Document of

The World Bank

Report No. 15389-CHA

STAFF APPRAISAL REPORT

CHINA

SECOND XINJIANG HIGHWAY PROJECT

August 30, 1996

Infrastructure Operations DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office

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CURRENCY EQUIVALENTS(as of January 1996)

Currency Unit = Yuan (Y)Y1.00 = $0.12$1.00 - YS.2

FISCAL YEAR

January I - December 31

WEIGHTS AND MEASURES

I meter (m) = 3.28 feet (ft)I kilometer (km) = 0.62 mile (mi)

I square meter (m2 ) - 10.76 square feet (ft2 )I square kilometer(km2 ) = 0.4 square miles(mi')

I hectare (ha) = 0.01 (kin2 ) = 2.47 acres (ac) = 15 muI mu = 666.7 m 2 = 0.0667 ha

I kilogram (kg) = 2.2046 pounds (lbs)I metric ton (m ton) = 2,204 pounds (Ibs)

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

7FYP - Seventh Five-Year PlanSFYP - Eighth Five-Year Plan9FYP - Ninth Five-Year PlanCMC - CMC Intemational Tendering ConipanyE&M - Electrical and Mechanical

EA - Environmental AssessmentEAP - Environmental Action PlanEIA - Environmental Impact Assessment

EIRR - Economic Intemal Rate of ReturnSO Engineering Supervision Office

FHSDI - MOC's First Highway Survey and Design InsdtuteGNP - Gross National Product

GOVAI - Gross Output Value of Agriculture and IndustryHEQMC - Highway Engineering Quota Management CenterHGHAB - High-Grade Highway Administration Bureau

HMC - Highway Maintenance ComponentHPDI - Highway Planning and Design InstituteHSS - Highway Safety SecretariatICB - Intemational Competitive Bidding[RI - Intemational Roughness IndexJST - Joint Supervision Team

LAR - Land Acquisition and ResettlementMOC - Ministry of CommunicanonsMOF - Ministry of FinanceMARP - Maintenance and Rehabilitation ProgramNCB - National Competitive Bidding

NTHS - National Trunk Highway SystemPEO Project Execution OfficePSB - Public Security Bureau

PSTP Public Security's Traffic Police (General Teams)RAES - Research Academy of Environmental ScienceRAP - Resettlement Action PlanRMF - Road Maintenance FeeRMO Resettlement and Monitoring OfficeROW - Right-of-waySOE - Statements of ExpenditureSPC - State Planning CommissionSTC - Shihezi Training CenterTIC Telecommunications Information Center

TUDH - Turpan-Urumqi-Dahuangshan HighwayUKH - Urumqi-Kuitun HighwayXAR - Xinjiang Uygur Autonomous Region

XASS - Xinjiang Academy of Social SciencesXCD - Xinjiang Communications DepartmentXCS - Xinjiang Communications School

XCTWS - Xinjiang Communications Technical Workers SchoolXHAB - Xinjiang Highway Administration Bureau

XHEQCC - Xinjiang Highway Engineering Quality Control CenterXHGHAB - Xinjiang High-Grade Highway Administration BureauXHGHCA - Xinjiang High-Grade Highway Construction Authority

XHPSDI - Xinjiang Highway Planning, Survey and Design InstituteXHPI - Xinjiang Highway Project IXHP2 - Xinjiang Highway Project 2XTSI - Xinjiang Traffic Science Institute

CHINA

SECOND XINJIANG HIGHWAY PROJECT

LOAN AND PROJECT SUMMARY

Borrower: People's Republic of China.

Implementing Agency: Xinjiang Communications Department.

Beneficiaries: Xinjiang Uygur Autonomous Region.

Poverty: Not applicable.

Amount: $300 million.

Terms: 20 years, including 5 years of grace, at the standard interestrate for LIBOR-based US dollar single-currency loans.

Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60days after signing, less any waiver.

Financing Plan: See para. 3.42.

Economic Rate of Return: 20.6 percent for the Urumqi-Kuitun Highway.

Project ID Number: CN-PE-3643.

Maps: IBRD 27621, 27622 and 27623.

CONTENTS

1. TRANSPORT BOTTLENECKS AND REFORMS . ........................................,I1A. Background .IB. Traffic .IC. Transport Reforms. D. The Highway Subsector .2E. Bank Group Participation .4F. Lessons From Previous Bank Operations .5

2. XINJIANG UYGUR AUTONOMOUS REGION TRANSPORT SECTOR ...........7A. Situation and Economy .7B. Transport Network .7C. Traffic Characteristics and Growth .9D. The Vehicle Fleet .9E. Highway Safety .10F. Highway Administration .0G. Planning, Budgeting and Financing .1H. Engineering, Construction and Maintenance .12I. Highway Development .13

3. THE PROJECT .. 14A. Project Formulation and Preparation .14B. Project Objectives and Rationale for Bank Involvement .14C. Project Monitoring .15D. Project Scope .16E. Environmental Assessment .24F. Land Acquisition and Resettlement .25G. Cost Estimates .26H. Financing .27l. Implementation .29J. Procurement .31K. Disbursements .35L. Auditing .36M. Project Supervision, Reporting and Monitoring .36

This report is based on the findings of an April 1996 appraisal mission comprisingYasuhiro Kawabata (Highway Engineer, Task Manager), Robin Carruthers (TransportEconomist), Claude Salem (Institutional/Training Specialist), Tosun Aricanli(Resettlement Specialist), Ole Sylte (Consultant, Highway Maintenance) and Xin Chen(Operational Assistant). Messrs. Katsunori Suzuki (Environmental Specialist), ManinderGill (Resettlement Specialist), and Richard Muskaug (Consultant, Highway SafetySpecialist) contributed to the preparation of the project. Peer reviewers for the project areH. Beenhakker (Economics), J. Irigoyen (Engineering) and S. Lundebye (HighwaySafety). The Division Chief is Richard Scurfield and the Department Director is NicholasC. Hope.

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4. ECONOMIC EVALUATION ........................................................... 38A. Benefits and Beneficiaries ........................................................... 38B. Urumqi-Kuitun Highway ............................................................ 39C. Project Risks ............................................................ 44

5. AGREEMENTS REACHED AND RECOMMENDATION ................................... 46

TABLES

Table 1.1: Traffic Turnover by Mode, 1980-94 ............................................................ 49Table 1.2: Road Accident Risks in Various Countries, 1993 ........................................... 50Table 1.3: China: Bank Group-Financed Transport Projects ........................................... 51Table 2.1: Xinjiang: Freight and Passenger Traffic, 1985-94 .......................................... 53Table 2.2: Xinjiang: Road Network, 1994 ............................................................ 54Table 2.3: Xinjiang: Length of Highway by Traffic Mix and ADT, National and

Provincial Roads Only ............................................................ 54Table 2.4: Xinjiang: Vehicle Fleet, 1985-94 ............................................................ 55Table 2.5: Xinjiang: Road Accidents (1985-94) ............................................................ 56Table 2.6: Xinjiang: Highway Revenues and Expenditures ............................................ 57Table 2.7: Xinjiang Trunk Highway Improvement Program in 9FYP (1996-2000) ........ 58Table 3.1: Project Cost Summary ............................................................ 59Table 3.2: Estimated Disbursement Schedule ............................................................ 60Table 4.1: Actual and Projected Traffic and Traffic Growth in the UKH Corridor ........ 61Table 4.2: Proportion of Projected Traffic on New and Existing Highway ..................... 62Table 4.3: Results of Economic Evaluations for the Whole Route .................................. 63Table 4.4: Results of Economic Evaluations ............................................................ 64Table 4.5: Sensitivity of Evaluation Results to Variations in Toll Level ......................... 65

CHARTS

Chart 1: Xinjiang Communications Department (XCD) .................................................. 66Chart 2: High-Grade Highway Construction and Management Structure ........................ 67Chart 3: Xinjiang Highway Administration Bureau (XHAB) .......................................... 68

ANNEXES

Annex 1: Highway Maintenance Prograrn ............................................................ 69Annex 2: Institutional Strengthening And Training ......................................................... 74

Appendix 1 To Annex 2: Organizations To Be Strengthened .......................... 75Appendix 2 To Annex 2: Training Program ..................................................... 78Appendix 3 To Annex 2: Total Cost Of Component ....................................... 80

Annex 3: Highway Safety Program ............................................................ 81

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Annex 4: Terms Of Reference For Strategic Study Of Regional Transport WithinXinjiang Province And Between Xinjiang And Neighboring ProvincesAnd Countries ........................................................... 86

Annex 5: Environmental Assessment And Action Plan Summary ................................... 92Appendix 1 To Annex 5: Key Elements Of The EAP ForThe Urumqi-Kuitun Highway (UKH) ........................................................... 102

Annex 6: Land Acquisition And Resettlement ........................................................... 105Annex 7: Implementation Schedule ............................................................ 111Annex 8: Supervision Mission Plan ............................................................ 114Annex 9: Proposed Monitoring Indicators ........................................................... 117Annex 10: Selected Documents Available In The Project File . .......................... 122

MAPS

1. China: Major Highway Development Program-National Trunk Highway System(NTHS), IBRD 27621

2. Transport System in Xinjiang Region, IBRD 276223. Second Xinjiang Highway Project's Urumqi-Kuitun Highway (UKH), IBRD 27623

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1. TRANSPORT BOTTLENECKS AND REFORMS,

A. BACKGROUND

1.1 The transport system in China has grown considerably over the last four decades.Since 1952, the length of the highway system increased by a factor of nine and the lengthof the railway network more than doubled. Despite this development, the transportnetwork is one of the sparsest in the world compared with the area and population itserves.

B. TRAFFIC

1.2 China had experienced rapid growth of traffic during 1980-89 when the economygrew at an average annual rate of 9.5 percent. Traffic growth declined when theeconomic growth slowed down during 1989-90, as the supply constraints became moreconspicuous. However, resumption of high economic growth since 1991 has broughtabout a corresponding surge in transport demand.

1.3 Traffic Growth. Despite the capacity constraints and related bottlenecks,between 1980 and 1994 the ton-km of freight have grown at 7.5 percent per year and thepassenger-kilometers at 9.9 percent per year. Highway freight traffic grew at the highestannual rate of 13.5 percent, compared with 5.7 percent for railway traffic and 8.4 percentfor coastal and inland waterway traffic. Despite its rapid growth, intercity passengertravel per capita in China remains very low, at about two thirds of the level for India.Civil aviation traffic is rapidly expanding and has grown 20.3 percent per year since1980, but still represents a small share of total traffic with most long-distance journeysmade by rail (Table 1.1).

1.4 Transport Demand and Modal Split Trends. Although the railway's share oftraffic has declined over the last decade as the share of road traffic has grown, rail transportstill dominates freight and passenger traffic in China. In 1994, 37.5 percent of freight and44.3 percent of passenger traffic turnover were attributable to rail, with the remaindermoved by road, inland waterway, coastal shipping, pipeline, and civil aviation.

C. TRANSPORT REFORMS

1.5 In the past decade, China's economic reforms have aimed to increase economicefficiency through measures designed to reduce national government intervention in the

This chapter is an abstract of the Bank report (No. 1 1819-CHA) China Highway Development and ManagementIssues, Options and Strategies, February 1994.

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production and distribution process, reduce the Government's deficits and subsidies tostate-owned enterprises, and open the economy by expanding trade and allowing furtherparticipation of private and collective enterprises.

1.6 These initiatives are helping to spur the growth and modernization of the transportsystem. To alleviate the transport bottlenecks and rationalize the transport system, theGovernment will need to take the following measures by the year 2000:

(a) increase the total level of transport investment in relation to GNP, to expandcapacity to meet the new traffic demands and to clear up the backlogscaused by past underinvestment;

(b) aim for balanced investments among the major freight transport modes ofrailways, highways, and waterways in terms of optimal economic cost oftransport;

(c) realign further the prices of freight transport services and those of the majorcommodities, especially coal, to bring them closer to their real costs;

(d) increase further the productivity of existing transport assets throughtechnological modernization and management reforms; and

(e) improve and expand the multimodal transport system, both across andwithin modes, with particular emphasis on more extensive use of containers.

D. THE HIGHWAY SUBSECTOR

The National Highway Network and its Utilization

1.7 China's road network consists mainly of aging roads with neither the capacity norstrength to carry current and projected future traffic. Many of the roads need upgradingin addition to normal maintenance and rehabilitation. A Bank policy study on roaddeterioration in developing countries classified China among the countries with anextensive and obsolete road network in need of modernization to meet the rapid growth inroad transport demand. Its outmoded maintenance technology would not be sufficient toarrest the accelerated deterioration of the aging road system network. China needs tomobilize domestic and external resources for modernizing its road system.

1.8 The rapid growth of highway traffic stems not only from the country's rapideconomic growth but also from other factors such as the national policy of shifting short-haul transport from rail to road as well as the expansion of the service sector and ruralindustries. Furthermore, with the increase in foreign trade, growth in transport demandwill be concentrated in transport corridors serving the main ports and their hinterlandsand, with containerization of higher-value commodities, most domestic movements ofthis foreign trade are expected to go by road.

1.9 Growth in the truck and bus fleet has been fairly steady at an average annual rate of12.3 percent over the last 12 years, with particularly strong growth in small passenger

vehicles. Growth in the tractor and motorcycle fleets has increased sharply, withmotorcycles showing the strongest growth of all vehicle types. The tractor and motorcyclefleets, at 5.4 million and 6.5 million respectively, well exceed the size of the truck and busfleet. Tractors and motorcycles contribute significantly to traffic congestion and are amongthe major causes of road accidents.

1.10 The trucking industry consists of publicly-owned trucks operated by truckingcompanies affiliated with local (provincial or district) highway authorities, and other trucksoperated by factories, cooperative organizations and, recently, private individuals. Therelaxation of trucking regulations in the early 1980s allowed own-account trucks to haulcargo for other factories and cooperatives and thus promoted competition between publicand own-account trucks. Market forces are expected to play a more important role inshaping the industry in the future.

1.11 Road safety is an important issue in the development of China's road sector, astraffic continues to grow rapidly on all roads and a high-speed, national highway networkis developed. The frequency and numbers of people involved in traffic accidents havereached serious proportions in China. The annual fatality rate per 10,000 vehicles inChina is 46, as compared with rates of 33 in India, 12 in Indonesia, 9 in Thailand, and 2in the United States, and the United Kingdom (Table 1.2). However, the annual fatalityrate per 100,000 population in China is the same or less than that for developed countries.This reflects the low motorization rates (vehicles per 1,000 population) in China.. Thesocial and economic costs of these accidents to the Chinese economy reached almost $1billion annually.2

1.12 Responsibility for highway safety matters was transferred from the Ministry ofCommunications (MOC) and the provincial Communications Departments to the Ministryof Public Security and its provincial units in 1988. This decision created transitionaladministrative problems. Cooperation between the provincial highway administrationbureaus and the concemed public security units is still weak. The Bank-financed XinjiangHighway Project (Loan 3787) and the Guangdong Provincial Highway Project (Loan 3530)contain pilot programs that address the traffic accident black spot problem.

Highway Administration, Planning and Finance

1. 13 Administration of the highway network is the responsibility of the provincialgovernments, through the Highways Bureaus of the Provincial CommunicationsDepartments. The central government's MOC provides general policy guidance andsupport to the provinces through its nationwide policies and regulations, specifyingdesign and construction standards. However, the Provincial CommunicationsDepartments are financially independent of MOC and carry out all road planning,construction, maintenance, and operation of roads and waterways in the provinces.

2 The costs analyzed in this case included loss of life, injury, property damage, reduced productivity, and medical,funeral, and legal costs.

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1.14 While the provinces manage the country's highway network, MOC is responsiblefor planning and investment strategies for the development of the National HighwaySystem. MOC has been evolving a long-term strategy for the systematic upgrading of thenational system in key corridors over a 30-year planning horizon. Known as the NationalTrunk Highway System (NTHS), the system, comprising 12 major roads for the exclusiveuse of motor vehicles (Map IBRD 27621) would connect all the provincial capitals andcities with populations exceeding 500,000. Development of the NTHS has been accordedhighest priority in investment planning for the highway sector. Priority for earlyconstruction is being given to two north-south corridors (Beijing-Zhuhai and Tongjiang-Harbin-Shenyang-Qingdao-Shanghai-Fuzhou-Guangzhou-Sanya); two east-west corridors(Lianyungang-Zhengzhou-Xian-Lanzhou-Urumqi-Houerguosi and Shanghai-Nanjing-Jiujiang-Wuhan-Chengdu) and the three corridors of Beijing-Shanghai, Beijing-Shenyangand Chongqing-Behai, and to those routes already identified as congested and hinderingeconomic activity.

1.15 A system for funding highway construction and maintenance is well established.The main revenues are generated by the Road Maintenance Fee (RMF), typically levied onthe revenue of freight and passenger transport companies and on the capacity of own-account vehicles. The RMF is levied by the provinces who retain the majority of themonies after remitting a portion to Central Government agencies. MOC also directlyreceives revenues from the Added Vehicle Purchase Fee, a supplementary earmarked tax onvehicle imports and sales, and uses these funds, which currently reach aboutY 2 billion/year, to contribute financing for: (a) the roads included in the national highwaynetwork, providing a higher share of financing for the poorer, inland provinces and a lowershare for the richer, coastal provinces, and (b) construction or rehabilitation of rural roadslocated in economically less-developed areas.

E. BANK GROUP PARTICIPATION

1.16 The Bank Group has supported initiatives by the Government in the transportsector through loans and credits totaling $5.6 billion for 34 projects (Table 1.3). Thevarious studies under the Bank-financed projects have, inter alia, emphasized the areas ofmultimodal transport investment and the setting of sectoral priorities based onsystemwide economic evaluation techniques.3

Transport Sector Work

1.17 Recent Bank Group reports on the transport sector include China's RailwayStrategy (No. 10592-CHA, February 1993), Highway Development and Management:

3 Six of the studies have explored multimodal pricing and investment issues in a more comprehensive and moreeconomically oriented analytical framework than was formerly available to China's decisionmakers: theGuangdong Comprehensive Transport Planning Study (GCTPS); the Yangtze Economic Zone Transport Study(YEZTS); the Coal Transport Study (CTS); the Railway Investment Study (RIS); the Southeast Coastal RegionStrategic Issues in Ports and Shipping Development Study (SIPS); and the Price Reform Study.

Issues, Options and Strategies (No. 1181 9-CHA, February 1994), and Strategies for RoadFreight Development (No. 12600-CHA, January 1995). In addition, studies on thetrucking industry and highway financing have been completed under ongoing projects, astudy of the provincial road construction industry is being undertaken under the FujianProvincial Highway Project, a study of interprovincial traffic facilitation and a highwaycapacity study are being undertaken under the National Highway Project (Hebei/Henan),a study of intercity passenger transport is being carried out under the Xinjiang HighwayProject, and a study of highway maintenance is included in the Second ShaanxiProvincial Highway Project. In addition, a study for improved prioritization of highwayinvestments and improved highway feasibility study methodology has been completed byJanuary 1996. The Bank Group also conducted a survey of the national water transportsystem in the mid-1980s, which has reaffirmed the need to further exploit the largepotential of the Chinese waterways. Chinese authorities and the Bank Group are currentlypreparing a comprehensive transport sector strategy paper that is expected to help guidesector development in a consistent, cohesive policy framework.

The Bank's Experience and Strategy in Highways

1.18 Of the 13 Bank-assisted highway projects in China, two have so far beencompleted (the First Highway Project and the Shaanxi Highway Project). The formerproject achieved its original objectives and demonstrated the benefits of improvedaccessibility to economically less-developed regions. Furthermore, the Bank'sinvolvement facilitated the acceptance of competition in the contracting for road works inpreference to force account operations.

1.19 The Bank strategy for highway lending in the medium term is detailed in HighwayDevelopment and Management: Issues, Options and Strategies. The strategy is to continuesupporting institutional development and sectoral reforms aimed at modernizing thehighway system and its management, and supporting investments focused on high-prioritylinks of the NTHS and the provincial road networks that feed into it.

1.20 While some institutional development and sectoral reform components willnormally be included in every project, specific issues identified during the Bank's dialoguewith the government, will be addressed selectively in individual provincial projects. Duringthe next few years, the projects' investment components will continue to focus on high-priority links of the national highway system and support the development of the provincialroad networks.

F. LESSONS FROM PREVIOUS BANK OPERATIONS

1.21 Previous highway projects in China emphasize the importance of rigorous, earlypreparation for major civil, and electrical and mechanical works and for procurementprocesses, where tendering often takes longer than expected. Advance preparation ofbidding documentation and independent design reviews have also fostered smoothimplementation and have helped reduce variations during the implementation period.The design of electrical and mechanical facilities (traffic monitoring,

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telecommunications, tolling and lighting) must be advanced so that these works would befinished shortly after completion of the civil works for high-grade highways.

1.22 Land acquisition and resettlement of affected people have also led toimplementation difficulties, including delays, in Chinese highway projects. Theinstitutional requirements for resettlement of a large number of people are significant;under the proposed project, resettlement has received considerable attention to ensureinstitutional capability to provide adequate compensation and to implement ResettlementAction Plans.

1.23 Experience in the environmental area in China has generally been favorable.However, more attention should be paid to environmental supervision duringconstruction, training of environmental personnel, and environmental monitoring duringboth the construction and operation phases.

1.24 Bank experience emphasizes the importance of adequate construction quality ofroads. Construction quality has also been highlighted as a sector issue for Bank highwayprojects. Effective remedial actions include careful formulation of supervisionarrangements, including engagement of foreign experts, training of local supervision staffand equipping the supervision teams with the necessary laboratory equipment, surveyinginstruments, transportation and telecommunications facilities.

1.25 There is a growing concern that adequate funding for highway maintenance is notnow being generated to cover an expanding and more expensive highway system.Experience with rural highways in Africa and South Asia and with the Bank's ShaanxiHighway Project in China has shown that provision of basic access through all-weatherroads and provision of nonnotorized transport are effective means of reducing poverty inrural areas, especially when combined with programs for socioeconomic development.

1.26 Based on the Bank's experience with institutional and policy aspects of highwayprojects, the phasing of studies and technical assistance and the intensity of Banksupervision are important for positive, sustainable outcomes. Systematic supervision andfollow-up of the findings of studies and technical assistance components by Bankmissions also enhance project outcomes. Ultimately, the success of the road safetycomponent of the project depends upon the Borrower's commitment to the objectives ofthe component and its ability to ensure effective coordination between the Public SecurityBureau (Traffic Police) and the Highway Department-the main two agencies involvedin the implementation of this component.

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2. XINJIANG UYGUR AUTONOMOUS REGIONTRANSPORT SECTOR

A. SITUATION AND ECONOMY

2.1 Xinjiang is the largest of China's provinces and autonomous regions, with a landof 1.6 million km2 (15 percent of China's total land area). The Xinjiang UygurAutonomous Region (XAR) is surrounded locally by Gansu and Qinghai Provinces andthe Tibet Autonomous Region and eight foreign countries-Mongolia, Russia,Kazakhstan, Kyrgystan, Tajikistan, Afghanistan, Pakistan and India (see Map IBRD27622). The climate is harsh, very cold in winter and hot in summer, with an annualrainfall of only 150 mm. Xinjiang's current population is about 16.3 million (1.36

2percent of China's total). The average population density is a low 10.2 persons/km (8percent of China's average). About 48 percent of the population in Xinjiang is urbanized;its capital Urumqi, has a population of about 1.4 million.

2.2 Xinjiang is rich in mineral resources including coal, petroleum and natural gas.Also, agricultural and animal production has been increasing. Xinjiang has become animportant production area of grain and cotton in China and has large livestock herds,especially sheep. The gross output value of agriculture and industry (GOVAI) increasedat an annual rate of 19.7 percent during 1980-94 and reached about Y 89.7 billion in1994. GOVAI per capita in 1994 for the Region (Y 5,540) was about the same as that forChina, whereas the corresponding figure for Urumqi (Y 6,432) was about 116 percent ofthat for China.

2.3 The core of the current economy of Xinjiang, located on the north slope of theTianshan Mountains contains the main industrial developments in the Region such aspetroleum, petrochemicals, coal, electric power, iron and steel, building materials, textilesand food industries. It accounts for 43 percent of the total number of industrialenterprises, 70 percent of the industrial output and 21 percent of the agricultural output ofthe Region. Moreover, it contains four (Urumqi, Shihezi, Kuitun and Bole) of the sixopen cities in the Region. The development of this area is supported by the only railroadin the Region and the two main arterial crossroads of Xingxingxia-Urumqi-Yining Roadand Altay-Urumqi-Hotan Road.

B. TRANSPORT NETWORK

2.4 Xinjiang is served by a sparse network of railways, highways, civil aviation and apipeline (Map IBRD 27622). The Region has presently only one main railway line(1,803 km), which connects Xingxingxia with Alataw Shankou as an extension of theLanzhou-Xinjiang (Lan-Xin) railway line, and branches at Daheyan to reach Korla.

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Double tracking of the Wuweinan (Gansu Province)-Urumqi section has been completed,which would increase its transport capacity from the present 11 million tons per year to35 million tons per year.

2.5 The airline network of Xinjiang consists of 12 airports, of which Urumqi isclassified as international. The network consists of 12 intraregional air routes and 24interregional air routes, as well as four international flights to Almatay, Istanbul,Tajikistan and Moscow. The total length of the network is about 53,715 km. Thenumber of passengers carried by air has increased at a rapid pace (31.5 percent per year)from 89,000 in 1985 to 1,060,000 in 1994 (Table 2.1).

2.6 The pipeline system in Xinjiang is a local service conveying crude oil from theTarim and Jungar fields to railheads. Oil production has increased from 5.58 million tonsin 1980 to 16.5 million tons in 1994 (or a 8.1 percent increase per year). The total lengthof the pipeline system in Xinjiang is 875 km, which presently transports 8.81 million tonsannually.

