. The study should be conducted accoding to local demand and with clear objectives. - 20 - H. The World Bank's work 26. Cooperation with the World Bank. It has been more than 14 years from listing Quanzhou ­ Xiamen Expressway in the proposed projects to be financed by the Bank in 1989 to present when the second Fujian Highway Project is ongoing. During this period, an excellent cooperation between Fujian Provincial Communications Department and the World Bank continued. Due to the different national conditions and cultural background as well as different cognizance in respect of engineering design philosophy, modes of economic analysis, land acquisition and resettlement and the environmental protection, etc., a lot of exchanges of views were made between the members of Bank missions and FPCD. Such an exchange was not limited to the project itself. Via different methodology, the World Bank have had deeper cognizance of China's national conditions and understood its operational approaches. At the same time, any rational proposals and requirements from the World Bank, especially the technical proposals, was accepted by FPCD with an open mind. 27. Sharpened Understanding of and Benefits from the FIDIC's Conditions. Since QXE was financed by the World Bank, in line with the requirements set forth by the World Bank, the contractors and supervision engineers were selected on the basis of international competitive bidding. Project management was in accordance with the FIDIC's conditions. Strict technical and organizational measures were taken to exercise management and control of works in combination with the national and provincial conditions. Since this was the first time for Fujian Province to introduce FIDIC's Conditions, it was inevitable that such an introduction would impact upon the existing construction management system. In addition, there was an adverse influence of World Bank's procurement practice which require an award of contract to low price bidder. FPCD was skeptical at the beginning on how effective and applicable such requirement was on local situation. However, with the constant development and perfection of the market economy in China, Bank procurement rules and the FIDIC's Conditions for project management have now been widely accepted in Fujian. At present, the construction management of expressways in Fujian is exercised fundamentally on the basis of the FIDIC's Conditions, simultaneously, taking into consideration the local situations of China and the province. 28. Benefits from the Training Program. As for most of the training courses, the participants were mainly composed of the engineers and technicians in relevant field. Appropriately designed training program enable them, on the macroscopic basis, to keep abreast of the management experience and practice in foreign countries to be applied by taking into account the specific situations in Fujian. Via training, the new technologies, the updated knowledge and new methodology learnt abroad have been applied and populated by the participants. What is more, the training program provided the engineers and the operational staff with an opportunity to widen their horizons by understanding and updating their knowledge, which is regarded as a critical factor for intellectual growth. - 21 - 29. Heightening of Consciousness of Environmental