Completion Report

Project Number: 33469 Loan Number: 2004-PRC June 2013

People’s Republic of China: Ningxia Roads Development Project

CURRENCY EQUIVALENTS

Currency Unit – yuan (CNY)

At Appraisal At Project Completion (1 August 2003) (30 June 2012)

CNY1.00 = $0.1208 $0.1566 $1.00 = CNY8.2773 CNY6.3851

ABBREVIATIONS

ADB – Asian Development Bank EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GDP – gross domestic product ICB – international competitive bidding MOC – Ministry of Communications NCB – national competitive bidding NCD – Ningxia Communications Department NHCAB – Ningxia Highway Construction Administration Bureau NHAB – Ningxia Highway Administration Bureau O&M – operation and maintenance PRC – People’s Republic of China VOC – vehicle operation cost WACC – weighted average cost of capital

WEIGHTS AND MEASURES km – kilometer m3 – cubic meter mu – Chinese unit of measurement (1 mu = 666.67 m2) pcu – passenger car unit

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 31 December 2009.

(ii) In this report, "$" refers to US dollars.

Vice-President S. Groff, Operations 2 Director General R. Wihtol, East Asia Department (EARD) Country Director H. Sharif, PRC Resident Mission, EARD Team leader C. Chu, Senior Portfolio Management Officer, EARD Team members Y. Dong, Senior Operations Assistant, EARD Z. Niu, Senior Project Officer (Environment), EARD F. Wang, Senior Project Officer (Financial Management), EARD H. Xia, Project Analyst, EARD W. Zhu, Senior Safeguards Officer (Resettlement), EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Road Safety and Vehicle Emissions 6 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 7 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 8

A. Relevance 8 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14 B. Lessons 14 C. Recommendations 14

APPENDIXES

1. Project Framework 16 2. Chronology of Major Events 20 3. Local Roads Upgraded under the Project 21 4. Training Program Provided 22 5. Project Cost and Financing Plan 24 6. Projected and Actual Contract Awards and Disbursements 25 7. Project Implementation Schedule 26 8. Organization Charts 27 9. Status of Compliance with Loan Covenants 30

10. Contract Details under the Project 40 11. Economic Reevaluation 44 12. Financial Reevaluation 50 13. Socioeconomic Impact and Poverty Reduction 53 14. Environmental Impact Analysis 59 15. Land Acquisition and Resettlement 62

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

People’s Republic of China 2004-PRC Ningxia Roads Development Project People’s Republic of China Ningxia Communications Department $250.0 million PCR:PRC 1389

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity – Grace Period

19 March 2003 27 March 2003 16 July 2003 18 July 2003 11 September 2003 29 March 2004 27 June 2004 12 May 2004 0 30 June 2009 27 July 2012 2 The sum of LIBOR and 0.6% fixed spread based lending facility 25 years 5 years

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8. Disbursements a. Dates

Initial Disbursement

12 May 2004

Final Disbursement

21 May 2012

Time Interval

97.7 months

Effective Date

12 May 2004

Original Closing Date

30 June 2009

Time Interval

62.5 months

b. Amount ($ ‘000)

Category

Original Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Civil Works-Expressway 177,600 201,917 0 201,917 201,917 Civil Works-Specific Local Road 5,000 4,478 0 4,478 4,478 Equipment 23,800 6,549 0 6,549 6,549 Traffic Engineering 7,400 19,458 0 19,458 19,458 Consulting Service & Training 1,500 1,348 0 1,348 1,348 Front End Fee 1,250 1,250 0 1,250 1,250 Interest & Commitment Charge 15,000 15,000 0 15,000 15,000 Unallocated 18,450 0 0 0 0

Total 250,000 250,000 0 250,000 250,000

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 280.2 250.0 Local Currency Cost 331.6 615.0 Total 611.8 865.0

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

ADB Loan 250.0 250.0 Domestic Loan 113.8 296.3 Grant from MOC 172.6 214.2 Raised by NCD 75.4 104.5

Total 611.8 865.0 ADB = Asian Development Bank; MOC = Ministry of Communications; NCD = Ningxia Communications Department.

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3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Base Cost 1. Civil Works 370.0 656.3 Building and Ancillary Facilities 23.5 25.7 2. Equipment 41.0 46.5 3. Land Acquisition and Resettlement 21.0 29.5 4. Consulting Services and Training 11.4 18.4 5. Local Road Program 20.5 10.8 ADB-financed portion 10.4 ---

Subtotal (A) 487.4 487.4 B. Contingencies 1. Physical Contingencies 31.4 0 2. Price Contingencies 47.8 0

Subtotal (B) 79.2 0 Front-End Fee 1.25 1.3 Interest During Construction 43.9 76.7

Total 611.8 865.0

4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants Dec 2003 Jun 2004 Completion of Engineering Designs Dec 2003 Dec 2003 Civil Works Contract (Section I) Date of Award Mar 2004 May 2004 Completion of Work Oct 2007 Dec 2005 Civil Works Contract (Section II) Date of Award May 2004 Apr 2005 Completion of Work Oct 2008 Dec 2007 Civil Works Contract (Section III) Date of Award - Jul 2009 Completion of Work - Dec 2011 Equipment and Supplies Dates First Procurement Mar 2007 Aug 2005 Last Procurement Mar 2008 Aug 2010 Completion of Equipment Installation Aug 2008 Aug 2011 Start of Operations Completion of Tests and Commissioning Dec 2008 Dec 2011 Beginning of Start-Up Jan 2009 Dec 2011

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 13 May 2004 to 27 July 2012 Satisfactory Satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of Members

Fact-finding 16-28 October 2002 6 78 a, b, c, d, e, f Appraisal 19-27 March 2003 7 63 a, b, c, e, f, g, h, i Inception 14-24 October 2004 4 44 c, g, j, k Review 1 18-22 July 2005 5 25 k, l, m, n, o Review 2 17-21 July 2006 3 15 k, l, o Review 3 20-27 September 2007 2 16 k, p Review 4 17-25 November 2008 3 27 k, p, q Midterm review 22-29 September 2009 3 24 k, p, r Review 5 23-28 August 2010 2 12 k, p Review 6 2-8 August 2011 4 28 s, t, u, v Project completion review 7-15 January 2013 5 31 t, u, v, w, x Note: a = project economist, b = project engineer (road), c = resettlement specialist, d = senior country officer, e = financial analyst, f = financial management specialist, g = transportation specialist, h = counsel, i = environmental specialist, j = senior transportation economist, k = assistant project analyst, l = project officer, m = project specialist (road), n = associate project analyst, o = resettlement officer, p = portfolio management officer, q = senior project management specialist, r = project officer (environment), s = senior financial control officer, t = senior safeguard officer (resettlement), u = senior project management officer, v = project analyst, w = senior financial officer, x = senior project officer (environment).

I. PROJECT DESCRIPTION

1. Ningxia Hui Autonomous Region (Ningxia), located in the poor northwestern part of the People’s Republic of China (PRC), was one of the country’s least developed inland areas. In 2002, its per capita gross domestic product (GDP) was CNY5,859, about two-thirds of the national average.1 Of Ningxia’s 15 counties, eight were designated poverty counties, all located in southern area of Ningxia. Agriculture was the mainstay of its economy, employing 60% of the labor force. The road infrastructure in Ningxia was underdeveloped, and the existing roads were in poor condition. S101, the region’s main road running north to south, was a class II road,2 and traffic exceeded the capacity at several points. The project was therefore designed to (i) develop the road network in southern Ningxia; (ii) provide a link to the Yinchuan-Wuhan road corridor that connects Ningxia to the better developed coastal regions; (iii) spread economic and social benefits to poor rural areas; and (iv) foster trade and catalyze economic growth in Ningxia. The project’s intended impact was to promote economic growth in the project area by increasing effective transport linkages, lowering transport costs, and facilitating trade and investment in the project area. The project expected outcomes were increased transport capacity and efficiency of freight and passenger movement, and improved access to poor counties in southern Ningxia. The project framework is in Appendix 1. 2. The project was the first road project supported by the Asian Development Bank (ADB) in Ningxia. ADB approved a loan of $250.0 million on 11 September 2003 from its ordinary capital resources to finance 41% of the project cost. The loan and project agreements were signed on 29 March 2004 and became effective on 12 May 2004. The project loan was closed on 30 June 2012. The project involved (i) constructing a 182-kilometer (km) four-lane access-controlled toll expressway from Tongxin to Yanchuanzi, including tunnels and bridges, interchanges and toll stations, and service areas; (ii) upgrading or improving 404 km of local roads serving poor counties and minority areas in Ningxia; (iii) procuring equipment for road maintenance and safety, toll collection, surveillance and communication, vehicle axle load testing, road safety and office administration; (iv) providing adequate compensation for the 1,040 hectares of land, trees, and crops to be acquired for the project and the relocation of 450 households; and (v) providing consulting services for construction supervision, safety audits, monitoring and evaluation, and capacity building. 3. The Ningxia Communications Department (NCD) was the executing agency for the project, responsible for overall project implementation. The Ningxia Highway Construction Administration Bureau (NHCAB) was the implementation agency, responsible for construction of the expressway and supervision of local roads improvement under the project, including coordination and monitoring of all construction activities of the expressway.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. The demand for road transport in the PRC has been rising since the economic growth of the 1980s. From 1990 to 2000, road traffic grew at 9.7% per annum for passenger traffic, reaching 660 billion passenger-km, and 5.9% per annum for freight, reaching 597 billion ton-km.

1 In 2011, the GDP in Ningxia was CNY32,691, 92.9% of the national average (CNY35,181).

2 PRC road standards include expressways and 4 classes of roads. Expressways are multi-lane, high speed national highways; class I roads are multi-lane national and provincial highways; class II roads are two-lane main roads; class III roads are two-lane roads, mostly used for local connections; class IV roads are two-lane or single-lane feeder roads.

2

Meanwhile, the road network was underdeveloped in both quality and coverage, with large parts of the country lacking road access, particularly in the poorer inland regions. In 2000, the road density in the PRC was low, with only 14.6 km per 100 square km. Roads of a high standard (above class II) accounted for only 12% of the total network, and the remaining were medium- to low-standard paved roads and gravel roads. The shortage of adequate road networks had limited economic growth and regional development before the commencement of the project. The project supported the PRC government’s road development policies and the government’s Western Region Development Strategy in the following areas: (i) constructing expressways to expand the National Trunk Highway System to link all cities with populations exceeding 500,000; (ii) developing secondary roads, particularly those that help reduce poverty and promote rural development; and (iii) reducing disparities in development between the western and coastal regions. The expressway supplied the missing link from Tongxin to Yanchuanzi in the Yinchuan–Wuhan road corridor, one of the eight priority western corridors included in the Tenth Five-Year Plan, 2001–2005. The expressway connected Yinchuan with Xi’an and Wuhan, which improved the north–south connection with other routes in the National Trunk Highway System. The project, located in southern Ningxia, covered seven counties/districts, all of which were designated poverty counties/districts. The construction of the expressway and improvement of the local roads were integrated to provide the rural poor with direct access to the expressway. 5. The project was also consistent with ADB’s country strategy for the road sector in the PRC,3 which included (i) building roads that connected major growth centers and promoted linkages with hinterland economies; (ii) integrating the road network so that the National Trunk Highway System was supported by a system of local roads, that provide access to poor areas; and (iii) promoting road safety and vehicle emission reduction. The project enhanced road safety through conducting road safety audits, limiting speed of traffic flow, managing overloaded vehicles, implementing a road safety operation plan, and improving local roads’ condition. To strengthen institutional capacity in road implementation and operation, the project provided consulting services to help the NCD and NHCAB in project implementation and incorporated an international training program to strengthen the skills of staff in road construction, traffic engineering and road safety, environmental management and monitoring, and road maintenance and operation. 6. An environmental impact assessment (EIA) for the expressway was conducted by the Ministry of Transport4 and approved by the Ministry of Environmental Protection5 in March 2003. A soil erosion protection plan was approved by the Ningxia Water Resources Department in January 2003. A resettlement plan was prepared by the NCD and endorsed by ADB in 2003. The National Development and Reform Commission approved the feasibility study for the expressway in June 2003. ADB provided technical assistance to help the government prepare the project. 6 The technical assistance refined the feasibility study, including the EIA and resettlement plan, and confirmed the project’s technical, economic, and financial viability. The preliminary design of the expressway was approved by the Ministry of Transport in June 2002. The project loan was approved on 11 September 2003 and became effective on 12 May 2004. The project was designed and formulated in a systematic and sound way. A chronology of the project’s major events is in Appendix 2.

3 ADB. 2003. Country Strategy and Program (2004-2006), PRC. Manila.

4 The Ministry of Transport was called the Ministry of Communications at the time of appraisal.

5 The State Environmental Protection Administration was renamed the Ministry of Environmental Protection in March

2008. 6 ADB. 2003. Technical Assistance to the PRC for Preparing the Ningxia Roads Development Project. Manila.

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B. Project Outputs

7. Expressway. At appraisal, a 182-km four-lane access-controlled toll expressway was planned to be constructed from Tongxin to Yanchuanzi, including access roads, interchanges, tunnels and bridges, toll stations, and service areas. The completed length of the expressway is 180.5 km, including 17.3 km of connecting roads, seven interchanges, six tunnels, nine large bridges, eight toll stations, two administrative buildings, and two service areas. A realignment of the expressway, affecting 12.7 km of the original alignment, was processed to avoid conflict with a planned reservoir for water supply and irrigation in the project area. ADB approved the realignment as a major change of scope on 15 April 2009, which resulted in the expressway being shortened by about 2.0 km. Otherwise, the expressway was constructed as envisaged at appraisal. Although the whole expressway has been open to public traffic for over one year,7 the upper layer of the pavement of the entire expressway will be completed by October 2013. 8. Local Roads. Originally the project included 12 sections of local roads in seven counties/districts with total length of 404 km. Of these 12 sections, two sections, Sanying to Xiwanmao and Jingyuan County to Shuanggedaliang, were financed by ADB. ADB approved the adjustment of the local road components as requested by the NCD in October 2007 to include the upgrading of six additional local roads in the project area. The alignment of the local roads generally followed the existing right-of-way of the local roads, which did not induce land acquisition and resettlement impacts. By the end of 2009, 18 local roads with a total length of 509 km had been completed. The completed local road component is shown in Appendix 3. The upgraded roads provide the poor communities with better access to townships, markets, and public services, as well as better opportunities for off-farm employment. 9. Equipment. The project procured equipment for (i) toll collection, surveillance and communications, and traffic control and monitoring; (ii) tunnel ventilation and lighting; (iii) vehicle axle road testing; and (iv) road maintenance and expressway operation. The equipment component consisted of six packages for traffic engineering; two for tolling, communication, and monitoring; eight for road maintenance; and one for tunnel ventilation and lighting. Traffic engineering packages were procured through International Competitive Bidding (ICB), with the package for tolling, communication, and monitoring procured in 2005. Procurement for road maintenance equipment started in 2009, and the equipment was delivered in December 2010. The equipment procured under the project ensured road safety in operation of the expressway. 10. Consulting Services and Capacity Building. An international consulting firm was engaged in June 2004 to provide consulting services to the project. The international consultant was mobilized in September 2004 and worked with national consultants on pavement design, tunnel construction, road safety, supervision of civil works construction, environmental protection and monitoring, and socioeconomic and poverty impact monitoring and evaluation. In addition to supervising the civil works construction, the consultant provided training and guidance to the NCD and NHCAB in contract management, environmental impact assessment and monitoring, road safety, tunnel construction, and socioeconomic and poverty impact monitoring and evaluation. In total, about 35 person-months of consulting services were provided, against the planned 55 person-months.

7 Phase I: Tongxin–Guyuan section with a length of 117.5 km has been open to the public since November 2007, Phase II: Guyuan–Shizi section with a length of 38.5 km has been open to the public since December 2007, and Phase III: Shizi–Yanchuanzi section with a length of 24.5 km has been open to the public since December 2011.

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11. In addition, the NHCAB engaged seven national consulting firms to undertake construction supervision and quality control of civil works and pavement work. A supervision unit headed by a chief supervision engineer was formed, comprising five resident supervision engineer offices responsible for specific sections of the expressway. In total, 8,802 person-months of national consulting services were provided for the project, against 4,642 person-months planned. The additional national consulting services were needed due to the longer time required for implementation of the expressway. 12. Capacity Building: The NCD developed a human resource development plan for NCD and NHCAB capacity building and training requirements. The plan included 118 person-months of international training. Starting from 2006, about 60 person-months of training were carried out. The international training covered construction management, procurement and contract management, traffic engineering and road safety, environmental management and monitoring, and road maintenance and operation. In addition, over 18 domestic training workshops were conducted for over 680 participants. The details of training workshops are shown in Appendix 4. C. Project Costs

13. At appraisal, the estimated project cost of $611.8 million (equivalent to CNY 5,064 million) was increased to $865.0 million (equivalent to CNY5,523 million).8 The increase was due to (i) significant cost increases for labor and material (cement, steel, and asphalt); (ii) increased fees for consulting services, including design and construction supervision; (iii) high interest costs for domestic loans; and (iv) yuan appreciation. Taking no account of yuan appreciation, the total cost of the project increased by about 9%. Appendix 5 shows the details of the appraisal estimates and the actual project costs. 14. The financing plan at appraisal included a $250.0 million loan from ADB (about 40.9% of the project cost), a loan of $113.8 million equivalent from domestic banks (18.6%), a grant of $172.6 million from the Ministry of Transport (28.2%), and a grant of $75.4 million from the NCD (12.3%). At project completion, the actual funding from ADB remained unchanged. The grant from the Ministry of Transport was $214.2 million equivalent in local currency, and $104.5 million from the NCD. Loans from commercial banks amounted to $296.3 million equivalent. The financing sources are shown in Appendix 5. D. Disbursements

15. The $250.0 million loan from ADB was fully disbursed after allocating savings from other categories to the expressway civil works. The significant cost increase for civil works for the expressway was mainly due to the increase in labor and materials costs during implementation, but this was offset from savings in other categories, such as equipment. Reimbursement, direct payment, and commitment procedures were used for the withdrawal of loan proceeds. Reimbursement was used for civil works, while payments for equipment and consulting services were made through commitment procedure, direct payment, and reimbursement procedures. Simplified reimbursement procedures, such as the statement of expenditures procedure, were used to pay consulting services. Loan disbursement was undertaken in a smooth and timely manner. The Ningxia Finance Department, NCD, and NHCAB were satisfied with the payment procedures and processes. The projected and actual contract awards and disbursements are presented in Appendix 6.