2.7 Xinjiang's highway system extends about 28,611 km, of which only 38 km (0.1percent of the total) are Class I roads, 4,132 km (14.4 percent of the total) are Class IIroads, 8,554 km (30.0 percent of the total) are Class III, 12,172 km (42.6 percent of thetotal) are Class IV roads, and the remainder are tracks (Table 2.2). The XinjiangHighway Project I (XHP1), which includes the East-West (between Turpan and Urumqi)and North-South (between Dahuangshan and Urumqi) corridors, has been successfullyimplemented since March 1995 as the first Bank-financed highway project in Xinjiang.The administrative classification of the road system in 1994 was as follows:

km Percent

National 8,533 29.8Provincial 6,797 23.8County 10,223 35.7Township 852 3.0Other 2,206 7.7

Total 28.611 100.0

2.8 Highways provide the only means of transport for large areas of the Region. Thedensity of the system is only 1.79 km per 100 km , which is equivalent to one seventh ofthe national average. Most of the existing highway network were initially built to gravelstandard and then later overlayed with a bituminous surface treatment without adequatepavement strengthening. These roads have now inadequate structural strength to copewith the growing traffic. The regional government is giving high priority to repairing andstrengthening these roads and to expansion of the highway network, especially Class IIIand IV roads.

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C. TRAFFIC CHARACTERISTICS AND GROWTH

2.9 Over the 1985-94 period, traffic has been rising strongly in all modes, withhighway transport dominating both freight and passenger services. In 1994, highwaystransported 98 percent of the passengers and 64 percent of the passenger-kilometers and92 percent of the freight tons and 40 percent of the ton-kilometers in Xinjiang (Table2.1). Railways carried a lesser portion of freight tonnage and the largest amount of ton-kilometers of freight, reflecting the very long haul distances (900 km by rail vs. about40 km by road). Air transport, albeit very small, is playing an increasingly important rolein Xinjiang because of the long distances between cities and the small size of the highwaynetwork and its limited geographic distribution. Highway traffic, nevertheless, rose athigh rates, 10.4 percent per year for freight ton-miles and 20.0 percent per year forpassenger-kilometers (Table 2.1).

2.10 The highway traffic growth rates are reflected in the changes in traffic densities onsome of the 15,300 km of National and Provincial Roads in the Region (Table 2.3). In1985, about eight percent of the National and Provincial Road network carried more than2,000 motor vehicles per day (mvpd). By 1994, the sections carrying more than 2,000mvpd had increased to 17 percent of the network, while the length of roads carrying over5,000 mvpd had reached 420 km.

2.11 During 1986-94, the total length of Class III and IV roads was increased by about3,800 km and 6,100 km, respectively. In 1985, highways transported 34 millionpassengers, growing to 310 million passengers in 1994, which represents an annualgrowth rate of about 27.8 percent.

2.12 Highway traffic includes slow-moving vehicles, mainly tractors of various sizes,bicycles and other nonmotorized vehicles. In 1994, this slow-moving traffic accountedfor about eight percent (in the converted traffic volume) of all motorized traffic in majorurban areas. The sections of the existing UKH between Urumqi and Wugongtai andwithin city limits of Manasi, Shihezi and Shawan along the existing Route 312 has theworst traffic congestion.

D. THE VEHICLE FLEET

2.13 The total vehicle fleet has expanded rapidly (12.3 percent per year for motorizedvehicles) in the nine years between 1985 and 1994 (Table 2.4). During this period, thefleets of medium- and small-size trucks, and small buses and passenger cars grew by 33percent and 21 percent per year, respectively, reflecting the growth in prosperity and alsothe light-vehicle needs of the growing number of smaller enterprises in the economy.Also, motorcycles registered an impressive annual growth rate of 36 percent. Tractors,which reached 194,000 units in 1994, are mainly used for agricultural purposes, but alsotravel on the roads.

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E. HIGHWAY SAFETY

2.14 Highway safety is a serious problem in Xinjiang, as elsewhere in China. In 1994alone, 1,712 persons were killed and 2,884 persons were injured in the 4,490 accidentsreported to the police in that year (Table 2.5). The severity of accidents (the numberkilled in relation to the total number killed and injured) is also high. Internationalcomparisons of the number killed in traffic accidents per 10,000 vehicles show that therate in Xinjiang is about 30 times higher than that for Western Europe and NorthAmerica.

2.15 Most responsibility for matters affecting highway safety lies with the TrafficPolice of the Public Security Bureau (PSB), including that for vehicle inspection, drivertraining, propaganda on safety, imposition of fines, driver licensing, enforcement oftraffic laws, related traffic management, highway patrols and all aspects of accidentcontrol, reporting, investigation and research. The Xinjiang CommunicationsDepartment (XCD) retains responsibility for all matters concerning safe highway designsand traffic control devices.

F. HIGHWAY ADMINISTRATION

2.16 XCD controls all highway undertaking in the Region. XCD reports directly to theregional government and acts as its administrative arm for planning, budgeting andfinancing of highway transport in the Region.

2.17 The administration of the road network in the Region takes place at three levels:(a) Xinjiang Highway Administration Bureau (XHAB), (b) general highway bureaus ineach district and prefecture, and (c) local-level highway units of the county highwaybureaus. XCD administers the regional highways through XHAB, and municipal andcounty transport bureaus administer local highways and village roads. Apart from thehigh-grade highways such as TUDH and UKH, XHAB is responsible for all highwaymatters, including construction and maintenance, but receives professional and technicalguidance from the Engineering Administration Department of MOC. It has a staff of 161.The 15 municipal and prefectural highway bureaus and the 83 county bureaus in theregion have a total staff of about 17,700, of which technical personnel are 870.

2.18 The Xinjiang High-Grade Highway Construction Authority (XHGHCA) (throughits Project Execution Office-PEO) is presently responsible for the construction of high-grade highways and is also taking a role as the High-Grade Highway AdministrationBureau, which is in charge of the direction, coordination, planning, design, construction,supervision, operation, and maintenance of high-grade highway projects in the Region.The multiagency Authority is led by a Vice Governor of Xinjiang People's Government(as Director-General) and by the Director of XCD (Deputy Director General). The PEOis responsible for raising construction funds, including collection of tolls on thesehighways, and paying back bank loans. It currently has a staff of about 80 and thisnumber will be increased as the scope of work is expanded.

G. PLANNING, BUDGETING AND FINANCING

2.19 Planning. XCD has overall responsibility for planning, construction, operationand maintenance of the regional highway network. The prefectural and county authoritieshave considerable autonomy in planning smaller road investments, but this is subject tothe approval of XCD. Each administrative group prepares investment plans for thehighway network under its jurisdiction and submits them to the planning division of XCDby June of each year for the next year's plan. XCD approves the next year's plan for eachcounty or local authority concerned before the end of March. Similarly, using inputsfrom lower-level administrative groups, XCD prepares the five-year road developmentplan, reflecting national or regional development policy guidelines and objectives.

2.20 Budgeting. XCD's planning division adopts a balanced budget policy. Theproposed highway expenditures are balanced against the revenues earmarked for highwaydevelopment; the amount of investment approved for each year is closely related to therevenues expected for the same year.

2.21 Financing. Highway funding sources and expenditures are summarized in Table2.6. Data for 1994 are displayed in Figure 2.1. Funding for highway construction andmaintenance comes from several sources, but by far the largest source is the roadmaintenance fee (RMF), which provided Y 860 million (about 81 percent) of all highwayftunding (Y 1,063 million) for the Region in 1994. This fee is collected by XCD frommotor vehicles throughout the Region. XCD retains all revenues from RMF after thefollowing are paid: Y 15 million to the Ministry of Finance's Energy andCommunication Fund; Y 10 million to the State Planning Commission (SPC)-controlledBudget Adjustment Fund; and PSB for their highway patrol and administrative operations(about 2.5 percent of the maintenance fee after deducting Y 25.0 million for energy andcommunications fund and the budget adjustment fund). The RMF retained by XCDincreased from about Y 289 million in 1986 to Y 814 million in 1994. The RMF islevied monthly on vehicles owned by transport companies as a percentage of theirfinancial turnover (presently 15 percent of gross revenue). Other vehicles are charged amonthly fee (presently Y 170 per month per payload ton).

Figure 2.1: HIGHWAY REVENUES AND EXPENDITURES IN XINJIANG IN 1994Periodic

MOC grant maintenance

14 1% Routine ECFBAFP

maintenance 43%

_ t~~~~~~Lcl contfi- 9- / _ ~~~butions \Rehab. new

/5 oN. Administration tonstRoad main- expenaes 49 6%

tenance fee O7th/ ___

SO 9Y. 2 / _ ~~~~~~~~~~~~~~~~~~~~~~~~~Othermaintenance

Othert 16 2%

Revenue 4 Expenditures

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2.22 Other sources of revenues include grants from MOC, which provided Y 150million (14 percent of total) in 1994, and locally collected capital and self-raised findswith an aggregate amount of Y 52 million (5 percent). The Region also raises highwayfunds by adding a passenger tariff surcharge, currently 1.0 fen per passenger-km. Thetotal amounts collected from this sources were Y 33.1 million in 1991 and Y 42.0 millionin 1994 and have been used for construction of transportation terminals. In addition toroad user charges discussed above, substantial fuel taxes are levied, but these accrue tothe Ministry of Finance (MOF) and are not allocated back to highway funding. Fueltaxes currently amount to 43 percent of the base price of gasoline and 13 percent of thebase price of diesel fuels.

H. ENGINEERING, CONSTRUCTION AND MAINTENANCE

2.23 Engineering. Road and bridge projects are designed by the planning and designinstitutes at the national, regional, prefectural and county levels. The Xinjiang HighwayPlanning, Survey and Design Institute (XHPSDI) is qualified for Class I roads and isresponsible for all major road, bridge and tunnel projects. It carries out most of the workitself but also uses the services of MOC's design institutes and private consulting firmsoutside the region on a contract basis. Due to overload of design works, both preliminaryand detailed designs for UKH were entrusted to the MOC's First Highway Survey andDesign Institute in Xian (FHSDI). The design institutes at the municipal and countylevels are responsible for lower-grade county and township road design works.

2.24 Construction Supervision. Xinjiang Highway Engineering Quality ControlCenter (XHEQCC) is responsible for quality testing and overall supervision of alltransport projects in the Region. Construction of roads and bridges is supervised bypersonnel from county, city and prefectural units. Generally, these units have relativelycompetent personnel to supervise the works adequately. The Engineering SupervisionOffice (ESO) of XHGHCA, approved by MOC, has been carrying out the supervision ofhigh-grade highways in Xinjiang.

2.25 Construction. XCD's Highway Engineering Division is normally responsible forthe construction of key highway projects in the Region. XHGHCA is responsible for themanagement and construction of high-grade highways. The municipal and countyhighway bureaus have their own construction units to carry out construction of minorprojects within their administrative districts. However, in recent years competitivebidding has been introduced in the Region, following the SPC directive that all majorcivil works be awarded after competitive bidding. Many of the larger regional and urbanconstruction bureaus, railway engineering and mining engineering units have beenreorganized into financially independent contracting companies. Thus, the constructionunits under the communication departments of the various cities and provinces can alsoparticipate in transprovincial bidding activities.

2.26 Maintenance. Highway maintenance is carried out by county highway bureausunder the control of municipal authorities. Maintenance is generally labor-intensive, but

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is neither well-organized nor well-carried out. Only about 57 percent (5,500 km) of thepaved network maintained by XHAB is rated as being in good condition. The averageInternational Roughness Index (IRI) calculated from the survey data on 9,700 km ofpaved roads was found to be 6.7 mm/m of road. This very high average road surfaceroughness indicates that many pavements are in a state of serious distress and that theyhave suffered from low quality maintenance operations. The poor condition of thehighway network is due in part to the insufficient allocation of financial and budgetaryresources to maintenance. To ensure that adequate maintenance is carried out,assurances were obtained at negotiations from XAR that XCD would, by March 30 ofeach year commencing in 1997 and ending in 2003, furnish an annual highwaymaintenance report covering all national and provincial roads for the Bank's review andcomments, which would: (a) show the length of each class of road by condition (good,fair, and bad); (b) establish targets for the following year, including an estimate of therequired physical works (routine maintenance, periodic maintenance, rehabilitation andupgrading) and the cost thereof; and (c) measure the results and the actual expendituresagainst the targets and the budgeted funds thereof

I. HIGHWAY DEVELOPMENT

2.27 Xinjiang's investments in highways have increased from Y 2.4 billion during the7FYP (1986-1990) to Y 5.1 billion during the 8FYP (1991-95) and to a projected 14.1billion (1996-2000). Details of the proposed expenditure under the 9FYP are shown inTable 2.6.

2.28 The short term (five years ) plans, which form the basis of the proposals for the9FYP, include completion of the TUDH by September 1998 and the proposed UKH bySeptember 2000. Details of the proposals are shown in Tables 2.7. The medium-term(15 years) plans include construction of the Xingxingxia-Urumqi-Yining and Altay-Urumqi-Hotan main arterial roads, comprising 392 km of Expressways, 540 km of ClassI highway, and other improvements to a total of 3,800 km of roads.

2.29 Realization of the short-term plans would imply an increase in expenditures ofmore than 200 percent compared with the previous five-year plan period. Althoughrevenue projections indicate that this is feasible, these projections are predicated on acontinued high rate of growth of the regional economy and a consequent continuing highrate of growth of the vehicle fleet and demand for road transport. Should these revenueprojections turn out to be optimistic, it is probable that the planned new constructionprogram would be rephased over a longer period.

2.30 In addition, there is a risk that any shortfall in projected revenue would put at riskthe proposed increase in reconstruction and maintenance expenditure. Although thisexpenditure is projected to increase in both proportional (from 15 percent of total highexpenditure under the 8FYP to 20 percent under the 9FYP) absolute terms, XCD is awareof the need to increase maintenance expenditure even further (Table 2.6).

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3. THE PROJECT

A. PROJECT FORMULATION AND PREPARATION

3.1 The support of high development in Xinjiang is particularly important sincehighways provide the only means of transport for large areas of the Region. One of itskey transport corridors is the heavily traveled east-west corridor along National HighwayNo. 312 from Urunmqi to Turpan in the east and to Kuitun and the Kazakhstan border inthe west. This route is a key strategic link among the 12 national trunk routes in theNTHS. Following the identification/preparation mission in April 1995, the preappraisalmission was sent in October 1995. The project was appraised in April 1996.

3.2 The Xinjiang Highway Project (TUDH) has been successfully implemented sinceMarch 1995 as the first Bank-financed highway project in Xinjiang. Although it is stilltoo early to evaluate the full implementation of the project, substantial experience hasbeen accumulated through the preparation and implementation of the project.International supervision consultants have been extensively involved in the actual workrather than simply acting as advisors to the construction agency. This set-up contributesto an improvement in construction quality and compliance with the plannedimplementation schedule. Consequently, this set-up would also be applied for the UKH.The other important lessons learned from XHP1 concerns road maintenance. To ensurethat adequate funds would be allocated to the highway maintenance program, the Bankwas involved in the planning of the sources and uses of highway funds in Xinjiang for the9FYP. Furthermore, for the first time in the highway sector in China, a portion of theBank's loan ($30 million) would be used to finance priority physical maintenanceactivities. Road sections to be rehabilitated under this program were determined on thebasis of results of a highway maintenance study financed under XHP 1.

B. PROJECT OBJECTIVES AND RATIONALE FOR BANK INVOLVEMENT

3.3 The proposed project builds on the achievement of the ongoing Bank-assistedXHP1. The project has the following objectives:

(a) support development of road infrastructure to relieve congestion, andstimulate socioeconomic development in the UKH corridor;

(b) improve maintenance of the regional highway network;

(c) promote development of institutional capacities of XCD, through trainingand other means;

(d) increase highway safety; and

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(e) promote transport linkages with neighboring provinces and countries.

3.4 Rationale for Bank Involvement. The Bank's Country Assistance Strategy(CAS) for China, presented to the Board on June 1, 1995, and the Progress Reportdiscussed on March 26, 1996 support China's strategy to alleviate infrastructurebottlenecks by, inter alia, rapidly modernizing and expanding its highway system. Theproposed project would further this goal by rehabilitating and maintaining the existinghighway network through the proposed highway maintenance program and implementingthe Urumqi-Kuitun Highway segment of the NTHS. Furthermore, Bank assistance toNTHS construction would facilitate interprovincial and international trade and promotelong-distance and transit road traffic, while furthering the liberalization, facilitation andcost reduction of transport, key requirements for market-oriented reforms to succeed.Bank support is also justified by providing a technical assistance to a strategic study oftransport linkages between Xinjiang and neighboring provinces and countries.

C. PROJECT MONITORING

3.5 Project impact would be monitored with respect to the project objectives (PO), thekey indicators of which are listed below.

Po (a): (i) reduced congestion levels on roads parallel to the proposed new road

(ii) increased average travel speeds on roads parallel to the proposed newroad

PO (b): (i) improved road surface roughness on the paved road network

(ii) increased segments of national and provincial roads in fair and goodcondition

PO (c): (i) reduced numbers of traffic accidents and fatalities on existing roads

In Annex 9, the following are delineated:

(a) More specific description of monitoring indicators;

(b) Baseline values;

(c) Mid-term benchmarks

(d) Interim benchmarks; and

(e) Target benchmarks.

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3.6 The achievement of project output would be tracked by monitoring indicators,listed below. Project output can be defined as immediate project targets and initial flowsof services, such as physical quantity (length of road constructed); institutionalstrengthening (training achieved), and quality (road surface roughness, safety initiatives).The following monitoring indicators were set up for some of the key project components.There are time-bound monitorable targets that would be described either as actualphysical outputs or as a percentage of components implemented.

Monitoring Indicators:

(a) UKH civil works completed

(b) roads under the highway maintenance and rehabilitation programcompleted;

(c) progress made in the implementation of the training component for XCDand its affiliated institutions;

(d) black spots improvement completed; and

(e) signing and marking on highways completed.

The proposed monitorable targets are shown in Annex 9.

D. PROJECT SCOPE

3.7 The scope of the project includes:

(a) Construction of a 267.4 km highway (UKH) on new right-of-way (ROW)between Urumqi and Kuitun (Map, IBRD 27623) which consists of:

(i) a 218.3 km 4-lane expressway between Urumqi and Kuitun;

(ii) a 32.4 km bypass to the west of Urumqi, including an 18.5 km 2-lane Class 2 motor vehicle only highway and a 13.9 km 4-laneClass 1 highway; and

(iii) a 16.7 km 4-lane Class I highway which links UKH with theTurpan-Urumqi-Dahuangshan Highway (TUDH).

(b) UKH would be operated as a toll facility. This would entail:

(i) supply and installation of electrical, electronic and mechanicalequipment for toll collection, telecommunication and lighting ofbridges, interchanges and toll collection area; and

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(ii) construction along UKH of management and maintenancebuildings, parking and service areas.

(c) Construction, rehabilitation and upgrading sections of 4 linking roads witha total length of about 18.8 km.

(d) Construction supervision of UKH and its linking roads.

(e) Highway maintenance program to maintain and rehabilitate about 2,450km of the existing highway network during the 9FYP.

(f) Provision of equipment for:

(i) control of construction quality during the construction of UKH andlinking roads;

(ii) operation and maintenance of UKH;

(iii) maintenance of the regional highway network;

(iv) institutional strengthening of XCD and related institutions; and

(v) highway safety component.

(g) Institutional development consisting of strengthening relevant institutionsand training schools affiliated with XCD.

(h) A highway safety program consisting of improvement of black spots, roadsigning and marking works, and training programs.

(i) A strategic study of regional transport.

Construction of UKH

3.8 The total length of the existing road (National Highway No. 312) from Urumqi toKuitun is 262 km. The highway standard is Class II (except for about 30 km of Class Iroad immediately west of Urumqi) with no separation of the motorized and slow-movingtraffic. The projected traffic cannot be accommodated by the existing road beyond 1998at an acceptable level of service. Widening of the existing road would not be feasiblebecause of the extensive side development along several townships and the poorconstruction of the existing pavement and drainage structures.

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3.9 Slow-moving vehicles such as tractors and bicycles will not be allowed access toUKH. Access to and from UKH would be provided at 16 interchanges. UKH alsoincludes about 32 grade separations, 8 long bridges, 5 medium-size bridges, 51 smallbridges, 166 underpasses to provide access to adjacent property, and about 561 culverts.The pavement structure is asphalt concrete with a total thickness ranging between 53 and67 cm.

3.10 UKH would be operated as an open toll highway. Three toll plazas on the mainroadway and five tolling stations on the interchange ramps are planned. In addition tocivil works, UKH includes: (a) the electrical, electronic and mechanical (E&M)installations required for toll collection, telecommunications, power supply, and lighting;(b) construction of four service areas and four parking areas; and (c) four managementand maintenance buildings to be located at Urumqi, Changji, Shihezi and Kuitun.

3.11 The preliminary engineering designs of UKH were prepared by FHSDI andreviewed by Italian experts under the Italian Trust Funds. MOC approved thepreliminary engineering designs in May 1995. The detailed engineering designs and biddocuments were completed in October 1995 and were reviewed by the same Italianexperts in October 1995. SPC approved the final engineering designs in December 1995.

3.12 Linking Roads. On the basis of a comprehensive review of all the linking roadsalong UKH, XCD selected four provincial roads, with a total length of 18.8 kin, for newconstruction, upgrading and reconstruction. Due to the short length of these roads, noseparate bid documents were prepared for them; instead they are included within thecorresponding documents for UKH.

Supervision of Construction of UKH and Linking Roads

3.13 Based on the experience gained from completed and ongoing Bank-financedhighway projects in China including XHPI, a combined team of local engineers,technicians and other personnel and international consultants would be set up to supervisethe construction of the UKH and linking roads. The organizational arrangements andTerms of Reference for supervision of the UKH have been drawn up by PEO and werefound to be adequate. The international supervising engineers would be integrated intothe organization with operational responsibilities. Furthermore, the internationalconsultants would help establish procedures at all levels of the supervisory work,including on-site inspections and laboratory testing, and train local staff both throughformnal training sessions and on-the-job.

3.14 A team composed of about 312 local staff and 7 international experts was agreedfor the supervision of UKH and linking roads. They would be retained until completionof the construction of UKH. The international firm supplying the experts would alsoprovide three trainers to train 150 staff locally for one month and 30 staff abroad for onemonth. The total effort by the international staff is estimated at about 216 person-months, composed of 183 person-months for supervision of civil works, 11 person-months for supervision of the electrical and mechanical facilities component, 3 person-

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months for training both locally and abroad, and 19 person-months as contingency to beused for unforeseen specialist services to be used if and when needed.

Highway Maintenance

3.15 In order to tackle highway maintenance problems, XCD carried out a highwaynetwork maintenance study financed under XHP1. The study proposes a four-yearMaintenance and Rehabilitation Program, which would be aimed at stabilizing theconditions of the existing network at a maintainable level by strengthening the seriouslydeteriorated pavement structures and by overlaying rehabilitation of most neededsections. The four-year program was prepared based on an annual budget ceiling of aboutY 185 million ($22 million), included as item II 4 (b) Periodic Maintenance in Table 2.6,"Xinjiang Highway Revenues and Expenditures." The project provides financing for afour-year Maintenance and Rehabilitation Program (MRP) which covers about 78 percentof the total budgeted program ($17 million of $22 million). A list of contract packages,showing road sections and strategy of improvement, for the first year (1997) is includedin Annex 1. In addition to the MRP, the project also includes procurement of equipmentfor maintenance of the highway network, training of staff, and strengthening ofinstitutions such as XCS and XCTWS that supply skilled labor for maintenanceoperations.

3.16 Selection of Road Sections. The proposed MRP would include rehabilitation ofabout 2,450 km of existing paved national and provincial roads, of which about 956 km(39 percent) would need strengthening of the pavement structure and 1,496 km would beoverlaid by 40 mm or 60 mm asphalt concrete. The criteria for screening and selection ofroad sections to be included in the MRP are detailed in Annex 1. The cost of the four-year MRP is estimated at about Y 577 million ($70 million). The EIRR for the first year(1997) of the MRP is estimated at 92 percent.

3.17 The individual road sections for the first year (1997) were selected on the basis ofpriorities given in the proposed study program and the need for a reasonable uniformstandard of sections, taking into account the location of road sections, size of contracts,and the administrative aspects of design and contract management. The additional roadsections to be improved under this MRP will be drawn from the pool of prioritized roadsegments identified in the study mentioned above (para 3.16), and their submission forapproval to the Bank will be effected in manageable batches of projects. Thedocumentation to be developed as part of the Bank approval process will constitute aProject File including: (a) an economic analysis including evidence that each of theproposed sections meets the EIRR criteria; and (b) a technical analysis, includingproposed designs and cost estimates.

3.18 Implementation. XHAB would undertake detailed engineering investigation anddesigns of all highway sections to be included in the MRP. The road sections to beimproved will be packaged into 6-12 contracts for each year's work. These maintenanceand rehabilitation works will be procured through National Competitive Bidding (NCB),

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and undertaken by contractors. Bidding documents will be prepared by competenttechnical personnel at county level, and coordinated and guided by a special design groupwithin XHAB. A separate supervision group would also be set up within XHAB to haveoverall responsibility for supervision of construction of MRP contracts. These groupswithin XHAB will be assisted by subgroups at county level to carry out detailedinvestigations and supervision of road construction within their area. The subgroups willbe composed of local personnel from the relevant county highway bureaus under XHABand are capable of supervising the works.