Protection. The environmental protection plays a very important role in the expressway construction. QXE is the first expressway ever constructed in Fujian, In every step of project identification, preparation and implementation FPCD carried out strictly the related laws and regulations of China and the relevant requirements set forth by the World Bank in respect of the environmental protection for highway project construction. It had implemented every environmental protection facilities required for QXE. The current achievements made in respect of environmental protection for QXE attributed not only to the constant development and perfection of policies of environmental protection of China and the strengthening of environmental design, but also to the environmental impact assessment by the Bank during project preparation stage as well as the strict supervision carried out during implementation stage. During the process, a subtle influence of environmental protection was exerted on the staff of FPCD and the related contractors. The heightening of consciousness of environmental protection greatly benefit the implementation of the China's sustainable development policy and the construction of the other expressway projects in Fujian Province. 30. Promotion of the Traffic Development. The experience from and the exemplary role played by QXE gave impetus to the acceleration of construction of the related road sections linking to QXE in the cities and counties nearby. It further promoted the development of highways along the corridor as will as the construction of related harbors. During the ninth Five-Year Plan, Quanzhou City made an investment of more than RMB 5.0 billion in the construction of transport infrastructure, among which, more than RMB 4 billion was for the construction of highways. Quanzhou Cities took the lead in this respect in Fujian province. In 1997, highways linking 2,257 administrative villages under the jurisdiction of Quanzhou Cities were open to traffic. In 2000, paved roads were further expanded linking to 1,851 administrative villages with 82% of rural roads were paved. Such achievement was ranked among the top cities and prefectures in Fujian. In 1999, there were 26 highway reconstruction and improvement projects in Xiamen City with a total investment of RMB 1.056 billion. Up to the end of 2000, the total length of highway opened to traffic in Xiamen was 1,051 km with a road network density of 68.36 km per 100 sq. km. Meanwhile, the county and town roads were rapidly developed, and as a result, 100% of towns and villages were linked by highways. With the development of the highways network in Quanzhou and Xiamen, the construction of ports were obviously accelerated. The implementation of coastal development strategy and development of the foreign-oriented economy were accelerated too. (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10. Additional Information - 22 - Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate This was not part of SAR and was retofitted later. Estimation at Appraisal 1A. Traffic on Quanzhou-Xiamen Expressway (Vpd) 1998 (opening year) 17,998 8,586 2003 24,305 13,490 1B. Traffic on old Quan-Xia Road 1998 6,260 18,373 2003 8,532 19,499 2A. Traffic on Fu-Quan Expressway 2000 (Opening year) 7,223 2003 10,281 2B. Traffic on old Fu-Quan Road 2000 13,134 