8 The cost included an estimated CNY355 million for implementing upper layer asphalt pavement.

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E. Project Schedule

16. The expressway was divided into three phases at implementation: Phase I: Tongxin–Guyuan at 117.5 km, Phase II: Guyuan–Shizi at 38.5 km, and Phase III: Shizi–Yanchuanzi at 24.5 km. 17. Phase I earthworks and bridge construction commenced in May 2004 and was completed in September 2005. Pavement work started in May 2005, and the lower layer asphalt pavement was completed in November 2005. The medium layer of the asphalt was completed in November 2007, 2 years after settlement of the earthwork. Traffic engineering, communication cable trenches, buildings, and ancillary facilities were completed by November 2005. The Tongxin–Guyuan section was opened to the public on 18 December 2005 on a trial basis. Phase II earthworks and bridge construction commenced in July 2005 and was completed in November 2007. Pavement works started in September 2007. The lower layer asphalt pavement was completed by 2007, and the medium layer was completed in 2009. Traffic engineering, communication cable trenches, buildings, and ancillary facilities were completed by the end of 2007, and Phase II was opened to the public on 28 December 2007. 18. From 2005 to 2007, a severe drought in the project area led to the construction of a water supply and irrigation reservoir in Qinjiahe Valley at a site that was along the original alignment planned for Phase III.9 A major change to the original alignment of Phase III was therefore necessary to avoid the site proposed for the new reservoir. As a result of this major change in scope, Phase III construction commenced in August 2009, 2.5 years later than planned. Construction of the pavement works for both the lower layer and medium layer was completed in November 2011, and Phase III was opened to the public on 1 December 2011. 19. The upper layer asphalt pavement of the entire expressway will be completed in October 2013 after the earthwork settles to avoid distortion to the road surface. Approximately 75% of the Phase I expressway section passed through foundations with collapsible loess. 10 Stabilization of the embankment on the collapsible loess foundation took years even where the foundation was well treated and compacted. As a result, the NCD and NHCAB spaced the laying of the asphalt pavement in intervals to allow for the settling and to correct any distortion in the road surface. The implementation schedule is shown in Appendix 7. F. Implementation Arrangements

20. The NCD was the executing agency responsible for overall project implementation. The Ningxia–Yinwu Expressway Engineering Construction Headquarters, established in August 2001 as a division of the NCD, was responsible for the coordination and monitoring of all construction activities and the supervision of the local roads improvement under the project. In June 2006, the Ningxia–Yinwu Expressway Engineering Construction Headquarters merged with the NHCAB, which was the implementing agency of the project. The NHCAB consisted of 13 divisions, one of which was responsible for project implementation. Additionally, county communications bureaus were responsible for the maintenance of the local roads. The

9 The planned reservoir for water supply and irrigation was completed in May 2012. The reservoir comprised a 230 meter dam, outlet works, and 4.2 km water mains, with a capacity of 5.6 million m

3. About 500,000 people benefited

from the completed water supply reservoir. 10

Collapsible loess is characterized by low density and cohesion, appreciable strength, and stiffness in the dry state, but is susceptible to significant deformation as a result of wetting. The approach used is applicable in project areas that are temperate and arid with annual average precipitation of about 300 millimeters. The main function of the upper layer asphalt is to provide water penetration to earthwork and skid resistance.

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NHCAB’s overall project coordination was effective. During project implementation, an international consulting firm and seven national consulting firms assisted the NHCAB in project management, quality assurance, and material testing. In addition, two national procurement agencies were engaged to assist the NHCAB in preparing bid documents and bid evaluation. 21. The Ningxia Highway Administration Bureau (NHAB) is responsible for the operation and maintenance of the expressway.11 To manage the expressway operation, eight tollgates, two maintenance centers, and two service areas were constructed, including road administration units and overload control units. The organization charts of the NHCAB and NHAB are in Appendix 8. G. Conditions and Covenants

22. All 30 loan covenants concerning implementation arrangements, environmental protection, social and resettlement issues, and economic and financial performance were complied with. Adverse environmental impacts were minimized by mitigation measures outlined in the environmental monitoring plan for the project. Audited accounts and audited financial statements were submitted to ADB on time, all with an unqualified opinion and a management letter. With the assistance of the international consultant, a project performance monitoring and evaluation system was developed in accordance with the project performance management system formulated at appraisal. The Ningxia Center for Environmental and Poverty Alleviation was entrusted to conduct socioeconomic and poverty impact monitoring and evaluation beginning in December 2004. Socioeconomic and poverty impacts were monitored and evaluated regularly with reports submitted to ADB. Counterpart financing was adequate and timely. Axle-weighing scales were installed, and penalties for infringement were enforced. The status of compliance with loan covenants is in Appendix 9. H. Road Safety and Vehicle Emissions

23. A road safety operation plan was developed prior to operation of the expressway. The plan integrated engineering, enforcement, education, and emergency activities in accordance with the national road safety law that became effective in May 2004. Traffic control equipment and surveillance systems were included in the road design and were properly installed prior to the opening of the expressway to traffic. Road safety audits were carried out during and after construction. Local communities and road users were educated on road safety prior to the opening of the expressway to the public. Speed monitoring equipment installed along the expressway compels road users to drive within the speed limits. The number of overloaded vehicles decreased significantly after installing axle-weighing scales at tollgates. A traffic police unit staffed by the Ningxia Public Security Bureau was established at the Yanchuanzi toll station to conduct regular patrols of the expressway and enforce traffic rules. Two service areas were constructed along the expressway to provide parking, refueling, restroom, repair, and restaurant services to road users. Traffic accident records indicate that the road safety measures implemented are effective.12

11

Established in June 2006, the NHAB is responsible for the operation and maintenance of national and provincial trunk highways and expressways in Ningxia, including road maintenance, road administration, and toll collection.

12 Traffic accidents records proved that road safety control measures were effective. After the expressway was opened to traffic in 2007, traffic accidents were reduced to 43 in 2008 and 37 in 2010 on S101 in the project area, compared with 179 in 2005 and 121 in 2006, and deaths were reduced to 18 in 2008 and 47 in 2010 from 90 in 2005. Further, the number of accidents was about 15 per year on average from 2007 to 2011, lower than the average on S101 for the same period.

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24. The S101 was the only road running north to south in Ningxia and the project expressway provided a more effective transport linkage with high capacity in the project area. From 2004 to 2011, the number of passenger vehicles in the project area increased by 266% from 1,663 to 6,081 and the number of trucks increased by 99% from 151,147 to 300,524, while traffic volume on S101 was reduced by 60% from 2005 levels.13 The traffic congestion on S101 was reduced as traffic was diverted to the expressway starting in 2007. Since the expressway road condition is better and the travel distance is shorter, the expressway has significantly reduced fuel consumption. The national vehicle emission regulations, which required all vehicles to have emission control devices and to use cleaner fuels, were also enforced under the project by the traffic police. I. Consultant Recruitment and Procurement

25. An international consulting firm was engaged in July 2004 through the quality- and cost- based selection method in accordance with ADB's Guidelines on the Use of Consultants 2002 (as amended from time to time). National consultants financed by the NCD were engaged in accordance with the government procedures acceptable to ADB. 26. All ADB-financed procurement followed ADB's Guidelines for Procurement 1999 (as amended from time to time). Two tendering companies were engaged by the NHCAB to provide assistance in procurement. Eighteen civil works contracts for the expressway were procured through ICB; seven for pavement packages, five for traffic engineering, and two for equipment were procured through ICB. Counterpart funds were used to procure the toll, communication and surveillance system, and the tunnel ventilation and lighting equipment. The upper layer asphalt pavement contracts will be financed by counterpart funds. Civil works for the rehabilitation of 509 km of local roads were procured through national competitive bidding and implemented by the local county communications bureaus. Details of contract packages financed by ADB are shown in Appendix 10. J. Performance of Consultants, Contractors, and Suppliers

27. The consultants engaged to undertake technical design, engineering, construction supervision, and social and environmental monitoring and evaluation performed satisfactorily. The technical design of the expressway was carried out by design institutes following national standards and specifications. The NCD and NHCAB acknowledged the importance of consulting services provided by the international consultants on the road pavement design and construction, and environmental management and monitoring. National consultants’ inputs in supervising expressway construction and in monitoring resettlement and environmental impacts were also satisfactory. 28. All contractors and suppliers fulfilled their contractual responsibilities. Civil works were completed according to design and specifications, and suppliers of equipment ensured timely delivery and installation of equipment, which are operating satisfactorily. The relevant government agencies conducted quality examinations of civil works, and the results showed the quality was satisfactory.

13

In 2005, the traffic volume of S101 reached a peak of 18,166 passenger car units per day in several congested sections.

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K. Performance of the Borrower and the Executing Agency

29. The borrower14 signed the loan agreement on 29 March 2004, about 5 months after Board approval. The loan became effective about 3 months thereafter. The time from loan approval to loan signing and from loan signing to loan effectiveness was consistent with the average for ADB’s portfolio in the PRC. Although the project was the first road project financed by ADB in Ningxia, the NCD and NHCAB managed to implement the project efficiently. The NCD and NHCAB effectively undertook advance procurement action, which also enabled physical construction of the expressway to start as early as May 2004. 30. The project was implemented according to the arrangements envisaged at appraisal. All loan covenants were complied with. The schedule, quality, and cost of construction were managed well, and adequate counterpart funds were provided in a timely manner by the borrower and executing agency. Land acquisition and resettlement were implemented smoothly and in accordance with the resettlement plan and ADB’s Involuntary Resettlement Policy (1995). The environmental management plan (EMP) was implemented well during construction, and adverse environmental impacts were mitigated effectively. The 3-year delay in the completion of the expressway was mainly due to realignment of Phase III of the expressway as explained in paragraph 18. Overall, the performance of the borrower and the executing agency was satisfactory. L. Performance of the Asian Development Bank

31. ADB’s performance is rated satisfactory. ADB’s project preparatory technical assistance was considered to be relevant and effective. Nine review missions were fielded during implementation. ADB’s review and supervision of project implementation was adequate and timely. Coordination between ADB, the Ningxia Finance Department, and the NCD was effective, and ADB’s guidance in processing the realignment of Phase III of the expressway and in reallocating loan proceeds for effective loan utilization contributed to the achievement of the project’s outcome.

III. EVALUATION OF PERFORMANCE

A. Relevance

32. The project is rated relevant. It was relevant to the PRC government’s road development policy at appraisal and at completion. The project contributed to the government’s Tenth Five-Year Plan 2001–2005, in transport sector development, which focused on constructing additional expressways to connect major economic growth centers, developing secondary roads to improve accessibility of rural areas and poor communities, and promoting cooperation between the poor western region and economic growth centers in the eastern region. The expressway connected Tongxin and Yanchuanzi and reduced travel time along the corridor. The upgrading of 18 local roads under the project has improved the accessibility of isolated rural areas and enhanced the impact of the expressway for the rural population. The expressway is part of the Yinchuan to Wuhan highway connecting Yinchuan with Xi’an and Wuhan. The project was also relevant to the government’s policies and plans for road development mapped out in the Twelfth Five-Year Plan, 2011–2015, which prioritized improving road network infrastructure, increasing rural families’ incomes, and reducing regional economic imbalances.

14

The PRC acting through the Ministry of Finance.

9

33. The project was also in line with ADB’s strategy for the PRC road sector at both appraisal and project completion. The strategy supports (i) building roads that connect major growth centers to promote linkages with hinterland economies and regional cooperation; (ii) integrating the road network to support the National Trunk Highway System to improve access to poor areas; (iii) promoting road safety and vehicle emissions reduction; and (iv) strengthening regional cooperation in transport. The project formed a part of the eight priority highway corridors in the western PRC, providing a key link in the Yinchuan–Wuhan corridor. 34. The realignment of Phase III of the expressway improved the relevance of the project design. As a result of the severe drought from 2005 to 2007, Ningxia planned to build a reservoir for water supply and irrigation in the project area. To avoid the site proposed for the new reservoir, the route of the Phase III section of the project expressway was realigned. The realignment required that an interchange be relocated 5 km westward from Xiasi River to Maxipo. To mitigate the impact of the road diversion for road users in Jingyuan County, the local road connecting Jinyuan County to the interchange was upgraded from class IV to class II using domestic funds. Meanwhile, people in the project area have benefited from the reservoir, which addressed the water shortage. B. Effectiveness in Achieving Outcome

35. The project is rated effective. The outputs of the expressway, local roads, and consulting services and capacity building were successfully implemented and completed with good quality. The project’s objectives of increasing transport capacity and efficiency of freight and passenger movements and providing poor counties/districts with better access to markets and social services have been achieved. The capacities of the NCD and NHCAB in road pavement design, procurement, construction management, project performance monitoring, and highway operation and maintenance have been strengthened by project activities. 36. Expressway and Local Roads. The expressway was constructed as planned, except for the realignment of the Phase III section to avoid the proposed site for a new reservoir. The 180.5 km four-lane access-controlled toll expressway was completed and opened to the public at the end of 2011. The preliminary assessment showed that the expressway was properly constructed and its ancillary facilities are functioning well. The connectivity of Ningxia with Shaanxi, Hubei, and Gansu provinces has been strengthened. The freight traffic volume by road increased by 148% from 27.7 million tons in 2004 to 68.8 million tons in 2010, and passenger traffic volume increased by 64% from 3.3 million persons to 5.4 million persons. Traffic accidents on S101 in the project area decreased from 179 in 2005 to 37 in 2010, even with an approximate 20% increase in traffic volume. 37. Eighteen local roads with a total length of 509 km were upgraded, as compared with 12 roads with a total length of 404 km planned at appraisal. In 2004, 1,008 villages out of 1,316 villages had all-weather road access. At project implementation, the number of villages with all-weather access roads increased to 1,287, or 97.8% of the total number of villages. The average travel distance to schools, hospitals, and other facilities was reduced by about 30% from 6 km to 4 km. As a result, about 99.8% of women gave birth in hospitals in 2010, and the birth mortality decreased significantly. In addition, the number of public bus lines in the project area increased to 1,502 in 2010 from 389 in 2004. 38. Road Safety. A road safety action plan was developed, which integrated engineering, enforcement, education, and emergency response features. Eight toll stations and two service areas were constructed along the expressway, providing sufficient rest and service areas to

10

road users. Traffic signs and guardrails were adequately provided, and traffic control equipment and surveillance systems were properly installed. Road safety education was provided to local communities and road users before the expressway was opened to the public. Speed monitoring equipment installed along the expressway has compelled drivers to follow the designated speed limits. The number of overloaded vehicles as a percentage of the number of total vehicles on the expressway decreased from 13.7% to 0.2% in 2011 with the installation of axle-weighing scales in July 2007. The road safety features under the project were implemented satisfactorily. 39. Road maintenance equipment was procured for the project, which included emergency towing equipment, asphalt pavement repair equipment, snow sweepers, and road sweepers. The NHAB, which is responsible for the operation and maintenance of national and provincial trunk highways and expressways in Ningxia, has established two maintenance stations with over 20 staff in each station to provide regular road maintenance, which includes road clearing, asphalt pavement repair, and slope protection. A traffic police unit was established in the Yanchuanzi toll station to conduct regular patrols of the expressway and to enforce traffic rules. 40. All road safety management measures were effective as evidenced by the reductions in traffic accidents in both S101 and the expressway from 656 in 2004 to 210 in 2010, in accident fatalities from 210 in 2004 to 109 in 2010, and in seriously injured persons from 680 in 2004 to 286 in 2010, despite an increase in traffic volume. C. Efficiency in Achieving Outcome and Outputs

41. The project is rated less than efficient. All project outputs were fulfilled as envisaged at appraisal and the intended project objectives have been achieved, but the project implementation was delayed by 3 years as explained in paragraph 18 above and the total project cost increased by about 9%. The actual traffic volume on the expressway from 2009 to 2011 was lower than projected at appraisal since the diverted traffic from S101 was less than expected. The reevaluated economic internal rate of return (EIRR) for the expressway is 15.7%, lower than 17.8% estimated at appraisal. The recalculated financial internal rate of return (FIRR) is 4.57% after tax, compared to 6.99% estimated at appraisal. 42. Traffic Volume. The expressway and existing S101 constituted the main transport corridor in the project area, and the expressway was considered as an alternative high-capacity route to S101. Phase I was opened to the public in November 2005, Phase II in December 2007, and Phase III in December 2011. Different sections of S101 carried traffic ranging between 6,801 passenger car units (pcu) per day and 14,339 pcu/day in 2004. In 2005, the most congested section of S101 carried traffic of 18,166 pcu/day and several sections had reached capacity. When the major sections of the expressway were opened to traffic during 2005–2007, a significant proportion of traffic was diverted from S101 to the expressway. In 2008, the traffic on the Sanying–Guyuan section of S101 was reduced to 10,833 pcu/day, or 60% of 2005 levels. Actual traffic volumes on the expressway were 3,395 pcu/day in 2009, 5,579 pcu/day in 2010, and 6,794 pcu/day in 2011. The average growth rate of expressway traffic reached 35% during 2009–2011 as a result of the traffic diversion with the improved road conditions and reduced travel distance. Compared with appraisal estimates, the expressway traffic volumes from 2006 to 2011 were lower, while the traffic on S101 was higher. The diverted traffic from S101 to the expressway was lower than projected due to improved road conditions of S101 and its advantage of lower toll rates.

11

43. Economic Reevaluation. The project is considered economically viable as the reevaluated EIRR of the expressway is 15.7%, higher than the cutoff rate of 12%. However, this is lower than the 17.8% estimated at appraisal. The lower EIRR was due to higher capital cost, delayed completion, and lower traffic volumes. A sensitivity analysis was carried out to test the impact of increased operation and maintenance (O&M) costs, a decrease in benefits, and a combination of these two sensitivity tests. The analysis showed that the project would remain economically viable under all sensitivity scenarios. Under the worst-case scenario of a 20% increase in O&M costs combined with a 20% reduction of benefits, the EIRR is 13.2%, indicating that the project remains economically viable. The economic reevaluation is in Appendix 11. 44. Financial Reevaluation. The FIRR was recalculated following the same methodology adopted at appraisal, based on the assumptions set out in Appendix 12. The recalculated FIRR is 4.57% after tax, which is lower than the appraisal estimate of 6.99%. This variation was mainly due to higher capital costs, lower toll rates, and lower traffic as compared with the appraisal estimates. The after-tax weighted average cost of capital (WACC) in real terms was calculated using the actual capital mix and cost of various financing sources. The revised WACC is 3.26%, which is lower than the appraisal estimate of 5.01%. The project’s recalculated FIRR is higher than the revised WACC, and the project is considered financially viable. A sensitivity analysis was conducted to evaluate the impacts of variations in O&M costs and revenues. The results indicate that the project’s financial viability is more sensitive to a decrease in revenues. The financial reevaluation is in Appendix 12. 45. A covenant in the project agreement states that the NCD shall maintain a working ratio of not more than 15% from the first fiscal year of full operation and a debt service coverage ratio of not less than 1.2 from the fourth year of full operation. According to the NHAB, there are no separate financial statements for the expressway or any other individual expressway or toll highway in Ningxia. Pro forma analysis indicates the expressway will be able to achieve a debt service coverage ratio of 1.2 in 2015, and working ratio of 12% in 2017. D. Preliminary Assessment of Sustainability

46. The project is rated likely sustainable. The expressway was well designed and constructed and has relieved traffic congestion on S101. In addition, local roads have improved the connectivity of numerous townships and villages in the project area. The road network and transport services in the project area have improved since completion of the project. Although the actual total project cost was slightly higher than the appraisal estimates, the FIRR recalculated after tax is higher than the WACC. The NHAB has established a sound operation and maintenance system of the national and provincial highways and expressways in Ningxia, including road maintenance, road administration, and toll collection. Eight toll stations, two service areas, and two maintenance stations have been established specifically for operating and maintaining the expressway. Maintenance of the local roads was assigned to relevant county communications bureaus. In December 2008, the State Council announced fuel tax reform to (i) encourage fuel efficiency, (ii) establish a stable funding source for local road construction and maintenance, (iii) simplify the tax structure, and (iv) link cost recovery with the usage of transport infrastructure. Implementation of ongoing fuel tax reform in the PRC is expected to boost funding for the maintenance of local roads in Ningxia. 47. The Twelfth Five-Year Traffic and Transportation Development Plan 2011–2015, emphasized further road network development in the PRC, including plans to construct an additional 34,000 km of expressway and 445,000 km of rural roads from 2011 to 2015.