3.19 Monitoring of MRP. The average road surface roughness (IRI) on the pavedroad network would serve as an indicator of achievement of the objective for improvedserviceability. IRI is expected to be improved from the present 6.4 mm/m to about 5.6mmnm after the four-year program. Assurances were obtained at negotiations from XARthat it would, by January 31 of each year commencing in 1997 and ending in 2000,furnish an annual highway maintenance and rehabilitation program report on roadsunder MRP for the Bank's review and comments, which would. (a) show themaintenance and rehabilitation activities undertaken during the previous year includingcosts; (b) show the results of IRI on the paved highway network; and (c) establish targetsfor the following year, including an estimate of the proposed works, costs and expected'RI:

Equipment

3.20 The equipment to be provided under the project was based on those procuredunder XHP 1 and reviewed by the Bank. The final agreed lists of equipment together withtheir estimated costs are available in the project files. These lists include equipmentrequired for operation and maintenance of UKH, control of construction quality duringconstruction of UKH and linking roads, maintenance of highway network, institutionalstrengthening of XCD and related institutions and training schools and the highwaysafety program. The preliminary total equipment cost is estimated at about Y 91.8million ($11.3 million), of which $9.5 million would be in foreign currencies. The Bankand XCD agreed that the equipment lists should be looked at as subject to reasonablechange with regard to type and number, and consequently, some flexibility should beexercised during project implementation to properly allow for changing circumstancesand needs.

3.21 Equipment for UKH. To support of the construction supervision activities ofUKH and its linking roads, there is a need for equipment and instruments. For theoperation and maintenance of UKH, equipment requirements have also been identified.This equipment is in addition to the site laboratory equipment and surveying instrumentsto be provided by the contractors for the civil works, and the toll collection andtelecommunication equipment to be provided by the contractor for theelectrical/mechanical works for UKH.

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3.22 Equipment for Maintenance of Roads. This equipment consists of urgentlyrequired equipment for routine, periodic and maintenance and heavy repair of roads toreplenish the equipment fleet of the regional and county maintenance units.

3.23 Equipment for Institutional Strengthening. These consist of specializedequipment for support of the four relevant institutions of XCD that would be strengthenedunder the proposed project (paras. 3.24-3.26).

Institutional Strengthening and Training

3.24 The institutional strengthening measures under this component are part of a broad,long-term effort started as part of XHP1. The purpose of this component is to build upthe planning, construction, maintenance and overall management capabilities of XCD, inthe light of its rapidly expanding investment and maintenance program. The priorityareas to be addressed here include highway engineering, highway maintenance and theoperations and management of high-grade highways. The component also strengthensXCD's institutional capabilities to train qualified technical and supervisory personnel forthe maintenance of the Xinjiang highway network. The total cost of the InstitutionalStrengthening and Training (IST) component is estimated at Y 15.0 million, of which$1.12 million is in foreign currencies (Annex2).

3.25 IST component consists of three elements:

(a) Organizational Strengthening. Through staff development (49 person-months in Training and Investigation Study Tours outside China) andrelated equipment for the priority organizations in the sector, i.e. the High-Grade Highway Administration Bureau (XHAB), the XinjiangCommunications School (XCS), the Xinjiang Communications TechnicalWorkers School (XCTWS), and the Highway Administration Bureau'sShihezi Training Center (STC) (Annex 2). The estimated total cost of thiselement is Y 10.9 million (of which $0.93 million is in foreign currencies).

(b) Staff Training. This element covers skills upgrading and specializedtraining for 710 persons (897 person-months) in Xinjiang, in other parts ofChina and abroad, for the staff in the organizations cited underOrganizational Strengthening, as well as for the staff of units which didnot receive support under XHPI: the Highway Engineering QualityControl Center (XHEQCC), the Highway Engineering Quota ManagementCenter (HEQMC), and the Telecommunications Information Center (TIC).The cost of this element is Y 2.6 million (of which $0.05 million is inforeign currencies).

(c) Technical Assistance. This element includes support for the training oftrainers at three technical training institutions, for an estimated total costof Y 1.5 million (of which $0.15 is in foreign currencies).

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3.26 Each of the agencies supported by this component prepared proposals for staff andorganizational strengthening in the forrn of Training Needs Outlines. These werereviewed in detail by Bank staff for interagency consistency and sectoral coherence, andfound to be satisfactory. The PEO staff responsible for managing the IST componentunder XHP1 also prepared an exhaustive Report on Institutional Strengthening andTraining which includes an inventory of personnel in the sector organizations and adetailed list of equipment required under the component justified on the basis of sectorfunctions and activities to be improved. The Report on IST is part of the Project File.

Highway Safety Program

3.27 In 1994 alone, 4,490 traffic accidents occurred on Xinjiang's highways, resultingin 1,712 fatalities and 2,884 injuries. The severity of accidents (in terms of the numberkilled in traffic accidents per 10,000 vehicles) indicates that the rate in Xinjiang is muchhigher than that of whole China. Annex 3 summarizes the existing highway safetysituation in Xinjiang and related problems and presents an implementable highway safetyprogram, which was discussed and agreed with XCD.

3.28 The design of UKH and the related linking roads was reviewed from a safety viewpoint by the Italian consultants and a Norwegian safety expert. Consequently, thosedesigns have been prepared to a high standard and reflect safety considerationsadequately. The highway safety program included under the project would build on whatwas provided for highway safety in XHPI and comprises:

(a) Establishing a Leading Group for Highway Safety Coordination tocoordinate between XCD and PSB, as well as a Highway SafetySecretariat (HSS) to prepare the work for the Leading Group. TheLeading Group and HSS would be established by the end of 1996 and byMarch 1997, respectively.

(b) Developing procedures for safety audits by HSS.

(c) Undertaking accident black spot analyses as well as the monitoring andevaluation by the Traffic Science Institute, and implementation ofengineering works of the identified black spots by XCD. XCD agreed toallocate Y 20 million ($2.4 million) to this purpose during 1997 and 1998.

(d) Undertaking of road signing and marking works on some 60 km of ClassII highways to which about Y 8.7 million ($1.1 million) would beallocated.

(e) First aid will be introduced in the curricula for police and driver training aswell as child psychology for police officers responsible for training ofschool children in traffic safety.

(f) Other training activities such as study tours (Annex 3 for details).

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(g) Provision of equipment to support the above activities (Ann.l3).

(h) Evaluation of the implementation of the Highway Safety program by anindependent local expert (1.5 person-month).

Assurances were obtained at negotiations that XAR would establish and maintain: (a) aLeading Group for traffic safety coordination, policy-making and planning, withfunctions and responsibilities acceptable to the Bank; and (b) a Highway SafetySecretariat to prepare work for the Leading Group, with functions and responsibilitiesacceptable to the Bank to carry out a black spot identification and improvement programand establish safety audit procedures and checks under terms of reference satisfactory tothe Bank Also, assurances were obtained during negotiations that XAR would, pursuantto terms of reference acceptable to the Bank: (i) by October 31, 2000, complete a blackspot identification and improvement program; (ii) by October 31, 2000, complete aprogram to improve road signs and markings; and (iii) by December 31, 2001, have anexpert acceptable to the Bank prepare an evaluation of its Highway Safety Programaccording to indicators acceptable to the Bank

Regional Transport Study

3.29 The proposed study of transport within Xinjiang and between Xinjiang andneighboring provinces and countries, would assist the government of the autonomousregion in identifying the principal medium-term transport needs and in developing plansand policies to satisfy those needs so far as is economically justifiable and financiallyfeasible. The study would include a review of existing transport plans, infrastructure andservices and determine the extent to which these need to be modified in light of theprojected high rate of growth of demand for transport both within Xinjiang and inconnecting Xinjiang with the rest of China and its neighboring countries.

3.30 The principal outputs of the study would be recommendations for changes totransport policy within the Region, and indications for a medium- and long-term transportinvestment program. This program would be based on realistic expectations of theinvestment funding likely to be available, taking into account national policies fordeveloping new financing sources for transport infrastructure. The study would be part ofthe provincial-based studies of transport sector issues, to be supported by Bank highwayprojects, as agreed between MOC and the Bank.

3.31 The study, which would be conducted by SPC's Comprehensive TransportResearch Institute with assistance from Xinjiang institutions, is expected to last 12months. Draft outline terms of reference for the study are shown in Annex 4. Assuranceswere obtained at negotiations from XAR that it would: (a) undertake and, by June 30,1998, complete the study in accordance with terms of reference satisfactory to the Bank;(b) establish a review panel comprising representatives of the central government andXinjiang Region to guide the said study and provide comments on the results andrecommendations thereof; (c) by September 30, 1998, furnish the said study to the saidreview panel for review; and (d) take appropriate steps to implement the

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recommendations of the study, taking into account the comments thereon of the saidreview panel.

E. ENVIRONMENTAL ASSESSMENT

3.32 Environmental Impact Assessment (EIA) of UKH and its linking roads werecarried out by the Research Academy of Environmental Science (RAES). An EIA report,an Environmental Action Plan (EAP), and an Environmental Assessment (EA) Summarywere revised several times based on the comments made by the Bank staff. The finalEIA, EAP and EA Summary of UKH were received by the Bank in December 1995 andfound to be satisfactory. Since the proposed MRP does not require any widening ofexisting roads, its impact on the environment is minimal. However, the biddingdocuments for the roads included in this component would include environmental clausesthat reflect good practices during construction, such as location of crushers and asphaltplants, dust control, restriction of working hours, etc.

3.33 Major environmental impacts include dust and noise, soil erosion and impacts onirrigation channels, and transportation of construction materials during the constructionperiod. Traffic noise and vehicle exhaust, soil erosion, and water pollution from serviceareas were identified as major adverse impacts during the operation period. Someproblems deserving special attention include impacts on livestock migration, noise andair pollution problems of Xishan linking road, and impact of traversing coal mines nearXishan.

3.34 The EAPs specified the appropriate mitigation measures, environmentalmonitoring plans, institutional arrangements to implement the EAPs, training andequipment requirements, and budget needed for environmental protection. Majormitigation measures include appropriate design of overpasses/underpasses to minimizesocial disruption, reconstruction of irrigation systems where appropriate, and watersprinkling to reduce dust during the construction phase. Major mitigation measuresinclude resettlement and construction of noise barriers around the schools, hospitals andresidences, strengthening of vehicle emission inspections and better maintenance ofvehicles to minimize air pollution problems, and afforestation to improve landscape andreduce air pollution during the operation phase. It was ascertained that the proposedUKH and its linking roads will not affect ecologically sensitive areas and that theirconstruction and operation would have no adverse impact on the environment through theimplementation of the EAP. The summary of the EIAs and EAPs are presented in Anne5 and copies of the EIAs and EAPs are available in the Public Information Center.Assurances were obtained at negotiations from XAR that: (a) the environmentalprotection measures stipulated in the EAPs would be carried out in a manner satisfactoryto the Bank; and (b) XAR wouldfurnish to the Bank an annual environmental monitoringreport for UKH during the construction phase and for each of the first three yearsfollowing completion of construction.

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F. LAND ACQUISITION AND RESETTLEMENT

3.35 Legal Framework and Resettlement Policies. The Land Administration Law ofChina and Xinjiang Regional Land Administration Regulations are the legal basis for theplanning and implementation of land acquisition and resettlement for all highwayprojects. Land acquisition and resettlement are well regulated in China, which generallyconform to the Bank's policies on involuntary resettlement. The main objective of theresettlement program is to ensure that the affected people are able to at least restore, if notimprove their standards of living after resettlement. Also efforts have been made tominimize acquisition of productive farmland and enterprises in order to reduce adverseimpacts of land acquisition and resettlement.

3.36 Project Impacts. Construction of UKH and its linking roads will requirepermanent acquisition of about 1,139.26 hectares (ha) of land and will affect about 3,706persons. Another 466.54 ha of land would be required to be leased temporarily duringconstruction. About 265 households (1,106 persons) will be affected through houserelocation. The project will also affect nine enterprises employing 243 workers. Adetailed socioeconomic survey of the affected persons was completed by the XinjiangAcademy of Social Sciences (XASS) in August 1996. The population of Xinjiang is 16.3million, making up 1.3 percent of the population of China. They are composed of 49ethnic groups. Among them, the most populous five ethnic groups are: Uygur, 7.19 m;Han, 5.7 m; Kazakh 1.1 m; Hue 670,000; and Kyrgys, 140,000. In the project affectedarea, the total city and county population is 2.8 million, and the majority (80 percent) areHan. Affected persons live in ethnically integrated, multicultural communities andconduct regular economic activities in agriculture, industry, and services. Those affectedthrough the loss of a house will be moved very short distances (100-300 meters) and willremain close to their regular social, cultural, and economic practices. Their standards ofliving will not be adversely affected after rehabilitation. The construction of the highwaywill bring benefits to the dffected persons and their communities.

3.37 Implementation. It is expected that the land acquisition and resettlement (LAR)activities will be completed by February 1997, whereas construction of UKH is expectedto start in March 1997. A Lead Group on resettlement has already been formed for XHP 1(TUDH) project and the same group will be responsible for overseeing theimplementation of the RAPs for the UKH. A summary of the RAP is given in Annex 6.A copy of the RAP is deposited in the Public Information Center. Assurances wereobtained at negotiations from XAR that all LAR activities with respect to the UKH andlinking roads would be completed according to the RAPs in a manner satisfactory to theBank

3.38 Monitoring and Evaluation. The implementation of the RAPs will bemonitored both internally (by the Resettlement and Monitoring Office (RMO) and thelocal communications bureau) and externally (by XASS, specially engaged by XCD forthe purpose).

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(a) Internal Monitoring. Internal monitoring, to be carried out by the stafffrom the Resettlement and Monitoring Office (RMO) and those from thelocal (city/county, and township) communications bureau, will beundertaken every three months and a summary of internal reporting will besubmitted to the Bank every six months. Internal monitoring willconcentrate on the physical progress of RAPs implementation.

(b) External Monitoring. The task of external monitoring of RAPs'implementation by an independent agency has been entrusted to XASS.Apart from physical monitoring of the LAR program, which will also becarried out by the internal monitoring agencies, XASS will concentrate onevaluation of the implementation of the RAPs. External monitoring willstart along with the initiation of LAR activities and will continue one yearbeyond project completion (until 2001). Monitoring reports will beprepared every six months and submitted to PEO and the Bank. The firstexternal monitoring report will be submitted to the Bank by December 31,1996. A final monitoring and evaluation report will also be prepared afterproject completion (based on a "follow-up" socioeconomic survey of theaffected persons) and submitted to the Bank by December 31, 2001.

Assurances were obtained at negotiations from XAR that XCD would, for UKH, furnishto the Bank: (a) by March 31 and September 30 of each year starting September 30,1996 internal monitoring reports prepared by appropriate agencies of Xinjiang; and(b) by June 30 and December 31 of each year starting December 31, 1996 externalmonitoring reports prepared by an independent agency acceptable to the Bank,regarding the implementation and input of the resettlement activities during the previoussix months, and carry out the monitoring of the effectiveness and socioeconomic impactof the resettlement process for UKH and its linking roads according to the monitoringplan in a manner satisfactory to the Bank. Implementation of the RAPs will also bemonitored through routine project supervision and project progress reports.

G. COST ESTIMATES

3.39 The project is estimated to cost about Y 5.40 billion or about $658 million,including land acquisition and physical and price contingencies as summarized in thefollowing table and detailed in Table 3.1. The foreign exchange cost would be about$280 million, or about 42 percent of the total. Base costs have been estimated usingDecember 1995 prices, and physical contingencies have been based on 10 percent of thebase costs of works and construction supervision of the highway component. Pricecontingencies for foreign expenditures have been estimated on assumed internationalprice escalation of 3.3 percent in 1996, 2.3 percent in 1997, 2.5 percent in 1998 through2001. Price contingencies for local costs have been estimated assuming annual priceescalation of 10.5 percent in 1996, 8.5 percent in 1997, 7.0 percent in 1998, 6.5 percent in1999, and 6.2 percent in each of 2000 and 2001.

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3.40 The costs of civil works are based on work quantities calculated from detailedengineering designs. The costs were computed on the basis of MOC's standard manualsfor labor and equipment productivity, the related annually updated costs and the currentmarket costs of materials.

3.41 The estimated cost of equipment is based on prevailing prices and those quoted bymanufacturers and suppliers and includes the cost of equipment delivered in Urumqi,spare parts, and related training if needed to operate and maintain the equipment. Theestimated cost of consulting services are based on recent contracts for similar servicesunder ongoing highway projects.

PROJECT COST SUMMARY

(December 1995 prices: $1.00 = Y 8.2)

ForeignCost of

Local Foreign Total Local Foreign Total Total-----------( Y million) --------- ----------($ million)-------- (%)

UKH and linking roads la 1,553.6 1,537.5 3,091.1 189.5 187.4 376.9 50Highway maintenance 331.3 246.0 577.3 40.4 30.0 70.4 43Highway safety 14.4 14.3 28.7 1.8 1.7 3.5 50

Subtotal 1.899.3 1.797.8 3.697.1 2312 2121 4508 49

Supervision of construction 68.3 28.9 97.2 8.3 3.5 11.8 30Equipment/2 14.6 77.5 92.1 1.9 9.4 11.3 84Training 2.5 7.5 10.0 0.3 1.0 1.3 75Technical assistance/studies 2.0 0.2 2.2 0.3 0.0 0.3 10

Total Base Coat 1.986.7 1.911.9 3,898.6 24215 233 Q 415.5 49

Physical contingency 196.8 182.6 379.4 24.0 22.2 46.2Price contingency Ld 708.5 199.5 908.0 86.4 24.3 110.7

Base cost withcontingencies 2,892.0 2,294.0 5,186.0 352.9 279.5 632.4

Land acquisition & resettlement 210.9 0.0 210.9 25.7 0.0 25.7 0

Total Proiect Cost 3,102.9 2.2940 5,396.9 378. 219.5 65&.1 42

/a Excludes taxes of Y 77.8 million ($9.5 million) as well as commitment fees and interest on Bank loanduring construction.

Lb Excludes taxes (VAT) and duties of Y 56.9 million ($6.9 million).L Ten percent of UKH and linking roads, highway maintenance, highway safety and supervision of

construction.Ld Includes Y 1 million and $55,000 to be allocated for either further study in training purposes after

completion of High Grade Highway Management Study in Henan in 1997-98.

H. FINANCING

3.42 The Bank loan of $300 million would finance about 46 percent of the total projectcost or 100 percent of the foreign exchange cost and 5 percent of the local cost. TheCentral Government (MOC) would provide the equivalent of about $96.3 million, whileXAR would provide the equivalent of about $261.8 million to meet the remaining costsof the project, including contingencies. MOC's funding would be restricted to the

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construction of UKH. The Bank loan of $300 million would be at the standard interestrate for LIBOR-based US dollar single-currency loans. It would be lent to the Ministry ofFinance for a maturity of 20 years, including 5 years of grace. The proceeds of the Bankloan would be made available to Xinjiang Uygur Autonomous Region (XAR) at the samerate payable to the Bank by the Borrower with 0.75 percent per year commitment fee onthe outstanding balance, beginning 60 days after loan signing, less any waiver.Agreement was obtained from the Borrower at negotiations that it would make theproceeds of the loan available to XAR on these terms. XAR would bear the foreignexchange risks. The Government of China and XAR have selected LIBOR-based USdollar single-currency loan terms for the project in order to facilitate management of theforeign exchange risk of their borrowings by more closely matching the currency of theirliabilities with that of their net trade flows, about 75 percent of which are US dollardenominated. They selected the LIBOR-based product in order to preserve the fullmaturity of the loan, compared to the fixed-rate option that would have resulted in a 15-year loan. The Borrower judges that it can manage any interest rate risk.

FINANCING PLAN

($ million)

Xinjiang Central WorldProvince Government Bank Total

UKH:Civil works, incl. link roads 72.4 96.3 168.6 337.3Stabilization of abandoned mines 2.4 - 2.4 4.8Building 11.4 - 11.4 22.8Supply and installation (E&M) 2.4 - 9.6 12.0

Highway maintenance 40.4 - 30.0 70.4Highway safety 1.8 - 1.7 3.5

Subtotal 130D 8 223.7 450

Supervision 8.3 - 3.5 11.8Equipment 1.8 - 9.5 11.3Institutional strengthening & training 0.3 - 1.0 1.3Study 0.1 - 0.2 0.3Contingencies 94.8 - 62.1 156.9Land acquisition 25.7 - - 25.7

Project Total 261.8 2 DM. 6

Percent of Total 3m 9 L4.6 45.6 100Q

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I. IMPLEMENTATION

3.43 Implementing Agencies. The implementation of the ploject would be theresponsibility of XCD. The PEO would be the executing agency for the construction ofthe UKH and related linking roads and their supervision as well as its related equipmentand all other equipment under the project except those destined to XHAB. XHAB wouldbe the executing agency for the highway maintenance and highway safety components, aswell as for the equipment for maintenance of the highway network (other than UKH).PEO and XCD Education and Science and Technology Divisions would be responsiblefor training. Training programs would be coordinated with those in other ongoing Bank-financed highway projects by MOC. The executing agency for the study of transportlinkages with neighboring provinces and countries would be the ComprehensiveTransport Research Institute of SPC. The Traffic Police of PSB would be responsible forthe safety component, except the civil works component. CMC International TenderingCompany (CMC) has been retained by XCD as the procurement agency for all aspects ofcivil works of the project requiring international competitive bidding (ICB) and forequipment to be procured from abroad. The supervision of construction of UKH wouldbe carried out by a joint foreign/local supervision team. Upon completion, it is expectedthat UKH would be operated and maintained by XHGHAB. Since UKH is a segment ofthe national highway system, MOC would also provide general supervision and guidancefor execution of the project.

3.44 UKH and Linking Roads. The implementation program for UKH is shown inAnnex 7. All civil works would be tendered at the same time. The contracts forelectrical and mechanical facilities would be tendered about the middle period of the civilworks for UKH. The invitation for prequalification of contractors for civil works forUKH was issued in December 1995 and the whole prequalification process was finishedby August 1996.

3.45 The detailed designs and bidding documents for all the 14 contract sections(highway civil works) were completed by the end of December 1995. Acquisition of landand the resettlement process are expected to be completed by February 1997. Theinstallation of electrical, electronic and mechanical systems for the operation of UKH isscheduled to commence around the third quarter of 1998 and be completed by July of2000. The construction of service facilities along UKH would be a continuous processduring the implementation period. The UKH is expected to be completed by September2000.

3.46 Supervision of Construction of UKH and Linking Roads. A team of localpersonnel, engineers and technicians recruited from other provincial institutions, andinternational consultants would be established to supervise the construction of the UKHand the linking roads. The joint supervision team (JST) would be headed by a ChiefSupervision Engineer. A Resident Engineer would be stationed on site for each of the 14civil works contracts. Invitations to international short-listed consulting firms (approvedby the Bank) for supervision of construction were issued in May 1996. A firm would be

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selected by October 1996. The consultants would be mobilized in February 1997 tobegin training of local personnel in construction supervision and to help set up thesupervision organization.

3.47 Institutional Strengthening and Training. In view of the central role oftraining for the strengthening of institutional capacity, XCD will implement thiscomponent under an arrangement found to be satisfactory under XHPl: an InstitutionalStrengthening Unit, located in the PEO, will act as the secretariat for an intra-XCDLeading Group chaired by XCD Deputy Director, and responsible for providing adviceand oversight of the IST Office's activities in implementing this component. The ISTUnit will be charged with undertaking the planning, implementation, financialmanagement and coordination for the training and other elements in the component. Theunit will be headed by a Training Coordinator, reporting to the PEO Director and assistedby two staff members from the Science and Technology and Education Departments ofXCD. The Training Coordinator will relate to all organizations in the sector with whichthe component is concerned and would share financial control over the resourcesallocated under the component.

3.48 Formal selection procedures for candidates to be trained have been developed andagreed with the Bank. The criteria specified for the selection of staff for further trainingwill be the same as those applied under XHPI. These criteria include both educationaland experience requirements, as well as English language comprehension and ability:trainees to be sent abroad for longer-term training would have a good working knowledgeof English or else would take a two-month long English course prior to traveling. Eachtrainee would be required to submit a report on the training received to his/her parentDepartment or agency.

3.49 The IST unit will submit to the Bank, on an annual basis, a Training Plan for thenext two-year period as well as a sample of the Training Needs Outlines and terms ofreference for the abroad training and study tours scheduled to occur as part of this Plan.Progress Reports will be submitted to MOC for transmission to the World Bank, on anannual basis, either at the same time as the Training Plan. By 1998, XCD will review theresults from a High Grade Highway Management Study carried out in Henan. XCD willadapt this report to local conditions and determine what training, if any, needs to becarried out, or if additional study is required. Any training or study resulting from thiswill be carried out according to the same procedures as the IST component. Atnegotiations, assurances were obtainedfrom XAR that XAR shall, by October 31 of eachyear commencing in 1997, furnish a rolling two-year training implementation schedule tothe Bank and carry out the training under a program acceptable to the Bank.

3.50 Equipment. The responsibility for procurement of equipment would be dividedbetween the two executing agencies. PEO would be responsible for the procurement ofequipment related to UKH and the Traffic Police. XHAB would administer theprocurement of equipment for the maintenance of the highway network (other than UKHand for the highway safety component). The equipment required for laboratories,

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strengthening of highway network maintenance, highway safety and institutionalstrengthening would be procured at an early stage of project implementation (1996/97),while that for the operation and maintenance of UKH is scheduled to be procured towardthe end of UKH construction (2000).

3.51 The project as a whole is scheduled to be completed by the end of 2001, with theloan closing date stipulated as December 31, 2002. The implementation schedule for theproject is presented in Annex 7.