2003 12,682 Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Estimation at Appraisal 1. Quanzhou-Xiamen Expressway (81.4km) December 1997 (100%) January 1998 (100%) 2. E & M for QXE June 1999 (100%) July 2001 (100%) 3. Fuzhou-Quanzhou Expressway (155km) December 1999 (100%) January 2000 (100%) 4. E & M for FQE June 2001 (100%) October 2003 (100%) 5. Group A-Upgrading of 3 road sections December 1996 (100%) December 1996 (100%) (58.3km) 6. Group B-Paving of 4 road sections December 1996 (100%) December 1996 (100%) (202.7km) 7. Procurement of equipment December 2000 (100%) December 2000 (100%) 8. Construction Industry Study July 1995 (100%) December 1997 (100%) 9. Planned Staff Training Program June 2000 (100%) December 1997 (100%) 1End of project - 23 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million A. Works 1. Quan-Xia Highway 314.9 299.7 95.2 2. E&M works (Quan-Xia) 6.5 13.4 206.2 3. RNIP 29.0 34.3 118.3 4. Fu-Quan Pavement 0.0 64.8 -- 5. E&M works (Fu-Quan) 0.0 8.9 -- Subtotal 350.4 421.1 120.2 B. Supervision 1. Quan-Xia Highway 8.4 11.1 132.1 2. RNIP 0.3 0.3 100.0 3. Fu-Quan Highway 0.0 9.3 -- Subtotal 8.7 20.7 237.9 C. Equipment 1. Highway E&M 2.3 4.2 182.6 2. Laboratories 0.5 1.1 220.0 3. RDB/ PMS 0.5 0.0 0.0 Subtotal 3.3 5.3 160.6 D. Studies & Training 1. Road construction. ind. 0.3 0.2 66.7 2. Staff training 0.7 0.6 85.7 Subtotal 1.0 0.8 80.0 363.4 447.9 123.3 Total Baseline Cost Contingencies: Physical 35.9 0.0 -- Price 104.9 0.0 -- Total Project Costs 504.2 447.9 88.8 Land acquisition 24.6 17.1 69.5 Total Financing Required 528.8 465.0 87.9 - 24 - Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 421.80 40.30 0.00 24.60 486.70 (122.10) (10.00) (0.00) (0.00) (132.10) 2. Goods 2.90 0.00 1.30 0.00 4.20 (2.70) (0.00) (1.00) (0.00) (3.70) 3. Services 0.00 0.00 13.30 0.00 13.30 (0.00) (0.00) (4.20) (0.00) (4.20) 4. Miscellaneous 0.00 0.00 0.00 24.60 24.60 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 424.70 40.30 14.60 49.20 528.80 (124.80) (10.00) (5.20) (0.00) (140.00) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 312.60 108.00 0.00 0.00 420.60 (75.60) (37.90) () (0.00) (113.50) 2. Goods 4.20 0.00 1.10 0.00 5.30 (0.40) (0.00) (0.00) (0.00) (0.40) 3. Services 3.30 8.90 9.80 0.00 22.00 (3.30) (0.00) (0.00) (0.00) (3.30) 4. Miscellaneous 0.00 0.00 0.00 17.10 17.10 (0.00) (0.00) (0.30) (0.00) (0.30) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 320.10 116.90 10.90 17.10 465.00 (79.30) (37.90) (0.30) (0.00) (117.50) 1/Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. - 25 - Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. Works: Quan-Xia Highway 184.00 48.70 82.20 179.80 52.50 66.90 97.7 107.8 81.4 Quan-Xia E&M 1.30 5.20 3.60 1.10 8.70 276.9 167.3 RNIP 21.80 7.20 21.00 6.10 7.20 96.3 100.0 Fu-Quan Pavement 28.50 8.30 28.00 Fu-Quan E&M 4.80 1.40 2.70 Construction Supervision 6.20 2.50 13.80 4.10 3.30 222.6 132.0 Equipment 0.40 2.90 3.70 1.20 0.40 925.0 13.8 Studies and Training: Road Constr. Ind. Study 0.10 0.20 0.20 0.0 100.0 Staff Training 0.10 0.60 0.40 0.10 0.10 400.0 16.7 Contingencies 101.60 39.20 0.0 0.0 Land Acquisition 24.60 13.20 3.90 53.7 Total Project Cost 340.10 48.70 140.00 268.80 78.70 117.50 79.0 161.6 83.9 - 26 - Annex 3. Economic Costs and Benefits Economic and Financial Evaluation Summary The ICR The SAR EIRR ENPV FIRR FNPV EIRR