12

Following the national strategy, the Ningxia government planned to build another 440 km expressway, upgrade 800 km of provincial highways, and construct 8,600 km of rural roads from 2011 to 2015. With the road network development in Ningxia, the project will be more effectively utilized and contribute more to Ningxia’s overall economic development. E. Impact

48. The project has promoted economic growth in the project area by increasing effective transport linkages, lowering transport costs, and facilitating trade and investment in the project area. The negative environmental impacts generated during project implementation were effectively mitigated, and safeguard measures on land acquisition and resettlement were effectively implemented. 49. Socioeconomic Impact. Construction and operation of the expressway have contributed to the socioeconomic development in the project area. A total of CNY5.52 billion ($865.0 million equivalent) was invested in expressway construction. The project investment generated income, employment, and business opportunities, and created potential to attract investment which has significantly contributed to regional socioeconomic growth in the project area and in Ningxia as a whole. Annual per capita GDP in the counties and districts along the expressway increased 252%–439% from 2004 to 2011. Construction of the expressway has facilitated external investments and contributed to local industrial development along the expressway. A total of 644 enterprises with about CNY27 billion ($4.2 billion equivalent) of investments started operations in seven counties/districts along the alignment from 2009 to 2012. The booming industrial parks provided significant employment opportunities to local poor. 50. With the socioeconomic growth and increased employment opportunities in the project area, living standards and the income of the local population have improved, particularly among the poor. The annual rural per capita income of farmers increased 152%–182% from 2004 to 2011 in the counties/districts in the project area, which was higher than 133% average increase in Ningxia. From 2004 to 2010, poverty incidence decreased from 44.4% to 22.3% in the seven counties/districts in the project area. 51. Around 49,352 local laborers were directly employed in expressway construction. During operation, 446 people were recruited to work in toll services, expressway maintenance, and road administration. In addition, 85 unskilled workers were hired from local villages as cleaners and security guards. Locally procured construction materials and supplies, including 80,678 tons of steel, 749,790 tons of cement, 6,344,367 cubic meters (m3) of water, 1,562,675 m3 of sand, and 79,747,150 kilograms of gasoline, also generated a large number of employment opportunities in the project area. 52. The operation of the expressway and improved local roads has promoted gender development in the project area. The girl’s enrollment at primary school increased from 97% in 2004 to 100% in 2011 and enrollment at middle school increased significantly from 76% in 2004 to 98% in 2011 in the project area. In addition, the improved road conditions have enabled local women, particularly those who live in remote mountainous areas, to gain access to medical services. The detailed socioeconomic impacts of the project are described in Appendix 13. 53. Environmental Impact. The project was implemented with adequate compliance of the EMP as derived from the domestic EIA and the soil erosion protection plan. No significant environmental impacts were incurred during project implementation. The Ministry of Environmental Protection approved the full EIA report for the project in March 2003, and the soil

13

erosion protection plan was approved by the Ningxia Water Resources Department in January 2003. The summary EIA was prepared according to the EIA and the soil erosion protection plan, and it was circulated to the Board in 2003. 54. To coordinate environmental management, the NHCAB established an environment management unit, which oversaw the implementation of the project’s EMP. During construction, a national consulting firm was engaged to conduct monitoring for water, air, noise, and ecological environment following the EMP requirements. The Ningxia Qingxi Soil and Water Conservation Service Center monitored soil erosion impacts. Twelve environment monitoring reports submitted to ADB and nine were disclosed on ADB’s website. 55. According to the environment monitoring and soil erosion monitoring reports, the adverse environmental impacts were adequately mitigated following the project’s EMP implementation, and there were no significant impacts during construction. The measures taken to mitigate adverse environmental impacts were effective and adequate. To minimize disturbances to land, borrow pits and disposal sites were carefully selected and subsequently restored and rehabilitated following the soil erosion protection plan using retaining structures, drainage systems, and vegetative cover. The concrete mixing plant stations were rehabilitated and revegetated. Siltation and waste from construction sites and workers’ camps were collected and properly treated. Specific measures were undertaken to minimize impacts on the aquatic environment while constructing bridges and tunnels. Air pollution from construction dust was effectively controlled through regular water spraying, use of protection materials during transport, and regulation of the speed of construction vehicles. During operation, garbage collection facilities were installed in the toll stations and service areas, and solid waste was collected and transported to landfills on a regular basis. Wastewater treatment facilities, such as septic tanks, were also constructed in administrative buildings and at service areas. A detailed environmental impact analysis is in Appendix 14. 56. Land Acquisition and Resettlement. Land acquisition and resettlement were implemented in three phases, which followed the implementation arrangement of the expressway. The implementation of land acquisition and resettlement for Phase I commenced in August 2003, Phase II in March 2005, and Phase III in May 2006. For the realigned section of Phase III, a supplementary resettlement plan was prepared and endorsed by ADB. The project permanently acquired 16,195 mu of land, 4.1% more than the estimated area.15 Average loss per capita was 0.27 mu, or about 10%. A total of 79,038 square meters of buildings were demolished, 10.9% less than estimated. A total of 42,761 people were affected by land acquisition, and 2,877 people were affected by house demolition. 57. Land acquisition and resettlement were implemented in accordance with the Land Administration Law (1998) of the PRC, ADB’s Involuntary Resettlement Policy (1995) and Policy on Indigenous Peoples (1998), the Implementation Measures for the Land Administration Law of the PRC in Ningxia Hui Autonomous Region (2001), and No. 192 decree on Compensation Rates for Land Acquisition and Resettlement for Western Corridor–Yinchuan to Wuhan Expressway (Ningxia section) issued by the Ningxia government (2001). The actual compensation rates for irrigated land and dry land were the same as those stipulated in the resettlement plan. The actual compensation rates for non-cultivated land were referred to the neighboring cultivated land. The actual annual compensation rates for temporary land use were CNY200–CNY400/mu, higher than those in the resettlement plan. In general, the actual compensation rates were similar to those listed in the resettlement plan. Implementation of land

15

A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

14

acquisition and resettlement cost was CNY208 million, 19.4% more than the estimated CNY174.2 million in the resettlement plan. 58. The survey conducted by the external monitor showed that the incomes of affected households had been properly restored as a result of various measures taken by the government. With the improved transport infrastructure and on-the-job skill training, local villagers obtained more opportunities for jobs after project completion. Wage income increased significantly, which compensated for the loss of agricultural income due to land acquisition. According to the survey result of 235 sampled households, the average per capita annual income increased by 66.3% from CNY2,508.8 to CNY4,171.4 after resettlement. The details of land acquisition and resettlement are shown in Appendix 15.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

59. Overall, the project is rated successful. The project was implemented in a satisfactory manner and all project outputs were completed as envisaged at appraisal. The project outcome was successfully achieved. The project has increased transport capacity and the efficiency of freight and passenger movement; improved access to poor counties/districts in southern Ningxia; and promoted economic growth in the project area by increasing effective transportation linkages, lowering transport costs, and facilitating trade and investment in the project area. Although the implementation was delayed for 3 years, the project objectives were further strengthened by the construction of the reservoir for water supply and irrigation in the project area. The implementation arrangements were effective. The environmental impacts were effectively mitigated and consulting services in project design and construction effectively delivered. The 9% increase in total project cost was mainly due to the increase of labor and material costs during implementation. The project was confirmed financially and economically viable. B. Lessons

60. The lessons learned from the collapsible loess foundation treatment are useful for road project design and implementation in the northwestern PRC, where collapsible loess is often encountered in road construction. The lessons learned include that (i) careful and adequate analysis of properties of collapsible loess at project site is necessary, because different types of collapsible loess behave differently while some treatment methods are more effective than others for certain types of loess; (ii) for projects that encounter collapsible loess, sufficient budget should be allocated to design of foundation treatment and its construction, which is much more economical than to remedy deformation of road when inappropriately treated loess settles at a later stage; and (iii) if possible, pavement layers should be constructed after one year or more of settlement of earthwork, depending on the type of treatment of collapsible loess. C. Recommendations

1. Project Related

61. Future monitoring. The NCD, NHCAB, and NHAB should continue conducting annual project performance monitoring for 3 years following project completion (until 2014), and report to ADB in a timely manner.

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62. Covenants. According to the financial reporting requirements of the Project Agreement, the NCD and NHAB shall submit to ADB annual audited accounts and financial statements for the expressway for the first 5 years of operation. However, according to the NHAB, there are no separate financial statements for the expressway or for any other individual expressway or toll highway. The NCD and NHAB were urged to provide separate financial records for the expressway and fulfill the covenant agreed at appraisal. In addition, the NCD was advised to examine the toll rates for the expressway since the current toll rates are lower than the rates in other provinces in the PRC.16 63. Further action or follow-up. The design of the upper layer asphalt has been completed, and construction should be completed by October 2013 as planned. Further technical studies and economic analyses of the pavement construction in different stages should be carried out, and lessons learnt could be summarized to provide a reference for future project implementation in Ningxia. 64. Timing of the project performance evaluation report. It is recommended that the project performance evaluation report be prepared in 2017, one year after the Dongshanpo–Maojiagou expressway is completed in 2016, and when the connection to the Dingxi–Luohandong expressway17 is completed and more accurate traffic flow data is available to conduct reassessment of the FIRR and EIRR.

2. General

65. The socioeconomic impacts were regularly monitored by the project, which provided abundant information in evaluating achievement of the project outcome and impact. A project performance management system was developed with assistance of an international consultant, and a local consultant was engaged to monitor the indicators, which covered social, economic, gender, road safety, and other aspects related to the project impact. To monitor project performance, a consolidated socioeconomic impact monitoring is recommended, which can cover indicators and activities stipulated in the project design and monitoring framework, social action plan, and gender action plan. This consolidated report can depict comprehensive project impacts since some of the indicators in different documents are similar or related.

16

In the PRC, the basic expressway toll rate ranges from CNY0.3 to CNY0.6/vehicle-km, while the basic toll rate of the project expressway is CNY0.3/vehicle-km, which is same as the rate for all other expressways in Ningxia.

17 The expressway was constructed under the Gansu Roads Development project, an ADB financed project. Since the section from Dongshanpo to Maojiagou passes through Ningxia Hui Autonomous Region, the implementation of Dongshanpo-Maojiagou expressway started in 2012 by NCD. Once this expressway is completed, it is expected that the traffic volume will further increase as the connection of expressway network is improved.

16 Appendix 1

PROJECT FRAMEWORK

Design Summary

Performance Indicators/Targets

Appraisal Actual

Goal

1. Promote economic growth in the project area by increasing effective transportation linkages, lowering the cost of transport, and facilitating trade and investment in the project area through better access to Yinchuan, Gansu, and other provinces.

2. Reduce poverty in the project area by improving living standards, creating employment, and improving access to markets.

1.1 During 2007-2014, GDP growth rate targets for Ningxia 7.5%.

1.2 During 2007-2014, GDP growth rate targets for the project area 8.0%.

1.3 Per capita income in Ningxia increased from CNY1,073 in 2001 to CNY1,300 in 2010.

1.4 During 2007-2014, increase in vehicle traffic in the project area, 8.0% for passenger traffic.

1.5 During 2007-2020, increase in vehicle traffic in the project area, 5.0% for freight traffic.

2.1 Poverty incidence using annual income below CNY1,000 reduced from 57% in 2001 to 40% in 2010.

2.2 Better access to markets: average distance to markets from 13.0 km to 5.0 km.

2.3 Number of poor labors employed targets 57,950.

1.1 Per capita GDP in Ningxia annual increase ranged from 15.0% to 29.9% from 2004 to 2011

1.2 Per capita GDP in the seven counties/districts of the project area increased by 252%–439% from 2004 to 2011

1.3 Per capita income of Ningxia increased from CNY2,320 in 2004 to CNY5,410 in 2011

1.4 Passenger traffic volume increased by 64% from 3.3 million persons in 2004 to 5.4 million persons in 2010

1.5 Freight traffic volume by road increased by 148% from 27.7 million tons in 2004 to 68.8 million tons in 2010

2.1 Poverty incidence decreased from 44.4% in 2004 to 22.3% 2010 in the project area (below CNY1,000)

2.2 Average distance to markets in the project area reduced from 13.0 km to 3.5 km

2.3 Around 49,352 local laborers directly employed in expressway construction. During operation, 359 people recruited to work for toll services, 75 people engaged in road maintenance

Purpose

1. Increased transport capacity and efficiency of freight and passenger movements.

1.1 Annual inter-provincial traffic per passengers and tonnage.

1.2 Reduced congestion level on S101 between Tongxin and Yanchuanzi, average daily traffic volume.

1.1 Average growth rate of the expressway traffic reached 35% from 2009 to 2011: 3,395 pcu/day in 2009, 5,579 pcu/day in 2010, and 6,794 pcu/day in 2011 when the first section of expressway opened to public.

1.2 In 2005, the most congested section of S101 carried traffic of 18,166 pcu/day; in 2008, it was reduced to 10,833 pcu/day after the first section of expressway was put into operation

Appendix 1 17

Design Summary

Performance Indicators/Targets

Appraisal Actual

2. Improved access to poor counties.

3. Facilitate interprovincial trade and transport in the western PRC region.

4. Improved road safety in the transport corridor.

2.1 Number of villages with all-weather roads.

2.2 Better access to social services in the project area: average distance to clinic 5.8 km in 2001 to 3.0 km in 2012.

2.3 Better access to social services in the project area: average distance primary school from 4.8 km to 3.0 km in 2012.

2.4 Better access to social services in the project area: average distance to market in 2001 was 13km.

3.1 North-South corridor capacity increased by 32,000 MTE per day at opening.

4.1 Traffic accidents in project area.

4.2 Traffic accidents in project expressway: Number of traffic accidents.

4.3 Traffic Accidents in S101: Number of traffic accidents.

2.1 Number of villages with all-weather roads increased from 1,008 in 2004 to 1,287 in 2010 (97.8% of villages)

2.2 Average distance to clinic in the project area reduced from 5.8 km in 2001 to 4.0 km in 2011

2.3 Average distance to primary school in the project area reduced from 4.8 km in 2001 to 4.0 km in 2011

2.4 Average distance to market reduced to 3.5 km in 2011

3.1 The traffic volume of the expressway was 3,395 pcu/day in 2009, 5,579 pcu/day in 2010, and 6,794 pcu/day in 2011

4.1 Traffic accidents in project area reduced to 205 in 2011 from 656 in 2004

4.2 Traffic accidents on project expressway reduced to 17 in 2011 from 13 in 2005

4.3 Traffic accidents on S101 reduced to 40 in 2011 from 179 in 2005

Outputs

1. Constructing of 182km, four-lane access-controlled, toll expressway from Tongxin to Yanchuanzi, including tunnels and bridges, interchanges and tool stations, and service areas.

1.1 Complementary investment from MOC, NCD and local government agencies ($ million).

1.2 Equipment operational and incident response plans implemented.

1.3 182 km, four-lane expressway from

Tongxin to Yanchuanzi.

1.1 The MOC provided $214.2 million and the NCD $104.5 million; loans from commercial banks amounted to $296.3 million equivalent in local currency

1.2 Equipment procured pertaining to (i) toll collection, surveillance and communications, and traffic control and monitoring; (ii) tunnel ventilation and lighting; (iii) vehicle axle road testing; and (iv) road maintenance are in operation

1.3 180.5 km, four-lane expressway

from Tongxin to Yanchuanzi was constructed

18 Appendix 1

Design Summary

Performance Indicators/Targets

Appraisal Actual

2. Upgrading or improving 404 km of local roads serving poor countries and minority areas in Ningxia.

3. Procuring equipment for road maintenance and safety, toll collection, surveillance and communication, tunnel ventilation and lighting, vehicle axle road testing, and environmental protection.

4. Providing adequate compensation for the 1,040 hectares of land, trees, and crops that will be acquired for the project, and the relocation of 450 households.

5. Consulting services for construction supervision, safety audits, monitoring and evaluation, and capacity building.

2.1 12 local roads with a total length of 404 km upgraded.

3.1 Six packages of traffic engineering procured.

3.2 Two packages of tolling, communication and monitoring system procured.

3.3 Eight packages of road maintenance equipment procured.

3.4 One package of tunnel ventilation and lighting procured.

4.1 About 1,040 ha of land acquired. 4.2 About 2,200 people to be relocated.

5.1 55 person-months of international consultants provide services to the project.

5.2 4,642 person-months of domestic consultants provide services to the project.

5.3 118 person-months of international training conducted for NCD and the IA.

2.1 18 local roads with a total length of 509 km upgraded under the project.

3.1 Six packages (C1–C6) of traffic engineering procured.

3.2 Package F1 for tolling, communication and monitoring system procured in 2005 and F2 in 2011.

3.3 Road maintenance equipment (F3–1 to F3–8) delivered on site in December 2010.

3.4 Package of tunnel ventilation and lighting (F4) procured.

4.1 1,079 hectares of land actually acquired 4.2 2,877 people actually relocated

5.1 35 person-months of international consultant inputs were provided to the project

5.2 8,802 person-months of national consultant inputs were provided to the project

5.3 61 person-months of international training conducted for the NCD and the implementing agency.

Activities/Inputs

1. Provide adequate counterpart funds.

2. Recruit supervision

consultants.

Funds allocated from MOC, NCD, and local governments. Consultants to be recruited by August 2003.

Grant from the MOC was $214.2 million and $104.5 million from the NCD; loans from commercial banks amounted to $296.3 million equivalent in local currency An international consulting firm was recruited in June 2004 and seven national consulting firms were recruited

Appendix 1 19

Design Summary

Performance Indicators/Targets

Appraisal Actual

3. Award contracts and

procurement 4. Construct and upgrade

expressway and local roads

5. Carry out construction

supervision and training program

6. Provide capacity building

and human resources development to NHCAB.

7. Acquire land, agree on compensation levels, restore livelihoods, and replace lost assets.

8. Incorporate appropriate

environmental mitigation measures in project design.