3.52 Operations of UKH. XCD intends to operate the new highway as a toll facilityconsistent with its design. Tolls would be collected at eight points (Map IBRD 27623),reflecting an open system for toll collection. To ensure that the toll rates would beappropriately structured and that toll levels would not lead to a substantial reduction inthe benefits of highway investment, the rationale for setting the level of tolling would bedetermined based on the findings of an analysis to be undertaken by the Region, whichtakes into consideration latest experience with operation of toll roads in China as well assimilar studies done under Bank-financed highway projects in China. Assurances wereobtained at negotiations from XAR that XCD shall undertake, and by April 30, 2000,complete and furnish to the Bank for its review and comments, an analysis andrecommendation for the toll rates on UKH taking into consideration the results of theToll Rate Study under the Bank-financed highway projects in China, as well asexperience with tolls on major roads in China.

3.53 Operation and Maintenance of UKH. UKH will be operated and maintained byXHGHAB with headquarters in Urumqi. This bureau is expected to establish fourmaintenance centers at Urumqi, Changji, Shihezi and Kuitun to maintain and operateUKH. Construction of these centers as well as their equipment needs are included in theproposed project. Following the institutional strengthening contained in the proposedproject, XHGHAB is expected to be capable of properly operating and maintaining UKH.

J. PROCUREMENT

3.54 Procurement under the project would be carried out as shown in the followingtable on the next page. The procurement arrangements for the project have taken intoaccount the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits,"published in January 1995 and revised in January 1996, as well as the experience gainedfrom previous Bank-financed highway projects. The documentation, for procurement,which covers the prequalification of contractors, ICB and National Competitive Bidding(NCB) for civil works, ICB for goods and consultant services contracts has beenstandardized for Chinese conditions in cooperation between the Chinese government andthe Bank. Standard documents would be used for all relevant procurement processesunder the project.

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Procurement Arrangements($ million)

TotalProcurement Method Project

ICB NCB Other /a NBF Lb Cost

WorksUKH - Civil Works 458.8 33.5 - - 492.3

(213.2) (16.7) (229.9)

UKH - E&M Supply & Installation 14.5 - - - 14.5(11.6) (11.6)

Highway Maintenance - 90.8 - - 90.8(39.2) (39.2)

Highway Safety - 3.8 0.9 - 4.7(1.9) (0.4) (2.3)

Equipment 8.6 - 3.9 0.3 12.8(7.9) (3.0) (10.9)

Consultancies & Training LSupervision of Construction - - 15.2 - 15.2

(4.6) (4.6)

Regional Transport Study - - 0.3 - 0.3(0.3) (0.3)

Training - - 1.8 - 1.8(1.2) (1.2)

Land Acquisition & Resettlement - - - 25.7 25.7

Total 481.9 128.1 22.1 26.0 658.1(232.7) (57.8) (9.5) (300.0)

/a Other includes force account, international shopping and limited international bidding, andconsultants and training.

/b NBF: Not Bank-financed.Lc Selection of consultants according to the Bank's Guidelines for the Use of Consultants.

Notes: (1) Figures in parentheses represent the amounts financed by the Bank Group.

(2) All figures are rounded and include estimated physical and price contingencies, butexclude the cost of land acquisition and resettlement which is shown as a separateaccount.

3.55 Works. The civil works of UKH would be divided into 14 contract sections.Electrical and mechanical works would be handled as one contract. Administration andmaintenance buildings, service areas and toll plazas would be carried out in fourcontracts. The linking roads (four road sections) would be included in the corresponding

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main UKH contract sections because of the small size of the works involved. Contractsfor the 14 civil works contracts and for the electrical and mechanical works contracts forthe UKH with an estimated cost of $473.3 million would be procured under ICB.Contracts would be bid on a slice and package basis; qualified firms would be allowed tobid for more than one contract so as to attract international contractors and large Chinesecontractors. The contracts for electrical and mechanical works would be bid later duringthe construction of the UKH. All contractors for the 14 ICB contracts for civil workswould be prequalified. The General Procurement Notice (GPN) for the project waspublished in the UN Development Business, No. 424 on October 16, 1995. This GPNserved as a specific procurement notice for the civil works contracts for UKH (eachcosting more than $10 million). For the remaining large contract for electromechanicalworks, invitations to bid would be advertised as specific procurement notices in the UNDevelopment Business and/or well-known technical magazines, newspapers, and tradepublications of wide international circulation. Domestic contractors competing underICB would be eligible for a 7.5 percent price preference. Domestic contractors areexpected to be competitive for all contracts under this project. Each contract for worksestimated to cost $50,000,000 equivalent or more shall include the provisions for adispute review board set forth in the standard bidding documents for works referred to inpara. 2.12 of the Guidelines for Procurement under IBRD Loans and IDA Credits(January 1995 and revised in January 1996).

3.56 Other works, including small service facilities (toll plazas, maintenance offices,service and rest areas, administrative buildings, etc., estimated to cost about $33.5million), highway maintenance (with a cost of $90.8 million) and most of the highwaysafety program (with a cost of $3.8 million) would be awarded following NCBprocedures acceptable to the Bank. These works would involve contracts estimated tocost less than $10 million per contract, up to an aggregate amount of about $128.1million. Since these contracts are small in value and scattered throughout the Region andwould be implemented over a four-year period, ICB would therefore be neither justifiednor practical, but foreign firms would not be precluded from bidding. However, in thecase of very small contracts for highway safety programs and under special conditions tobe justified by XCD, force account could be used for the procurement of civil works witha total estimated cost of 20 percent (about Y 7.4 million or about $0.9 million) of the totalcost of highway safety programs.

3.57 Equipment. Generally, all contracts for goods and equipment costing more than$250,000 equivalent would be awarded under ICB. However, for equipment where thenumber of suppliers is small, limited international bidding would be followed, in anaggregate amount not exceeding $2.3 million. All other items or groups of itemscovering minor maintenance equipment, laboratories, and research estimated to cost lessthan $250,000 per contract package, in an aggregate amount not exceeding $1.6 millionwould be procured following international shopping procedures on the basis of acomparison of price quotations solicited from at least three suppliers (from at least twocountries) eligible under the Bank Guidelines for Procurement. Domestic manufactures

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competing under ICB would be eligible for a margin of preference in the comparison ofbids of 15 percent for goods, or the prevailing custom duties, whichever is lower.

3.58 Consultants. All consultants required for construction supervision (cost of $15.2million), regional transport study (cost of $0.3 million), and staff training (cost of $1.8million) would be selected and employed under terms and conditions acceptable to theBank in accordance with Bank Guidelines on the Use of Consultants. Local expertiseavailable in the various regional/provincial universities and institutes in the highwaysubsector would be used as much as possible.

3.59 Advance Contracting. XCD requested advance contracting and retroactivefinancing in the following areas:

(a) Stabilization of Abandoned Mines. This would allow treatment ofsettlement before the earth work commences in March, 1997. The amountsubject to retroactive financing is estimated at Y 20 million ($2.4 million).This work will be procured according to NCB procedures acceptable to theBank.

(b) Consultants for Supervision of Construction of UKH. This wouldallow for training of local staff and start-up of supervision of constructionby the time contracts are signed with contractors. The amount subject toretroactive financing is estimated at $1 million.

(c) Laboratory Equipment for the Joint International/Local SupervisionTeam. This would permit effective, timely supervison of construction.The amount subject to retroactive financing is estimated at $0.15 million.

3.60 Agreement to the above three requests for advance contracting and retroactivefinancing is recommended, subject to XCD completing all Bank requirements, includingthose for procurement, environment and resettlement. The total amount subject toretroactive financing is estimated at about $3.6 million. All of this amount would applyto eligible expenditures after April 1, 1996.

3.61 Bank Review. Prior review procedures would be used for: (a) civil workscontracts with an estimated cost of $2 million (Y 17 million) or more; (b) equipment withan estimated cost of more than $250,000 per contract; and (c) consulting services with anestimated contract cost of more than $100,000 for firms and $50,000 for individuals. Inthe case of consultancy service contracts, all terms of reference and single-sourceselections, regardless of the value of the contract, are subject to prior review. Priorreview would apply to about 89 percent and 85 percent of the total contract values ofworks and goods, respectively. For contracts below the above-mentioned limits, post-review procedures would be followed.

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K. DISBURSEMENTS

3.62 The proposed Bank loan of $300 million would be disbursed over a period ofabout six years, as follows:

Amount disbursedCategory ($ million) Percent disbursed

Civil worksConstruction of UKH 182.4 50% of total expendituresHighway maintenance 30.0 43% of total expendituresHighway Safety 1.7 50% of total expenditures

Electrical and mechanical worksUKH 9.6 80% of total expenditures

Equipment 9.5 100% of foreign expendituresfor directly importedequipment or 100% of localexpenditures (ex-factory) forlocally manufacturedequipment and 75% of localexpenditures for other itemsprocured locally

Consultant services and training 4.7 100% of foreign expenditures

Unallocated 62.1

IQoS .300.

3.63 To facilitate disbursements, a Special Account would be opened with anauthorized allocation of $25 million equivalent, the estimated average expenditures for afour-month period. The account would be opened in US dollars in a bank acceptable tothe Bank, and managed by the project implementing agency. Applications forreplenishment of the Special Account would be submitted monthly or whenever theSpecial Account is drawn down to 50 percent of its initial deposit, whichever comes first.A schedule of estimated disbursements is given in Table 3.2, which takes intoconsideration the project disbursement profile for transport projects in China and thepotential risks of delay in project implementation.

3.64 Disbursements would be made against authorized payment requests for work doneunder priced contracts for the civil works and for the delivery and installation of theequipment. Interim certification of civil works completed and costed at unit rates in thecontracts will be prepared by the contractors, reviewed by the supervision teams/units andpayments authorized by PEO/XHGHCA and XHAB. Retroactive financing of up to$3.6 million would be applied to expenditures made after April 1, 1996, for stabilization

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works of abandoned mines ($2.4 million); consultants for supervision of construction ofthe UKH and training of local supervision staff ($1.0 million); and for purchase oflaboratory equipment ($0.2 million). Disbursements for staff training in China or abroadwould be made from the Special Account against the actual costs of travel, subsistenceand tuition or training fees. For expenditures relating to contracts for works of $2 millionor less, training, force account, contracts for goods, each valued at $250,000 equivalent orless, and contracts for services each valued at $100,000 equivalent or less for finns and$50,000 equivalent or less for individuals, reimbursement would be made on the basis ofStatements of Expenditures (SOEs). Documentation supporting SOEs would be retainedby the implementing agencies and made available for review by the Bank supervisionmissions.

L. AUDITING

3.65 The Foreign Investment Audit Bureau of the State Auditing Administration(SAA) would be responsible for auditing of project expenditures. Assurances wereobtained from XAR during negotiations that the project accounts and the SpecialAccounts, including SOEs, would be audited by independent auditors acceptable to theBank and that audit reports would be sent to the Bank for review within six months of theclose of each fiscal year. In the case of the SOEs, the audit report would contain aseparate opinion by the auditors as to whether the SOEs submitted during the fiscal year,together with the procedures and internal controls involved in their preparation, can berelied upon to support the related withdrawals. The Bank Group currently accepts SAAaudits for this purpose.

M. PROJECT SUPERVISION, REPORTING AND MONITORING

3.66 Supervision. The project would be supervised through Bank missions whosefrequency would be guided by the progress of the works. However, on the average, amission at about nine-month intervals would be mounted; a Supervision Mission Plan ispresented in Annex 8. In addition to field missions, staff input would be provided atHeadquarters for project-related activities such as completion of supervision reports,procurement documentation and contracts, staff training and equipment proposals andfollow-up and review of the studies on highway safety and on operation and maintenanceof high-grade highways. Moreover, the Bank would monitor progress of implementationof all project components through quarterly progress reports to be submitted to the Bank.In addition, XCD would submit to the Bank monthly reports on progress of civil worksfor UKH. It is estimated that over the implementation period of the project the total timeexpended on supervision would be in the order of 70 person-weeks.

3.67 Monitoring. During implementation, project performance, including theachievement of physical targets and attainment of other project objectives will bemonitored by PEO through the use of performance indicators, reports on the environmentand land acquisition and resettlement, progress reports and auditing of project accounts.In addition, upon completion, the project will be reviewed in an Implementation

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Completion Report. Annex 9 presents the proposed monitoring indicators for the project.Each of the project components' indices will track annual progress in attaining targetsduring implementation and impact objectives after the project is completed. Assuranceswere obtained at negotiations that XAR shall, by March 31 of each year commencing in1997 and ending three years after completion of the project, furnish to the Bank anannual monitoring report, in a format acceptable to the Bank, covering all components ofthe project, in conformance with the monitoring indicators.

3.68 Reporting. Based on the monitoring activities described in Annex 9, PEO willsubmit to the Bank an annual monitoring report. This report will be based on thefollowing reports, which will be submitted to the Bank during the course of a given year:

(a) Annual environmental monitoring reports during the construction phaseand the first three years of the operation phase of UKH (para. 3.34).

(b) A series of internal and external (independent) monitoring reportsassessing the impact of land acquisition and resettlement on varioussegments of the local population, describing the income restorationstrategies followed and the number of people rehabilitated (para. 3.38 andAnnex ).

(c) Annual audit reports for the project accounts and financial statements(para. 3.65).

(d) Quarterly progress reports for all project activities and up-to-dateperformance indicators (para. 3.66).

(e) A report, by an independent agency/expert, on the completion of thehighway safety component within six months of the completion of thiscomponent.

(f) A Project Implementation Completion Report would be prepared andsubmitted to the Bank not later than six months after the loan closing date.

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4. ECONOMIC EVALUATION

4.1 The economic evaluation focuses on the Urumqi-Kuitun Highway (UKH) andHighway Maintenance components of the project, which account for 85 percent of thetotal project costs. The four linking roads to the UKH are all relatively short, with a totallength of 18.8 km, and since they are essential to the functioning of the UKH, have beenincluded in its evaluation. The other linking roads using existing roads do not need to beimproved.

A. BENEFITS AND BENEFICIARIES

4.2 The existing road from Urumqi to Kuitun is heavily congested on the first 64 kmfrom Urumqi to the starting point of the Wugontai-Karamay road, from which point thetraffic level reduces by about half. Congestion on the second section of the road ispresently lower, but even on this section of the road, traffic will exceed the estimatedcapacity before the proposed UKH is open.

4.3 The existing road is built to Class I standards as far as Changji (29.2 km), to ClassII auto-only standards from Changji to Wugongtai (48.5 km), and to Class II (all users)standards throughout the remainder. The need for additional capacity is therefore similarthrough the length of the corridor, despite the higher present traffic level on the sectionnearest to Urumqi. There is a high proportion of truck traffic on the existing highway,with 11 percent of vehicles being truck-trailers, 17 percent being large trucks, and 27percent being medium trucks, mostly associated with coal- and petroleum-relatedindustries. These two products account for more than 40 percent of the freighttransported in large trucks and 32 percent of the medium truck freight. The continueddevelopment of the petroleum, petrochemical and metallurgical industries in the vicinitywill depend on the availability of good transport access to Urumqi, and this in turn willdepend on the provision of new capacity.

4.4 The proposed UKH would form part of the principal transport corridor linking theeastern provinces of China with central Asia (Russia and Kazakhstan) and through themto Europe. The proposed UKH would improve the prospects for significant growth ininternational trade between the western regions and provinces of China and central Asiancountries with which they have long historic cultural links. A study of transport linkageswith neighboring countries and provinces, as well as within Xinjiang, is included as partof the project and will identify further transport policy or investment measures needed tostimulate international trade.

4.5 In addition to the benefits of reduced vehicle operating costs, which in turn willlead to economic and trade development prospects, provision of a divided highway willreduce the present very high accident rate. This high rate is a consequence of the high

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traffic volume/capacity ratio on a single carriageway road, which reduces theopportunities for one vehicle to safely pass another. The high proportion of relativelyslow moving trucks leads drivers of faster moving vehicles to take additional risks inorder to avoid being delayed. If the UKH is not built, the number of risk situations willincrease faster than the rate of growth of traffic.

4.6 The proposed project will also finance a significant proportion of the agreedhighway maintenance program for the Region. Completion of this program is expectedto improve the average value of the index of highway surface condition (InternationalRoughness Index, IRI) from its current level of 6.7 to about 5.6 mm per m. Agreementson annual maintenance activities and monitoring of highway revenues and expendituresare expected to ensure that adequate funds are allocated to maintenance, despite the needto add to highway capacity during a period of expected high economic growth and levelsof motorization.

B. URUMQI-KUITUN HIGHWAY

4.7 The Existing Corridor. The proposed UKH is part of the highway networkcentered on Urumqi that has consistently been identified as important to the economicgrowth of the region. The area that would be served by the proposed road includes apresent population of about 3.8 million, or about 22 percent of the XAR total. However,as its importance in industrial and agricultural production is greater than in proportion toits population, it accounts for almost half the Regional total for GOVAI. The Region as awhole has experienced high economic growth, averaging more than 10 percent per yearfor the last 15 years. The imminent opening of new production facilities, such as a highcapacity ethylene and alkyl-benzene works, is expected to reestablish the high economicgrowth of a decade ago and result in a large increase in demand for transport

4.8 Urumqi-Kazakstan Railway. The railway that parallels the line of the proposedUKH is operating at substantially less than its full capacity, transporting some 1.58million tons and 0.56 million passengers in 1994. The total length of the line from theborder with Kazakstan to Urumqi is 456 km and from Kuitun to Urumqi, the sectionrelevant as a possible alternative to construction of the UKH, is only 222 km. Railtransport is inefficient compared with road transport over these short distances, and theline is not aimed at such local traffic but, rather, at that traveling the longer distances toBeijing and other cities in the coastal provinces. Less than 25 percent of the projectedtraffic on the UKH will have trip lengths such that rail transport could be a viablealternative. Some of this freight might in the long term transfer to rail, but only when thecombined Xinjiang and MOR operation can be made more attractive to the relativelysmall loads that travel by road, and this is not expected to come about within the next 10years.

4.9 Traffic on the Existing Road. In 1995, traffic between Urumqi and Hutubi(90 km from Urumqi) was more than two and half times higher than six years earlier(Table 4.1) , while on the section between Hutubi and Kuitun, traffic was about double

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the earlier level, representing average annual growth rates of more than 17 percent and 14percent respectively. However, growth in the last five years has been much lower, at 13percent and 6 percent on each of the sections. The lower recent growth can be attributedto a slow down in the coal, petroleum and petrochemical industries, which is now beingovercome with the construction of new capacity and facilities. Traffic already exceedsthe design capacity throughout the Class II section of the existing road and will soon dothe same for the Class I section in the Urumqi urban area. Table 4.1 shows the presentand projected traffic levels in the corridor.

4.10 Traffic Projections. Traffic projections for the proposed highway take intoaccount expected population growth, increases in real incomes that lead to higher demandfor travel and higher levels of motorization, and increases in mineral and petroleumoutput and agricultural and industrial production that will lead to increased freighttransport demand. They also account for the generation of new demand as a consequenceof construction of the proposed road.

4.11 The population of Xinjiang increased at an average annual rate of almost 2 percentbetween 1982 and 1995, with the highest rate of 2.5 percent in the period 1990 to 1995.The population of Urumqi has grown slightly faster, that of Kuitun much faster at morethan 12 percent per year, while that of the region between Urumqi and Kuitun has grownrather slower. Projections of the population of Urumqi are for a growth of about 1.8percent per year until 2000, slowing to 1.25 percent until the end of the study period(2020). For Kuitun they are 3.0 percent and 1.7 percent, while for the intermediate areathey are 1.3 percent and 1.4 percent in each of the periods.

4.12 The economy of the area of influence of the proposed highway is expected togrow about 20 percent faster than the 12 percent, 10 percent and 7 percent projection forthe whole of Xinjiang in the periods 1995 to 2000, 2000 to 2010, and 2010 to 2020. Thebasis for these high projections of growth are the expected developments of agriculturalproduction, with a returning to profitability of cotton and textile production, petroleumproduction and refining and associated petrochemical industries. Industrial productionwith a focus on export-oriented industries is also expected to grow faster than the regionaland national averages, as are industries related to construction and mining. Generatedtraffic is estimated to add 6 percent to the base level of traffic, with 10 percent for tripsthat would travel the full length of the corridor and 4 percent for those making use of thenew road for shorter distances. The results of the traffic projections indicate an averagegrowth rate from 1995 to 2000 of about 14 percent, largely the result of an increase inreal incomes, reducing to just over 8 percent from 2000 to 2010 and to rather more than 4percent from 2010 to 2020 (Table 4.1).

4.13 The proportion of traffic using the proposed new highway was estimated takingaccount of the lower vehicle operating costs and shorter travel times that would result, aswell as the tolls that would need to be paid by users of the road. In the early years ofoperation, when congestion on the existing road would be a deterrent to its use,84 percent of corridor traffic is expected to use the new road, except within the Urumqi

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urban area where it would be only about 78 percent because of the larger number ofalternative routes available. However, as traffic levels on the new road increase, the timeadvantage in comparison with the existing road would reduce, so the expected proportionof traffic diverting to the road would also reduce to between 65 percent and 80 percent bythe year 2020 (Table 4.2).

4.14 The Proposed New Highway. The projected volumes of traffic indicate that thenew highway should be built to full Expressway standards, that is, a four-lane dividedhighway with access control outside the urban area of Urumqi, whereas within the urbanarea, the 17.4 km section from Urabo to Xishan should be built as a Class II accesscontrolled highway, and the 13.2 km section from Xishan to West Station as a Class Ihighway. Traffic volumes and economic evaluations indicate that three of the fourlinking roads should be built to Class II standards, but it is proposed to build the fourthlinking road, that to Manasi, to the same Class II standard to retain operationalconsistency.

4.15 Alternative alignments. Considerations taken into account in the location of theroute included geology, the location of worked and unworked coal seams, risk ofearthquakes, the need to provide a route easily accessible to the intermediate cities andtowns without constructing a barrier to their future development, hydrology including theneed to minimize interference with irrigation canals, and the location of agriculturalproduction units.

4.16 Alternative alignments were considered for the location of the Urumqi urbansection, including the linking road from Shangshahe to West Station, the section fromWest Station to Wugongtai, the section close to Shihezi and the location of the endingpoint close to Kuitun. The economic evaluations of alternatives shown in Table 4.4 wereconsidered together with social and environmnental issues in selecting the preferredalignments from the alternatives considered.

4.17 Interchanges. It is proposed to provide 16 interchanges along the 267 km lengthof the UKH, including those at the start and end, an average of 1 every 17 kin, although 5would be located in the first 30 km within the Urumqi urban area. In addition, therewould be 32 grade-separated crossings of highways, railways and urban roads. Theintersections in the urban area are where the proposed highway would cross otherprincipal roads (two of the interchanges would connect with the TUDH) and elsewherethey are provided for each locality that would generate significant volumes of traffic.

4.18 Link Roads. Most of the proposed interchanges would be located where theUKH would cross existing highways, so construction of new link roads or improvementof existing link roads would not be necessary. The four exceptions where link roadswould be necessary were subject to a detailed operational, economic and socialevaluation.

4.19 Economic Evaluation. Economic analyses, based on April 1995 price levels,were carried out for the route as a whole and for each of its 13 sections. Construction of

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the highway was assumed to start in 1997 and be completed by the end of 2000, and theeconomic life of the highway to be 20 years with a residual value of 50 percent of theoriginal cost. Project costs included annual maintenance and operation of the toll system,and periodic maintenance (pavement overlay) in the tenth year of operation. Economiccosts were derived from financial costs by eliminating taxes, duties and pricecontingencies and by applying shadow prices to construction materials.

4.20 Benefits of the highway were assumed to accrue from savings in vehicle operatingcosts, reductions in travel time and reduced accident costs, this last benefit beingquantified only in terms of reduced vehicle damage cost savings. Vehicle operating costswere assumed to vary with the type of vehicle, average speed of traffic and Class of road(higher costs for a given speed on Class III and Class IV roads), the condition (roughness)of the road surface, and the horizontal and vertical alignment of the road. A comparisonbetween the computed vehicle operating costs on a road network similar to that currentlyprovided and the results of a survey of actual vehicle maintenance costs indicated adifference of less than 5 percent.

4.21 Sensitivity tests. Sensitivity tests were carried out for three alternatives for eachof the linkages to the Urumqi Transit Road, three alternatives for the section of roadbetween Urumqi and Changji, and for each of the four proposed new link roads. Thebasic evaluation made use of the lowest of the three projected traffic levels and assumedthat tolls would be charged at a level that would balance economic and financialconsiderations. Sensitivity tests were made with a higher demand projection, with tollsthat optimized financial returns as well as a situation with no tolls, and with a zerovaluation of travel time savings to vehicle occupants.. Further sensitivity tests werecarried out with increases of costs of up to 20 percent, reductions of benefits of up to 20percent and combinations of these value. Probabilities were assigned to each differentcombination of costs and benefits, and an expected value of the economic rate of returnderived from them.

4.22 Economic evaluation results. The economic evaluation of the proposed projectas a whole yielded a best estimate EIRR of 20.6 percent and a probability weighted EIRRof 19.3 percent. For the EIRR value to fall below the threshold value of 12 percent, costswould need to be at least 25 percent higher than estimated at the same time as benefitswould need to be at least 25 percent lower than estimated. The probability of thisoutcome was assessed at less than 4 percent. The weights used in determining theprobability weighted result ("Expected" EIRR) are shown in Table 4.4, together with thecontribution of each element to the overall result.

4.23 The basic EIRR values for each of the 13 road sections were between 16 percentand 23 percent, with the lower values generally being for the sections of road further fromUrumqi (Table 4.4). The selected alternative for connection to the Urumqi Transit Roadas a Class II Highway to be built in a single stage had an EIRR in excess of 27 percentand the selected alignment for the section between Urumqi and Wugontai in excess of 20percent. Three of the proposed link roads had an EIRR in excess of 25 percent, while the

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fourth (that to Manasi) with only a marginally acceptable EIRR of 12.1 percent, wasincluded in the project because of the additional benefits it would bring to local trafficwhich were not included in the evaluation. Elimination of the benefits of time savingsshowed a reduction in the EIRR to 18.5 percent.