ENPV FIRR FNPV (%) (12%, (%) (4.5%, (%) (12%, (%) mY) mY) mY) 1. Fuzhou - Xiamen expressway a. Fuzhou - Quanzhou 15.8 1,685 -- -- -- -- -- -- b. Quanzhou - Xiamen 19.0 1,657 6.5 834 24.3 2,146 -- -- Subtotal 17.1 3,000 -- -- -- -- -- -- 2. RNIP a. Group A (3 roads) 30.5 173 -- -- 26.2 168 -- -- b. Group B (4 roads) 38.5 261 -- -- 40.4 166 -- -- Subtotal 33.2 314 -- -- 31.1 334 -- -- Total 17.9 3,280 -- -- 25.0 2,480 -- -- Number Of Motorized Vehicle Per Day (1998-2003) SAR ICR Old Road Diversion Old Road New Diversion (G324) New Road Total ratio (G324) Road Total ratio (1) (2) (3=1+2) (4=2/3) (1) (2) (3=1+2) (4=2/3) 1. Xiamen- Quanzhou Expressway: 1998 6,260 17,998 24,258 74.2% 18,373 8,586 26,959 31.8% 1999 6,665 19,165 25,830 74.2% 19,227 8,934 28,161 31.7% 2000 7,097 20,406 27,503 74.2% 17,537 9,987 27,524 36.3% 2001 7,557 21,729 29,286 74.2% 17,560 11,303 28,863 39.2% 2002 8,048 23,137 31,185 74.2% 19,103 12,478 31,581 39.5% 2003 8,532 24,305 32,837 74.0% 19,499 13,490 32,989 40.9% 2010 9,668 27,014 36,682 73.6% 22,218 22,905 45,123 50.8% 2017 19,314 48,586 67,900 71.6% 24,632 33,884 58,516 57.9% Average growth pa 2003-2017 6.0% 5.1% 5.3% -- 1.7% 6.8% 4.2% -- 2. Fuzhou- Quanzhou Expressway: 1999 -- -- -- -- 16,200 5,807 22,007 26.4% 2000 -- -- -- -- 13,134 7,223 20,357 35.5% 2001 -- -- -- -- 12,603 7,519 20,122 37.4% 2002 -- -- -- -- 12,410 7,737 20,147 38.4% 2003 -- -- -- -- 12,682 10,281 22,963 44.8% 2010 -- -- -- -- 14,680 18,082 32,762 55.2% 2020 -- -- -- -- 17,354 33,645 50,999 66.0% Average growth pa 2003-2020 -- -- -- -- 1.9% 7.2% 4.8% -- Sources: FPCD and the Bank staff. - 27 - Fuzhou- Xiamen Expressway Project EIRR: Quanzhou- Xiamen section (million Yuan) Page 1 of 3 Costs Benefits (Savings) Net cash Capital O & M Total VOC Time Accident Total flow 1993 134.81 134.81 -134.81 1994 183.41 183.41 -183.41 1995 277.16 277.16 -277.16 1996 525.49 525.49 -525.49 1997 957.82 0.78 958.60 2.40 0.43 0.03 2.86 -955.74 1998 233.42 18.76 252.18 230.06 41.47 2.73 274.26 22.08 1999 316.33 26.48 342.81 257.37 48.32 2.89 308.58 -34.23 2000 28.52 28.52 311.95 67.65 3.37 382.97 354.45 2001 33.02 33.02 347.63 81.84 3.72 433.19 400.17 2002 27.41 27.41 381.10 97.72 4.05 482.87 455.46 2003 29.13 29.13 418.14 116.65 4.41 539.20 510.07 2004 30.95 30.95 459.17 139.20 4.76 603.13 572.18 2005 32.90 32.90 505.77 165.91 4.95 676.63 643.73 2006 34.98 34.98 566.01 200.93 5.17 772.11 737.13 2007 37.19 37.19 635.60 243.73 5.37 884.70 847.51 2008 /_1 217.70 217.70 716.49 296.23 5.56 1,018.28 800.58 2009 42.07 42.07 811.15 360.95 5.74 1,177.84 1,135.77 2010 44.77 44.77 922.84 441.20 5.89 1,369.93 1,325.16 2011 47.64 47.64 983.99 493.64 5.87 1,483.50 1,435.86 2012 50.70 50.70 1,049.30 551.56 5.81 1,606.67 1,555.97 2013 53.98 53.98 1,119.01 615.38 5.70 1,740.09 1,686.11 2014 57.47 57.47 1,193.39 685.52 5.53 1,884.44 1,826.97 2015 61.21 61.21 1,272.69 762.36 5.29 2,040.34 1,979.13 2016 65.21 65.21 1,516.13 919.41 5.29 2,440.83 2,375.62 2017 /_2 -1,244.8 -1,244.8 1,670.10 1,106.66 5.25 2,782.01 4,026.76 Total 2,628.44 -303.88 2,324.56 15,370.3 7,436.76 97.38 22,904.4 20,579.9 EIRR 19.0% NPV (12%) 1,656.7 /_1: Major maintenance /_2: Includes the residual value. - 28 - Fuzhou- Xiamen Expressway Project EIRR: Fuzhou- Quanzhou section (million Yuan) Page 2 of 3 Costs Benefits (Savings) Net cash Capital O & M Total VOC Time Accident