9. Monitor and evaluate benefits from road development.

Civil works contracts to be awarded by October 2003. Construction and upgrading completed by November 2006. 55 person-months of international consultants, assisted by 4,642 person-months of domestic consultants. 118 person-months of international training in construction supervision, environmental protection, etc. Resettlement plan and compensation measures implemented by 2003 and minimized relocation in final alignment selection and interchange design. Mitigation and environmental enhancement measures from the environmental impact assessment management plan. Development and implementation of a project performance management system.

to undertake construction supervision The first batch of civil works contracts were awarded in May 2004 Construction of the project expressway started in May 2004 and Phase II opened to the public in December 2007. The entire expressway was opened to the public in December 2011. Local roads upgrading was completed by 2009

35 person-months of international consultants and 8,802 person-months of national consultants provided services to the project

61 person-months of international training conducted for NCD and the implementing agency; over 18 national training workshops were conducted for 680 people

The project permanently acquired 16,195 mu of land, 4.1% more than estimates.

a Actual compensation rates

were similar to those indicated in the resettlement plan. Mitigation of environmental impacts was incorporated into the project design. Mitigation measures were included in all contracts, and two-level environmental supervision was arranged during construction The Ningxia Center for Environmental and Poverty Alleviation engaged to conduct social impact monitoring. Seven reports were submitted to ADB covering 2005 to 2011

ADB = Asian Development Bank; GDP = gross domestic product; km = kilometer; MOC = Ministry of Communications; mu = Chinese unit of measurement; NCD = Ningxia Communications Department; pcu = passenger car unit. a A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

Sources: Project performance management system reports and project progress reports.

20 Appendix 2

CHRONOLOGY OF MAJOR EVENTS

Date Milestone Event

16 November 2001 Approval of project preparatory technical assistance (TA 3776-PRC)

16–28 October 2002 Fact-finding mission fielded

13 March 2003 Management Review Meeting

19–27 March 2003 Loan appraisal mission fielded

9 May 2003 Staff Review Meeting

16–18 July 2003 Loan negotiations

11 September 2003 Loan approval

29 March 2004 Loan and project agreements signed

12 May 2004 Loan effectiveness

14–24 October 2004 Inception mission fielded 18–22 July 2005 Review mission of year 2005 fielded 1 September 2005 Delegation to People's Republic of China Resident Mission 7 November 2005 The first loan reallocation 18 December 2005 Phase I: Tongxin–Guyuan section opened to traffic 17–21 July 2006 Review mission of year 2006 fielded 20–27 September 2007 Review mission of year 2007 fielded 27 December 2007 Phase II: Guyuan–Shizi section opened to traffic 17–25 November 2008 Review mission of year 2008 fielded 8 December 2008 The second loan reallocation 6 April 2009 Approval of change in project scope 21 April 2009 The first extension of loan closing date 22–29 September 2009 Midterm review mission fielded 23–28 August 2010 Review mission of year 2010 fielded 4 April 2011 The second extension of loan closing date

2–8 August 2011 Review mission of year 2011 fielded 1 December 2011 Phase III: Shizi–Yanchuanzi section opened to traffic 23 March 2012 The third loan reallocation 30 June 2012 Loan closing date 27 July 2012 Actual closing date of loan account 7–15 January 2013 Project completion review mission fielded

Sources: Asian Development Bank and Ningxia Communications Department.

LOCAL ROADS UPGRADED UNDER THE PROJECT

No. Location Name of Road Original Standard

Standard after Upgrading

Length (km)

Implement-ation Time

Cost (CNY

million)

ADB Financing ($ million)

Domestic Fund (CNY

million)

Year of Completion

1

Guyuan

Sanying–Xiwanmao Class IV gravel Class III asphalt

pavement 60.0 2008 48.0 0.0 48.0 2008

2 Hongzhuang–Litao Unclassified Class IV gravel 18.0 2006 3.0 0.0 3.0 2006

3 Dongyuan–Yanglang Unclassified Class IV gravel 20.0 2006 3.0 0.0 3.0 2006

4 Choushuigou–Ligou* Class IV gravel

Class IV asphalt pavement

11.4 2008 5.9 0.4 3.5 2009

5 Tiegou–Jianghe* Glass IV gravel

Class IV asphalt pavement

9.4 2008 4.8 0.3 2.9 2009

6

Haiyuan

Shidian–Shuanghe–Yanghsna

Class IV or unclassified

Class III gravel 51.0 2008 24.3 0.0 24.3 2008

7 Shuanghe-Louchuan Unclassified Class IV gravel 25.0 2007 6.3 0.0 6.3 2008

8 Liwang–Jiudao* Class IV gravel

Class III & IV asphalt pavement

33.4 2009 25.5 1.7 14.7 2009

9

Jingyuan

Jingyuan–Shuanggedaliang

Class III gravel Class II asphalt

pavement 34.0 2008 30.6 0.0 30.6 2008

10

Landazhuang–Xingsheng

Unclassified Class IV gravel 15.0 2007 3.0 0.0 3.0 2008

11 Haodian–Shuanghe* Class IV gravel

Class IV concrete pavement

19.0 2009 20.1 1.3 11.5 2009

12 Xiji Xiji–Xingping–Pingfeng

Class III or IV gravel

Class III gravel 50.0 2006 21.9 0.0 21.9 2006

13 Xingping–Xitan Unclassified Class IV gravel 27.0 2006 4.1 0.0 4.1 2008

14 Tongxi

Xiamaguan–Chijiamao*

Class IV gravel Class III & IV asphalt

pavement 22.9 2009 12.7 0.8 7.4 2008

15

Pengyang

Migou–Fengzhuang Unclassified Class IV gravel 25.0 2008 3.8 0.0 3.8 2006

16 Liuyuan–Chengziyangjia

No road Class IV gravel 24.0 2008 3.8 0.0 3.8 2008

17 Doupo–Luanjingzi No road Class IV gravel 37.0 2008 5.9 0.0 5.9 2008

18 Longde Chongan–Jian–Tongbian

Class IV gravel Class III gravel 27.0 2007 16.2 0.0 16.2 2009

Total 509.0

242.8 4.5 213.7

ADB = Asian Development Bank. * = ADB financed local roads

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22 Appendix 4

TRAINING PROGRAM PROVIDED

Table A4.1: International Trainings

Topic Number of Trainees

Person-months

Duration

Starting Ending

Highway Maintenance & Management System

7 4.7 9 Sep 06 28 Sep 06

Environmental Protection & Monitoring 8 5.6 17 Sep 06 6 Oct 06 Institutional Capacity Development & Management

8 5.6 3 Nov 06 23 Nov 06

Corporatization Management of Expressway Company

8 5.6 7 Dec 06 27 Dec 06

Expressway Operation Management 7 4 9 Dec 06 25 Dec 06 International Procurement & Contract Management

6 2.8 14 Apr 07 27 Apr 07

Expressway Construction Control & Management

8 3.7 25 Aug 07 7 Sep 07

Traffic Engineering & Road Safety 8 3.7 11 Sep 07 24 Sep 07 Operation Management of Expressway & Logistic Management

10 4.7 23 Sep 07 5 Oct 07

Expressway Construction Management 8 3.7 27 Sep 07 11 Oct 07 Highway Maintenance & Management System

8 3.7 18 Oct 07 31 Oct 07

Expressway Construction Control & Management

5 2 13 Dec 08 22 Dec 08

Highway Maintenance & Management System

6 2.4 13 Dec 08 24 Dec 08

Expressway Construction Management 6 2.4 30 Dec 08 10 Jan 09 Port Management 6 2.4 28 Nov 10 9 Dec 10 Expressway Construction Management & Logistic Management

6 2.4 13 Feb 11 24 Feb 11

Total 115 59.4

Sources: Asian Development Bank and Ningxia Highway Construction Administration Bureau.

Appendix 4 23

Table A4.2: National Trainings

Topic Number of Trainees

Duration

Starting Ending

Construction Quality, Safety, Environmental Protection & Documentary Management

128 20 Apr 04 25 Apr 04

Construction Quality, Safety, Environmental Protection & Documentary Management

78 20 Aug 05 24 Aug 05

Environmental Protection (Spoil Area Recovery) 43 10 Sep 05 10 Sep 05 Tunnel Construction Safety 32 28 Mar 06 28 Mar 06 Tunnel Construction Management 45 23 Sep 06 24 Sep 06 Environmental Protection (Borrow Pit & Spoil Area Recovery)

30 20 Oct 07 20 Oct 07

Safety and Environmental Protection for Supervision Aspects

65 23 Apr 08 29 Apr 08

Construction Quality, Safety, Environmental Protection & Documentary Management

70 25 Jul 09 28 Jul 09

Tunnel Construction Safety 24 18 Oct 09 18 Oct 09 Safety Management 164 22 Mar 11 22 Mar 11 Environmental Protection (Borrow Pit & Spoil Area Recovery and River Regulation)

28 25 Nov 11 25 Nov 11

Safety Management 88 16 Apr 12 16 Apr 12 Video Training Module on Construction Safety 35 12 Jun 12 12 Jun 12 Safety and Environmental Protection for Supervision Aspects

46 25 May 12 30 May 12

Total 876

Sources: Asian Development Bank and Ningxia Highway Construction Administration Bureau.

24 Appendix 5

PROJECT COST AND FINANCING PLAN

Table A5.1: Project Cost ($ million)

Item Appraisal Estimates Actual

Total Cost

ADB Financing

Total Cost ADB

Financing

A. Base Cost

1. Civil works 370.00 177.60 656.30 201.92

Building and ancillary facilities 23.50 0 25.65 0

2. Equipment 41.00 31.20 46.54 26.01

3. Land acquisition and resettlement 21.00 0 29.45 0

4. Consulting services and training 11.40 1.50 18.35 1.35

5. Local road program 20.50 5.00 10.81 4.48

Subtotal (A) 487.40 215.30 487.40 233.76

B. Contingencies 1. Physical contingencies 31.40 15.05 0 0

2. Price contingencies 47.80 3.40 0 0

Subtotal (B) 79.20 18.45 0 0

C. Front–End Fee 1.25 1.25 1.25 1.25

D. Interest During Construction 43.90 15.00 76.68 15.00

Total 611.80 250.00 865.00 250.00 ADB = Asian Development Bank. Note: Numbers may not add up precisely because of rounding. Sources: Asian Development Bank and Ningxia Highway Construction Administration Bureau

Table A5.2: Financing Plan

($ million)

ADB = Asian Development Bank; MOC = Ministry of Communications; NCD = Ningxia Communications Department. Note: Numbers may not add up precisely because of rounding. Sources: Asian Development Bank and Ningxia Highway Construction Administration Bureau.

Source Appraisal Estimates Actual

ADB loan 250.0 250.0

Commercial domestic loan 113.8 296.3

Grant from MOC 172.6 214.2

Raised by NCD 75.4 104.5

Total 611.8 865.0

Appendix 6 25

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENTS ($ million)

Year

Contract Awards

Actual/Projected (%)

Disbursement

Actual/Projected (%) Projection Actual Projection Actual

2003 0 0 - 0 0 -

2004 43.0 62.4 145.1% 28.0 35 125.0%

2005 90.0 112.7 125.2% 34.0 38.9 114.4%

2006 34.6 0 - 51.0 35.2 69.0%

2007 30.0 7.1 23.7% 55.0 56.4 102.5%

2008 12.0 1.0 8.3% 18.0 14.3 79.4%

2009 35.0 35.6 101.7% 30.0 21.6 72.0%

2010 5.4 5.7 105.6% 34.0 23.7 69.7%

2011 - 9.2 - - 19.0 -

2012 - 0.1 - - 5.7 -

Total 250.0 233.8 93.5% 250.0 250.0 100.0%

Source: Asian Development Bank.

26

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PROJECT IMPLEMENTATION SCHEDULE

Source: Ningxia Highway Construction Administration Bureau.

ORGANIZATION CHARTS

Figure A8.1: Organization Chart of Ningxia Highway Construction Administration Bureau

Source: Ningxia Highway Construction Administration Bureau.

Director General

Deputy Director General

Admin. Office

Expressway Construction

Division

Office of Chief

Engineer

Quality and Safety

Division

Finance Division

Coordination Division

Supervision Division

Publicity Division

Deputy Director General

Deputy Director General

Deputy Director General

Yan-Zhong Highway Division

Yinchuan Ring Road

Division

Zhong-Ying Highway Division

Local Road Division

Tong-Yan Expressway

Division (the Project Expressway)

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7

Figure A8.2: Organization Chart of Project Management Office

Source: Ningxia Highway Construction Administration Bureau.

Central Lab

Chief Supervision Engineer Office

Engineering & Technical

Department

工程部

Guyuan Representative

Office

Contract Management Department

Localization and

Resettlement Office

Admin Dept.

Financial Department

Safety & Environmental

Protection Department

Efficiency Supervision Department

Design Representative Office

Consultants (Construction

Technical, Road Safety &

Safeguards)

Contractors

合同段

Tong-Yan Expressway

Division

Resident Supervision

Offices

驻地办

28

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Figure A8.3: Organization Chart of Ningxia Highway Administration Bureau

Source: Ningxia Highway Administration Bureau.

Human Resources

Division

Admin. Office

Roads Admin. &

Management Division

Roads Maintenance

Division

Toll Roads Management

Division

Planning & Statistics Division

Finance & Audit Office

Public Security Division

Integrity & Supervision

Division

Yinchuan Sub-Bureau

Shizuishan Sub-Bureau

Wuzhong Sub-Bureau

Zhongwei Sub-Bureau

Guyuan Sub-Bureau

Director General

Deputy Director General

Deputy Director General

Deputy Director General

Deputy Director General

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30 Appendix 9

STATUS OF COMPLIANCE WITH LOAN COVENANTS

No. Covenant Reference in

Loan Agreement

Status of Compliance

1 Construction Quality. NHAR shall, through NCD, ensure that (a) the project expressway is constructed in accordance with Ministry of Communications’ (MOC) technical standards of highway engineering and the recommendations of the highway design manual developed under the ADB financed TA 2573–PRC: Review of Highway Design Standards; (b) the local roads under the Project are upgraded, constructed, and maintained in accordance with national standards; and (c) construction supervision, quality control, and contract management for the Project are conducted in accordance with national standards and internationally accepted practices.

PA, Schedule, para. 4

Complied with. The technical design of the expressway followed the PRC design standards, and the MOC reviewed and endorsed the design of the realigned section of the expressway. Local roads were upgraded to the design standards, and construction was supervised by the appropriate consulting firms.

2 Road Safety. NHAR shall, at least six months prior to the commencement of expressway operations, ensure that (a) NCD develops, adopts, and implements a plan, acceptable to NHAR and ADB, for ensuring safe operation of infrastructure facilities in coordination with the international consultant and (b) the NPSB and NCD establish teams of security personnel, in accordance with national and NHAR standards, to patrol the project expressway and enforce the national laws and regulations. NHAR shall ensure that NCD utilizes its traffic control and surveillance systems to support the NPSB to implement road safety measures for the project.

PA, Schedule, para. 5

Complied with. A road safety operation plan was developed and implemented prior to the full operation of the project expressway. A traffic police unit staffed by NPSB was established in the Yanchuanzi toll station to conduct regular patrols of the expressway and enforce traffic rules.

3 NHAR shall ensure that NHCAB (a) puts in place the road safety signage, emergency communication system, traffic monitoring, and vehicle weighing systems included in the design of the project facilities; and (b) takes all appropriate measures in order to prevent overloading on the project expressway by installing vehicle axle weighing and weighing scales equipment at

PA, Schedule, para. 6

Complied with. Traffic signs and guardrails were adequately provided and traffic control equipment and surveillance systems were properly

Appendix 9 31

No. Covenant Reference in

Loan Agreement

Status of Compliance

expressway tollgates.

installed.

4 Monitoring and Evaluation. NHAR shall, through NCD and NHCAB, monitor and evaluate project impacts through a PPMS to ensure that the project facilities are managed effectively and the benefits, particularly to the poor, are maximized. NHAR shall, through NCD and NHCAB, collect PPMS data agreed with ADB prior to implementation of the project, at completion, and on an annual basis for 3 years subsequent to Project completion.

PA, Schedule, para. 25

Complied with. An external monitor was engaged to conduct monitoring on the PPMS and six annual reports were submitted to ADB on time.

5 Environment. NHAR shall, through NCD and NHCAB, ensure that (a) the project is constructed and operated in accordance with national and local environmental procedures and guidelines, ADB’s environmental procedures and guidelines and the EIA, (b) any adverse environmental impacts arising from the Project are minimized by implementing the mitigating measures and environmental monitoring program presented in the EIA, and (c) the implementation of the environmental monitoring program (including mitigating measures, copies of permits, licenses, and clearances) and any violation of safety or environmental standards, if any (and the actions taken to remedy such violations), is regularly reported to ADB in accordance with the specifications set forth in the EIA.

PA, Schedule, para. 16

Complied with. The project adequately complied with the EMP together with the soil erosion protection plan. Twelve environment monitoring reports were submitted to ADB. According to the reports, the adverse environmental impacts were adequately mitigated.

6 Vehicle Emissions. NHAR shall, at least six months prior to the commencement of project expressway operations, provide to ADB the vehicle emission regulation limits prepared by the NEPB and the penalties for infringement of such regulations (NEPB Emission Standards).

PA, Schedule, para. 17

Complied with.

7 NHAR shall ensure that NEPB, the Ningxia Public Security Bureau (NPSB) and other relevant agencies comply with and enforce the NEPB emission standards as well as the national vehicle emission standards.

PA, Schedule, para. 18

Complied with. A traffic police unit was established in the Yanchuanzi toll station

32 Appendix 9

No. Covenant Reference in

Loan Agreement

Status of Compliance

to conduct regular patrols of the expressway and to enforce traffic rules.

8 Land Acquisition and Resettlement. NHAR shall, through NCD and NHCAB, (a) implement the RP in accordance with its terms, (b) ensure that all land and rights–of–way required by the project are made available in a timely manner, (c) ensure that the provisions of the RP, including compensation and entitlements for affected persons (AP), will be implemented in accordance with all applicable national and local laws and regulations and ADB’s Policy on Involuntary Resettlement, (d) ensure the timely provision of counterpart funds for land acquisition and resettlement activities, (e) meet any obligations in excess of the RP budget estimate, and (f) ensure that the APs will be at least as well off as they would have been in the absence of the project.

PA, Schedule, para. 19

Complied with. Land acquisition and resettlement were implemented in accordance with the Land Administration Law (1998) of the PRC, ADB’s Involuntary Resettlement Policy (1995) and Policy on Indigenous Peoples (1998), and the Implementation Measures for the Land Administration Law of the PRC in Ningxia (2001). In addition, according to the social impact monitoring results, the affected persons were better off.

9 NHAR shall, through NCD and NHCAB, ensure that (a) adequate staff and resources are committed to supervising and monitoring the implementation of the RP and providing quarterly reports on such implementation to ADB, (b) an independent agency acceptable to ADB will be contracted to carry out monitoring and evaluation, and forward reports to ADB as required by ADB, and (c) a summary of NHAR audits of resettlement disbursements and expenditures is provided to ADB on an annual basis until such time as all payments required to be made under the RP have been made.

PA, Schedule, para. 20

Complied with. The resettlement activities were monitored regularly, and seven annual external resettlement monitoring and evaluation reports were submitted to ADB since 2005.

10 NHAR shall, through NCD and NHCAB, update the RP (a) (i) upon the completion of

PA, Schedule, para. 21

Complied with.

Appendix 9 33

No. Covenant Reference in

Loan Agreement

Status of Compliance

the Detailed Measurement Survey as described in the RP and (ii) prior to the commencement of civil works, submit any such modifications to ADB for its concurrence; and (b) as necessary to reflect any significant material changes in project scope or other causes, and submit any such changes to ADB for its approval.