4.24 Effect of tolls. A toll of about 16 fen/veh-km (US 1.7 cents veh-km) would besufficient to finance loan amortization charges. This level of toll is substantially lowerthan those presently being applied on toll roads in coastal provinces. The sensitivity testswith respect to operation of the road without tolls showed an increase in the EIRR to 23percent. Sensitivity tests to the level of tolls (Table 4.5) showed that even at a toll ofabout 42 fen/veh-km (about US 5 cents at December 1995 prices), the EIRR is still within75 percent of its maximum value and the FIRR has almost reached its maximum. Abovethis level of toll, the EIRR falls rapidly while the FIRR also falls as the cross-elasticity ofdemand becomes greater than 1.0, so a proportionate increase in toll produces a less thanproportionate increase in revenue.

4.25 The level of tolls would be established just before opening of the road, and wouldtake account of the conflicting objectives of recovering sufficient revenue to finance loanamortization charges while not deterring a high proportion of traffic from using the roadand thereby reducing its economic benefits. The toll will also take account of usersconcerns that they should not be charged twice for construction of the proposed highway,once through the toll and again through the Road Maintenance Fee (RMF), part of whichis allocated to new road construction. It is this concern that has led to the currentpreference to set the toll level to cover only the loan amortization cost and not that part ofthe cost financed by the RMF. Private finance of the full construction cost would requirea toll of about 50 fen/veh-km (US 6 cents) to give an acceptable rate of return toproviders of both debt and equity, and this level would substantially reduce the economicbenefits of the project. XHGHCA would submit to the Bank by April 30, 2000, a studyof the tolls to be charged.

4.26 Financial Evaluation. It is intended that the UKH be operated as a toll road,with an open tolling system. This would result in greater cost savings than revenue lossesin comparison with a closed toll system. There would be three on-route toll stations, atChangji, Manasi and Kuitun, and five on-ramp toll stations, at Bagang, Changji,Wulawusu, Shawan, and Anjihai interchanges.

4.27 Although the net present value of toll revenues exceeds that of loan amortizationpayments, the cash flow from toll revenues would generate sufficient funds in the earlyyears of the project to finance amortization payments based on a conventional Bankrepayment schedule of equal repayments throughout the period of the loan. Since therevenue would be much higher in the later years of the project, the repayment schedule onwhich the toll rate was determined more closely paralleled the revenue stream from tollpayments. In addition, the toll revenues are calculated in money rather than real terms,since the loan amortization payments are independent of inflation, but the revenues willdepend on how tolls are adjusted to keep up with inflation.

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4.28 Highway Maintenance. The 30 sub-projects proposed for the first year of thehighway maintenance program, covering a total road length of 562 km, have also beensubjected to an economic evaluation. The sub-projects were of two types, a 40-mmasphalt concrete overlay, to be applied to 57 percent of the length ("overlay"), and a 60-masphalt concrete overlay and a 200-mm base course ("strengthening") for the remainder.The evaluated benefits of the sub-projects included reduced vehicle operating costs androutine highway maintenance costs. The mean EIRR for these first year sub-projects was92 percent with a standard deviation of 44 percent, and a range from 14 percent to morethan 400 percent, with similar values for each of the two types of sub-project. These highEIRR values indicate that higher expenditure on periodic maintenance would be justified,as is proposed in the highway improvement program of the XHAB, which includes manyperiodic maintenance activities as part of broader improvements.

C. PROJECT RISKS

4.29 The principal risks are related to implementation delay, lack of counterpart fundsand insufficient institutional capacity. Based on the experience of the ongoing XHP1,these risks are lower in Xinjiang than in other provinces and regions. The risk of costoverruns is small, given the relatively easy geological conditions of the area in which theroad would be constructed and the strong management of XHGHCA. Experience withXHGHCA during the implementation of the TUDH has been excellent, their havingdemonstrated not only strong management, but also an ability to ensure adequate andtimely availability of finance. The perception of risk of a lack of counterpart funds arisefrom two considerations. First, the projected future revenues of the highway sectorinclude borrowing and an assumed strong economic growth and consequent increase inthe number of vehicles to generate revenue to amortize the loans. Should the expectedrate of growth not come about, sector revenues would not reach their projected levels, butborrowing and repayment commitments would already have been made. The Region'shighway sector might therefore find itself unable to meet its counterpart financingobligations.

4.30 Second, the conditionality of the proposed project requires a significant increasein expenditure on maintenance and rehabilitation of the existing highway network. Thisnetwork was not designed for the volumes of traffic or weights of trucks now using it. Ifthe planned rehabilitation does not take place, the condition of the network will quicklydeteriorate to unacceptable levels. The combination of increased maintenanceexpenditure, loan amortization payments, and counterpart funding obligations willconsume almost all the projected sector revenue, even if the expected economic growthdoes take place. Any increase in maintenance and construction costs will rapidly take upthe small margin of projected revenue over expenditure and put in risk all of the proposedinvestments.

4.31 Fortunately, the sector agencies are aware of this risk and are proposinginstitutional changes that will go far in ensuring that adequate funds are available. Theproposals would convert XHGHCA into a highways operating rather than a highways

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construction agency, possibly with responsibilities for more than just the high-gradehighways that is presently responsible for constructing. With revenue and expenditurefor the whole highways sector under a single agency, the risks of inadequate financingwould be greatly reduced.

4.32 Specific measures to reduce project risks would include:

(a) intensive review of final designs both by independent internationalconsultants and Bank staff before Project approval by the Board, tominimize the risk of subsequent changes;

(b) intensive supervision of construction both by local staff of XHGHCA andintemational consultants to ensure strict adherence to designs andmaterials quality; and

(c) annual review and agreement by the Bank of the proposed highwaymaintenance program and budget for the subsequent year, as well as adetailed review of the previous years performance.

4.33 It is possible that should traffic volumes and toll revenues on the new UKH fail tomeet expectations, XHGHCA would be tempted to discourage use of the existing road byimposing tolls or failing to undertake adequate maintenance. The risk of failure of thenew road to attract sufficient traffic to provide adequate toll revenue will be reduced byensuring that all cost effective measures are taken to increase attractiveness of the newroad while not reducing that of the existing road. These measures would includeprovision of safety features to reduce accidents and service and rest areas.

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5. AGREEMENTS REACHED AND RECOMMENDATION

5.1 Agreement was reached with the Central Government at negotiations that it wouldmake the proceeds of the loan available to XAR on the same terms as those of the Bankloan to it: 20 years, including 5 years of grace, at the same rate payable to the Bank bythe Borrower, with 0.75 percent per year commitment fee on the outstanding balance,beginning 60 days after signing, less any waiver (para. 3.42).

5.2 During negotiations, assurances were obtained from XAR that:

(a) XAR would, by March 30 of each year commencing in 1997 and ending in2003, furnish an annual highway maintenance report for the Bank's reviewand comments, which would: (i) show the length of each class of road bycondition (good, fair, and bad); (ii) establish targets for the following year,including an estimate of the required physical works (routine maintenance,periodic maintenance, rehabilitation and upgrading) and the cost thereof;and (iii) measure the results and the actual expenditures against the targetsand the budgeted funds in a format acceptable to the Bank (para. 2.26).

(b) XAR would, by January 31 of each year commencing in 1997 and endingin 2000, furnish an annual highway maintenance and rehabilitationprogram report for the Bank's review and comments, which would:(i) show the maintenance and rehabilitation activities undertaken duringthe previous year including costs; (ii) show the results of IRI on the pavedhighway network; and (iii) establish targets for the following year,including an eestimate of the proposed works, costs and expected IRI(para. 3.19).

(c) XAR would, by December 31, 1996, establish and maintain: (i) a LeadingGroup for traffic safety coordination, policy-making and planning, withfunctions and responsibilities acceptable to the Bank; and (ii) a HighwaySafety Secretariat to prepare work for the Leading Group, with functionsand responsibilities acceptable to the Bank to carry out a black spotidentification and improvement program, and establish safety auditprocedures and checks under terms of reference satisfactory to the Bank.Also, XAR would, pursuant to terms of reference acceptable to the Bank:(i) by October 31, 2000, complete a black spot identification andimprovement program; (ii) by October 31, 2000, complete a program toimprove road signs and markings; and (iii) by December 31, 2001, have anexpert acceptable to the Bank prepare an evaluation of its Highway SafetyProgram according to indicators acceptable to the Bank (para. 3.28).

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(d) XAR would: (i) by December 31, 1996, establish a review panelcomprising representatives of the central government and Xinjiang Regionto guide the said study and provide comments on the results andrecommendations thereof; (ii) undertake and, by June 30, 1998, completethe Regional Transport study in accordance with terms of referencesatisfactory to the Bank; (iii) by September 30, 1998 furnish the said studyto the said review panel for review; and (iv) take appropriate steps toimplement the recommendations of the study, taking into account thecomments thereon of the said review panel (para. 3.31).

(e) The environmental protection measures stipulated in the EAP, with respectto the UKH and its linking roads, would be carried out in a mannersatisfactory to the Bank. Also, XAR shall furnish to the Bank an annualenvironmental monitoring report for UKH during the construction phaseand for each of the first three years following completion of construction(para. 3.34).

(f) All land acquisition and resettlement activities with respect to UKH, andits linking roads would be completed according to the RAPs in a mannersatisfactory to the Bank (para. 3.37).

(g) XAR shall, for UKH, furnish to the Bank: (i) by March 31 and September30 of each year starting September 30, 1996, internal monitoring reportsprepared by appropriate agencies of Xinjiang; and (ii) by June 30 andDecember 31 of each year starting December 31, 1996, externalmonitoring reports prepared by an independent agency acceptable to theBank regarding the implementation and input of the resettlement activitiesduring the previous six months and carry out the monitoring of theeffectiveness and socioeconomic impact of the resettlement process forUKH and its linking roads according to the monitoring plan in a mannersatisfactory to the Bank (para. 3.38).

(h) XAR shall, by October 31 of each year commencing in 1997, furnish therolling two-year training implementation schedule to the Bank and shallcarry out the training under terms of reference and in a manner satisfactoryto the Bank (para. 3.49).

(i) XAR shall undertake and, by April 30, 2000, complete and furnish to theBank for its review and comments, an analysis and recommendation forthe toll rates on the UKH, taking into consideration the results of the TollRate Studies under the Bank-financed highway projects in China, as wellas experience with tolls on major roads in China (para. 3.52).

(j) The project accounts and the Special Accounts, including SOEs, would beaudited by independent auditors acceptable to the Bank and that audit

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reports would be sent to the Bank for review within six months of theclose of each fiscal year (para. 3.65).

(k) XAR shall prepare on the basis of guidelines acceptable to the Bank andfurnish to the Bank: (i) a monthly report of the progress of works on UKH;(ii) a quarterly report of implementation progress of all components; and(iii) by March 31 of each year commencing in 1997, and ending threeyears after completion of the project, furnish to the Bank an annualmonitoring report, in a format acceptable to the Bank, covering allcomponents of the project to measure the extent to which differentimplementation and impact objectives are being attained in the course ofproject execution and operation (para. 3.67).

5.3 Subject to the foregoing, the proposed project would be suitable for a US Dollarsingle-currency Bank loan of $300 million to the People's Republic of China. The loanwould be for a term of 20 years, including a grace period of 5 years, at the Bank'sstandard variable interest rate for LIBOR-based US Dollar-denominated single-currencyloans.

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TABLE 1.1: TRAFFIC TURNOVER BY MODE, 1980-94

TURNOVER VOLUME OF FREIGHT TRAFFIC(billion ton-km)

PetroleumCivil and gas

Year Total Railway Highway Waterway aviation pipelines

1980 1,202.60 571.69 76.40 505.28 0.14 49.101990 2,620.70 1,062.24 335.81 1,159.19 0.82 62.701993 3,051.00 1,195.46 407.05 1,386.08 1.66 60.801994 3,327.40 1,246.20 448.10 1,570.40 1.86 60.80

Compound annual 7.54 5.72 13.47 8.44 20.29 1.54growth rate,1980-94 (%)

Compound annual 6.15 4.07 7.48 7.89 22.72 -0.77growth rate,1990-94 (%)

TURNOVER VOLUME OF PASSENGER TRAFFIC(billion passenger-km)

CivilYear Total Railway Highway Waterway aviation

1980 228.1 138.3 73.0 12.9 4.01990 562.8 261.2 262.0 16.5 23.01993 785.8 348.3 370.1 19.6 47.81994 851.1 363.7 414.7 17.5 55.2

Compound annual 9.86 7.15 13.22 2.20 20.72growth rate,1980-94 (%)

Compound annual 10.89 8.86 12.16 1.50 24.40growth rate,1990-94 (%)

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TABLE 1.2: ROAD ACCIDENT RISKS IN VARIOUS COUNTRIES, 1993

Number of Vehicles per Number of Fatalities per Fatalities perVehicles 1,000 Fatalities 10,000 100,000

Country ('000) P La ('000) L Population (Person) L Vehicles Population

CHINA 1,185,170 13,823 12 63,551 46.0 5.4

Xinjiang (1994) 16,327 224 14 1,712 76.0 10.0

Shaanxi (1994) 34,800 214 6 1,604 75.0 0.5

Henan (1994) 90,300 452 5 3,648 80.7 0.4

Brazil 153,900 13,469 88 5,500 4.1 3.6

CanadaLd 27,400 20,632 753 3,485 1.7 12.7

Costa Rica 3,200 396 124 235 5.9 7.3

Denmark 5,200 1,991 383 573 2.9 11.0

EgyptA 54,700 1,986 36 4,315 21.7 7.9

France 57,400 32,440 565 9,052 2.8 15.8

GermanyZ/ 80,600 43,826 544 10,643 2.4 13.2

HungaryLd 10,300 2,510 244 4,577 18.2 44.4

Indiak 883,600 16,479 19 54,058 32.8 6.1

Indonesia/¢ 184,300 8,889 48 10,887 12.2 5.9

Japan 124,500 79,761 641 10,942 9.6 8.8

Mexico/A 85,000 11,368 134 5,252 4.6 6.2

Norway 4,300 2,981 693 281 0.9 6.5

Pakistan 119,300 2,279 19 6,299 27.6 5.3

Poland 38,400 9,247 241 6,341 6.9 16.5

Korea 43,700 8,210 188 10,402 12.7 23.8

Spain/A 39,100 19,128 489 6,014 3.1 15.4

Thailand 58,000 10,243 177 9,496 9.3 16.4

Turkey 58,500 5,648 97 6,444 11.4 11.0

UK 57,800 25,448 440 4,229 1.7 7.3

USALd 255,400 195,706 766 39,235 2.0 15.4

Ln Mid -1992 population; World Development Report, 1994, pp. 162 -3.1 Analysis of accident rates may be limited by the fact that number of vehicles sometimes includes only motor vehicles.

However, figures vehicles have been adjusted to include nonmotor vehicles where data was available. Provincial data on theincidence of accidents is based on motor vehicles plus tractors and motorcycles; however, does not include bicycles or othervehicles that may contribute to the rate of accidents.

L World Road statistics 1989-1993, Intemational Road Federation.Ld Data for 1992.IS Data for 1990.

TABLE 1.3: CHINA: BANK GROUP-FINANCED TRANSPORT PROJECTS

Loan/ Loan amount,(credit) Board Date Closing S million (SAR)

Project name number date effective date Bank IDA Status

RAILWAYSRailway Project 2394 03/27/84 07/10/84 12/31/90 220.00 ClosedSecond Railway 2540 05/14/85 11/22/85 06/30/94 235.00 ClosedThird Railway 2678/(1680) 04/15/86 01/13/87 06/30/93 160.00 70.00 OngoingFourth Railway 2968 06/23/88 03/27/89 12/31/93 200.00 OngoingInner Mongolia Local Railway 3060/(2014) 05/12/89 01/03/90 12/31/96 70.00 80.00 OngoingFifth Railway 3406 09/24/91 01/09/92 12/31/98 350.00 OngoingSixth Railway 3581 03/25/93 07/14/93 12/31/99 420.00 OngoingSeventh Railway 3897 06/01/95 12/31/2002 400.00 Ongoing

Subtotal 2.055.00 150.00

Total Loan and Credit Amount 2.205.00

HIGHWAYSHighway Project 2539/(1594) 05/14/85 12/04/85 06/30/91 42.60 30.00 ClosedBeijing-Tianjin-Tanggu Expressway 2811/(1792) 05/12/87 12/08/87 12/31/92 25.00 125.00 OngoingSichuan Provincial Highway 2951/(1917) 06/09/88 05/31/89 12/31/94 75.00 50.00 OngoingShaanxi Provincial Highway 2952 06/09/88 05/31/89 12/31/94 50.00 OngoingJiangxi Provincial Highway (1984) 02/07/89 05/31/89 12/31/95 61.00 OngoingShangdong Provincial Highway 3073/(2025) 05/25/89 12/11/89 06/30/95 60.00 50.00 OngoingZhejiang Provincial Highway 3471 05/19/92 09/02/91 12/31/96 220.00 OngoingGuangdong Provincial Highway 3530 11/17/92 04/16/93 06/30/99 240.00 OngoingHenan Highway 3531 11/17/92 04/16/93 06/30/98 120.00 OngoingFujian Highway 3681 12/14/93 07/24/94 06/30/200 140.00 OngoingNational Highway 3748 06/07/94 10/24/94 06/30/2000 380.00 OngoingXinjiang Highway 3787 08/30/94 02/09/95 12/31/2000 150.00 OngoingShanghai-Zhejiang Highway 3929 08/01/95 01/31/96 260.00 Ongoing

Subtotal 1762.60 316.0

Total Loan and Credit Amount 2,078.60

TABLE 1.3: (CONT'D)

Loan/ Loan amount,(credit) Board Date Closing $ million (SAR)

Project name number date effective date Bank IDA Status

PORTS AND WATERWAYSThree Ports 2207 11/02/82 02/02/83 06/30/88 124.00 ClosedTianjin Port 2689 05/06/86 03/20/87 12/31/92 130.00 ClosedHuangpu Port 2877/(1845) 10/06/87 10/03/88 12/31/93 63.00 25.00 ClosedDalian Port 2907/(1975) 02/09/88 10/03/88 12/31/93 71.00 25.00 ClosedNingbo and Shanghai Ports 3006 12/13/88 05/09/89 12/31/93 76.40 OngoingXiamen Port 3007 12/13/88 01/09/90 03/31/94 36.00 ClosedShip Waste Disposal 2391 06/17/92 12/31/92 06/30/96 15.00 OngoingShanghai Port Restructuring and Development 3552 12/22/92 05/13/93 06/30/99 150.00 OngoingInland Waterways I 3910 06/20/95 12/31/95 06/30/2001 210.00 Ongoing

Subtotal 860.40 600

Total Loan and Credit Amount 925Q40

MULTIMODALJiangsu Provincial Transport 3316/(2226) 04/09/91 09/06/91 06/30/96 100.00 53.60 OngoingTransport Rehabilitation (2015) 05/24/94 09/09/94 09/30/99 30.00 Ongoing

Total Loan and Credit Amount 183.60

URBAN TRANSPORTShanghai Metropolitan Transport (2296) 09/10/91 09/10/91 06/30/98 60.00 OngoingSecond Shanghai Metropolitan Transport 3652 10/14/93 03/08/94 12/31/98 150.00 Ongoing

Total Loan and Credit Amount 210.00

GRAND T OTAL 5.602.60

Source: Compiled by the mission.

TABLE 2.1: XINJIANG: FREIGHT AND PASSENGER TRAFFIC, 1985-94

A. Freight Traffic

Year Tons Transported Tons-Kilometers Average Haul distance/ aRailways Highways Civil Pipeline Total Railways Highways Civil Pipeline Total Railways Highways Civil Pipeline

Aviation Aviation Aviation(million) -ml(m iion) -( h olom eters)

1985 12.78 88.47 0 5.56 106.81 10,202 6,125 1 1,145 17,473 798 69 945 2061989 16.44 126.55 0.01 5.99 148.99 13,267 11,690 2 1,373 26,332 806 92 2,397 2291990 16.90 115.51 0.01 6.77 139.19 14,116 10,809 2 1,284 26,211 835 94 2,354 1901991 17.63 145.37 0.01 6.87 169.88 16,334 12,907 2 1,254 30,497 926 89 2,353 1831992 18.90 133.90 0.01 7.61 160.42 17,348 12,192 3 1,328 30,871 918 91 2,419 1751993 20.18 351.28 0.01 7.81 379.28 18,340 17,680 3 1,275 37,423 913 50 3,722 1631994 23.18 365.47 0.02 8.81 399.48 20,764 14,976 5 1,300 37,089 896 41 2,500 148

Annual Growth(%/) (1985-94) 6.8 17.1 19.6 5.2 15.7 8.2 10.4 19.6 1.4 8.7

B. Passenger TrafficU'

Year Passengers Passenger- kilometers Average travel distance /bRailways Highways Civil Total Railways Highways Civil Total Railways Highways Civil

Aviation Aviation Aviation-(million) - (million)----- (klmees

1985 3.20 33.99 0.09 37.28 3,315 2,913 87 6,315 1,036 86 9691989 4.53 82.40 0.47 87.40 4,452 6,637 980 12,069 983 81 2,0861990 3.88 91.61 0.53 96.02 3,796 5,511 1,087 10,394 978 60 2,0251991 3.83 141.42 0.57 145.82 4,194 6,805 1,209 12,208 1,095 48 2,1211992 4.25 144.90 0.82 149.97 4,448 7,538 1,838 13,824 1,047 52 2,2411993 5.13 307.54 0.90 313.57 5,000 15,151 2,073 22,223 975 49 2,3931994 6.70 309.55 1.06 317.31 5,808 15,074 2,500 23,382 807 49 2,358

Annual Growth(%) (1985-94) 8.6 27.8 31.5 26.9 6.4 20.0 45.2 15.7

da Average haul distance = ton-kilometers/tons transported./b Average travel distance = passenger-kilometers/passengers.

Sources: Xinjiang Statistical Yearbook, 1995.Xinjiang Communications Department.

- 54 -

TABLE 2.2: XINJIANG: ROAD NETWORK, 1994

ClassificationSub- Total Percentage

By administration I II III IV standard (km) of total

National 31 3,002 3,428 1,409 663 8,533 29.8(0) (2,853) (2,817) (1,490) (1,543) (8,703) (39.4)

Provincial 3 1,003 2,527 1,968 1,296 6,797 23.8(0) (379) (1,274) (1,952) (2,062) (5,667) (25.7)

County 0 64 2,187 6,499 1,473 10,223 35.7(0) (13) (55) (1,094) (4,861) (6,023) (27.3)

Township 0 0 1 48 803 852 3.0(0) n/a n/a n/a n/a n/a n/a

Other 4 62 364 1,493 283 2,206 7.7(0) (52) (239) (819) (580) (1,690) (7.6)

Total 38 4.132 8,554 12172 3.715 28.611 100Q.(o! (3 297) (4-385) (5.355) (9.046) (22.083) (100-0)

Percentage of total 0.1 14.4 29.9 42.6 13.0 100.0(0) (14.9) (19.9) (24.2) (41.0) (100.0)

Note: Numbers in (x) show the data in 1983.

Source: Xinjiang Communications Department.

TABLE 2.3: XINJIANG: LENGTH OF HIGHWAY BY TRAFFIC MIX AND ADT,NATIONAL AND PROVINCIAL ROADS ONLY La

(km)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Total observed 12,349 12,103 12,215 12,210 12,840 14,325 13,820 13,669 14,546 15,330length

Mixed TrafficADT>10,000 - - - - 7 - 14 21 30ADT 5,001-10,000 342 155 213 140 258 280 328 350 385 413ADT 2,001-5,000 1,420 2,098 1,359 1,397 1,144 1,239 1,894 1,337 2,252 2,337ADT 301-2,000 6,587 5,961 8,847 7,941 8,577 7,506 6,853 7,043 7,277 8,344ADT <300 621 3,889 1,934 2,732 2,861 5,293 4,745 4,925 4,611 4,338

Motor VehicleTraffic OnlyADT >10,000 - - - - - 7 7 14 21 30ADT 5,001-10,000 86 77 140 130 56 106 160 414 328 390ADT 2,001-5,000 963 1,616 687 764 800 876 1,252 1,966 2,020 2,118ADT 301-2,000 5,698 6,159 8,026 7,043 6,486 5,861 6,446 7,214 7,810 8,012ADT <300 5,602 4,251 3,182 4,173 4,328 7,475 5,955 4,061 4,367 4,912

/a ADT = Average Daily Traffic (both directions), expressed in medium vehicles per day.

Source: Xinjiang Highway Administration Bureau.

Table 2.4: XINJIANG: VEHICLE FLEET, 1985-94

Annualgrowth (°/)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1985-94

Large trucks (>7 tons) 60,977 62,992 60,293 60,372 61,475 62,798 67,678 73,964 78,257 83,019 3.3Medium & small trucks 3,312 6,468 10,325 14,844 17,776 19,536 22,293 26,945 33,629 37,554 33.2Buses (>25 seats) 4,752 5,173 4,975 6,144 6,735 7,225 7,776 8,607 9,696 12,275 11.8Small buses & passenger cars 11,727 15,168 18,218 19,897 22,294 25,280 30,434 36,093 51,280 63,939 21.0TrucksforspecialuseLa n/a n/a 6,363 7,216 7,246 8,093 9,419 11,676 15,133 16,578 17.5Other vehicies for special usc Lb n/a n/a 2,218 4,036 4,365 4,886 5,365 6,164 6,752 7,187 10.1Specific vehicles ( 7,467 6,332 1,763 1,831 2,149 2,279 2,469 2,734 3,167 3,086 9.3L

Subtotal 88235 2396133 104.155 114.340 122.040 130097 145 434 166.183 197M916 223.638 11

Wheel tractors 83,578 12,910 107,658 115,974 116,277 133,588 177,967 192,270 249,616 193,778 10.9Motorcycles 23,967 30,077 32,933 43,146 55,456 63,587 73,849 87,347 107,600 120,406 35.9Other vehicles Id 2,121 3,730 1,307 2,797 4,036 3,578 4,380 7,149 9,475 12,265 23.2 LA

iotl 197-901 142d130 246.053 276.257 297L908 330.850 401.630 452.949 504.601 550087

la Includes dump trucks, oil tankers, refrigerated trucks and cement tankers.L Includes water bowsers, workshop cars, post delivery cars, veterinary cars, cars for epidemic prevention and truck cranes./c Includes fire trucks, ambulances, wreckers and sentry trucks.Ld Includes electric cars and agricultural transport vehicles.l: Annual growth rate during 1987-94.