Total flow 1993 0.00 0.00 0.00 1994 0.00 0.00 0.00 1995 164.07 164.07 -164.07 1996 684.30 684.30 -684.30 1997 1,712.67 0.00 1,712.67 0.00 0.00 0.00 0.00 -1,712.67 1998 936.87 0.00 936.87 0.00 0.00 0.00 0.00 -936.87 1999 708.33 0.00 708.33 0.00 0.00 0.00 0.00 -708.33 2000 85.90 0.00 85.90 0.00 0.00 0.00 0.00 -85.90 2001 182.77 58.33 241.10 408.52 96.17 4.37 509.06 267.96 2002 37.92 48.42 86.34 417.44 107.04 4.44 528.92 442.58 2003 0.00 51.46 51.46 562.95 157.05 5.94 725.94 674.48 2004 0.00 54.67 54.67 621.68 188.47 6.44 816.59 761.92 2005 0.00 58.12 58.12 688.68 225.91 6.74 921.33 863.21 2006 0.00 61.79 61.79 774.39 274.90 7.07 1,056.36 994.57 2007 0.00 65.70 65.70 873.81 335.08 7.38 1,216.27 1,150.57 2008 /_1 0.00 384.58 384.58 989.75 409.21 7.68 1,406.64 1,022.06 2009 0.00 74.32 74.32 1,125.87 500.99 7.97 1,634.83 1,560.51 2010 0.00 79.09 79.09 1,286.98 615.29 8.21 1,910.48 1,831.39 2011 0.00 84.16 84.16 1,377.45 691.03 8.22 2,076.70 1,992.54 2012 0.00 89.57 89.57 1,474.41 775.02 8.16 2,257.59 2,168.02 2013 0.00 95.36 95.36 1,578.32 867.97 8.04 2,454.33 2,358.97 2014 0.00 101.52 101.52 1,689.59 970.55 7.83 2,667.97 2,566.45 2015 0.00 108.13 108.13 1,808.67 1,083.42 7.52 2,899.61 2,791.48 2016 0.00 115.19 115.19 2,180.84 1,322.50 7.61 3,510.95 3,395.76 2017 /_2 0.00 -2,133.7 -2,133.7 2,431.56 1,611.23 7.64 4,050.43 6,184.12 Total 4,512.83 -603.28 3,909.56 20,290.9 1,0231.83 121.26 30,644.0 26,734.4 EIRR 15.8% NPV (12%) 1,684.6 /_1: Major maintenance /_2: Includes the residual value. - 29 - EIRR: Fuzhou- Xiamen Expressway Project (million Yuan) Page 3 of 3 Costs Benefits (Savings) Net cash Capital O & M Total VOC Time Accident Total flow 1993 134.82 134.82 -134.82 1994 183.41 183.41 -183.41 1995 441.24 441.24 -441.24 1996 1,209.79 1,209.79 -1,209.79 1997 2,670.49 0.78 2,671.27 2.40 0.43 0.03 2.86 -2,668.41 1998 1,170.28 18.76 1,189.04 230.06 41.47 2.73 274.26 -914.78 1999 1,024.65 26.48 1,051.13 257.37 48.32 2.89 308.58 -742.55 2000 85.90 28.52 114.42 311.95 67.65 3.37 382.97 268.55 2001 182.77 91.35 274.12 756.15 178.01 8.09 942.25 668.13 2002 37.92 75.83 113.75 798.54 204.76 8.49 1,011.79 898.04 2003 0.00 80.59 80.59 981.09 273.70 10.35 1,265.14 1,184.55 2004 0.00 85.62 85.62 1,080.85 327.67 11.20 1,419.72 1,334.10 2005 0.00 91.02 91.02 1,194.45 391.82 11.69 1,597.96 1,506.94 2006 0.00 96.77 96.77 1,340.40 475.83 12.24 1,828.47 1,731.70 2007 0.00 102.89 102.89 1,509.41 578.81 12.75 2,100.97 1,998.08 2008 /_1 0.00 602.28 602.28 1,706.24 705.44 13.24 2,424.92 1,822.64 2009 0.00 116.39 116.39 1,937.02 861.94 13.71 2,812.67 2,696.28 2010 0.00 123.86 123.86 2,209.82 1,056.49 14.10 3,280.41 3,156.55 2011 0.00 131.80 131.80 2,361.44 1,184.67 14.09 3,560.20 3,428.40 2012 0.00 140.27 140.27 2,523.71 1,326.58 13.97 3,864.26 3,723.99 2013 0.00 149.34 149.34 2,697.33 1,483.35 13.74 4,194.42 4,045.08 2014 0.00 158.99 158.99 2,882.98 1,656.07 13.36 4,552.41 4,393.42 2015 0.00 169.34 169.34 3,081.36 1,845.78 12.81 4,939.95 4,770.61 2016 0.00 180.40 180.40 3,696.97 2,241.91 12.90 5,951.78 5,771.38 2017 /_2 0.00 -3,378.4 -3,378.4 4,101.66 2,717.89 12.89 6,832.44 10,210.88 Total 7,141.27 -907.16 6,234.12 35,661.2 17,668.6 218.64 53,548.4 47,314.3 EIRR 17.1% NPV (12%) 2,999.6 /_1: Major maintenance /_2: Includes the residual value. - 30 - FIRR: Quanzhou- Xiamen Expressway (million Yuan) Costs Financial Net cash Local