A supplementary resettlement plan was submitted to ADB for realignment of Phase III of the expressway.

11 NHAR shall, through NCD and NHCAB, ensure that civil works contractors’ specifications include requirements to fully comply with the RP policy and entitlements for permanent and temporary impacts to APs or entities, which result from works carried out by the contractors. NHAR shall, through NCD and NHCAB, supervise the contractors to ensure compliance with requirements of the RP, applicable law, and ADB policy.

PA, Schedule, para. 22

Complied with. Land that was temporarily used was fully restored.

12 NHAR shall, through NCD and NHCAB, ensure that (a) any land acquisition carried out by county communications bureaus for the local roads component of the project will also be implemented in accordance with the Resettlement Plan, and (b) adequate resettlement compensation funds are available and property utilized.

PA, Schedule, para. 23

Complied with. Local roads under the project were upgraded within the original scope of right of way, which did not induce land acquisition and resettlement impacts.

13 Poverty Reduction. NHAR shall ensure that (a) NHCAB advises the contractors to maximize to their employment of local poor persons who meet the job and efficiency requirements for the construction of the project facilities and (b) NCD (i) monitors the impacts of the Project on poverty in accordance with the guidelines set forth in the PPMS, and (ii) reviews the results of ADB-financed TA 3900–PRC: Socioeconomic Assessment of Road Projects, together with the assistance of an agreed upon designated local institute.

PA, Schedule, para. 24

Complied with. Around 49,352 local laborers were directly employed in expressway construction. An external agency was engaged to conduct monitoring and evaluation of social impact and poverty reduction for the project.

14 Gender and Development. NHAR shall, through NCD, NHCAB and NHHAB, follow

PA, Schedule, para. 26

Complied with.

34 Appendix 9

No. Covenant Reference in

Loan Agreement

Status of Compliance

ADB’s policy on gender and development during project implementation and shall take all necessary steps to encourage women living in the project area to participate in planning and implementing the Project, including advising the contractors to maximize their employment of women in connection with the Project. NHAR shall, through NCD and NHCAB, monitor the Project’s effects on women during project implementation.

The improved road conditions have enabled local women to gain access to medical services, schools, and job opportunities.

15 Health Risks. NHAR shall ensure that NCD and NHCAB, in close coordination with the appropriate agencies identified by NHAR, cause the contractors to disseminate information on the risks of socially and sexually transmitted diseases, including HIV/AIDS, to their employees during project implementation. NHAR shall, through NCD, NHCAB and NHHAB, cause the appropriate agencies to disseminate similar information to transport operators and communities, particularly females, living in the project area during project implementation and operation of the project facilities.

PA, Schedule, para. 27

Complied with. Construction laborers and operators were educated in preventing sexually transmitted diseases, including HIV/AIDS.

16 Women and Child Labor. NHAR shall, through NCD, NHCAB and NHHAB ensure that (a) there is no differential payment between men and women for work of equal value; and (b) civil works contractors do not employ child labor in project activities, in accordance with the relevant national and local laws and regulations.

PA, Schedule, para. 28

Complied with. Equal payment to men and women was made for work of equal value. No child labor was hired in project activities.

17 Tolls. The toll rates for the project expressway shall be set in accordance with the principles established under the Highway Law. NHAR shall, at least six 6 months prior to the commencement start of expressway operations, ensure that NCD (a) proposes the appropriate toll rates for the project expressway in accordance with the Highway Law and (b) seek ADB’s concurrence on the proposed toll structure and levels prior to submitting the toll rate

PA, Schedule, para. 7

Complied with. The toll rates for the expressway in Ningxia were applied to the project expressway and the toll structure will be further reviewed in the near future according to ADB’s requirements.

Appendix 9 35

No. Covenant Reference in

Loan Agreement

Status of Compliance

application to NARG for approval. NHAR shall ensure that, for the first five 5 years of full commercial operations, NCD will, on an annual basis, review the toll structure and levels and report any significant difficulties in meeting the principles established under the Highway Law to ADB. If the toll rates need to be adjusted during this five–year period, NHAR shall ensure that NCD seeks ADB’s comments prior to submitting any application for the approval of the toll rates to NHAR.

18 Financial Ratios. NHAR shall, through NCD, ensure that the project expressway maintains (a) a working ratio (annual operating and maintenance cost to net revenue, excluding depreciation and periodic maintenance cost) of not more than 15% from the first fiscal year of full operation and onward, and (b) a debt service coverage ratio of not less than 1.2 from the fourth fiscal year of full operation and onward.

PA, Schedule, para. 8

Not yet due. Analysis conducted on a pro forma basis indicates the project expressway will be able to achieve a debt service coverage ratio of 1.2 in 2015 and a working ratio of 12% in 2017.

19 Financial Reporting. NHAR shall ensure that NCD (a) during the construction period and (b) for the first five fiscal years of full commercial operations of the project expressway, submit to ADB annual audited accounts and financial statements for the Project, including the accounts maintained by each of NHCAB and NHHAB for the Project expressway. In each such case, independent and qualified auditors, appointed by NCD, shall review such statements, including the project account, income statement, funds statement, and balance sheet. NHAR shall ensure that NCD submits to ADB certified copies of the audited project accounts and financial statements, and an auditor’s report for the project (all in English) on or before September 30 of the year following the end of the current fiscal year.

PA, Schedule, para. 12

Complied with. During the construction period, annual audited reports with financial statements were submitted to ADB on time. For the operation period, the NCD and NHAB must submit separate financial records for the expressway and fulfill the covenant agreed at appraisal.

36 Appendix 9

No. Covenant Reference in

Loan Agreement

Status of Compliance

20 Non-government Financing. NHAR shall, through NCD, six months prior to the commencement of project expressway operations, analyze the feasibility of attracting non-government investment funds for future road sector investment, including private sector participation in the operation and maintenance of the project expressway, and report such conclusions to ADB.

PA, Schedule, para. 15

Complied with.

21 NCD shall be the project Executing Agency. NCD shall have overall responsibility for Project implementation and shall directly carry out the local roads component of the Project through the county communications bureaus.

PA, Schedule, para. 1

Complied with.

22 NHCAB shall be the project Implementation Agency. NHCAB shall be responsible for the construction of the project expressway. NHCAB’s general manager shall be the Project Director and shall be responsible for overall management of the project in regard to the project expressway, approval of contracts and payments. A Project Implementation Unit (PIU) shall be established within NHCAB to facilitate land acquisition, resettlement and environmental protection measures. The PIU shall be headed by a Project Manager responsible for physical implementation activities on a day-to-day basis and the preparation of progress reports.

PA, Schedule, para. 2

Complied with.

23 NHHAB shall, upon the completion of the project expressway, be responsible for the operation, maintenance and management of the Project expressway.

PA, Schedule, para. 3

Complied with. The NHAB has taken over operation and maintenance of the expressway, and it is also responsible for operation and maintenance of national and provincial trunk highways and expressways.

Appendix 9 37

No. Covenant Reference in

Loan Agreement

Status of Compliance

24 Fielding of Consultants. The consultants shall be selected and engaged as a firm by NHAR, through NCD, using the QCBS method in accordance with the procedures set forth in para. 3, Schedule 5 of the Loan Agreement.

LA, Schedule 5, para. 3

Complied with. Using the quality- and cost-based selection method, an international consulting firm was engaged in June 2004 to provide international consulting services to the project.

25 Counterpart Financing. The Borrower shall take, and shall cause the NHAR, through NCD, to take all necessary measures, including the provision of additional funds, to ensure that (a) NHCAB can successfully construct the project expressway; (b) NHHAB can successfully operate, manage, and maintain the project expressway after completion; (c) the local communication bureaus can successfully construct, operate, manage, and maintain the local roads of the project; and (d) the local roads construction and improvements are completed prior to the opening of the project expressway.

LA, Schedule 6, para. 1

Complied with. Counterpart funds were adequate and provided by the government in a timely manner.

26 Change in Operations. In the event that any change in ownership of the project facilities is anticipated, the Borrower, through NHAR (and NHAR, through NHHAB), shall consult ADB, at least six months prior to the implementation of such change. The Borrower and NHAR (through NHHAB) shall ensure that any proposed change in the ownership of the Project facilities is carried out in a transparent manner and does not affect repayment of the ADB loan.

LA, Schedule 6, para. 3 and PA, Schedule, para. 13

Complied with. No change in ownership of the project facilities so far.

27 Human Resources Development and Training. NHAR shall ensure that, prior to the commencement of civil works for the project expressway, NHCAB and NHHAB, in consultation with NCD, will develop and

PA, Schedule, para. 14

Complied with. An overall human resource development plan was developed,

38 Appendix 9

No. Covenant Reference in

Loan Agreement

Status of Compliance

implement a human resources development plan, acceptable to ADB, that identifies the managerial, staffing, and investment requirements of NHCAB and NHHAB in relation to the Project and that includes an international training component to address these needs (Human Resources Development Plan). As an integral part of the this Human Resources Development Plan, NHAR shall ensure that each of NHCAB and NHHAB prepare (a) a training plan and a list of nominated candidates, (ii) a program of workshops to be given to NHCAB and NHHAB employees by those who will participate in the international training, and (c) a list of training equipment and aids required to strengthen these domestic training programs. Personnel participating in the international training workshops will be required to remain in the employment of the NHAR transportation sector for a minimum period of five 5 years after project completion to ensure skills retention and continued implementation of workshops for other staff members. NHAR shall ensure that, upon completion of each workshop, NHCAB or NHHAB, as the case may be, shall submit to ADB an evaluation of the international training and workshop.

and about 60 person-months of international training and over 18 domestic training workshops were conducted.

28 NHAR shall ensure that (a) NCD’s internal audit unit maintains separate accounts and records for activities related to the project and (b) each of NHCAB and NHHAB maintains separate accounting records for the project.

PA, Schedule, para. 9

Complied with. During the construction period, annual audited reports with financial statements were submitted to ADB in a timely manner. For the operation period, the NCD and NHAB are urged to find a way to maintain separate financial records for the expressway and fulfill the covenant agreed at appraisal.

Appendix 9 39

No. Covenant Reference in

Loan Agreement

Status of Compliance

29 NHAR shall ensure that, upon provisional acceptance of the project expressway, NCD provides ADB with a draft agreement that, among others, (a) provides for the transfer of the expressway and its assets from NHCAB to NHHAB, (b) sets forth the division of financial, staffing, and managerial responsibilities between NCD and NHHAB, (c) includes incentives for NHHAB to strengthen its management and enhance its efficiency, (d) authorizes NHHAB to operate and manage the project expressway, and (e) provides NHHAB with an agreed– upon level of control over the use of the toll revenues from the project expressway, in each case, acceptable to ADB (Project Transfer Agreement). On final acceptance of the project expressway, NCD, on behalf of NARG, NHCAB, and NHHAB, will execute the Project Transfer Agreement, in form and substance satisfactory to ADB.

PA, Schedule, para. 10

Complied with. The NHAB was established in June 2006 and is responsible for the operation and maintenance of national and provincial trunk highways and expressways in Ningxia, including the project expressway.

30 NHAR shall ensure that NCD and NHCAB provide the international consultant recruited under the Loan as the team leader-cum-assistant chief supervision engineer with all the necessary powers to review and help certify variation orders and contractors' monthly payments, prior to their approval by the chief supervision engineer.

PA, Schedule, para. 11

Complied with. An international consulting firm was recruited in July 2004 through the quality- and cost-based selection method. The team leader of the consulting firm acted as deputy chief engineer of the supervision team.

ADB = Asian Development Bank; EMP = environmental management plan; MOC = Ministry of Communications; NHAB = Ningxia Highway Administration Bureau; PPMS = project performance management system; PRC = People’s Republic of China.

40 Appendix 10

CONTRACT DETAILS UNDER THE PROJECT

Table A10.1: Civil Works Contracts

PCSS No.

Contractor Mode of Procure-

ment

Contract Date

Country

Final Contract Amount

Total (CNY)

ADB Financed

($)

0001 China Railway 13 Bureau Group Corporation

ICB 18 May 04 PRC 106,294,347 6,341,995

0002 China Railway 19 Bureau Group Corporation

ICB 18 May 04 PRC 112,122,781 6,710,783

0003 Ningxia Highway & Bridge Engineering Co. Ltd.

ICB 18 May 04 PRC 125,490,035 7,291,269

0004 The Third Engineering Group Co. Ltd. of China Railway

ICB 18 May 04 PRC 112,066,491 6,693,437

0005 The Second Highway Engineering Bureau, Road & Bridge Group

ICB 18 May 04 PRC 129,580,636 7,752,081

0006

The Sixth Engineering Dept. of Second Highway Engineering Bureau Road & Bridge Group

ICB 18 May 04 PRC 97,811,594 5,871,433

0007 Ningxia Highway & Bridge Engineering Co. Ltd.

ICB 18 May 04 PRC 114,532,900 6,842,421

0008 Zhejiang Province Dacheng Construction Group Co. Ltd.

ICB 18 May 04 PRC 101,961,850 6,061,329

0009 Ningxia Highway & Bridge Engineering Co. Ltd.

ICB 18 May 04 PRC 132,203,485 7,910,375

0011 Changqing Road Construction Eng. Co.

ICB 21 Apr 05 PRC 57,556,675 3,664,934

0012 China Railway Tunnel Group Erchu Co. Ltd.

ICB 22 Apr 05 PRC 157,124,777 10,113,323

0013 China Railway 13th Bureau Group Co. Ltd.

ICB 23 Apr 05 PRC 254,417,246 16,019,102

0014 The 3rd Engineering Co. Ltd. under China Railway Wuju Group

ICB 24 Apr 05 PRC 361,221,308 23,038,120

0015 The 4th Engineering Co. Ltd. of China Railway 19 Bureau Group Corp.

ICB 25 Apr 05 PRC 168,450,263 10,685,580

0016 Changqing Road Construction Engineering Co.

ICB 5 Apr 05 PRC 155,316,381 9,782,166

0017 Ningxia Highway & Bridge Engineering Co. Ltd.

ICB 5 Apr 05 PRC 156,170,533 9,873,593

0018 Chec Second Navigational Engineering Bureau

ICB 6 Apr 05 PRC 119,385,779 7,445,950

0019 Ningxia Highway & Bridge Engineering Co., Ltd.

ICB 7 Apr 05 PRC 138,691,044 8,790,105

0033 The 4th Engineering Co., Ltd of China Railway 19 Bureau Group Corporation

ICB 28 Jul 09 PRC 131,635,704 9,468,057

Appendix 10 41

PCSS No.

Contractor Mode of Procure-

ment

Contract Date

Country

Final Contract Amount

Total (CNY)

ADB Financed

($)

0034 Ningxia Highway & Bridge Engineering Co., Ltd.

ICB 28 Jul 09 PRC 139,655,417 10,113,545

0035 Hunan Construction Engineering Group Corp.

ICB 28 Jul 09 PRC 92,278,552 6,667,755

0036 No.5 Engineering Co., Ltd. of China Railway 15th Bureau Group

ICB 28 Jul 09 PRC 76,835,404 5,558,228

0045 China Railway 13th Bureau Group Co., Ltd.

ICB 9 May 11 PRC 121,860,921 9,221,395

0027 Guyuan Kaida Road Engineering Co., Ltd.

NCB 30 Jun 09 PRC 5,234,658 369,388

0028 Guyuan Hongxiang Road Engineering Co., Ltd.

NCB 1 Jul 09 PRC 4,258,481 300,528

0029 Ningxia Zhengdao Mechanical Engineering Co., Ltd.

NCB 2 Jul 09 PRC 11,618,233 828,538

0030 Ningxia Zhengdao Mechanical Engineering Co., Ltd.

NCB 3 Jul 09 PRC 11,844,315 845,255

0031 Ningxia Zhongtong Road Maintenance Engineering Co., Ltd.

NCB 4 Jul 09 PRC 11,647,656 823,143

0032 Ningxia Luhao Road Engineering Co., Ltd.

NCB 5 Jul 09 PRC 18,356,240 1,311,119

ADB = Asian Development Bank; ICB = international competitive bidding; NCB = national competitive bidding; PCSS = Procurement Contract Summary Sheet; PRC = People’s Republic of China. Source: Ningxia Highway Construction Administration Bureau.

42 Appendix 10

Table A10.2: Equipment and Traffic Engineering Contracts

PCSS No.

Item Contractor Mode of

Procurement Country

Contract Date

Contract Currency

Contract Amount

0037

Road Maintenance Equipment

China Xi'an Xijin Import and Export Co., Ltd. ICB PRC 19 Aug 10 $ 903,345

0038 Road Maintenance Equipment

The Stanley Works(Shanghai) Co., Ltd.

ICB PRC 20 Aug 10 $ 588,150

0039

Road Maintenance Equipment

Anshan Senyuan Road and Bridge Limited Corporation

ICB PRC 21 Aug 10 CNY 5,272,196

0040

Road Maintenance Equipment

Ningxia Liugong Tonghe Machinery Ltd. ICB PRC 22 Aug 10 CNY 4,091,518

0041

Road Maintenance Equipment

Shangdong Putian Luwei Special Motors Co., Ltd. & RoadMainT Co., Ltd.

ICB PRC 23 Aug 10 CNY 6,594,500

0042

Road Maintenance Equipment

Guangdong CIMLINEYA Technology Industry Co., Ltd.

ICB PRC 24 Aug 10 CNY 2,338,800

0043

Road Maintenance Equipment

Shenyang North Traffic Heavy Industry Co., Ltd.

ICB PRC 25 Aug 10 CNY 5,590,730

0044

Road Maintenance Equipment

Yantai Haide Special Vehicle Co., Ltd. ICB PRC 26 Aug 10 CNY 3,508,862

0020 Traffic Engineering Works

Ningxia Donghe Traffic Engineering Development Co., Ltd.

ICB PRC 10 Aug 05 CNY 24,841,952

0021 Traffic Engineering Works

Hebei Keli Traffic Facility Co. Ltd. ICB PRC 11 Aug 05 CNY 23,383,255

0022 Traffic Engineering Works

Beijing Ximen Communication Facilities Engineering Co.

ICB PRC 12 Aug 05 CNY 25,767,562

0023 Traffic Engineering Works

Guangdong Traffic Development Co., Ltd. ICB PRC 13 Aug 05 CNY 21,598,270

0025 Traffic Engineering Works

Ningxia Donghe Traffic Engineering Development Co., Ltd.

ICB PRC 11 Jul 07 CNY 50,685,591

ICB = international competitive bidding; PCSS = Procurement Contract Summary Sheet; PRC = People's Republic of China. Source: Ningxia Highway Construction Administration Bureau.

Appendix 10 43

Table A10.3: Consulting Service and Training Contracts

PCSS No. Item Contractor

Mode of Procurement Country

Contract Date

Contract Currency

Contract Amount

0010 Consulting Service

The Louis Berger Group, Inc.

Quality- and cost-based selection

United States

29 Jun 04 $ 933,989

0026 International Training

Various Direct contract Various 5 Nov 07 $ 282,958

0046 International Training

Various Direct contract Various 26 Dec 08 $ 131,444

PCSS = Procurement Contract Summary Sheet. Source: Ningxia Highway Construction Administration Bureau.