Source: UKH Project Feasibility Study Report, First Highway Survey and Design Institute.

- 56 -

TABLE 2.5: XINJIANG: ROAD ACCIDENTS (1985-94)

Year Number of accidents Number of fatalities Number of persons injured

1985 5,174 942 2,8201986 5,799 1,183 2,8681987 5,989 1,130 3,2011988 7,050 1,384 3,5361989 5,546 1,233 2,7661990 5,160 1,193 2,6021991 5,280 1,292 2,6461992 4,077 1,364 2,2681993 4,102 1,568 2,6391994 4,490 1,712 2,884

Source: Xinjiang Communications Department.

Table 2.6: XINJIANG: HIGHWAY REVENUES AND EXPENDITURES

- Seventh Five-Year Plan Eighth Five-Yesr Pla - -Ninth Five-Year Pla1986 1987 1988 1989 1990 Total 1991 1992 1993 1994 1995 Total 1996 1997 1998 1999 2000 Total

1. Mwannance fee 321.88 341.37 354.54 45066 560.86 2,029.3 5049 66090 743.00 860.25 963.48 3,878 1 1,0791 1.2086 1,353.6 1,516.1 1,6980 6,855.4of which: Amount 28946 30846 32130 415.02 52246 1.8564 0985 620.00 72005 8,1437 91464 3,6789 951 1 1,0591 1,18541 1,337.1 1,40261 5,935.32

retaied by XCD for cor-aticson and mainteiance

2 Tolls fom high-grade /-6n I- I- I- I I I I I / / I / / 6811 7516 143.27Lighways

3 GraingfmmMOC 3950 42.50 43.60 53W0 47.00 2264 5485 1109 117.10 15000 20500 63785 264 524 552 490 500 2,330of which:llJDH /- /- / - I I I / / 70 00 100 00 170 00 64 00 64 00 62 00 / / 190.00

UICH / I I I / I I I I I / I / 260.00 290.00 290.00 30000 1,140004. GrantsfromtheRegion 2200 23.00 20.00 8.00 9.60 82.6 850 I 2.5 2.5 300 16.50 300 3.00 300 300 300 15005. Odtera 2.64 3.2 6.42 498 2.90 2014 1.73 500 35S 5000 12000 1S02S 13440 15053 16859 18882 2114F 853.826. Externalbotrwmg / I I I I I I I I / 25131 25131 371.20 1,051.8 970.7 640.0 6300 3,6637

of whirch:TUDH / I I I I I I / I / 251.31 251.31 37120 351.8 3307 / 1,0537UJKH / I I I I I I I I I / I / 700 640 640 630 2,610

7. ReliefWorkforcounty / I I I I I I I I 1 43 43 43 43 43 43 43 215aDd village mods

ToQal 3t6.0.2 410.07 426 51744 620.36 2-3584 1.5L7 776. S 1.062.8 1585.79 .007 1.8947 2.98093 3.090.8 2.949.03 3.160.64 14.076.19

nI. EzditusI. TransferstoEnergyand 15.00 1500 15.00 1500 1500 4500 1500 1500 1500 1500 1500 7500 / / I I I /

Communication Fund2 Tunafemn oB Bdaet 10.00 10.00 10.00 10.00 10.00 50.00 10.00 10.00 1000 10.00 10.00 50.00 1000 1000 1000 10.00 1000 5000

Adjutilmnt' Fund3. PablicSeourity Bureautraffic 7.42 791 8.24 1064 13.40 4761 15.64 1590 1795 2088 1107 8144 12 135 15 17 20 775

reldation esp# Vl

4 Maintesswnce nd contruction 27937 298.82 308.82 395.41 491 10 1,773.5 7951 63586 7127 89938 1,0471 4,23216 1,7237 2.78843 2,8797 2,72703 2,822.25 12,941 11

(a) Routine mamineance 49.00 5363 53.69 5452 6834 279.18 7006 3801 9400 10165 110 41412 115 125 125 135 150 650(b) Periodiscmaintenance 16.00 26.10 21.37 39.54 54.06 157.07 58.26 62.99 89.9 98.6 6.5 316.29 17 185 185 185 185 757(c) Reabilitatoneandnew 111.92 146.23 153.76 226.71 283.55 922.17 40.52 37251 40826 52667 1,10221 2,75017 1.3684 2.3127 2,5117 2,316 2,11473 10,623.63coescesnt 9

of whids :Q)TUDH / I I I I I I / 78.79 227.90 590.92 89761 680.6 660.5 6317 / 1 1,9728(i)JUKH I I I I I I I / 1028 1773 7126 9927 30000 1,230.0 1,2600 1,270 1,21073 5,27073

(d) Subsidy of county 3460 35.41 3635 3762 3900 182.98 4195 4802 5050 7980 50 27027 57 70 77 88 97 389and village rotb(e) Emergency and 46 25 14.02 18.55 1109 19.74 109.65 38.43 59.53 14 5 24 00 13 149 46 20 00 21 00 24 00 20 00 25 00 110nr dinaers(f) Other 21.60 23 43 2510 25 93 26.41 122.47 30 29 54 80 55 10 68.63 80 288.82 76.59 80.12 82 84.77 88 41148

5 Adminristrstionexpenes/ 4820 50.01 52.20 54.29 56.46 261.16 58.72 61.07 703 749 9061 3556 66 83 9619 102 12417 471366 Othereexpe_o L 2603 2833 3030 3210 3440 151 16 3670 3897 40.2 4262 5431 2128 40 43 47 50 55 235

7. Repayment of loans I I I I I I I I I I / / I I 86.22 86 22

RPliefworkforcountyand I I I I I I I I I / 43 43 43 43 43 43 43 215village roads

IQ l386 02 41007 42456 51744 62036 2358.5 1557 7768 B662 10628 1585£79 507 1.894.7 2.98093 3.090.89 2.949.03 3.16Q64 14.07619

L ",'meam nil.& Otber revenues include funds resuling from construction of private roads (by XCD units) to major traffic generatorsL Administuation ex_pen include expene for administration ad management of maintenance deparutmetts/units, comntucrion

of ancillary works, technology development, scientific reseach and training/education, investigations of trefic volumes and roadcondition sveys, contsuction of brming for staff, cotnstuction and maintenance eqwupment, communications equipment, and collection nd mangement f road maintenace fee

g Other expenses include expene for social security. retired personnel, schools for employees' children, labor inurance, safety and public relations

Suc Xinjiang Communications Departsnent, November 1995

Table 2.7: Xinjiang Trunk Highway Improvement Program in 9FYP (1996-2000)

Ninth Five-Year Plan (Y million)

Name of Project Length Original Proposed standard Planned Remarksstandard schedule 1996 1997 998 1999 2000 Total

Turpan-Urumqi- 283.3 New Class-I, 101 km 95-98 680.6 660.5 631.7 1,972.8

Dahuangshan construction Class-li vehicle only,182bm

Urumqi-Kuitun 266.64 New Expressway 218.6 km 97-2000 300 1,230 1,260 1,270 1,210.73 5,270.73construction Class-I, 30.6 km

Class-Il, vehicle only17.4 km

Bachu-Babanshuimo 160 Class 1, 111 Class-Il 96-99 50 50 100 150 350

Altay-Buljin Ill Substandard Class-Il 96-97 100 100 200

Turpan-Shanshan 90 Class 11, III Class-Il vehicle only 97-2000 40 80 50 170

Wuchia-Yelkstan 150 Substandard Class-IlIl 96-98 67.89 62.2 79.91 210 Cross borderhighway due to theopen door policy.

Altay-Hongshanzui 150 New Class-IlIl 97-2000 30 50 96 84 260 Cross borderconstruction highway due to the 00

open door policy.

Yining-Dularta 80 Substandard Class-IlL 98-2000 30 30 50 110 Cross borderhighway due to theopen door policy.

Balikun-Laohuangmiao 180 New Class-Ill 98-2000 50 140 130 320 Cross borderconstruction highway due to the

open door policy.Zhaosu-Muzharte 110 New Class-l1l 98-2000 40 60 60 160 Cross border

construction highway due to theopen door policy.

Mulei-Wulasitai 140 New Class-l1l 98-2000 50 70 80 200 Cross borderconstruction highway due to the

open door policy.

Key sections of 250 Improvement 96-2000 80 80 80 190 170 600

National Highway 314Key sections of 300 Improvement 96-2000 90 100 100 230 280 800

National Highway 217& 218

TQlh 2253.22 1.368.49 2.312.7 2.511.7 2.3J 2,114.73 10.623.63

- 59-

TABLE 3.1: PROJECT COST SUMMARY

(December 1995 prices: $1.00 = Y 8.2)

Y million S million ForeignLocal Foreign Total Local Foreign Total costs (%)

A. WORKS(a) UKH

(i) Civil Works, inc. Link Roads La 1,383.1 1,383.0 2,766.1 168.7 168.6 337.3 50(ii) Stabilization of abandoned mines 20.0 20.0 40.0 2.4 2.4 4.8 50(iii) Buildings 130.9 56.0 186.9 16.0 6.8 22.8 30(iv) Supply and installation (E&M) 19.6 78.5 98.1 2.4 9.6 12.0 S0

(b) Highway maintenance 331.3 246.0 577.3 40.4 30.0 70.4 43(c) Highway Safety 14.4 14.3 28.7 1.8 1.7 3.5 50

Subtotal 1 89923 1.797.8 3.697.1 231L2 212A1 4 49

B. CONSTRUCTION SUPERVISION(a) UKH and Linking Roads 65.5 28.3 93.8 8.0 3.4 11.4(b) Highway Maintenance (HMC) 2.8 0.6 3.4 0.3 0.1 0.4

Subtotal 68 23 222 8 3U1

C. EQUIPMENT Lb(a) UKH

(i) Laboratories 0.4 4.5 4.9 0.1 0.5 0.6(ii) Operations and maintenance 6.7 46.5 53.2 0.8 5.7 6.5

Subtotal IA1 1i 0 5 .1 9 1

(b) Maintenance of Highway Network 2.2 24.5 26.7 0.3 3.0 3.3(c) Institutional strengthening 3.3 1.6 4.9 0.4 0.2 0.6(d) Highway Safety 2.0 0.4 2.4 0.3 0.0 0.3

Total 14.6J 25 22A 12 2.4 l3 84

D. INSTITUTIONAL STRENGTHENINGAND TRAINING

(a) Training and Study 2.2 6.3 8.5 0.3 0.8 1.1(b) Technical Asssistancc 0.3 1.2 1.5 0.0 0.2 0.2

Subtotal 2 21 101 ° 0 3 75

E. STUDIES(a) Transport Linkages 2.0 0.2 2.2 0.3 0.0 0.3(b) Highway Safety 0.0 0.0 0.0 0.0 0.0 0.0

Subtotal 2.0 21 2.2 21 3 01

ITotal Base Cost 19867 1.911. 3,898.6 2421 2130 47 49

Physical contingencies L 196.8 182.6 379.4 24.0 22.2 46.2Price contingencies ad 708.5 199.5 908.0 86.4 24.3 110.7

Base Cost with contineencies 2892202 2294.0 5-186.0 3512 29 2.A

Land acquisition and resettlement 210.9 0.0 210.9 25.7 0.0 25.7

Total Proiect Cost 3-10292 2294.0 5-396 9 378. 279 658u 42

LI Excludes taxes of Y 77.8 million ($9.5 million) as well as commitment fees and interest on the Bank loan during construction.Taxes and duties would not be financed from the proceeds of the loan.

Lb Excludes taxes (VAT) and duties of Y 56.9 million (S6.9 million).& Ten percent of items A and B.a Includes Y I million and S55,000 to be allocated for either further study in Training purposes after completion of High Grade

Highway Management Study in Henan in 1997-98.

- 60 -

TABLE 3.2: ESTIMATED DISBURSEMENT SCHEDULE($ million)

Disbursement profileBank fiscal year Estimated disbursements of transport projects

and semester Semester Cumulative % in China (%)

i997 aJune 30, 1997 30 30 10 6

i199December31, 1997 22 52 17 11June 30, 1998 20 72 24 16

i99December31, 1998 40 112 37 26June30, 1999 30 142 47 38

2000December31, 1999 42 184 61 48June 30, 2000 31 215 72 60

2Q01December 31, 2000 45 260 87 69June 30, 2001 23 283 94 78

2Q02December 31, 2001 12 295 98 90June 30, 2002 5 300 100 100

Notes: (1) Project Completion Date: December 2001.(2) Loan Closing Date: December 2002.

Source: Mission estimates.

- 61 -

TABLE 4.1: ACTUAL AND PROJECTED TRAFFIC AND TRAFFIC GROWTH

IN THE UKH CORRIDOR

A. Actual and Projected Traffic Volume (measured in mte/day)

YearActual Projected

Road Section 1987 1989 1991 1993 1995 2000 2010 2020

Urumqi Transit 2,898 4,277 7,563 9,033 11,360 11,248 24,144 41,401HighwayUrumqi-Changji 5,346 7,239 9,503 10,830 13,963 19,875 40,988 69,466Changji-Hutubi 5,728 8,599 9,012 10,031 11,735 18,219 35,379 61,086Hutubi-Huke 5,455 4,756 5,337 6,771 7,500 12,489 27,424 51,236Road ForkHuke Road 3,605 4,371 4,988 5,481 13,550 28,500 53,000Fork-ManasiManasi-Shihezi 4,537 4,287 5,733 6,279 12,064 26,708 49,738Shihezi-Shawan 3,747 4,014 5,919 6,669 9,244 20,010 38,542Shawan-Anjihai 2,165 2,466 4,113 4,888 9,011 19,483 36,759Anjihai-Kuitun 2,707 2,645 3,881 4,364 9,035 19.538 36,543

B. Actual and ProjectedTraffic Growth Rates

Annual Growth Rates Period of GrowthRoad Section 1987-1995 1991-1995 1993-1995 1995-2000 2000-2010 2010-2020 1995-2020

Urumqi Transit 18.6% 7.0% 12.1% -0.2% 7.9% 5.5% 5.3%HighwayUrumqi-Changji 12.8% 6.6% 13.5% 7.3% 7.5% 5.4% 6.6%Changji-Hutubi 9.4% 4.5% 8.2% 9.2% 6.9% 5.6% 6.8%Hutubi-Huke Road 4.1% 5.8% 5.2% 17.9% 8.2% 6.4% 9.4%ForkHuke Road Fork- 3.8% 4.8% 16.7% 7.7% 6.4% 8.9%ManasiManasi-Shihezi 6.6% 4.7% 18.0% 8.3% 6.4% 9.4%Shihezi-Shawan 8.8% 6.1% 13.6% 8.0% 6.8% 8.6%Shawan-Anjihai 12.1% 9.0% 16.6% 8.0% 6.6% 9.1%Anjihai-Kuitun 8.7% 6.0% 15.7% 8.0% 6.5% 8.9%

Table 4.2: PROPORTION OF PROJECTED TRAFFIC ON NEW AND EXISTING HIGHWAY

A. Vehicles per day (measured in mte)

2000 2010 2020Road Section New Exisitng Total New Exisiting Total New Exisiting Total

Urumqi Transit Highway 8,823 2,425 11,248 16,036 8,108 24,144 19,865 15,112 34,977Urumqi - Changji 18,242 1,633 19,875 33,528 7,460 40,988 41,474 19,303 60,777Changji - Hutubi 15,402 2,817 18,219 31,158 6,908 38,066 39,096 19,024 58,120Hutubi - Huke Road Fork 14,630 2,554 17,184 28,579 6,838 35,417 36,947 16,446 53,393Huke Road Fork - Manasi 8,976 3,513 12,489 22,829 4,595 27,424 32,996 12,383 45,379Manasi - Shihezi 8,919 3,145 12,064 22,543 4,165 26,708 32,433 11,498 43,931Shihezi - Shawan 7,769 1,475 9,244 17,003 3,007 20,010 25,181 6,009 31,190Shawan - Anjihai 7,573 1,438 9,011 16,338 3,095 19,433 24,171 5,845 30,016Anjihai - Kuitun 7,489 1,546 9,035 16,213 3,325 19,538 23,433 5,845 29,278

B. Percentage of daily corridor traffic on each road

2000 2010 2020Road Section New Exisitng Total New Exisiting Total New Exisiting Total

Urumqi Transit Highway 78% 22 100% 66% 34% 100% 57% 43% 100%Urumqi - Changji 92% 8 100% 82% 18% 100% 68% 32% 100%Changji - Hutubi 85% 15 100% 82% 18% 100% 67% 33% 100%Hutubi - Huke Road Fork 85% 15 100% 81% 19% 100% 69% 31% 100%Huke Road Fork - Manasi 72% 28 100% 83% 17% 100% 73% 27% 100%Manasi - Shihezi 74% 26 100% 84% 16% 100% 74% 26% 100%Shihezi - Shawan 84% 16 100% 85% 15% 100% 81% 19% 100%Shawan - Anjihai 84% 16 100% 84% 16% 100% 81% 19% 100%Anjihai - Kuitun 83% 17 100% 83% 17% 100% 80% 20% 100%

- 63 -

TABLE 4.3: RESULTS OF ECONOMIC EVALUATIONS FOR THE WHOLE ROUTE

A. EIRR

Benefit Cost VariationVariation -20% -10% 0% 10% 20%

-20% 20.5% 18.9% 17.6% 16.5% 15.5-10% 22.1% 20.5% 19.1% 18.0% 16.9

0% 23.7% 22.0% 20.6% 19.3% 18.2+10% 25.2% 23.4% 21.9% 20.6% 19.5+20% 26.6% 24.7% 23.2% 21.8% 20.6

B. Probability

Cost VariationBenefit -20% -10% 0% +10% +20% TotalVariation Probablility 100%

-20% 20% 1.00% 2.00% 7.00% 6.00% 4.00% 20%-10% 30% 1.50% 3.00% 10.50% 9.00% 6.00% 30%

0% 35% 1.75% 3.50% 12.25% 10.50% 7.00% 35%+10% 10% 0.50% 1.00% 3.50% 3.00% 2.00% 10%+20% 5% 0.25% 0.50% 1.75% 1.50% 1.00% 5%

Total 100% 5% 10% 35% 30% 20% 100%

C. Contribution of Probability Weighted EIRR% to Total EIRR% Value

Benefit Cost variationvariation -20% -10% 0% +10% +20% Total

-20% 0.2% 0.4% 1.2% 1.0% 0.6% 3.4%-10% 0.3% 0.6% 2.0% 1.6% 1.0% 5.5%

0% 0.4% 0.8% 2.5% 2.0% 1.3% 7.0%+10% 0.1% 0.2% 0.8% 0.6% 0.4% 2.1%+20% 0.1% 0.1% 0.4% 0.3% 0.2% 1.1%

1.1% 2.1% 6.9% 5.6% 3.5% 19.3%

- 64 -

TABLE 4.4: RESULTS OF ECONOMIC EVALUATIONS

Basic results

Number Road section EIRR% NPV

I Urabo - Changfanggou 16.0 1.69

2 Changfanggou - Xishan 22.1 9.80

3 Xishan - West Station 21.8 14.59

4 West Station - Bagang 20.9 6.22

5 Bagang - Changji 22.3 25.74

6 Changji - Hutubi 20.7 45.11

7 Hutubi - Wugongtai 20.6 24.41

8 Wugongtai - Manasi 22.7 59.58

9 Manasi - Shihezi 20.2 12.66

10 Shihezi - Wulawusu 20.6 31.37

11 Wulawusu -Shawan 19.2 15.34

12 Shawan - Anjihai 18.9 25.95

13 Anjihai - Kuitun 19.1 38.39

Whole route

Includes Sections A,B,and C 20.5 331.60

Comparison of altematives

a) Class 11

A Xiaodiwopu - West Station 28.7 1.11

B Xiaodiwopu - Shangshahe 27.3 24.74

C West Station - Shangshahe 27.6 26.02

b) Staged construction

A Xiaodiwopu - West Station 27.6 1.22

B Xiaodiwopu - Shangshahe 24.0 24.33

C West Station - Shangshahe 24.2 25.55

c) Class I

A Xiaodiwopu - West Station 21.5 22.34

B Xiaodiwopu - Shangshahe 21.6 23.47

C West Station - Shangshahe 20.5 24.50

Link roads

a Xishan Link Road 34.3 6.41

b Changii Link Road 25.5 1.52

c Manasi Link Road 12.1 0.20

d Shihezi Link Road 33.7 2.81

Changji altematives

Xiaodiwopu - Changji 13.4 4.59

Changji - Yushugou 17.7 13.94

Yushugou - Wugontai 21.6 31.24

Sensitivity tests

Without tolls 23.0 350.40

Excluding time saving benefits 18.5 298.50

- 65 -

TABLE 4.5: SENSITIVITY OF EVALUATION RESULTS TO VARIATIONS IN TOLL LEVEL

Toll Charge FIRR EIRR

(US cents/veh-km) % O

5 -0.1 21.5

10 4.8 20.5

16 7.8 20.0

2 1 9.9 19.3

321 13.0 18.2

42 14.8 16.8

62 11.5 9.2

83 12.5 7.7

166 11.8 3.3

Chart 1: XINJIANG COMMUNICATIONS DEPARTMENT (XCD)

Prefectural XnigCmuicainDprmn Xinjiang High-Grade Highway|_Goverrnments & Comncain Deprten Constructio n Authority l

_Municipalities __ I---- Headquarters Divisions--- Execution

oPreectural Administrative Office Highway Xinjiang Roads & Supervision- Communication I - ~~~Administration Bridge Company Ofc

Division q Policy& Regulation Bureau * I Bg

Financial Transportation Xinjiang Goods &Mwaicipal ~ Financial _ Administration Materials Company _

Communication Science & Technology Bureau L Xinjiang High-Division ~ ~ ~ ~ ~ ~ _________jLabor Service Grade Highway

Labor& Salary Company Administration(Project Execution

Personnel & Security | Xinjiang Highway Xinjiang Office) *Planning, Survey Communication

Organization Membership Design Institute Hospital

Propaganda Xinjiang Traffic Translation Service

_[77 ~ Auditing Science Institute Office

Supervision Xinjiang [Quota ManagementR Communication Center *

q Retired Carders { | School *

Educ Engineering QualityXinjiang Control Center *

Toll Collection Communication;Technical Workers Telecommunications

School * & InformationCenter o

*Units to receive organizational strengthening and training under the project.

Chart 2: HIGH-GRADE HIGHWAY CONSTRUCTION AND MANAGEMENT STRUCTURE

P~,jc. Eiaj HGHI Coiutruion| P hject Execution ............. uat C

| Chief l |... . ......... .|HIghdf u | Hi5hway | TrannepcSure,h Ez mginesi|ChiEfCmedin uaion ........................... Hity F P=&Adminiton Adminimijce PIStey, _ Quxity

Office Admi_I A tion Bur|au Diign Intiute Control

Engintwing | l l l l ~~~~~~ ~~~~~~~~~~~~~~~~~~~~Tmfric Engiean

_ TedmlobSy 2 Fin nciel l Science _ _ Qe

_ l ~~~~~~~~Compuahent ive . _ ,SieiI iueM n

[Equip.ent & |C | nning & Manatemig n

-| | -al Statica ni

[ I _ | | ~~~~~Tethooy | L Ca _e| li do | naatn

*Enventlz||n Zr|llAnul

AdminarauirinvIOP I

|1 Financid |fic

||En_nein | -. | | | Xdtn Tay |i -LnL _L!Lj

1 -m . -_L!E

Chart 3: XINJIANG HIGHWAY ADMINISTRATION BUREAU (XHAB)

|Xinjiang HighwayAcdministrationil

Road Construc- Bitumen Stor- Highway Class I Highway Man- Prefecture, Highway Manage-Transport tion Machinery age General General agement Divisions, Man- County, City ment Department

Company (1) Factory (I) Station (2) Division (14) agement Departmnent (I) and Town Highway (other unit)

Bitumen Stor-Maintenance Ve e age Brunch Highway Engineering Emergency Maintenance MaintenanceWorkshop (1) Team(2) Station (5) Division (77) Tearn (25) Squad (1) Team (67) Team

00

MaintenanceGang (550)

Note: Numbers in brackets represent existing number of subunits.

- 69 - ANNEX 1

ANNEX 1: HIGHWAY MAINTENANCE PROGRAM

1. In order to help address Xinjiang's highway maintenance problems, XCD carriedout a highway network maintenance study financed under XHPI. The study proposed afour-year Maintenance and Rehabilitation Program (periodic maintenance) based on anannual budget ceiling of about Y 185 million, which would provide the basis for selectionof actual road lengths to be included in the highway maintenance program under theproposed XHP2. The highway maintenance and rehabilitation program would be aimedat stabilizing the conditions of the existing network at a maintainable level byreconstruction of seriously deteriorated highway sections and by overlay rehabilitation ofmost needed sections.

2. Implementation. The highway maintenance and rehabilitation program would beexecuted from 1977 onwards to 2000 with about the same level of expenditures each year(Table 1). It was agreed that XHAB would carry out detailed engineering investigationand design of all highway sections to be included in the four-year program. The formatof the engineering design will follow the national standard used by XHAB for highwayrehabilitation, and will among others include plan and profile drawings, pavement designand details of drainage structures. The roads to be included in the first year program(1997), are shown in Table 2, identifying each contract, the name and sections of road tobe improved, the type of improvement intervention, the estimated costs and EconomicInternal Rate of Return (EIRR) for each road.