IBRD Total benefits flow 1993 118.35 29.18 147.53 -147.53 1994 161.00 39.70 200.70 -200.70 1995 243.31 59.99 303.30 -303.30 1996 461.31 113.73 575.04 -575.04 1997 840.83 207.30 1,048.13 -15.15 -1,063.28 1998 204.90 50.52 255.42 109.62 -145.80 1999 277.69 68.46 346.15 82.37 -263.78 2000 76.15 76.15 2001 96.05 96.05 2002 113.26 113.26 2003 135.43 135.43 2004 159.52 159.52 2005 184.03 184.03 2006 201.94 201.94 2007 221.17 221.17 2008 155.43 155.43 2009 310.82 310.82 2010 338.09 338.09 2011 362.38 362.38 2012 388.18 388.18 2013 482.61 482.61 2014 515.70 515.70 2015 548.12 548.12 2016 577.22 577.22 2017 607.81 607.81 2018 528.21 528.21 2019 778.94 778.94 2020 819.88 819.88 Total 2,307.39 568.88 2,876.27 7,777.78 4,901.51 FIRR = 6.5% NPV (4.5%) = 833.6 - 31 - Xiamen - Quanzhou Expressway: Income Statement (Y million, year ending 31 December) Page 1 of 4 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Traffic (million veh-km) -- 255.10 265.44 296.72 335.82 370.73 400.80 437.82 478.32 513.26 550.75 Revenue Tolls 2.68 146.11 189.67 201.17 251.11 275.92 330.66 361.20 394.61 423.44 454.37 Others 0.00 0.00 0.95 2.01 2.51 2.76 2.76 2.76 2.76 2.76 2.76 Total 2.68 146.11 190.62 203.18 253.62 278.68 333.42 363.96 397.37 426.20 457.13 Less: Operating Taxes 0.00 0.00 5.48 11.68 14.58 16.02 19.17 20.93 22.85 24.51 26.28 Net Revenue 2.68 146.11 185.14 191.50 239.04 262.66 314.25 343.03 374.52 401.69 430.85 Operating Costs Operating and management 0.68 16.39 15.86 16.65 16.93 16.00 19.00 20.75 22.65 24.29 26.06 Maintenance 0.11 2.55 11.43 12.78 17.32 12.28 15.36 16.13 16.94 17.79 18.68 Total working costs 0.79 18.94 27.29 29.43 34.25 28.28 34.36 36.88 39.59 42.08 44.74 Depreciation 17.04 17.55 18.76 18.76 18.76 31.22 31.80 31.83 31.87 31.90 31.94 Total operating costs 17.83 36.49 46.05 48.19 53.01 59.50 66.16 68.71 71.46 73.98 76.68 Operating Profit (15.15) 109.62 139.09 143.31 186.03 203.16 248.09 274.32 303.06 327.71 354.17 Financial charges: IBRD - - 37.57 37.29 34.51 32.86 31.10 29.19 27.15 24.95 22.58 Local Bank - - 16.78 25.81 47.90 21.30 13.95 5.97 - - - Other income (expenses) - - - - - - - - - - - Profit Before Taxes /1 (15.15) 109.62 84.74 80.21 103.62 149.00 203.04 239.16 275.91 302.76 331.59 Income tax - - 2.37 4.06 7.57 35.74 67.61 79.64 91.88 100.82 110.42 Net Profit After Taxes (15.15) 109.62 82.37 76.15 96.05 113.26 135.43 159.52 184.03 201.94 221.17 Actual: 1997-2002, forecast: 2003 thereafter. /_1: Opened to traffic in December 20, 1997. /_2: Starting 2003, income rate = 33.3% - 32 - Xiamen ­ Quanzhou Expressway: Sources and Applications of Funds (Y million, year ending 31 December)p Page 2 of 4 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sources: Net profits - - - - (15.15) 109.62 82.37 76.15 96.05 113.26 135.43 159.52 184.03 201.94 221.17 Depreciation - - - - 17.04 17.55 18.76 18.76 18.76 31.22 31.80 31.83 31.87 31.90 31.94 State contribution 26.74 36.38 54.99 104.25 190.01 46.30 62.75 - - - - - - - - Provincial contribution 54.97 74.78 113.00 214.24 390.51 95.16 128.97 - - - - - - - - Borrowing: IBRD 29.18 39.70 59.99 113.73 207.30 50.52 68.46 - - - - - - - - Local 30.48 41.47 62.67 118.83 216.58 52.78 71.53 - - - - - - - - Others 6.16 8.37 12.65 23.99 43.73 10.66 14.44 - - - - - - - - Total 147.53 200.70 303.30 575.04 1,050.02 382.59 447.28 94.91 114.81 144.48 167.23 191.35 215.90 233.84 