44 Appendix 11

ECONOMIC REEVALUATION

A. General

1. The project comprised a four-lane expressway of 180.5 kilometers (km) from Tongxin to Yanchuanzi and the upgrading of 505 km of local rural roads in seven counties/districts. The economic reevaluation was conducted for the expressway component using with- and without-project scenarios in accordance with the Asian Development Bank’s Guidelines for the Economic Analysis of Projects (1993). Without the project, corridor traffic would use the existing provincial road from Tongxin to Yanchuanzi (S101) and exceed its capacity at several points. This would result in increased vehicle operating costs (VOCs), longer travel time, and more road accidents. With the project, the corridor transport capacity is increased, allowing vehicles on the project expressway to drive at faster speeds over shorter distances with lower VOCs. Congestion on S101 is also relieved, resulting in shorter travel time and lower VOCs. More traffic is generated due to improved road conditions and lower operation cost in the corridor. The evaluation period covers the implementation period from 2004 to 2011 and the operation period from 2012 to 2031. The analysis is undertaken using 2012 constant prices.

2. The economic costs were derived from financial costs by (i) excluding taxes and duties as well as financing charges, (ii) applying a shadow wage rate of 0.67 on unskilled labor that has been utilized, and (iii) converting border prices to domestic economic prices using a shadow exchange rate factor of 1.013.

B. Updated Traffic Forecast

3. The project expressway, which traverses the southern part of Ningxia, forms a segment of the national trunk highway from Fuzhou to Yinchuan. The expressway connects Yinchuan with the main economic centers in the west, central, and east regions, such as Xi’an, Wuhan, and Fuzhou, and improves the north–south connection with other routes in the national highway system. The expressway shortens the distance between Tongxin and the border of Gansu by 20 km and offers a considerably faster and relatively safe alternative to the existing road. It also provides an alternative high-capacity route to the existing S101. The expressway was opened to traffic in sections: Tongxin to Guyuan (117.5 km) in November 2005, Guyuan to Shizi (38.5 km) in December 2007, and Shizi to Yanchuanzi (24.5 km) in December 2011 due to the impact of realignment. The traffic analysis was based on the actual traffic data from 2006–2012 provided by the Ningxia Highway Construction Administration Bureau (NHCAB) and Ningxia Highway Administration Bureau (NHAB). The impact of other roads and rail lines that divert expressway traffic was also taken into consideration in addition to the composition of the traffic, future socioeconomic development in the project area, and overall future transport demand of the corridor.

4. The project expressway and S101 constitute the transport corridor in the project area. Different sections of S101, a class II road, had traffic volume ranging from 6,801 passenger car units (pcu)/day to 14,339 pcu/day in 2004. In 2005 the most congested section of S101 carried traffic of 18,166 pcu/day and several sections had reached capacity. When the major section of the expressway was open to traffic during 2005–2007, a significant proportion of traffic had been diverted from S101 to the expressway. In 2008, the traffic on the Sanying–Guyuan section of S101 was reduced to 10,833 pcu/day, or 60% of the level of 2005. The actual traffic on the expressway was 3,395 pcu/day in 2009, 5,579 pcu/day in 2010, and 6,794 pcu/day in 2011. The average growth rate of the expressway traffic reached 35% during the period of 2009–2011. This was mainly due to the diverted traffic resulting from the improved transport conditions,

Appendix 11 45

which allowed for higher speed and shorter distances. The expressway traffic from 2006 to 2011 was significantly lower than the appraisal estimates, while the traffic on S101 was higher than the appraisal estimates (Table A11.1). The diversion of traffic from S101 took longer than expected because the road conditions of S101 were improved as a result of local government maintenance and the toll rates on S101 were lower than the toll rates on the expressway.

5. The traffic growth for the expressway will be 8% annually from 2012 to 2021, slowing down to 5% from 2021 to 2031. The traffic growth on S101 will be 1% from 2012 to 2031. The revised traffic forecast is lower than the appraisal estimates.

Table A11.1: Updated Traffic Forecast (average annual daily traffic)

Year

Appraisal Estimates (medium truck equivalent/day)

Updated Forecast

(PCU/day)

Expressway S101 Total Expressway S101 Total

2007 4,881 3,661 8,542 2,975 13,906 16,881 2017 9,194 5,961 15,155 11,992 12,163 24,155 2027 16,323 8,960 25,283 22,322 13,081 35,403 PCU = passenger car unit. Note: The unit of medium tuck equivalent is no longer used in the PRC road sector (1 medium truck equivalent = 2 PCU). Sources: Report and Recommendation of the President; Ningxia Highway Administration Bureau; Asian Development Bank.

C. Benefits

6. The economic benefits that were quantified for the expressway component at appraisal included: (i) savings in VOCs resulting from shorter travel times and improved traffic conditions, (ii) savings in the value of passenger time, (iii) benefits to generated traffic, and (iv) benefits due to reduced road accidents on both the expressway and S101.

7. VOC savings are the main source of economic benefits. Unit VOC data for different types of vehicles under different road and traffic conditions have been used in the calculation. VOCs were calculated based on fuel and lubricating oil consumption, tires and spare parts, vehicle maintenance labor costs, vehicle crew wages, vehicle depreciation, and average travel speed as a function of the geometry and the condition of the road. The VOC savings per vehicle-km were estimated to be CNY0.1 to CNY0.3 per vehicle-km for the expressway traffic for different types of vehicles. VOC savings from the reduced travel distance was calculated. VOCs for the traffic on the S101 have also been reduced as a result of the reduced congestion. The unit VOC savings for S101 traffic is CNY0.05–CNY0.10 per vehicle-km. For generated traffic, half of the VOC savings are considered as benefits. Table A11.2 provides the unit VOC savings by vehicle type for both the expressway and S101.

46 Appendix 11

Table A11.2: Vehicle Operating Costs (2012 prices, CNY/vehicle-kilometer)

Car Bus Small Truck

Medium Truck

Large Truck Super Truck

Expressway 1.5 3.2 1.6 2.4 3.5 3.5

S101 (with project) 1.65 3.5 1.7 2.65 3.8 3.8

S101 (without project)

1.6 3.4 1.65 2.55 3.7 3.7

Expressway savings

0.15 0.3 0.1 0.25 0.3 0.3

S101 savings 0.05 0.1 0.05 0.1 0.1 0.1

Source: Executing agency’s project completion report.

8. Passenger travel time savings were estimated for different types of passenger vehicles. The average passenger time value was derived from the per capita income of Guangxi Province in 2010 and assumed to increase by 8% to 5% for 2011–2028, consistent with the anticipated gross domestic product (GDP) growth rates. Other factors considered in recalculating travel time savings include average vehicle load, percentage of working trips, travel distance, and speeds for the with- and without-project scenarios.

9. The benefits related to reductions in road accidents were evaluated based on the actual accident rates of the expressway and of S101 both before and after the introduction of the expressway. Although such changes cannot be fully attributed to the project considering the road condition of S101 had been improved as a result of the additional inputs of local governments and other measures, such as more effective public education on safe driving, inclusion of the benefits does not significantly affect the overall result of the reevaluation.

10. The local road component comprised the upgrading of 505 km of local rural roads, benefiting seven counties/districts and a population of 286,850 (2011). The economic benefits of the local road components were computed based on increases in per capita income of the

residents in the affected areas (Table A11.3), VOC savings, and the impact of changes in accessibility due to road improvements (Table A11.4). The reevaluation, however, did not quantify the benefits due to the difficulty in attributing these benefits and the lack of traffic count on these roads. Although significant growth of per capita incomes was observed in the counties/districts of the affected areas, attributing this growth to specific factors cannot be done due to the lack of reliable information. Eliminating these benefits, however, does not affect the overall economic viability of the project because they represent a small proportion of total benefits.

Table A11.3: Per Capita Rural Income in Counties/districts Benefiting from Local Road Component

(CNY)

County 2004 2011 +（%）

Yuanzhou 1,529 4,138 170.6

Xiji 1,481 4,016 171.2

Jingyuan 1,306 3,678 181.6

Pengyang 1,519 4,146 172.9

Delong 1,502 4,034 168.6

Tongxin 1,565 3,942 151.9

Haiyuan 1,313 3,627 176.2 Source: Executing agency’s project completion report.

Appendix 11 47

Table A11.4: Accessibility in Counties/districts Benefiting from Local Road Component

( ) = negative Sources: Executing agency’s project completion report.

D. Economic Internal Rate of Return Reevaluation

10. The reevaluated economic internal rate of return (EIRR) for the project expressway is 15.7%, as compared with 17.8% estimated at appraisal. The lower EIRR was mainly due to higher capital cost, delayed completion, and lower traffic. The reevaluated EIRR is higher than the cutoff rate of 12%, and the project is considered economically viable. The economic reevaluation results are in Table A11.5.

11. Sensitivity analysis was carried out to test the impacts of (i) the increase in operation and maintenance (O&M) costs, (ii) the decrease in benefits, and (iii) the combination of these two scenarios. According to this analysis, the project would continue to be economically viable under all sensitivity tests. The project EIRR is robust in all sensitivity scenarios. The results of the sensitivity analysis are provided in Table A11.6.

Indicator Unit 2004 2011 +/-(%) 2004 2011 +/-(%) 2004 2011 +/-(%) Villages number 216 197 (8.8) 167 168 0.6 229 193 (15.7) Of which, with all-weather access roads 158 196 24.1 120 168 40.0 134 193 44.0 Average distance to clinic/hospital km 7 5 (28.6) 5 4 -20.0 10 5 (50.0) Average time to reach clinic/hospital min 20 15 (25.0) 30 20 -33.3 45 20 (55.6) Average distance to market km 70 15 (78.6) 17 10 -41.2 20 8 (60.0) Average time to reach Market min 120 25 (79.2) 60 20 -66.7 75 25 (66.7) Average distance to primary/secondary school km 7 5 (28.6) 5 4 -20.0 35 20 (42.9) Average time to reach primary/secondary school min 60 30 (50.0) 60 18 -70.0 70 20 (71.4)

Country Tongxin Haiyuan Yuanzhou

48 Appendix 11

Table A11.5: Economic Reevaluation (CNY million)

Year Capital Cost

O&M Cost Total Cost

Project Benefits

Total Benefits

Net Benefits

Savings in

VOCs

Time Savings

Accident Savings

2004 617.2

617.2

(617.2)

2005 798.5

798.5

(798.5)

2006 769.1 3.9 773.0 198.3 83.9 282.2 (490.9)

2007 965.2 19.8 984.9 202.7 93.9 296.6 (688.3)

2008 346.1 20.5 366.5 192.5 89.2 281.7 (84.8)

2009 234.5 21.3 255.8 231.4 107.2 338.6 82.8

2010 462.7 22.1 484.8 380.2 176.2 556.4 71.6

2011 652.7 23.0 675.8 463.0 214.6 677.6 1.8

2012

24.0 24.0 297.1 137.7 36.8 471.6 447.6

2013 350.4 25.0 375.4 428.8 198.7 39.7 667.3 291.9

2014

26.1 26.1 484.6 224.6 42.9 752.0 725.9

2015

27.2 27.2 547.5 253.8 46.3 847.6 820.4

2016

28.4 28.4 591.4 274.1 50.0 915.5 887.1

2017

29.6 29.6 638.7 296.0 54.0 988.7 959.0

2018

30.9 30.9 689.8 319.7 58.3 1,067.9 1,037.0

2019

32.2 32.2 745.0 345.2 63.0 1,153.2 1,121.0

2020

33.7 33.7 804.5 372.9 68.1 1,245.4 1,211.8

2021

713.8 713.8 844.7 391.5 73.5 1,309.7 867.4

2022

36.7 36.7 887.0 411.1 79.4 1,377.4 1,340.7

2023

38.4 38.4 931.4 431.6 84.1 1,447.1 1,408.8

2024

40.1 40.1 978.0 453.2 89.2 1,520.4 1,480.3

2025

41.9 41.9 1,026.9 475.9 94.5 1,597.3 1,555.4

2026

43.8 43.8 1,078.2 499.7 100.2 1,678.0 1,634.2

2027

45.8 45.8 1,132.0 524.6 106.2 1,762.9 1,717.1

2028

47.9 47.9 1,188.8 550.9 112.6 1,852.3 1,804.4

2029

50.1 50.1 1,248.4 578.6 119.4 1,946.3 1,896.2

2030

52.4 52.4 1,311.0 607.6 126.5 2,045.0 1,992.6

2031 (2,598.2) 602.1 (1,996.1) 1,376.7 638.0 134.1 2,148.8 4,145.0

EIRR

15.3%

NPV at 12% 1,062 EIRR = economic internal rate of return; NPV = Net Present Value; O&M = operation and maintenance, VOC = vehicle operating cost. Sources: Executing agency’s project completion report and Asian Development Bank project completion report mission.

Appendix 11 49

Table A11.6: Sensitivity Analysis

Changes EIRR

Net present value at 12% (CNY million) O&M Cost Benefits

Base Case 15.3% 1,062

Changes (+/-)

+20% 15.2% 1,029

-10% 14.5% 760

-20% 13.6% 459

+20% -20% 13.5% 426

EIRR = economic internal rate of return, O&M = operation and maintenance. Sources: Asian Development Bank project completion report mission.

50 Appendix 12

FINANCIAL REEVALUATION

E. Introduction

1. The financial reevaluation was undertaken in accordance with the Asian Development Bank’s Guidelines for the Financial Management and Analysis of Projects (2005). The project has both revenue and non-revenue components. The 188.5-kilometer (km) four-lane expressway from Tongxin to Yanchuanzi is the revenue component under the project. The expressway is being operated by the Ningxia Highway Administration Bureau (NHAB). Financial reevaluation is being conducted on the revenue generating component, with the evaluation period covering the implementation period from 2004 to 2011 and the operation period from 2012 to 2031. F. Basic Assumptions

2. The capital cost is based on actual expenditures incurred for the expressway, excluding the cost for interest during construction for the financial internal rate of return (FIRR) calculation. The actual capital cost in CNY is about 9% higher than the appraisal estimates. The expressway operation and maintenance (O&M) expenses are estimated based on (i) the number of operating staff, (ii) their average salary level, (iii) routine maintenance costs of CNY70,000 per km per year, (iv) traffic control and management equipment costs of CNY15,000 per km, and (v) tunnel O&M costs of CNY108,000–CNY148,000 per km depending on the length of the tunnel. Periodic maintenance, including pavement repaving, will be conducted every 10 years at an expenditure of CNY1.5 million per km. It was assumed that the O&M cost would increase by 3% in real terms each year to ensure that the expressway facilities remain in good condition. Depreciation expenses are calculated using an average depreciation ratio of 5%. Depreciation expenses are excluded from the FIRR calculation.

3. The actual toll revenues for 2006–2011 are included and the future toll revenues will increase consistent with the traffic growth. Current toll rates (Table A12.1) with a base toll level of CNY0.30 for a passenger car unit (pcu) per km have been applied to the expressway since 2005. The overall toll level is lower than the appraisal estimate, and no increase in toll level in real terms is assumed. Non-toll vehicles, including trucks delivering fresh agriculture products, account for 5% of total traffic. Toll revenues are subjected to a 3.3% business tax. Corporate income tax is not applicable because the expressway is operated by the NHAB, which is not a company. All revenues and expenses were expressed in 2012 prices for the FIRR calculation. Residual value of fixed assets is considered based on the economic life of expressway facilities.

Table A12.1: Toll Rates for Project Expressway

Vehicle Class 1 2 3 4 5

Truck by weight (ton) <2 2–5 5–10 10–15 and >15 and

20-foot

container 40-foot container

Bus by number of seats <7 8–9 20–39 >40

Toll rates (CNY/vehicle-kilometer)

0.30 0.50 0.85 1.50 1.50

Source: Ningxia Highway Administration Bureau.

Appendix 12 51

G. Financial Internal Rate of Return

4. The FIRR after corporate income tax was recalculated as 4.57% (Table A12.2), which is lower than the appraisal estimate of 6.99%. This variation was mainly due to the higher capital costs, lower tariff rates, and lower traffic as compared with the appraisal estimates. The after-tax weighted average cost of capital (WACC) in real terms was calculated using the actual capital mix and cost of various financing sources. The revised WACC is 3.26%, which is lower than the appraisal estimate of 5.01%. The project’s recalculated FIRR is higher than the revised WACC, and the project is considered financially viable.

Table A12.2: Financial Internal Rate of Return (CNY million)

Expenditures Revenues

Mainte-

Business Cash Flow

Year Capital nance Operation Total Toll Tax After Tax

2004 625.4

625.4

(625.4)

2005 809.0

809.0

(809.0)

2006 779.2

4.0 783.2

42.9 1.4 (741.7)

2007 977.9 12.0 8.1 997.9

45.5 1.6 (954.0)

2008 350.6 12.2 8.5 371.4

82.3 2.9 (291.9)

2009 237.6 12.6 9.0 259.2

95.7 3.3 (166.8)

2010 468.8 12.9 9.5 491.2

139.7 4.8 (356.3)

2011 661.3 13.3 10.0 684.7

191.5 6.6 (499.8)

2012

13.7 10.6 24.3

230.0 8.0 197.7

2013 355.0 14.1 11.2 380.3

248.4 8.6 (140.6)

2014

14.5 11.9 26.4

268.3 9.3 232.5

2015

15.0 12.6 27.6

289.7 10.0 252.1

2016

15.4 13.3 28.8

312.9 10.8 273.3

2017

15.9 14.1 30.0

337.9 11.7 296.2

2018

16.4 14.9 31.3

365.0 12.6 321.0

2019

16.9 15.8 32.7

394.2 13.7 347.8

2020

17.4 16.8 34.1

425.7 14.8 376.8

2021

430.4 17.7 448.2

459.7 15.9 (4.3)

2022

18.4 18.8 37.2

496.5 17.2 442.1

2023

19.0 19.9 38.9

526.3 18.2 469.2

2024

19.5 21.1 40.6

557.9 19.3 497.9

2025

20.1 22.3 42.4

591.4 20.5 528.4

2026

20.7 23.6 44.4

626.8 21.7 560.8

2027

21.3 25.0 46.4

664.5 23.0 595.0

2028

22.0 26.5 48.5

704.3 24.4 631.4

2029

22.6 28.1 50.8

746.6 25.9 670.0

2030

23.3 29.8 53.1

791.4 27.4 710.9

2031 (2,632.4) 578.4 31.5 (2,022.4) 838.9 69.4 2,791.9

FIRR= 4.57%

WACC= 3.26%

NPV at WACC= 994.0

FIRR = financial internal rate of return, NPV = Net Present Value, O&M = operation and maintenance, WACC = weighted average cost of capital, ( ) = negative. Sources: Executing agency’s project completion report and Asian Development Bank project completion report mission.

52 Appendix 12

5. Sensitivity analysis is conducted to test the impacts of variations in O&M costs and revenues. The results indicate that the project will remain financially viable under tested conditions except when the revenue is 20% or below coupled with an increase in O&M costs. The result of sensitivity analysis is shown in Table A12.3.