3. Selection of Road Sections. The selection of roads was based on the analysis andthe recommendations made in the Xinjiang Highway Maintenance Study (XHMS). Thestudy was carried out by XHAB, assisted by experts from the Finnish National RoadAdministration (FinnRA), between November 1994 and December 1995. The FinalReport of the study was completed on January 10, 1996. The study analyses were basedon the use of the latest versions of the HDM-III software and the China PavementManagement System (CPMS). Road conditions and other basic data needed to run themodels were collected by XHAB, and included:

(a) Paved Roads (9,721 kin)

* distress data by a visual survey for each kilometer;

* deflection data by Benkelman Beam measurement, for every 100 m;and

* roughness survey by Bump Integrators, calibrated to obtain the real IRIvalues.

-70 - ANNEX 1

(b) Gravel Roads (4,935 km)

* road width and shoulder width;

* gravel thickness and age; and

• material properties for surface, base and subgrade.

In addition, data were collected for traffic volumes, vehicle weights, vehicle operatingcosts as well as geometric and enviromnental data.

4. For the HDM-III analysis, the road network was divided into representativesections in the database, based on pavement type, traffic volume, roughness anddeflection for paved roads, and road classification, gravel thickness and type of terrainsfor gravel roads. The whole network included 24 homogenous segments with asphaltconcrete, 32 with surface treatment and 16 gravel. Four different maintenance strategieswere considered for paved roads in addition to normal routine maintenance: (i) resealing(10 or 25 mm), (ii) overlay (25,40 or 60 mm), (iii) strengthening with 25 mm surfacetreatment and 200 mm base course, and (iv) strengthening with 20, 40, or 60 mm asphaltconcrete and 200 mm gravel base course. For gravel roads, the maintenance andrehabilitation options included grading, spot regravelling, regravelling and upgrading tosurface treatment.

5. The basic screening of various maintenance and rehabilitation options was doneusing the HDM-III model. The optimization of maintenance interventions took intoaccount the cost of routine maintenance, overlay cost, strengthening cost and the resultingvehicle operating costs to select investments with the highest discounted benefits.Several runs were made with the HDM-III model to prepare the four-year (1997-2000)maintenance and rehabilitation program with a budget limitation of Y 185 million peryear. The objectives of the selection process were three-fold:

(a) to select one or two feasible maintenance actions for each section of theroad network;

(b) for each section to schedule one or two of the most feasible maintenanceactions into the four-year period (1997-2000); and

(c) to optimize the net benefits of the investments by selecting an optimal setof maintenance actions for the four-year period (1997-2000).

Two categories of roads, totaling about 2,500 km, were excluded from the HDM-111analysis:

(d) roads in excellent condition, which obviously do not need anymaintenance intervention during the four-year (1997-2000) period, i.e.,where normal routine maintenance activities would be sufficient.

- 71- ANNEX 1

(e) roads in poor condition, but having such low traffic volumes that anyinvestment in the four-year (1997-2000) period would be obviouslyuneconomical.

6. The final output of XHMS was a proposed four-year maintenance program at atotal cost of Y 742 million. The program was presented in a matrix format, showing roadlengths and maintenance interventions for each homogenous road segment, all with anEIRR higher than 32 percent. In general, the high roughness on existing paved roads, didnot allow a choice of resealings or thin overlays. An asphalt concrete overlay wasselected for the better road sections with less deflection and roughness. The poorestsections with very high deflections and roughness were selected for strengthening. Theanalysis of gravel roads revealed that it was not feasible at this stage to upgrade anysection to paved standard (surface treatment), even though some had relatively hightraffic figures. The main reason was that upgrading costs would be high due to theremote location of these sections, and to avoid damage from frequent flooding andlandslides.

7. Project component includes financing of a four-year (1997-2000) HighwayMaintenance and Rehabilitation Program (MRP) that covers 2,450 km, or about 78percent of the total cost of the whole four-year program referred to in paragraph 6 above.The individual road sections shown in Table 2 were selected from the proposed four-yearprogram in matrix format in XHMS. In the selection of sections, engineering andpractical aspects of implementation, such as packaging of contracts, location and need fora uniform standard of sections were taken into account. Also, the administrative aspectwas considered in relation to contract packaging, as the design and supervisionorganization would reflect the geographical division between the relevant highwaycounty bureaus. Consequently, the first year maintenance and rehabilitation programwould include 12 contracts to be procured under NCB. The overall EIRR of the first yearprogram was estimated to about 92 percent.

8. Monitoring and Key Indicators of Success: Recorded average surfaceroughness (IRI) of the paved highway network is an indication of the serviceability of theregion's highway network. The four-year Maintenance and Rehabilitation Program isenvisaged to result in improved serviceability. The road surface roughness on the pavedroad network is estimated to improve from a present average IRI of 6.7 mm/m to about5.6 mm/m after the four-year program. The proportional reduction in the total transportcost would be greater, as the improved road lengths would carry more than averagetraffic. The Bank and XCD would, during each year's supervision mission, review themaintenance activities undertaken during the previous year, and compare the results withthose agreed in the previous year, and agree on the periodic maintenance andrehabilitation program for the following year. The average road surface roughness on thepaved road network would be surveyed once a year and would serve as an indicator ofachievement of the objective of improved serviceability.

- 72 - ANNEX I

Table 1: COST SUMMARY OF HIGHWAY MAINTENANCEAND REHABILITATION PROGRAM

Road Lengths Total TotalComponents (km) Y million $ million

Year 1 (1997)(i) Overlay 318.0 51.4 6.3(ii) Strengthening 244.0 87.4 10.6

Subtotal 18 16.9

Year 2 (1998)(i) Overlay 401.8 64.3 7.8(ii) Strengthening 243.6 83.8 10.2

Subtotal 14.1 1

Year 3 (1999)(i) Overlay 253.5 40.6 5.0(ii) Strengthening 296.4 101.8 12.4

Subtotal 1A2A 17.4

Year 4 (2000)(i) Overlay 520.4 83.3 10.2(ii) Strengthening 172.9 59.7 7.3

Subtotal 14 11-5-

lotal 2,450.6 577 70.4

-73 - ANNEX I

Table 2: FOUR-YEAR MAINTENANCE AND REHABILITATION PROGRAMCONTRACT PACKAGES FOR THE FIRST YEAR (1997)

Contract Road Start End Cost EIRRNo. Code Strategy km km Length Y million %

1997/1 S102 1 0.0 20.0 20.0 2.80 169.8S102 3 20.0 33.0 13.0 4.25 95.0S106 1 0.0 7.6 7.6 1.22 138.9

1997/2 G216 1 673.0 701.0 28.0 3.92 116.7S104 3 0.0 11.7 11.7 4.92 27.0

1997/3 S232 3 0.0 7.0 7.0 2.78 192.2G312 1 4,433.0 4,461.0 28.0 4.47 280.8

1997/4 G217 3 370.0 376.0 6.0 2.94 138.6G217 1 376.0 379.1 3.1 1.12 66.6G217 3 379.0 391.25 12.3 5.15 127.5

1997/5 S227 1 49.0 87.0 38.0 6.84 60.3S227 3 87.0 104.0 17.0 7.15 88.7S227 1 104.0 118.0 14.0 2.52 67.6

1997/6 S227 1 132.0 164.0 32.0 5.76 68.7S227 1 197.0 223.0 26.0 4.68 75.6S227 1 223.0 249.0 26.0 4.68 70.2

1997/7 G314 1 126.0 152.3 26.3 3.69 134.8

1997/8 S227 3 24.0 36.5 12.5 5.25 77.3S227 3 36.5 49.0 12.5 5.25 77.3

1997/9 G218 1 611.0 620.0 9.0 1.26 24.46218 3 620.0 634.0 14.0 4.58 94.3G218 1 634.0 637.0 3.0 0.42 14.2

1997/10 G314 1 274.0 331.0 57.0 7.98 90.5G314 3 331.0 350.0 19.0 6.21 98.1

1997/11 G314 3 350.0 369.0 19.0 6.21 91.1G314 3 369.0 379.0 10.0 3.27 98.8G314 3 379.0 404.0 25.0 8.18 29.8

1997/12 G314 3 476.0 498.0 22.0 7.19 407.4G314 3 498.0 520.0 22.0 7.19 169.0G314 3 520.0 541.0 21.0 6.86 90.4

Total Strategy 1 318 51.41997 Strategy 3 244 87.4

Contracts Total 562 138.8 92.0

Note: Strategy 1 = 40 mm asphalt concrete overlayStrategy 3 = 60 mm asphalt concrete overlay + 200 mm base course

- 74 - ANNEX2

ANNEX 2: INSTITUTIONAL STRENGTHENING ANDTRAINING

This Annex on Institutional Strengthening and Training includes the followingelements:

* Appendix 1 includes brief descriptions of the organizations to be strengthened underthis project. These include training and research organizations already covered in theprevious project, as well as organizations to be strengthened for the first time underthe present project;

* Appendix 2 details the subjects included in the Training Program, by organizationand by source of training (i.e. training in China, study and awareness tours and longerterm training abroad); and

- Appendix 3 presents the total cost of the Institutional Strengthening and Trainingcomponent, by organizations to be strengthened and major element (i.e. Training,Equipment and Technical Assistance).

- 75 - ANNEX2Appendix 1

APPENDIX 1 TO ANNEX 2: ORGANIZATIONS TO BESTRENGTHENED

Xinjiang Communications Department (XCD)

1. The Xinjiang Communications Department (XCD) is the governmentaldepartment in charge of highway and waterway transport within XAR. It is a policy-making agency, supervising the overall transport system, setting strategic operational anddevelopment objectives, regulating the transport system and setting sector managementpolicies, with planning and implementation oversight responsibilities. XCD oversees theoperations of the Xinjiang Highway Administration Bureau (XHAB), the TransportAdministration Bureau (TAB), and the High-Grade Highway AdministrationBureau (XHGHAB). The High-Grade Highway Construction Authority (XHGHCA)oversees the construction and supervision of the works on high-grade highwaydevelopments in XAR.

Project Execution Office (PEO)

2. The Project Execution Office (PEO) operates under the supervision of XHGHCAand XCD. It was established in April 1992 to supervise the construction of high-gradehighways with external funding. The PEO will become part of XHGHAB, responsiblefor management of high-grade highways in the Region. It has an establishment of 40organized in 5 offices. By 1998, it will have a headquarters staff of 125 and a totalestablishment of 1,400.

Xinjiang High-Grade Highway Administration Bureau (XHGHAB)

3. XHGHAB was founded in February 1994, by approval of the People'sGovernment of XAR. The authorized establishment of XHGHAB is 130. Most of thestaff are recent University and academy graduates, and some of thetechnical/management staff have been transferred from subordinating units within XCDand other relevant departments. They are responsible for the construction, operations andmanagement of high-grade highways in Xinjiang.

Highway Engineering Quality Control Center (XHEQCC)

4. XHEQCC was founded in 1994 by approval of XAR. XHEQCC carries outmandatory supervision and management control of the quality of highway projects, inaccordance with technical specifications, regulations and quality inspection criteria issuedby the MOC. Any highway project, with respect to design, construction and supervision,can be supervised by XHEQCC.

-76 - ANNEX2Appendix 1

Highway Engineering Quota Management Center (HEQMC)

5. The HEQMC is part of XCD. Its main functions are to establish highwayengineering quota standards, carry out management of highway engineering quotastandards to pursue a quota-wage system, and train and certify professional staff in chargeof quota standards and budget.

Telecommunications Information Center (TIC)

6. The TIC of XCD was founded in 1993 by approval of XAR. It is within thejurisdiction of XCD, as well as a Class II long distance telecommunication station ofMOC. The authorized establishment of the TIC is 35; at the present time only 9 staff areavailable. The TIC is responsible for radio communication system within the jurisdictionof XCD, telecommunications and information network among highway managementagencies in Xinjiang and all over China, and planning, construction and management ofClass III, Class IV telecommunication stations within the jurisdiction of XCD.

Xinjiang Communications Technical Workers School (XCTWS)

7. The role of XCTWS, a vocational school, is to train qualified technical workersfor XCD institutions. Founded in 1953, the school started as a training center for vehicleoperators and drivers. In 1984, its scope was broadened to repair and maintenance ofhighway construction and maintenance equipment. In 1990, the program was expandedto include technical training for highway construction and maintenance.

Xinjiang Communications School (XCS)

8. XCS was established in 1982. The school is the sole polytechnic institutionaddressing technician-level needs in the transportation sector. Its basic role is to traintechnical and management personnel in the fields of highway, automobile, planning andstatistics, financial affairs and accounting for XCD and its subdivisions. The school alsoprepares for preuniversity entry at Xian Highway Institute. Up to 1991, students wereadmitted on the basis of selection criteria; since that date the school recruits at the level ofcounties, and as a result there is a higher proportion of attendees from the 17 poorercounties in the Xinjiang Region. The school currently benefits from support underXHP1.

Shihezi Training Center of Xinjiang Highway Administration Bureau (STC)

9. The STC is subordinated to XHAB. Its main function is to carry out training ofcadres from units under the jurisdiction of XCD. The Television Technical School ofXCD and Working Station of XHAB are located in this Center. Presently, it consists of ateaching building (24 standard classrooms) and a comprehensive office building which isabout to be completed. The Center has 16 years of training experience, various teachingmaterials, audiovisual apparatus and good teaching conditions. The Center lacksqualified teachers, training instruments and technical equipment for training purposes.

- 77 - ANNEX2Appendix 1

Xinjiang Highway Planning, Survey and Design Institute (XHPSDI)

10. XHPSD was founded in April 1961. It is the only comprehensive highwaysurvey and design unit in XAR. With a staff of 402 (including 150 specialized technicalcadres, 24 senior engineers, and 56 middle-level technical cadres), XHPSDI hascompleted more than 300 designs in Xinjiang, including most of the large nationalhighway projects, large bridges and airport runways. Under XHPI, XHPSDI sought,through training and specialized equipment, to upgrade the competence of its professionalstaff in the planning and design of highways, bridges and traffic engineering.

Xinjiang Traffic Science Research Institute (XTSRI)

11. XTSRI is the sole research and development organization in Xijiang for highwaytraffic analysis. It has a total staff of 1 10, including 15 senior, 32 junior and 41 assistantengineers. The Institute operates with funding from the Xinjiang Region's Science andTechnology Committee, from XCD, and from contract work for the MOC, and RegionalScience and Technology Committee. Additional funding is derived from motor vehicletesting, survey and design of new roads and bridges, test of new materials and pavingtechnology. It was called upon to undertake a study of intercity and rural passengertransport, which forms a part of the proposed project.

APPENDIX 2 TO ANNEX 2: TRAINING PROGRAM La

Training In China Study & Awareness Tours Training Abroad TotalSubject Of Training Agency N P/M Yuan N P/M US $ N P/M USS YUAN USS USS %

('000) ('000) ('000) ('000) Total

Organizational Strengthening:

Highway Engineering XHGHAB 6 4 36 4 48 120 1,280 156 100.0XCS I 1 6 49 6

Highway Maintenance XHGHAB 2 24 60 492 60 100.0

Traffic Engineering XHGHAB 6 4 36 2 24 60 788 96 100.0

Financial control XHGHAB 2 24 60 492 60 100.0

Engineering Geology XHGHAB I 12 30 246 30 100.000

Highway Operations Mngmt XHGHAB 9 6 54 4 48 120 1,427 174 100.0

Economic Management XHGHAB 3 36 90 738 90 100.0

Training Organization Mngmt XHGHAB 6 4 36 0 296 36 100.0XCS I 1 6 0 49 6 100.0XCTWS I 1 6 0 49 6 100.0STC I 1 6 0 49 6 100.0

Subtotal Q Q 2;1 186 18 216 540 5.52 126 n0Staff Training:

Highway Engineering XHGHAB 30 15 32 0 0 32 4 0.0

Highway&Bridge Engineerg HEQCC I 1 6 0 49 6 100.0HEQMC 3 3 11 2 1 12 0 110 13 89.7

Highway Engineering Testing XHGHAB 40 40 86 0 0 86 10 0.0HEQCC 2 2 4 0 0 . 4 1 0.0 i

LiL Details of contents of Training in China, Study Tours, and Training Abroad are included in the IST Report which is part of the Project File.

Training Program (Cont'd)

Training In China Study & Awareness Tours Training Abroad Total

Subject Of Training Agency N P/M Yuan N P/M US S N P/M USS YUAN USS USS %('000) ('000) ('000) ('000) Total

Highway Maintenance Mngmt XHGHAB 300 450 966 0 0 966 118 0.0

H'way Engineering Machienery XHGHAB 150 150 322 322 39 0.0XCTWS 1 5 10 0 0 10 1 0.0

Computer Application XHGHAB 60 60 129 0 0 129 16 0.0XCS 3 7 15 0 0 15 2 0.0STC 3 7 15 0 15 2 0.0

Engish Language XHGHAB 60 120 258 0 0 258 31 0.0

HighwayOperationsManapment XHGHAB 20 20 76 0 0 76 9 0.0

Higlway Maintenance XCS 2 4 11 0 0 11 1 0.0STC 2 4 11 0 0 11 1 0.0

Hway Enginering Supervision XHGHAB 100 100 100 0 0 100 12 0.0HEQCC 6 6 16 0 1 1 9 92 11 82.7XCS 2 2 4 4 1 0.0

Environmental Protection XHGHAB 28 28 73 0 0 73 9 0.0

Highway Construction & XCTWS 2 4 11 0 0 11 1 0.0

Maintenance Skills

Satellite and Microwave XTC 4 24 50 0 0 50 6 0.0

Communications Skills

Wire Communication XTC 20 10 21 0 0 21 3 0.0

Organization and Administration XTC 3 2 18 0 148 18 100.0

of Highway Telecommunication

Tota u 1Qk 06 292 25 m2 19 217 549 8.54 104 X ;

APPENDIX 3 TO ANNEX 2: TOTAL COST OF COMPONENT

Trainimg Eauioment TA. and Other Total PercentYuan USS Yuan USS Yuan USS Yuan USS Foreign

('000) ('000) (C000) ('000) Currency

Sector Orpaantio.s

High Grade Highway Administration 2,040.7 702.5 3,057.3 200.0 0.0 0.0 12,498.5 1,524.2 59.2XinjiangConumunications School 29.7 12.0 56.0 100.0 50.0 694.1 14.6 73.2Xinjiani Communications Tech. Wrlk. Sch. 21.3 6.0 60.0 100.0 50.0 640.5 78.1 71.7Shihiezi Trrining Centre 25.5 6.0 114.0 100.0 50.0 698.7 85.2 65.7

Highway Engineering Quality Control Center 20.1 15.3 145.6 17.8 86.2Highway Engincering Quoa MgmLCentr 11.3 12.0 110.0 13.4 89.8Tekconununications Information Centre 71.5 18.1 219.6 26.8 67.4

Toal 2.22Q.0 Io 1217.3 2000 Q 1500 15,007.7 1,830.2 61.3

Organizational Strengthening 726.6 3,287.3 200.0 10,885.6 1,327.5 69.8

Staff Training 2,220.0 45.4 2,592.3 316.1 14.4

Technical Asistance 300.0 150.0 1,530.0 186.6 80.4

Iol 2.22Q 77 3.287.3 20 30 150.0 15Q07. 1832 i

-81- ANNEX3

ANNEX 3: HIGHWAY SAFETY PROGRAM

1. The accident situation in Xinjiang (as in other provinces in China) is serious. Atotal of 4,490 accidents was reported in 1994, which is not high, but this may reflect alow degree of reporting of accidents, especially in rural areas. However, the numberkilled (1,712) and injured (2,884) is high, and the rate of 76 killed per 10,000 motorvehicles is high and is about 25 times higher than that for Western European and NorthAmerican countries. Also, the severity rate (37 percent), defined as the number killeddivided by the total number killed and injured is also high.

2. Due to this situation, the Bank is financing the road safety improvement programunder XHP 1. Hence, a variety of programs and activities related to highway safety havebeen taking place. However, these programs and activities have been undertakenindependently and without proper coordination between XCD and the Public SecurityBureau (Traffic Police). The most serious deficiency is the lack of a long-termcomprehensive planning in the field of highway safety. A major objective of theproposed highway safety component under XHP2 would therefore, be strengthening ofthe capacity for policy-making and planning among the relevant agencies. In this regard,the development of regular highway safety planning and coordination, which would be aprerequisite for the efficient comprehensive highway safety program, should be startedfirst. The pilot work on black spots improvement, which was proposed under XHPIshould be continued. This kind of work has proven that it would be one of the mostefficient activities in relation to highway safety. Also, the intensive training or accidentstatistics would greatly contribute to the development of capacity of analyzing therelationship between accidents and accident contributing factors.

Present Situation

3. It was observed that the existing accident data collection system is adequate forthe time being, even though there is room for improvement, especially the developmentof software for further analyses. The present system was improved a few years ago and isused in all provinces in China, and hence it is not subject to local modifications.

Highway Safety Policy and Planning

4. A Leading Group for Highway Safety Planning. It was agreed to establish aLeading Group for highway safety coordination, policy-making and planning. TheLeading Group will be chaired by a Vice Governor or by another representative from theGovernment Office, and it will have two high-rank representatives from each of XCD andPSB. The main functions of the Leading Group will be to monitor the accident situationand to propose strategies and policies as well as comprehensive highway safety plans toXAR. Such plans should include all aspects of highway safety work, also those parts that

- 82 - ANNEX3

are outside the responsibility of XCD and PSB. The analyses of the situation should bedone on a yearly basis. Short-term action plans should also be developed on a yearlybasis and objectives and longer-term plans should equally be revised at regular intervals.The Leading Group will be a permanent group, and its activities will go on after thetermination of the project. The Leading Group will act as a Board for the HighwaySafety Secretariat (see below). The Leading Group shall be established by the end of1996. The first tentative policy and action plan shall be presented by the end of 1997.

5. A Highway Safety Secretariat. It was agreed to establish a Highway SafetySecretariat (HSS) in order to prepare the work for the Leading Group. It is suggested thatthe HSS be staffed by two specially qualified persons from each of XCD and PSB.

6. The main tasks of HSS will be to carry out analyses of the traffic accidentsituation, and on the basis of such analyses it will prepare highway safety objectives,strategies and short- and long-term highway safety plans. These objectives, strategies andplans will be presented to the Leading Group for discussion. When adopted by theLeading Group, they will be presented to XAR for approval. HSS will monitor thehighway safety work and situation and suggest new actions to be taken and studies to beundertaken. HSS will also act as a resource group for the authorities. In carrying outtheir duties, HSS should have the possibility to be professional assistance from the staffin XCD and PSB when needed. In addition, HSS will act as a coordinating group for theHighway Safety component of XHP2 during the project period.

7. HSS shall be established by March 1997. Shortly after its creation, the fourmembers of HSS will be offered a four-week study tour abroad. The tour will includemeetings with key personnel from institutions in a highly motorized country. Theywould meet people from Central Government and Roads Department, as well as theservices that carry out practical highway safety work. Traffic police should be visited aswell as research institutions and private organizations working with highway safetymatters. It will focus on the elaboration of highway safety objectives and thedevelopment of highway safety policies and plans, and also on the necessity to undertakeregular highway safety development work and research. The first regional policy onhighway safety will be developed during 1997, and the first tentative highway safety planwill be presented to the Leading Group by the end of 1997.

Safety Audit Procedures

8. Safety audit procedures would be developed by HSS during the project period.The development work in Xinjiang could be inspired by the safety audit work to becarried out under the Bank-financed projects in Zhejiang, Shaanxi and Henan.Subsequent to the establishment of such audit procedures, these would be applied to allmajor roads projects in the region.

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Black Spot Work

9. The black spot improvement work was initiated under XHPI. The bulk of theimprovement work would, however, be covered under XHP2. The black spot workwould follow the following process: (a) identification of black spots; (b) analyses ofaccident files and accident sites; (c) planning of improvements; (d) implementation; and(e) monitoring.

10. It was recommended that XIC would carry out the pilot black spot work as anexperiment with control site, so that it is possible to demonstrate the efficiency of theblack spot work. This could be done as follows:

(a) XIC or TP identifies some 20 black spots.

(b) From 20 black spots identified, 10 would be selected at random toconstitute the experiment sites, and the remaining 10 as the control sites.

(c) Ten black spots identified as the experiment sites would be analyzed andimproved, whereas no measures would be taken at the control sites.

(d) The effect of the black spot work would be measured through before andafter studies on accidents and road user behavior at both the experimentsites and the control sites.

Once the pilot black spot work was completed, the regular black spot work would betransferred to XCD to be continued on a regular basis.

Traffic Signs and Markings

11. Due to the poor maintenance of road signs and markings in the past, the situationis far below the acceptable standard. Recently, the responsibility for road signs andmarkings was transferred from PSB to XCD. About Y 8.7 million would be allocated tothe road signs and markings component. Taking an average cost of approximatelyY 150,000 for resigning and remarking per 1 kilometer of Class II road, about 60 km ofClass II roads would be included in the proposed program.

First Aid Training

12. The first people who arrive at the scene of an accident will be other drivers and/orthe police. The problem is, however, that none of these people have any training in firstaid techniques, and in many cases that may lead to more harm than help. It was agreedthat the first aid training be introduced into the curriculum for driver training for allcategories of drivers. It was further agreed to introduce first aid training into thecurriculum for the basic training of traffic police, as well as into the curriculum for thecourses to be organized by the new Traffic Police Training Center.