253.11 Applications: Capital expenditure 147.53 200.70 303.30 575.04 1,048.13 255.42 346.15 2.88 3.02 3.17 3.33 3.50 3.68 3.86 4.05 Other expenditure - - - - - - - - - - - - - - - Loan repayment: IBRD - - - - - - 21.65 39.83 24.18 26.01 27.98 30.09 32.37 34.81 37.45 Local - - - - - - 140.00 95.00 119.24 118.46 138.75 102.89 - - - Change w/ capital - - - - 0.27 14.26 4.44 1.25 5.02 2.49 5.45 3.04 3.32 2.86 3.08 Total 147.53 200.70 303.30 575.04 1,048.40 269.68 512.24 138.96 151.46 150.13 175.51 139.52 39.37 41.53 44.58 Net Funds Flow - - - - 1.62 112.91 (64.96) (44.05) (36.65) (5.65) (8.3) 51.83 176.53 192.31 208.53 Open balance - - - - - 1.62 114.53 49.57 5.52 (31.13) (36.78) (45.06) 6.77 183.30 375.61 Closing balance - - - - 1.62 114.53 49.57 5.52 (31.13) (36.78) (45.06) 6.77 183.30 375.61 584.14 D/S Cover -- -- -- -- -- -- 0.63 0.70 0.80 1.00 1.00 1.44 6.67 6.72 6.76 - 33 - Xiamen ­ Quanzhou Expressway: Balance Sheet (Y million, year ending 31 December) Page 3 of 4 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Assets: Fixed Assets At cost 1873.27 1929.04 2061.79 2061.79 2061.79 2061.79 2061.79 2061.79 2061.79 2061.792061.79 Less: Depreciation 31.31 48.86 67.62 86.38 105.14 136.36 168.16 199.99 231.86 263.76 295.70 Net fixed assets 1841.96 1880.18 1994.17 1975.41 1956.65 1925.43 1893.63 1861.80 1829.93 1798.031766.09 Current Assets Inventory - 0.07 0.10 0.10 0.13 0.14 0.17 0.18 0.20 0.21 0.23 Receivable 0.27 14.61 19.06 20.32 25.36 27.87 33.34 36.40 39.74 42.62 45.71 Cash 1.62 114.53 49.57 5.52 (31.13) (36.78) (45.06) 6.77 183.30 375.61 584.1 Subtotal 1.89 129.21 68.73 25.94 (5.64) (8.77) (11.55) 43.35 223.24 418.44 630.1 Other Assets -- -- -- -- -- -- -- -- -- -- -- Total Assets 1843.85 2009.39 2062.90 2001.35 1951.01 1916.66 1882.08 1905.15 2053.17 2216.472396.17 Liabilities & Equity State funds- Equity 829.02 880.45 941.14 1014.41 1107.44 1217.53 1349.63 1505.65 1686.00 1884.082101.20 L/T loans: IBRD 449.90 500.42 547.23 507.40 483.22 457.21 429.23 399.14 366.77 331.96 294.51 Local 564.93 628.37 574.34 479.34 360.10 241.64 102.89 - - - - Subtotal 1014.83 1128.79 1121.57 986.74 843.32 698.85 532.12 399.14 366.77 331.96 294.51 Current Liabilities - 0.15 0.19 0.20 0.25 0.28 0.33 0.36 0.40 0.43 0.46 Other Liabilities -- -- -- -- -- -- -- -- -- -- -- Total Liabilities & Equity 1843.85 2009.39 2062.90 2001.35 1951.01 1916.66 1882.08 1905.15 2053.17 2216.472396.17 Debt: capital ratio 55.0 56.2 54.4 49.3 43.2 36.5 28.3 21.0 17.9 15.0 12.3 Debt/ equity ratio 55/45 56/44 54/46 49/51 43/57 36/64 28/72 21/79 18/82 15/85 12/88 - 34 - Xiamen ­ Quanzhou Expressway Assumptions for Financial Forecasts Page 4 of 4 1. Traffic (AADT): Small Medium Large Small Medium Large Tractor car bus bus truck truck truck -Trailer Total 1998 2,275 760 731 2,183 2,197 282 158 8,586 1999 2,368 791 760 2,272 2,286 294 163 8,934 2000 2,647 884 850 2,540 2,556 329 181 9,987 2001 2,995 1,000 962 2,874 2,892 372 208 11,303 2002 3,307 1,104 1,062 3,173 3,193 411 228 12,478 2003 3,575 1,194 1,148 3,431 3,452 444 246 13,490 2005 4,266 1,425 1,370 4,094 4,120 530 294 16,099 2010 6,070 2,027 1,949 5,825 5,861 754 419 22,905 2020 10,432 3,484 3,350 10,011 10,074 1,295 721 39,367 2. Tolls (Yuan/ vehicle- km): Small Medium Large Heavy Extra vehicle vehicle vehicle vehicle heavy Before December 29, 2002 0.50 1.00 1.50 2.00 2.70 After December 29, 2002 0.55 1.10 1.65 2.20 3.00 3. Operating Taxes 5.75% of total revenue. 