Table A12.3: Sensitivity Analysis

Scenario FIRR

Base case

4.57%

Revenues decrease by 10%

3.94%

Revenues decrease by 20%

3.25%

O&M costs increase by 20%

4.37%

20% increase in O&M costs, 20% decrease in revenues 3.01%

Note: FIRR = financial internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank project completion report mission.

6. As covenanted in the project agreement, the Ningxia Communications Department (NCD) will ensure that the project expressway maintains (i) a working ratio (i.e., annual O&M cost to net revenue, excluding depreciation and periodic maintenance cost) of not more than 15% from the first fiscal year of full operation and (ii) a debt service coverage ratio of not less than 1.2 from the fourth fiscal year of full operation. The project expressway is operated by the NHAB, which is responsible for O&M of all expressways and provincial roads in the province. According to the NHAB, there are no separate financial statements for the project expressway or any other individual expressway or road. Analysis conducted on a pro forma basis indicates the project expressway will be able to achieve a debt service coverage ratio of 1.2 in 2015 and a working ratio of 12% in 2017.

Appendix 13 53

SOCIOECONOMIC IMPACT AND POVERTY REDUCTION A. Introduction 1. A social and poverty analysis was conducted during project preparation, which showed that the poor are concentrated in remote, isolated communities in the southern mountainous area of Ningxia Hui Autonomous Region (Ningxia), with many living in deep poverty in a harsh environment. Due to geographical isolation and the high cost of motorized transport, most farmers in the mountainous rural villages have limited mobility and do not have adequate access to markets. This limitation keeps the poor from taking advantage of job opportunities generated by economic growth. Insufficient access to production, income generation, migration, and social development activities, particularly in the mountainous areas, are the main causes of rural poverty in the project area. The largest project beneficiary group will be the rural households in the project area. Rural farmers, particularly those located in the area of the local road program as well as those located near the expressway interchanges, will be in a position to increase their agricultural incomes through better access to markets, more competitive prices for their products, and cheaper transport costs. Furthermore, the rural households served by the local road component will have easier access to social services, faster information flows, and increased interaction with the outside world. Tourism is also expected to pick up in the project area so that the rural residents in these areas will profit from increased employment opportunities. B. Socioeconomic Growth in the Project Area 2. Construction of section I of the project expressway commenced in May 2004, and it opened to traffic in November 2005. Construction of section II commenced in July 2005, and it opened to traffic in December 2007. Construction of section III commenced in August 2009, and it opened to traffic in December 2011. A total of CNY5.52 billion was invested in expressway construction. The generated income, employment, and business opportunities, and potential to attract external investment have contributed significantly to regional socioeconomic growth in the project area and in Ningxia as a whole. Annual per capita gross domestic product (GDP) in the counties and/or districts along the expressway alignment increased 252%–439% from 2004 to 2011 (Table A13.1).

Table A13.1 Growth of Gross Domestic Product in the Project Area (Unit: CNY/person)

Project County/District 2004 2005 2006 2007 2008 2009 2010 2011

Tongxin GDP per capita 2,561 3,022 3,536 4,522 5,118 5,591 7,661 9,737

Growth rate

18.0% 17.0% 27.9% 13.2% 9.2% 37.0% 27.1%

Haiyuan GDP per capita 1,837 2,264 2,424 3,020 3,857 4,440 5,415 6,475

Growth rate

23.2% 7.1% 24.6% 27.7% 15.1% 22.0% 19.6%

Yuanzhou GDP per capita 3,355 4,127 4,667 5,526 7,127 9,437 10,913 14,254

Growth rate

23.0% 13.1% 18.4% 29.0% 32.4% 15.6% 30.6%

Pengyang GDP per capita 2,263 2,605 3,091 4,061 4,916 6,572 8,187 12,204

Growth rate

15.1% 18.7% 31.4% 21.1% 33.7% 24.6% 49.1%

Jingyuan GDP per capita 2,226 2,702 3,047 3,788 4,802 5,387 6,609 8,123

Growth rate

21.4% 12.8% 24.3% 26.8% 12.2% 22.7% 22.9%

54 Appendix 13

Project County/District 2004 2005 2006 2007 2008 2009 2010 2011

Longde GDP per capita 1,920 2,676 3,097 3,864 4,784 5,105 6,492 7,863

Growth rate

39.4% 15.7% 24.8% 23.8% 6.7% 27.2% 21.1%

Xiji GDP per capita 1,635 2,221 2,553 3,415 4,497 5,037 6,503 8,165

Growth rate

35.8% 14.9% 33.8% 31.7% 12.0% 29.1% 25.6%

Ningxia GDP per capita 7,882 10,239 11,770 14,649 17,892 21,777 26,860 33,043

Growth rate 29.9% 15.0% 24.5% 22.1% 21.7% 23.3% 23.0%

GDP = gross domestic product. Sources: 2005–2012 statistical yearbooks of project counties/districts and Ningxia Hui Autonomous Region.

3. Construction of the expressway has facilitated external investments and contributed to local industrial development along the expressway. Due to labor shortages and rising land prices, increasing numbers of enterprises and investments from the coastal areas have gradually relocated to inland areas, with construction and operation of the expressway greatly facilitating these relocations in the project area. The project has given local governments a significant opportunity to attract external investments. New industrial parks have been constructed close to the expressway, and more enterprises have started operations along the expressway alignment. A total of 644 enterprises with CNY27 billion of investments started operations from 2009 to 2012 in seven counties and/or districts along the alignment (Table A13.2). The booming industrial parks play an important role in providing employment to local surplus laborers.

Table A13.2 New Enterprises and Investment in the Project Area

Project County/District Unit 2009 2010 2011 2012 Total

Tongxin Enterprises number 16 20 35 40 111

Investment CNY million 217 1,440 3,150 6,400 11,207

Haiyuan Enterprises number 29 33 77 31 170

Investment CNY million 173 212 1,360 1,446 3,191

Yuanzhou Enterprises number 20 14 10 18 62

Investment CNY million 250 270 960 1,620 3,100

Pengyang Enterprises number 12 9 14 7 42

Investment CNY million 738 380 624 1,450 3,192

Jingyuan Enterprises number 17 14 15 17 63

Investment CNY million 153 208 467 720 1,548

Longde Enterprises number 30 26 23 23 102

Investment CNY million 361 500 580 780 2,221

Xiji Enterprises number 16 17 16 45 94

Investment CNY million 255 343 824 1,154 2,576

Total Enterprises number 140 133 190 181 644

Investment CNY million 2,147 3,353 7,965 13,570 27,035

Source: Ningxia Center for Environmental and Poverty Alleviation.

4. The operation of the expressway and improvement of local roads have promoted transport development for both passengers and cargo. The travel time from Yuanzhou to Yinchuan has been reduced from 6 hours to 3 hours, and the number of buses and cars within

Appendix 13 55

each county increased along the expressway alignment, which led to a deferred increase in ticket price due to increased competition, further benefiting local communities. 5. The operation of the expressway and improvement of local roads have also promoted tourism development in the project area. There are many scenic spots and tourism resources in the project area, including Liupan Mountain, Xumishan Grottoes, and Huoshizai Danxia landform, but most of them were not well known due to access difficulties. The opening of the expressway has attracted an increasing number of tourists from both Ningxia and Gansu. Local governments have taken measures to develop tourism resources by taking advantage of expressway transportation options. A total of 1.60 million tourists visited Guyuan Municipality in 2011, 48% more than the 1.08 million tourists that visited in 2007, and the total tourism revenue reached CNY640 million in 2011, 144% more than the 2011 revenue of CNY262 million. C. Poverty Reduction 6. With the socioeconomic growth and increased employment opportunities in the project area, the living standards and incomes of local people, particularly the poor, have improved. The annual rural per capita income of farmers increased 152%–182% from 2004 to 2011 in the counties and/or districts along the alignment, which is higher than the overall average of 133% throughout Ningxia (Table A13.3).

Table A13.3: Growth of Per Capita Income of Farmers in Project Area

(CNY/person) Project

County/District 2004 2005 2006 2007 2008 2009 2010 2011

Tongxin Income a 1,565 1,710 1,900 2,214 2,603 2,914 3,669 3,942

Growth

9.3% 11.1% 16.5% 17.6% 12.0% 25.9% 7.4%

Haiyuan Income 1,313 1,446 1,584 1,920 2,291 2,640 3,111 3,627

Growth

10.1% 9.5% 21.2% 19.3% 15.2% 17.8% 16.6%

Yuanzhou Income 1,529 1,723 1,940 2,241 2,667 3,005 3,546 4,138

Growth

12.7% 12.6% 15.5% 19.0% 12.7% 18.0% 16.7%

Pengyang Income 1,518 1,764 1,978 2,266 2,663 3,045 3,556 4,146

Growth

16.2% 12.1% 14.6% 17.5% 14.3% 16.8% 16.6%

Jingyuan Income 1,306 1,508 1,738 2,064 2,426 2,726 3,168 3,678

Growth

15.5% 15.3% 18.8% 17.5% 12.3% 16.2% 16.1%

Longde Income 1,502 1,696 1,906 2,175 2,604 2,959 3,478 4,034

Growth

12.9% 12.4% 14.1% 19.7% 13.7% 17.5% 16.0%

Xiji Income 1,481 1,740 1,940 2,215 2,590 2,944 3,459 4,016

Growth

17.5% 11.5% 14.2% 16.9% 13.7% 17.5% 16.1%

Ningxia Income 2,320 2,509 2,760 3,181 3,681 4,048 4,675 5,410

Growth 8.1% 10.0% 15.2% 15.7% 10.0% 15.5% 15.7%

a = Annual rural per capita income. Sources: 2005–2012 statistical yearbooks of project counties/districts and Ningxia Hui Autonomous Region.

7. Poverty incidence has also been significantly reduced in the project area. From 2004 to 2010, poverty incidence (per capita income of less than CNY1,000) decreased from 44.4% to 22.3% in the seven counties/districts and/or districts along the alignment (Table A13.4).

56 Appendix 13

Table A13.4: Poverty Incidence in Project Area

Project

County/district Total population The Poor (<CNY 1,000) Poverty incidence (%) Variation

Tongxin 2004 325,097 165,337 50.9

2011 326,156 85,470 26.2 -24.7

Haiyuan 2004 381,653 169,987 44.5

2011 394,022 90,625 23.0 -21.5

Yuanzhou 2004 489,130 183,721 37.6

2011 418,622 72,236 17.3 -20.3

Pengyang 2004 253,040 122,300 48.3

2011 202,636 43,606 21.5 -26.8

Jingyuan 2004 123,070 57,260 46.5

2011 102,317 24,073 23.5 -23.0

Longde 2004 186,107 82,780 44.5

2011 162,239 35,314 21.8 -22.7

Xiji 2004 461,418 202,980 44.0

2011 361,209 86,770 24.0 -20.0

Total 2004 2,219,515 984,365 44.4

2011 1,967,201 438,094 22.3 -22.1

Sources: Ningxia Center for Environmental and Poverty Alleviation. D. Labor and Employment 8. According to the project completion report prepared by the Ningxia Highway Construction Administration Bureau (NHCAB), 49,352 local laborers were directly employed in expressway construction along the alignment (Table A13.5). During operation, 359 people were recruited to work for toll services, 75 people have been engaged in expressway maintenance, and 12 people in road administration. In addition, 85 unskilled jobs, such as cleaner and security guard, have been provided to local villagers, most of them from poor families in surrounding areas. Table A13.5: Local Employment Opportunities Resulting from Expressway Construction

(Persons)

Item Unit 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total

Laborers Person 15,440 6,032 2,883 2,400 1,900 2,700 8,692 9,100 205 49,352

Source: Ningxia Highway Construction Administration Bureau.

9. Locally procured construction materials and supplies, including 80,678 tons of steel, 749,790 tons of cement, 6,344,367 cubic meters (m3) of water, 1,562,675 m3 of sand, and 79,747,150 kilograms of gasoline, also provided a large number of employment opportunities in the project area. A total of CNY1.519 billion was spent on procurement of local construction materials (Table A13.6).

Appendix 13 57

Table A13.6: Procurement of Local Construction Materials Resulting from Expressway Construction

Item Unit Amount Average Price Cost (CNY million)

Cement ton 749,790 305.00 229

Asphalt ton 88,124 2180.00 192

Gasoline kilogram 259,429 3.60 1

Diesel kilogram 79,747,150 3.25 259

Water cubic meter 6,344,367 8.76 56

Lime ton 310,523 151.95 47

Sand cubic meter 1,562,675 44.02 69

Grit cubic meter 2,048,575 53.86 110

Gravel cubic meter 356,124 57.67 21

Rubble cubic meter 1,288,948 71.51 92

Crushed stone (fine) cubic meter 2,398,169 81.36 195

Crushed stone (coarse) cubic meter 288,752 76.37 22

Steel ton 80,678 2,801.53 226

Total

1,519

Source: Ningxia Highway Construction Administration Bureau.

F. Gender Development

10. The operation of the expressway and improved local roads has promoted gender development in the project area. In addition to the increased girls’ enrollment rates in primary and middle schools (Table A13.7), the improved road conditions have enabled local women, particularly those who live in remote mountainous areas, to gain access to medical services. In recent years, more women have delivered their babies in hospitals, with the hospital delivery rate increasing from 37.1%–85.5% in 2004 to 95.5%–99.7% in 2011 in the project area, which largely enhanced the safety of baby delivery in the rural area (Table A13.8). Furthermore, the improvement of transport conditions has promoted career development for local women, particularly their engagement in local tourism.

Table A13.7: Primary and Middle School Enrollment Rates

Project County/District

Primary School Enrollment Rate Middle School Enrollment Rate

Overall (%) Boy (%) Girl (%) Overall (%) Boy (%) Girl (%)

Tongxin 2004 99.1 99.8 97.6 65.3 76.1 58.4

2011 100 100 100 98 98.1 97.9

Haiyuan 2004 97.8 98.5 97.1 74.3 77.3 70.2

2011 99.96 99.96 99.96 98.29 98.33 98.26

Yuanzhou 2004 98.8 99.4 98.2 92.8 94.5 90.8

2011 100 100 100 99.9 - -

Pengyang 2004 99.5 99.7 99.3 82.5 87 78

2011 100 100 100 98.8 98.8 98.8

Jingyuan 2004 99.3 99.7 99 76.6 78.9 74.4

2011 99.99 99.98 100 97.98 97.99 97.96

Longde 2004 99.8 99.9 99.7 98.1 98.9 95.6

2011 100 100 100 100 100 100

Xiji 2004 98.5 98.8 97.7 76.8 76.9 76.2

2011 100 100 100 98.5 98.5 97.6

Sources: Socioeconomic and poverty reduction impact monitoring report, 2013.

58 Appendix 13

Table A13.8: Enhanced Safety of Pregnancy and Delivery

Project County/district Unit 2004 2011 Variation

Tongxin Delivery rate in hospital % 37.1 99.09 61.99

Infant mortality ‰ 21.6 14.11 (7.49)

Haiyuan Delivery rate in hospital % 54.8 95.54 40.74

Infant mortality ‰ 25.9 16.98 (8.92)

Yuanzhou Delivery rate in hospital % 64.7 99.52 34.82

Infant mortality ‰ 19.6 10.7 (8.9)

Pengyang Delivery rate in hospital % 68.9 99.7 30.8

Infant mortality ‰ 24.7 12.71 (11.99)

Jingyuan Delivery rate in hospital % 50.5 99.7 49.2

Infant mortality ‰ 67 18.01 (48.99)

Longde Delivery rate in hospital % 85.8 99.53 13.73

Infant mortality ‰ 28.5 14.11 (14.39)

Xiji Delivery rate in hospital % 44.5 99.27 54.77

Infant mortality ‰ 22.2 10.91 (11.29)

( ) = negative. Sources: Socioeconomic and poverty reduction impact monitoring report, 2013.

G. Ethnic Minorities 11. Other than land acquisition and resettlement, the project has not had significant adverse impacts on ethnic minorities. Hui people, who constitute 40% of the people affected by land acquisition and resettlement, and Han people have benefited equally from the project. The adverse impacts of land acquisition were addressed during the implementation of the resettlement plan. H. Monitoring and Evaluation 12. The Ningxia Center for Environmental and Poverty Alleviation was engaged as the external agency to conduct monitoring and evaluation of social impact and poverty reduction for the project. The Ningxia Center for Environmental and Poverty Alleviation prepared and submitted the first socioeconomic and poverty reduction impact monitoring report to the Asian Development Bank (ADB) in 2005, and it submitted six subsequent annual reports from 2006 to 2011. In January 2013, the Ningxia Center for Environmental and Poverty Alleviation submitted the final monitoring report to ADB. These reports concluded that the construction and operation of the expressway have greatly contributed to regional socioeconomic development, poverty reduction, accessibility, education, health, and gender development. 13. A project performance management system was developed with assistance of an international consultant, and a local consultant was engaged to monitor the indicators, which covered social, economic, gender, road safety, and other aspects related to the project impact. The socioeconomic impact monitoring reports covered indicators and activities stipulated in the project performance management system.

Appendix 14 59

ENVIRONMENTAL IMPACT ANALYSIS

A. Introduction

1. The project constructed a 180.5-kilometer (km) four-lane access-controlled expressway from Tongxin to Yanchuanzi in Ningxia Hui Autonomous Region (Ningxia), including tunnels and bridges, interchanges and toll stations, and service areas. The project also constructed and/or upgraded 505 km of local roads in seven counties/districts. 2. The project was classified as Asian Development Bank (ADB) environmental category A. The summary environmental impact assessment (EIA) report was prepared in April 2003 based on the national EIA and soil erosion protection plan. The summary EIA elaborated on the environmental management plan (EMP), including its mitigation measures and the monitoring program. The summary EIA concluded that the project would (i) reduce vehicle emission volumes, (ii) lessen dust levels through the paving of local roads, and (iii) improve environmental technical skills at the operating levels and heighten environmental awareness at the management level. Potential adverse environmental impacts would be minimized to acceptable levels through appropriate mitigation and compensation measures. 3. The national EIA report was approved by the State Environmental Protection Administration in March 2003. The soil erosion protection plan was approved by the Ministry of Water Resources in January 2003. The summary EIA was uploaded to ADB website. For a realignment of 24.5 km from Shizi to Yanchuanzi, additional environmental analysis was conducted and the paper was uploaded to ADB website in June 2008. The associated EMP for the realignment was included in the revised project EMP accordingly. B. Environmental Protection and Management

4. During construction, the environment management office established under the Ningxia Communications Department (NCD) coordinated the environmental management for the project. The environment and resettlement unit under the Ningxia Highway Construction Administration Bureau (NHCAB) oversaw the project’s EMP implementation. The supervision consultants engaged, supervised, and inspected implementation of the on-site mitigation measures. 5. During operation, the environmental management mainly involves maintenance of embankment protection works and landscape vegetation, treatment of wastewater and solid wastes from service areas, and environmental monitoring. These tasks are coordinated by the environment and resettlement unit under the NHCAB and supervised by the environment management office of the NCD. Mitigation measures have been undertaken as necessary to remedy the adverse environmental impacts according to the monitoring results. 6. At appraisal, it was estimated that the total cost of environmental protection and mitigation measures would be about CNY116.8 million exclusive of engineering costs for erosion control. According to NHCAB’s completion report, the actual total investment for environmental protection was CNY145.8 million. C. Environmental Monitoring 7. Following ADB’s EMP monitoring requirements, the environmental monitoring relevant to EMP monitoring was conducted regularly according to the monitoring program as stipulated in the summary EIA. Environmental monitoring was undertaken at two levels: (i) regular monitoring

60 Appendix 14

of on-site project impacts by contractors and construction supervision companies, and (ii) periodic environmental compliance monitoring by external monitors, who took samples for analysis in accordance with relevant environment standards and technical codes. 8. During construction, the Ningxia Petrochemical Environment Science Institute was engaged to conduct compliance monitoring for water, air, noise, and ecological environment. The Ningxia Qingxi Soil and Water Conservation Service Center monitored soil erosion and conservation effectiveness. Twelve environmental monitoring reports relevant to EMP monitoring were submitted to ADB and nine were disclosed on the ADB website. The monitoring results showed that no significant environmental damage occurred during construction.