4. Operating Cost: Increase 5 % pa. a. Operating and management 5.7% of total revenue. b. Maintenance 3-4% of toll revenue. c. Depreciation 1.51% of the book value, after 2003. 5. Income tax rate 33.3% of profit before tax, after 2003. 6. Borrowing: The IBRD 7-9%, 20 year maturities, LIBOR US$ based single currency, 5 years grace period and the foreign exchange risks. Local 5.76%, overall weighted average, total 5 years maturities, no grace period. - 35 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 05/14/1992 3 HIGHWAY ENGINEER (2); ENVIRONMENTAL SPEC. (1) 03/28/1993 6 HIGHWAY ENGINEER (2); FINANCIAL ANALYST (1); RESEARCH ANALYST (1); RESETTLEMENT SPEC. (1); CONSTRUCTION INDUSTRY SPECIALIST (1) Appraisal/Negotiation 7/01/1993 4 HIGHWAY ENGINEER (2); FINANCIAL ANALYST; REEARCH ANALYST Supervision 05/06/1994 3 RESETTLEMENT SPEC. (1); 1 1 HIGHWAY ENGINEER (1); FINANCIAL ANALYST (1) 12/11/1994 1 HIGHWAY ENGINEER (1) S HS 08/05/1995 1 HIGHWAY ENGINEER (1) S S 10/20/1996 2 TASK MANAGER (1); S S HIGHWAY CONSULTANT (1) 03/25/1997 4 TRANSPORT ECONOMIST (1); S S TASK MANAGER (1); ENVIRONMENTAL SPEC. (1); HIGHWAY CONSULTANT (1) 11/12/1997 6 TASK MANAGER (1); HS HS HIGHWAY CONS. (1); INSTITUTIONAL CONS. (1); ENVIRONMENTAL SPEC. (1); RESETTLEMENT SPEC. (1); OPERATIONS CONS. (1) 11/15/1998 4 TASK MANAGER (1); HS HS HIGHWAY CONS. (1); INSTITUTIONAL CONS. (1); RESETTLEMENT SPEC. (1) 03/29/1999 2 TASK MANAGER (1); S S HIGHWAY ENGINEER (1) 12/05/1999 5 TASK MANAGER (1); S S HIGHWAY ENGINEER (1); INSTITUTIONAL CONS. (1); RESETTLEMENT SPEC. (1); ENVIRONMENT SPEC. (1) 07/24/2000 4 TASK MANAGER (1); S S - 36 - HIGHWAY ENGINEER (1); INSTITUTIONAL CONS. (1); RESETTLEMENT SPEC. (1) 03/24/2001 7 TASK MANAGER (1); SR. S S HIGHWAY ENGINEER (1); HIGHWAY SPECIALIST (1); HIGHWAY ENGINEER (1); RESETTLEMENT SPECIALIS (1); HIGHWAY CONSULTANT (1); SAFTY/IST CONSULTANT (1) 11/02/2001 4 TASK MANAGER (1); SENIOR S S HIGHWAY ENGR. (1); HIGHWAY ENGR. (2) 03/15/2002 2 TRANSPORT SPECIALIST (1); S S ENVIRONMENTAL SPECIALI (1) 11/09/2002 5 TASK TEAM LEADER (1); S S TRANSPORT SPECIALIST (1); SOCIAL DEV. SPECIALIST (1); DISBURSEMENT OFFICER (1); SR. HIGHWAY ENGINEER (1) 03/28/2003 3 TASK TEAM LEADER (1); S S TRANSPORT SPECIALIST (1); SOCIAL DEV. SPECIALIST (1) ICR 12/01/2003 1 HIGHWAY ENGINEER S S (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation n.a. 260.6 Appraisal/Negotiation n.a. 171.2 Supervision n.a. 443.8 ICR n.a. 40. Total n.a. 915.6 - 37 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 38 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 39 - Annex 7. List of Supporting Documents 1. The World Bank, Staff Appraisal Report, China: Fujian Provincial Highway Project, November 17, 1993 2. The World Bank, Loan Agreement, China: Fujian Provincial Highway Project Between The People's Republic of China and the International Bank for Reconstruction and Development 3. Fujian Provincial Transport Department, Fujian Provincial Highway Project, Resettlement Completion Report, November 2003 4. Fujian Provincial Transport Department, Fujian Provincial Highway Project, Environmental Monitoring Reports, 2000-2001 5. The World Bank, Fujian Provincial Highway Project, Supervision Mission AMs and PSRs from May 1994 to December 2003 - 40 - - 41 -