D. Environmental Impacts and Mitigation Measures

1. Soils and Solid Wastes 9. During construction, the project permanently acquired 1,021.2 hectares of land, 20.2 hectares fewer than the appraisal estimate. About 489.6 hectares of land was occupied temporarily for borrow pits, disposal sites, and construction access roads. Under the project, 26 borrow pits and 33 disposal sites were employed. The borrow pits and disposal sites were carefully selected to minimize the number of sites, thus minimizing land disturbance. All borrow pits and disposal sites have been restored and rehabilitated according to the soil erosion protection plan through retaining structures, drainage systems, and vegetative measures. 10. During operation, the solid wastes are mainly from domestic operations of toll and service stations. All stations have been fitted with garbage collection facilities. All solid wastes are collected and transported by maintenance and service staff according to national and local regulations.

2. Surface and Ground Water 11. During construction, the adverse impacts on water quality were limited and were mainly from siltation and wastes from construction sites and workers' camps. All proposed mitigation measures were undertaken appropriately. The monitoring results showed that the water quality of Qingshui, Shatang, and Dawan rivers was well maintained within the targeted national standards (grade III, GB3838–2002). 12. Potential operating impacts on water quality included limited pollution of domestic wastewater from toll and service stations and from periodic stormwater runoff from road surfaces. To mitigate these impacts, wastewater treatment facilities have been constructed in line with the EIA requirements. Domestic wastewater has been discharged after treatment and meets the discharge standards. Road surface runoff has been diverted through drainage systems. An emergency response system has been established to mitigate risks from hazardous materials transportation, which includes institutional set up, staff assignment, working mechanism, and communication and reporting arrangements.

3. Noise 13. According to the final engineering design, 16 noise-sensitive sites were identified. During construction, noise impacts were mainly from construction machinery and transportation vehicles. Mitigation measures were undertaken to minimize and/or avoid noise impacts as described in the project EMP. The monitoring results showed that noise levels from construction

Appendix 14 61

were within national noise standards for construction sites (GB12523–90). During operation, noise levels are within grade II of the national ambient noise standard (GB3096–2008) according to the monitoring results. Also trees and shrubs planted on both sides of the alignment have helped ease noise impacts.

4. Ambient Air Quality 14. During construction, the major source of air pollution was from dust produced by cement mixing and transportation. Mitigation measures were fully implemented as required in the EMP, which included water spraying, covering of transported materials, and good machinery maintenance. During operation, the negative impacts on air quality are minor and limited to vehicle emissions. The monitoring results for vehicle emissions show that the level of nitrogen dioxide is below the grade II limits of the national ambient air quality standards (GB3095–1996). No gases are emitted from toll and service stations as electricity heating systems were deployed. Trees and shrubs along the alignment also reduce dust and disperse particles effectively.

5. Liupanshan National Nature Reserve 15. Due to the realignment, the project alignment passing through the experimental zone of Liupanshan National Nature Reserve was shortened to 5.66 km from the original estimated length of 13.30 km. Thus, actual impacts on the nature reserve during construction were significantly reduced. Bridges totaling 2.73 km in length were built to provide adequate corridors where animals can cross. Stringent mitigation measures were undertaken to minimize impacts of construction activities according to the project EMP. All excavation profiles were protected and re-vegetated. During operation, warning boards and signs were installed to remind drivers to not use the horn to avoid potential noise impacts on animals and birds. E. Conclusions 16. During construction, all contractors fulfilled their obligation to protect the environment and to implement mitigation measures in their construction schemes. The NHCAB implemented the project EMP effectively, which minimized the adverse effects associated with project construction on the surrounding environment. No rare species or cultural relics were affected as a result of the project. During operation, the impacts on the ambient environment are minor and within the summary EIA scope. The project has resulted in certain environmental benefits, including reduced motor vehicle emissions owing to improved engine efficiency when operating on the expressway as well as lower dust levels on rural roads. 17. The major challenges in implementing the EMP were to ensure (i) mitigation measures were taken during phase III civil works construction in the experimental zone of Liupanshan National Nature Reserve and (ii) contractors properly treated waste and restored and rehabilitated construction sites, including restoring water and local road systems that were affected by the project construction. The special measures described in the summary EIA were included in the contracts of civil works contractors, and an environmental specialist was designated in the supervision team to ensure the mitigation measures were implemented effectively. The restoration of water and local road systems was set as precondition for demobilization of the contractors.

62 Appendix 15

LAND ACQUISITION AND RESETTLEMENT

A. Background

1. A resettlement plan for the project was prepared and approved by the Asian Development Bank (ADB) during the loan processing in 2003. According to the resettlement plan, 15,564 mu of land would be acquired permanently under the project (70.7% of which was farmland), and 12,567 people, or 2,600 households, would be affected by permanent land acquisition.1 A total of 88,662 square meters of houses or buildings would be demolished, causing the relocation of 451 households with 2,208 people. In addition, the project would acquire about 5,330 mu of temporarily borrowed land for construction purposes. The land acquisition and resettlement cost estimate of CNY174.2 million was included in the project cost estimates. 2. Land acquisition and resettlement was implemented in three phases due to the construction of the expressway in three sections. The implementation of land acquisition and resettlement for section I commenced in August 2003, in March 2005 for section II, and in May 2006 for section III. In addition, around 10 kilometers (km) of section III had to be realigned due to construction of a reservoir project. A supplementary resettlement plan was prepared and submitted to ADB in 2008 before commencement of civil works (Table A15.1).

Table A15.1: Implementation Schedule of Land Acquisition and Resettlement

Section Section Length (km)

Expressway Construction Duration

Implementation of Land Acquisition and Resettlement

Section I Tongxin to Guyuan 117.5 May 2004 - October 2006 August 2003–end 2004

Section II Guyuan to Shizi 38.5 July 2005 - October 2007 March 2005–Jan 2006

Section III Shizi to Yanchuanzi 24 September 2009 – End 2012

May 2006–Jan 2007 for original section III July 2009–April 2010 for realigned section

Source: Ningxia Highway Construction Administration Bureau.

3. Hui people, who constitute 40% of the people affected by land acquisition and resettlement, and Han people have benefited equally from the project. The adverse impacts of land acquisition were addressed during the implementation of the resettlement plan.

B. Scope of Land Acquisition and Resettlement 4. According to the project completion report prepared by the Ningxia Highway Construction Administration Bureau (NHCAB), the project permanently acquired 16,195 mu of land, 4.1% more than the estimated area, with an average loss per capita of 0.27 mu or about 10%. A total of 79,038 square meters of buildings were demolished, 10.9% less than estimated. A total of 42,761 people were affected by land acquisition, and 2,877 people were affected by house demolition. The significant increase in the amount of people affected by land acquisition was because the number of affected people in the resettlement plan (12,567) was estimated on the basis of an average of one-third land loss (0.88 mu per capita). In actuality, around 90% of affected households lost less than 30% of their lands, and around 70% of households lost less than 10% of the total. This indicates that the impact on individual households was much lower than the estimation in the resettlement plan. Table A15.2 presents the actual project impacts

1 A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

Appendix 15 63

versus those estimated in the resettlement plan.

Table A15.2: Land Acquisition and Resettlement Impacts

Item Unit Impacts Variation

Resettlement Plan

Actual Quantity Percentage

A. Permanent Land Acquisition

mua 15,564 16,195 631 4.1%

In which: Farmland mu 11,004 11,635 631 5.7%

B. Temporary Land Use mu 5,330 5,065 (265) (5.0%)

C. Building Demolition square meters 88,664 79,038 (9,626) (10.9%)

D. Population Affected

D1. By land acquisition person 12,567 42,761 30,194 240.3%

household 2,600 9,794 7,194 276.7%

D2. By building demolition

person 2,208 2,877 669 30.3%

household 451 659 208 46.1% a A mu is a Chinese unit of measurement (1 mu = 666.67 square meters). Note: ( ) = negative. Sources: Resettlement plan and the Ningxia Highway Construction Administration Bureau.

5. A total of 18 local roads were constructed under the project, of which five were financed by ADB. According to the external resettlement monitoring report, local roads under the project were upgraded within the original scope of right of way, which did not induce land acquisition and resettlement impacts. C. Resettlement Policy and Compensation Rates 6. Land acquisition and resettlement were implemented in accordance with the Land Administration Law (1998) of the People’s Republic of China (PRC), ADB’s Involuntary Resettlement Policy (1995) and Policy on Indigenous Peoples (1998), the Implementation Measures for the Land Administration Law of the PRC in Ningxia Hui Autonomous Region (2001), and No. 192 decree on Compensation Rates for Land Acquisition and Resettlement for Western Corridor–Yinchuan to Wuhan Expressway (Ningxia section) issued by Ningxia government (2001). 7. The implemented compensation rates for irrigated land and dry land were the same as those in the resettlement plan. The actual compensation rates for non-cultivated land were referred to the neighboring cultivated land (i.e., if the land was close to irrigated land, it was paid at the rate for irrigated land; otherwise the rate for dry land was applied). The actual annual compensation rates for temporary land use were CNY200–CNY400/mu, higher than those in the resettlement plan. The actual compensation rates for brick-tile-wood and earth-wood houses were broken down to reflect the replacement costs of various simple houses in the project area. In general, the implemented compensation rates were similar to those in the resettlement plan (Table A15.3).

64 Appendix 15

Table A15.3: Compensation Rates for Land Acquisition and House Demolition

Items Unit Resettlement Plan Actual

A. Permanent Land Acquisition

Irrigated land CNY/mua 6,000 6,000

Dry land CNY/mu 2,500 2,500

Uncultivated land CNY/mu 1,000–6,000 2,500–6,000

B. Temporary Land Use

Dry land CNY/mu/year 333 400

Waste land CNY/mu/year 100 200

C. House Compensation

Brick-concrete house CNY/square meter 300 300

Brick-wood house CNY/square meter 220 220

Brick-earth-wood house CNY/square meter 150 140–180

Earth-wood house CNY/square meter 120 90–120 a A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

Sources: Resettlement plan and the Ningxia Highway Construction Administration Bureau.

D. Rehabilitation and Income Restoration 8. The land compensation has been divided between the affected households and the village collective. For irrigated land, households receive CNY4,000/mu and the village receives CNY2000/mu; for dry land, the household receives CNY2,000/mu and the village receives CNY500/mu. Compensation was paid from 2003 to 2006, except for the realignment section. Most villages opted to use this compensation for improvements to irrigation systems and village roads, and construction of greenhouses. There has been no readjustment of cultivated land because people prefer cash compensation. In addition to compensation, the NHCAB and county resettlement offices took the following measures to assist affected households in income restoration: (i) encouraged contractors to recruit affected people in construction of expressway (e.g., 20% of villagers in Baijia Village worked for expressway construction); (ii) conducted skill training for affected people (e.g., fruit planting, animal husbandry, welder, tailor, etc.), which benefited 60% of affected households according to the survey by the external monitor; (iii) organized affected people to engage in migrant labor (e.g., around 50% of villagers in Maxipo Village worked as migrant laborers); and (iv) provided special subsidies to affected vulnerable groups along the expressway alignment. A total of 11 poor households received a CNY25,800 special allowance each. In addition, local governments also provided low-income insurance to vulnerable groups. 9. The sampling survey conducted by the external monitor showed that the income of affected households increased after resettlement. With the improvement of transport infrastructure and the provision of skill training, local villagers had more employment opportunities, which increased wage incomes significantly relative to all income sources and filled the loss of agricultural incomes due to land acquisition. According to results of a survey of 235 sample households, the average annual income increased by 66.3% from CNY2,508.8 to CNY4,171.4 after resettlement (Table A15.4). These results confirmed the finding that the degree of farmland loss did not have a serious impact on incomes and that increased non-farm income opportunities could easily offset those losses.

Appendix 15 65

Table A15.4 Income Restoration of Sample Affected Households (CNY/person)

Item 2004

a 2008

b Variation

Annual income

Percentage Annual income

Percentage Income Rate

1. Wage and/or salary 1,007.2 40.1% 2,145.9 51.4% 1,138.7 113.0%

2. Planting 530.1 21.1% 395.8 9.5% (134.3) (25.3%)

3. Forest and/or fruit 10.4 0.4% 136.7 3.3% 126.3 1,217.0%

4. Animal husbandry 258.9 10.3% 262.1 6.3% 3.3 1.3%

5. Sideline 59.9 2.4% 40.2 1.0% (19.7) (32.8%)

6. Non-agricultural business 96.6 3.9% 158.2 3.8% 61.6 63.7%

7. Others 545.8 21.8% 1,032.6 24.8% 486.7 89.2%

Total 2,508.8 100.0% 4,171.4 100.0% 1,662.6 66.3% a 2007 for realigned section.

b 2011 for realigned section.

( ) = negative. Sources: External resettlement monitoring report and project completion report by the Ningxia Highway Construction Administration Bureau.

10. There were house relocation two methods. First, for those villages where only a few households were affected, they were relocated nearby and the new housing plots close to the original house were allocated by the villages. The infrastructure for the housing plot was usually completed by the expressway construction contractors with coordination from the project and assistance from the county resettlement offices. The second method applied in cases where many households in one village were affected. These households were usually relocated to a concentrated resettlement site within the same village. The infrastructure and community facilities for concentrated resettlement sites were usually constructed by the county government. The housing plot for each household in the concentrated resettlement site was decided by drawing lots in a transparent manner. All the new houses were usually built by the relocated households themselves using compensation funds. In addition, a special subsidy of CNY4,000 for each affected household was provided to those affected households in the realigned section to account for increased prices of construction materials. Furthermore, the local governments provided additional resources from the Construction of New Countryside program, which have been very helpful in constructing resettlement sites as well as new houses for displaced households. The external monitoring report indicates that the house conditions of affected households have improved compared with before relocation. E. Resettlement Cost 11. Implementation of land acquisition and resettlement cost CNY208 million, 19.4% more than the CNY174.2 million estimated in the resettlement plan including contingency (Table A15.5). The actual costs for land acquisition and house relocation were similar to the estimates in the resettlement plan. However, there was a significant increase in the cost of replacing infrastructure facilities as well as compensation for trees and temporary land. The amount of government taxes owed was lower than estimated because some fees were waived.

66 Appendix 15

Table A15.5: Land Acquisition and Resettlement Costs (CNY)

Items Resettlement

Plan Actual

Difference

Amount Rates

1. Permanent land acquisition 65,452,590 67,935,435 2,482,845 3.8%

2. House compensation 14,490,530 14,620,807 130,277 0.9%

3. Temporary land use 5,067,600

108,779,804 a 64,011,400 58.8%

4. Ground auxiliaries 3,375,440

5. Relocation assistance and allowance 242,000

6. Trees 7,866,865

7. Affected facilities 15,857,700

8. Assistance for vulnerable groups 1,123,527

9. Contingency 11,235,272

10. Resettlement monitoring 1,123,527 650,000 (473,527) (42.2%)

11. Resettlement administration 3,370,582 4,517,539 1,146,957 34.0%

12. Taxes and/or fees 45,000,000 11,561,160 (33,438,840) (74.3%)

Total 174,205,633 208,064,745 33,859,112 19.4% a Subtotal of items 3–9.

( ) = negative. Sources: Project completion report by the Ningxia Highway Construction Administration Bureau.

F. Information Disclosure, Consultation, and Participation 12. Various surveys were conducted during the resettlement planning stage to identify the project impacts on affected people as well as their specific requirements, which were used to formulate resettlement policies, compensation rates, and income restoration measures. Given the limited education levels of most affected people in the project area, the resettlement information booklets were disseminated through village committees and the affected people were briefed about the project information, construction schedule, resettlement measures, compensation standards, grievance channel, etc. through villager meetings prior to the commencement of land acquisition and resettlement. 13. During the implementation stage of land acquisition and resettlement, the NHCAB and county resettlement offices along the alignment held consultations with the affected people to address their questions and concerns. With regard to the selection of resettlement sites or housing plots, the county resettlement offices proposed an initial plan based on technical factors and then consulted with the displaced households. New site planning would not be finalized unless an agreement was reached by both parties. In addition, the opinions of affected households were taken into consideration in rehabilitating and constructing affected infrastructure and communities. For example, in Niuying Village, the affected villagers requested improvements to their village road. After consultation, the project helped build a 400-meter sandstone village road, which has directly benefited affected villagers. G. Institutional Arrangement 14. The expressway construction headquarters was established in 2001, and it recruited experienced staff from past expressway projects in Ningxia. The project coordination division was responsible for supervising land acquisition and resettlement implementation for the project. In 2006, the NHCAB was established and the project coordination division was incorporated into

Appendix 15 67

NHCAB, where it continued its responsibilities in land acquisition and resettlement. In addition, each county and/or district government along the alignment set up a construction coordination leading group and resettlement office to implement land acquisition and resettlement. Each vice county governor was assigned the team leader of each leading group, and each resettlement office comprised officials from the financial, transport, and land and resource bureaus. The external monitor evaluated the capacity of resettlement organizations and concluded that the institutional arrangement for land acquisition and resettlement has operated well. H. Monitoring and Evaluation 15. The Shanghai Resettlement Consulting Company was engaged for external monitoring and evaluation of land acquisition and resettlement implementation. So far, ADB has received seven annual external resettlement monitoring and evaluation reports since July 2005. The submitted monitoring and evaluation reports have provided timely accounts of resettlement progress, actual project impacts, implemented resettlement policies, compensation rates, implementation of resettlement measures, relocation and reconstruction, resettlement costs, and professional recommendations. In addition, the external monitor also conducted sample household surveys and evaluated income restoration of affected households. I. Lessons 16. The lessons learned from the implementation of land acquisition and resettlement include the following:

(i) Local governments provided additional resources from the Construction of New Countryside program, which have been very helpful in constructing resettlement sites as well as new houses for displaced households.

(ii) The decision to realign expressway section III should have been made earlier to avoid land compensation for both the original alignment and the new one. Consequently the land compensation paid for the original alignment could not be reclaimed from local villagers.

(iii) Some adverse impacts caused by construction activities should be identified and the compensation costs should be estimated in the project budget, including the damage caused by tamping or blasting to houses close to construction sites.