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Training in Child Psychology

13. The police are responsible for training of children at school. In Urumqi, 12 policeofficers are involved in this activity, and in the whole region, about 100 officers. None ofthese have, however, taken any training related to the training of children. It was agreedthat a one-week course/seminar would be offered to two groups of police officers who areinvolved in this activity (one Chinese-speaking and one Uygur-speaking). The seminarwould cover child psychology and the child's capability to learn about, and to cope withtraffic at different ages. A three-week consultancy will be required, including preparationand seminar.

Other Training Components

14. A certain amount of training would be offered to various types of personnel fromXCD and PSB. The proposed training components are detailed in the project file.

Equipment

15. For the implementation of the highway safety component, as well as for the safemanagement of the highway, certain equipment would be procured.

Evaluation of the Highway Safety Component

16. The objective of the highway safety component is to initiate activities that wouldlead to improved highway safety in a longer perspective. It was agreed that by the end ofthe project, a Chinese consultant would carry out an evaluation of the highway safetycomponent. His services would require 1.5 person-months. During this period, theconsultant would review the highway safety component of XHP2 as well as the roadsafety component of XHPl and prepare a written report on his findings for HSS.

Costs

17. The cost estimates for each category are as follows:

(a) Black Spot Work. Costs for black spot improvements as well as for themonitoring and evaluation of black spot work: Y 20 million;

(b) Traffic Signs and Markings. Costs of resigning and remarking of about60 km of Class II highway: Y 8.7 million;

(c) Consultancy for Child Psychology. Costs for one local expert includingtravel costs: Y 12,000;

(d) Training. The estimated cost of this component for 104 person/months:Y 1.4 million;

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(e) Equipment. The estimated total cost for 8 items of equipment:Y 2.4 million;

(f) Evaluation of the Highway Safety Component. Costs for one localexpert including travel costs: Y 31,000; and

(g) Total cost of the Highway Safety Component. The estimated total costof the highway safety component would be: Y 32.6 million or $4.0million.

The detailed breakdown of each cost item is included in the project file.

Implementation Schedule

18. The proposed highway safety component would be implemented over the four-year period starting 1997.

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ANNEX 4: TERMS OF REFERENCEFOR STRATEGIC STUDY OF REGIONAL TRANSPORT

WITHIN XINJIANG PROVINCE AND BETWEEN XINJIANGAND NEIGHBORING PROVINCES AND COUNTRIES

A. BACKGROUND

1. Xinjiang borders eight other countries, Mongolia, Russia, Kazakhstan, Kyrgystan,Tajikstan, Afghanistan, Pakistan and India and is the gateway of China in the west tocentral Asia and eastern Europe. The total length of the foreign border is 5,391 km. Italso borders some other Chinese provinces or regions, Tibet, Qinghai and Gansu

2. Since the founding of this autonomous region, especially since the reform andopen, transportation has seen a rapid development, forming an initial and integratedtransport system incorporating rail, air, pipeline in Xinjiang. By the end of 1994, therewere 28,600 km of road, 1,800 km of railway, 12 airports and 223,600 motor vehicles, inwhich 137,200 are for freight and 86,400 for passenger and others.

3. The vast distance between Xinjiang and the main consuming market in otherprovinces of China features transport of Xinjiang while creating the most unfavorablecondition for the transport of Xinjiang. The rail distance between Urunqi toLianyungang, the nearest port to Xinjiang is more than 3,760 km and to the nearestprovincial capital, Lanzhou in Gansu, is 1,900 km. The average trip length of goodstransported to and from Urumqi were 2,350 km and 3,300 km respectively. Thesedistances increase to 4,000 km to 5,000 km when the additional trip length withinXinjiang is added to the distances from Urumqi. The vast transport distance greatlyincreases the transport cost and hinders the development of regional economy andexploitation of the rich reserves. Therefore, more transport links between Xinjiang andthe rest of China should be provided to increase transport capacity, reduce transport costand heighten transport efficiency. Moreover, efforts should be made in technicalpromotion, rational modal split and optimization of transport structure and management.

4. Xinjiang and its neighboring countries have many cultural elements in commonwhile their economies show considerable complimentarity. With China's priority ofeconomy development given to the west regions, passenger and freight transport betweenXinjiang and its neighboring countries will see a dramatic growth. At present, apart fromBeijing railroad, there are 13 direct road connections between Xinjiang and itsneighboring countries with total input and export of 4.3 million tons and 1I.1 millionpassengers in 1994.

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5. Recently, the central government listed the narrowing of the gap between the Eastand Central-western regions of the country as a major priority in its Ninth Five-Year Plan(1996-2000) and a long-term goal for the year 2010. Priority will be given toimprovement of transport infrastructure which is considered as a fundamental way toachieve the goal. Therefore, to carry out , e study in question is very essential and ingood time which is of far-reaching influence not only to the regional economy but also tothe national economy in the next century.

B. STUDY OBJECTIVES AND PROCEDURES

6. The objectives of the study are: to provide scientific basis for the governmentsat all levels of Xinjiang in working out the medium- and long-term transport planning andformulating transport policies and regulations. The study is to be conducted regardingthe following:

(a) to review the present transport infrastructure and services within Xinjiangand between Xinjiang and the rest of China and adjoining countries, tosum up achievements and experience gained in the recent years;

(b) to analyze the regional social economic development and predict futuretransport demand; and

(c) to recommend construction options which can satisfy the social economicdevelopment and users' needs, to justify some comparable alternatives oftransport corridors, to recommend priorities for investment and fortransport policy and regulations favorable to transport development.

7. In consideration of coordination of the regional medium- and long-term planningwith that of the nation and the need of having a lead study for transport facilities, thisstudy is projected for 15 years (1996-2010), taking the Ninth Five-Year Plan period(1996-2000) as a key period. For some key transport projects, it can be extended to theyear 2020 when necessary.

C. SCOPE OF WORK

8. Part I: To identify existing transport infrastructure and services which serve bothpassenger and freight transport within Xinjiang and between Xinjiang and its neighboringcountries and provinces which include the following:

(a) identification of all existing transport infrastructure (rail, road, air andpipeline), terminal and storage facilities (including physical characteristicsand condition, inventory, capacity and location);

(b) fleet for each mode (including inventory by type, utilization, physicalcondition, maintenance, and replacement cost);

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(c) identification of ownership of transport vehicles (includingenterprise/institution, state transport enterprises, private and individualowned vehicles) and share of total traffic;

(d) identification of transport manufactures and maintenance industries;

(e) review of institutional regulation system;

(f) identification of transport prices and transport cost by mode and by type ofvehicle; and

(g) review of transport investments made for each by year and the way ofraising funds for investment.

9. Part II: To review and analyze the present of socioeconomic conditions and itsfuture development and predict future transport demand.

(a) quantification of various reserves and identification of distribution;

(b) collection of socioeconomic data by year (including population, GNP,industrial structure, output value, output and distribution of mainproducts);

(c) collection of data of social economic development for the next 15 years(including population, industrial structure, output value, output anddistribution of the main products);

(d) collection of historical data of passenger/freight transport by year and theprojections for the next 15 years;

(e) collection of historical data by year of O-D volume for some maincommodities projections for the next 15 years;

(f) collection of historical data by year of transport volume between Xinjiangand its neighboring provinces and countries (by import and export) andprojections for the next 15 years; and

(g) data collection on the existing and its neighboring provinces and countries.

10. Part III: To make recommendations for the policies and development of thissector.

(a) proposals for the policies and basic thinking under which the transportinfrastructure and service are planned and provided;

(b) assessment of adequacy of proposed transport infrastructure to satisfy theprojected demand (for 2000, 2005 and 2010) and construction priorities;

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(c) analysis and justification of proposed key transport projects;

(d) proposals for increasing transport efficiency and lowering transport cost;

(e) analyses of proposed investments in transport projects and investmentpriority. Financial evaluation for source and uses of funds to financetransport infrastructure investment;

(f) proposals for improvement of transport institutional regulatory system;and

(g) a review of the conditions necessary for the greater use of containers forthe transport of products between Xinjiang and the rest of the China andneighboring countries.

D. STUDY METHODOLOGY AND PROCEDURES

11. The above three parts of the work should be considered as a whole. The first twoparts will be undertaken step-by-step or concurrently, while the third, which depends onthe results of the first two, will be completed some time later.

12. Efforts should be made to get support and assistance from SPC, MOR, and MOC,and maximum use should be made of the existing data sources and infornation availablefrom all regional and national agencies who have made a great deal of work in this sector.During the study, all new information cropped up should be considered so as to make thestudy deep and expansive. All the recommendations of the study should be practical fullyconsidering advice of the regional government, being based on facts and experiencingscientific justification.

13. This study will put stress on the transport planning within Xinjiang. Assessmentsof future demands for transport infrastructure should be based on minimizing the costs oftransport and providing the most efficient service to users. While working out the planefforts should also be made for focusing on integrated development, entire distributionand measures so as to avoid possible limitations from a sectorial planning. The studyteam should make the best use of time so as to keep working schedule and ensure studyquality.

14. It is intended to introduce TGIS to make the qualitative analysis having scientificbasis and provide ocular study results. Data analysis and presentation of quantitativerelations will be done by means of GIS, cartogram and data bank two-dimensionaltabulations. The general function will be designed when the above-mentioned scope ofwork is approved.

15. To ensure a promising result of the study, it is intended to invite experiencedexports from the region as the senior advisors to the study.

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16. The study report should be provided to the team of advisors (who have intimateknowledge of the transportation in China and international transport development) and tothe World Bank for comment. At the conclusion of the study a seminar will be arrangedwith participation from relevant central and provincial government agencies to discussand assess its recommendations.

E. ORGANIZATION OF STUDY

17. The Xinjiang High-Grade Highway Administration Bureau (XHGHAB) will takethe leadership of the study, while the SPC's Comprehensive Transport Research Institute,in cooperation with the Planning Division of XCD and the Regional Institution ofEconomics will carry out this study.

18. Organization Chart:

Xinjiang High-Grade Highway Administration Bureau

Senior Advisor Team Leader Team of InternationalAdvisors

Study Team

Economists Rail & Pipeline Expertsi Road Experts Air Experts

F. WORKING SCHEDULE

19. This study will take one year from commencement to delivery of the final report,deadline set for delivery of reports are as follows:

(a) report of Part I will be delivered 8 months after the officialcommencement;

(b) that of Part II will be delivered 10 months after the officialcommencement; and

(c) the final report will be delivered 12 months of the official commencement.

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G. BUDGETS

20. The estimated total cost for this study is Y 2.5 million with the followingbreakdown:

(a) Staff costs(one international advisor and local experts): Y 1.82 million;

(b) Travel Costs: Y 0.28 million;

(c) Subsistence allowance: Y 0.19 million;

(d) Other costs (office, interpreter, printing): Y 0.10 million;

(e) Contingency Y 0.1 1 million

TOTAL Y 2.50 million

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ANNEX 5: ENVIRONMENTAL ASSESSMENT AND ACTIONPLAN SUMMARY

A. BACKGROUND

1. Environmental Impact Assessment (EIA) of Urumqi-Kuitun Highway (UKH) andits linking roads were carried out by the Research Academy of Environmental Science.An EIA report, an Environmental Action Plan (EAP) and an Environmental Assessment(EA) Summary were submitted to the Bank in April 1995 and reviewed by the Bankduring the identification mission in April 1995. Based on the comments by the Bank, therevised EIA report, EAP and EA Summary were submitted to the Bank in June 1995 andcommented by the Bank in July 1995. Further revised EIA-related documents weresubmitted to the Bank in September 1995 for final review.

2. The process of environmental review involved inputs from various units in theregion, including environmental protection bureaus, research institutions and universities.The affected groups and NGOs along the highways, and the people subject toresettlement and land acquisition in particular, have been intensively consulted.

3. The policy and administrative requirements for environmental assessment ofdevelopment projects in China were followed during preparation and evaluation of theEIA, as well as the Bank's OD 4.01 on Environmental Assessment. Major laws andregulations applied to the EIA for the Second Xinjiang Highway Project are presentedbelow. The major environmental standards applied in the EIA are detailed in the projectfile.

(a) Environmental Protection Law of Peoples' Republic of China (PRC);

(b) Atmospheric Pollution Control Law of PRC;

(c) Environmental Noise Control Law of PRC;

(d) Water Pollution Control Law of PRC;

(e) Cultural Relics Protection Law of PRC;

(f) Land Management Law of PRC;

(g) Grassland Law of PRC;

(h) Forest Law of PRC;

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(i) Management Guidelines on Environmental Protection of ConstructionProject, Number 003 (86), issued by the National EnvironmentalProtection Agency (NEPA); and

(j) Measures for Environmental Protection Management of TransportConstruction Projects, Number 17 (90), issued by Ministry ofCommunications (MOC).

4. The scope of and the criteria for the EIA are presented below.

(a) The investigations for eco-environmental setting including wildlife,cultural relics and air pollution sources cover 1,000 m from both sides ofthe proposed roads. Scope of the predictions for noise, atmosphericenvironmental impacts and cultural relics covers areas within 200 m fromboth sides of the roads.

(b) The following standards are applied as the criteria for the EIA:

(i) Air pollution: Class 2 air quality standards (GB 3095-82);

(ii) Noise: Class 4 standards (70 dB(A) in daytime and 55 dB(A) atnight: GB 3096-93) in general and Class 2 noise standards [60dB(A) in daytime and 50 dB(A) at night] for areas with schoolsand hospitals.

(c) Considering the project features and construction cycle, the prediction wasmade for the years of 2000, 2010 and 2020.

B. BRIEF PROJECT DESCRIPTION

5. The scope of the Second Xinjiang Highway Project is discussed in para. 3.7.

C. BASELINE ENVIRONMENTAL DESCRIPTION

6. Geology and Topography. The proposed alignment of UKH is located in thenorth slope of Tianshan Mountains and on the southern fringe of Junggur Basin. Itsterrain is high in south and low in north. There is Gurbabtunggut desert to the north ofUKH. There are two major land forms along the highway-the low mountains and hillyareas (Urabo-Diwopu) and flooding and alluvial plain in Junggar Basin (Diwopu-Kuitun).The area that UKH traverses is in Tianshan Mountains seismic belt of Xinjiang MiddlePart Seismic Region. According to the Earthquake Intensity Map of Xinjiang in 1986and the Earthquake Intensity Division Map of China in 1990, the basic seismic intensityis 7 degrees in Urabo-Diwopu Section, 6 degrees in Diwopu-Jingou River, and 7 fromJingou River to the western border of Shawan County. From the western border ofShawan County to Kuitun, 8 degrees to the south of UKH and 7 degrees to the north.

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7. Climate and Hydrology. The project area belongs to the continental arid climatezone, with hot summers, long and cold winters, large temperature range in the year. Themean annual temperatures is approximately 7°C. Extremely maximum temperature isapproximately 40°C, and extremely minimum is approximately -40°C. The mean annualprecipitation is 160-200 mm, and maximum daily precipitation is 20-27 mm.Precipitation in April through July is more than 50 percent of annual precipitation. Theprevailing wind direction is southwest and the maximum wind velocity is over 20 m/s.The rivers traversed by UKH are 11, which belong to continental rivers. These areseasonal rivers whose sources are glacier, melted snow and precipitation in mountainareas. About 65 to 72 percent of annual runoff volume flows between June and August.

8. Socioeconomic Situation. The project area is located on the economic belt of thenorthern slope of Tianshan Mountains whose hub is Urumqi City. Its area includes125,800 km or 7.6 percent of whole Xinjiang. The total population was about 3.9million in 1995 and population density is 31 persons/km2 . The total industrial productionof the area was approximately Y 18 billion in 1993, which was 58 percent of wholeXinjiang.

9. Agriculture. The project area has been an important base of grain, cotton, sugarand vegetable oil products in Xinjiang. Arable land was 5.8 million mu (390,000 ha) in1993, about 50 percent for grain crops (mainly wheat) and 30 percent for cash crops(mainly cotton, corn and bean). Irrigation area is about 466,000 ha, for which irrigationchannels have been well developed along UKH. Animal husbandry has also been welldeveloped. Natural grazing land is mainly located between the Anjihai and KuitunSection. Main domestic animals are sheep, goats and pigs.

10. Ecological Setting. Main zonal vegetation is xeric shrubs and hemi-shrubs,which constitutes drought desert pasture. Quality of pasture is medium and partly low,and the yield is generally low. There is no natural forests along UKH. Two artificialforests have been developed in the project area: Manasi Tree Farm (6,000 ha) andGanhezi Tree Farm, which are located to the north of UKH. A few trees such as Ulmusalevis and Fraxinus sodgiana are scattered along the proposed alignment of UKH.

11. The project belongs to Wusu and Qitai Desert Unit, which is the reclamation areaof the northern foot of Tianshan Mountains. Insecta and arthropoda are dominant in thearea. The common animal species are Bufo species of Amphibian, Eremia velox andphrynocephalus species of Reptilia, which are widely distributed in desert belt of thenorthern Xinjiang. There are no precious or endangered species along the proposedalignment of UKH.

12. Air Quality. Baseline air quality monitoring was carried out at nine sites inMarch and July/August 1993. The air quality standards on NO, and TSP exceeded atonly one site, Xishan, which is in the boundary of the city limit. At all other sites, themonitoring levels were well below the standards and considered fairly good.

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13. Noise. Baseline noise monitoring was carried out at 19 noise sensitive sites inJuly 1993. The monitoring results suggest that at all sites the noise level (Leq) in bothdaytime and at night is below the noise standards, which are adopted as assessmentcriteria, and at most sites the noise level is fairly low, less than 50 dB(A) in daytime and40 dB(A) at night. The major noise source is traffic.

D. POTENTIAL ENVIRONMENTAL IMPACTS AND THEIR MITIGATION MEASURES

14. Major potential impacts and their mitigation measures regarding UKH and itslinking roads are summarized below and incorporated in the Environmental Action Plan(EAP) of UKH and its linking roads. The EAP stipulates how the environmental impactsidentified in the EIA will be dealt with in the design, construction and operation phases,and what institutional arrangements have been made for the implementation of the EAPduring the three distinct phases. The key elements of the EAP are summarized asAppendix I of this Annex.

Design Phase

15. Alternative Alignments. Two alternatives were considered in each of UrumqiTransit Section, Xishan-Wugontai Section and Shihezi Section. For Urumqi TransitSection, a new transit road starting from Urabo, and upgrading of the existing road wereconsidered. Consequently, the new road was selected because of less disturbance of citytraffic and has less resettlement and environmental pollution in the city. For Xishan-Wugontai Section, northern and southern alternatives were considered and the southernroute was adopted because of less resettlement, less environmentally sensitive areas andbetter geological conditions. For Shihezi Section, southern and northern routes wereconsidered and the southern route was selected because of much less farmlandoccupation, less resettlement, less dust and noise impacts in Shihezi City, and bettergeological conditions.

16. Social Disruption. In order to minimize problems of community separation andisolation due to the project construction, 32 grade separations and 166 underpasses wouldbe provided.

17. Soil Erosion. Soil erosion will mainly take place in low mountains and hillyareas. High embankment slopes will be stabilized with turf. Planting of trees and grassin the median divider and along the roadside was included in the design whereappropriate. Temporary and permanent drainage systems were designed to minimize soilerosion and alteration of hydrological regimes.

18. Transmigration of Livestock. Based on field surveys, the Anjihai-KuitunSection (54 km) was identified to be a main area where transmigration of livestockfrequently happens in spring and autumn. For this section, 3 medium bridges, 14 smallbridges and 32 underpasses with sufficient height and width for livestock were designedto avoid impacts on their transmigration. In addition, some culverts will also be used fortransmigration of livestock.

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19. Noise. Most of the villages within 200 m from the roadsides are small andsparsely populated. Altogether 19 environmentally sensitive sites were identified forspecial attention. According to the traffic noise prediction during the operation phase(2000, 2010 and 2020), the noise level at 12 sites will significantly exceed the assessmentcriteria. To avoid such noise problems, the following measures have been identified andintegrated into the designs, considering predicted noise levels and local situations.

(a) By 2000, resettlement of residences to avoid significant noise problems(Changfeng Sidui, Yuanhucum Shang);

(b) By 2010, approximately 5,860 m of heightened fences besides residencesand schools (5 sites), and resettlement at one site; and

(c) By 2020, 300 m of noise barrier (142 Brickyard), additional 765 m ofheightened fences besides residences and schools (3 sites), andresettlement at 2 sites.

(d) The construction of new residential buildings will be prohibited within200 m from the roadsides. The residences within 200 m from the roadsidewill be gradually relocated.

20. Air Pollution. NOX, CO and hydrocarbons (HC) concentrations in 2000, 2010and 2020 were predicted along the proposed alignment and environmentally sensitivesites. While CO and HC concentrations will be below the standards in all predictedyears, NO. concentrations besides the road will exceed the standards. Daily average NO.concentrations will exceed the standard at one section in 2000, 10 sections in 2010 and 14sections in 2020. The probability to exceed the standard is, however, only 9 percentthroughout a year. Maximum NOx concentrations will exceed the standard in 5 sectionsin 2000, 14 sections in 2010, and 17 sections in 2020. However, NOX concentrations willexceed the standards at no environmentally sensitive sites in 2000 and 2010, and at only 2sites (Sanpin Liudui and Yuanhucun) in 2020. To avoid air pollution problems, thefollowing measures will be taken:

(a) Tree planting will be undertaken, to mitigate air pollution particularly dustand NOx.

(b) Vehicle emission inspection will be strengthened. XCD will alsoundertake random vehicle emission inspection at three toll stations(Urumqi, Shihezi and Kuitun) not to allow the vehicles exceeding theemission standards traveling on the Expressway.

(c) Air quality monitoring will be carried out during the operation phase todetect any significant air pollution problems and to take necessarymeasures.

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(d) Besides the above effort by XCD and other relevant authorities inXinjiang, it is expected that the vehicle emission standards will bestrengthened and more stringent emission standards will be applied to newvehicles in the future, which is not taken into account in the EIA.

21. Water Pollution. Impacts on surface water are mainly anticipated in Toutonghe-Shihezi Section and Shihezi-Anjihai Section. Adequate permanent and temporarydrainage systems were incorporated in the designs to minimize surface water pollutionand disturbance to irrigation channels and existing drainage systems. Wastewatertreatment facilities were included in the design of service areas in order to prevent directdischarge of waste water to public water bodies.

22. Cultural Relics. An archaeological field survey was carried out in March/April1995 by Xinjiang Cultural Relics and Archeological Institute. The survey revealed thatmost remains are located more than 1,000 m away from the proposed alignment of UKH.Only an unclassified archaeological site at Cangfanggou in Dawan Xiang (K7 + 750:between Urabo and Xishan Sections) may be affected by construction activities.Excavation of the site, therefore, was conducted and it was found that no cultural remainsexist underground within the working area of construction activities.

23. Flooding. All bridges, culverts and roadside drainage systems were adequatelydesigned to meet requirements for safe discharge of floods (300-year design floods forsuper-large bridges and 1 00-year floods design for other bridges and culverts).

24. Landscape. Afforestation will be undertaken to improve landscape at mediandividers, slopes and ditches as well as beyond the right-of-way. Also landscaping andother aesthetic effects were considered during the design of bridges, service areas andinterchanges.

Construction Phase

25. Fugitive Dust and Other Air Pollution. Quarries, material borrow sites, wastedisposal sites and transportation routes to construction sites were identified as the majorareas that create dust and other air pollution. Road surfaces, excavation areas andconstruction sites will be sprayed with water and kept moist particularly near towns andother sensitive locations. Access roads will be upgraded, widened and paved wherenecessary, and sprayed regularly to minimize fugitive dust. Stockpiles and storage areaswill be either covered or sprayed. Construction materials will be covered during haulingto prevent undue dust or debris on roads. Asphalt and lime stone mixing equipment willbe equipped with dust collectors and will be located at least 500 m from residential areason the leeside of the wind directions.

26. Noise. Construction machinery and trucks will be equipped with proper noisecontrol devices and will be properly operated and maintained. Construction activitieswill be suspended between 11:00 p.m. and 9:00 a.m. within 200 m from residential areas.Transportation of construction materials will be undertaken with careful consideration to

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minimizing noise impacts on residents along the roadside. Traffic management,including dissemination of traffic rules and setting up of speed limits will bestrengthened.

27. Protection of Land Resources. Forests will not be used for material borrowsites. Arable land will be avoided as material borrow sites where possible. If excavationhas to be done in arable land, top soil layer will be saved and returned after constructionworks is completed to minimize impacts on ecosystems and agriculture. Education ofconstruction workers will be strengthened to protect natural resources, wild plants andanimals.

28. Soil Erosion and Water Pollution. Trees and grass will be planted on sideslopes, and along the roadside, where appropriate. Appropriate measures, eitherrehabilitation or reconstruction, will be taken if the existing irrigation or drainage systemsare damaged. All necessary measures will be taken to prevent earth and stones fromsilting up rivers, water channels or existing irrigation and drainage systems. Temporarychannel or conduit will be constructed for irrigation and drainage, during the constructionof permanent drainage systems. All reasonable measures will be taken to prevent directdischarge of polluted water from construction activities into rivers and irrigationchannels.

29. Construction Camps. Septic tanks will be installed at construction camp sites toprevent direct discharge of sanitary sewage to public water bodies. Sludge in sewertreatment pits will be disposed of regularly. Garbage will be collected in garbage cans atfixed locations and disposed of regularly. Drinking water at construction sites will meetChina's national drinking water standards.

30. Cultural Relics. Construction works will be stopped immediately if any culturalrelics are discovered as a result of road construction or excavation activities. The localcultural relics authorities will be informed and a field survey of the site will beundertaken. Excavation will not be resumed until authorized institutions identify theimportance and necessary preservation measures.

31. Traffic Management. Adequate traffic control measures, including installationof traffic signals, will be implemented particularly in interchange sections and maincontrol points to prevent or minimize traffic jams during the construction period. Aconstruction material transportation plan will be developed to avoid hauling activitiesduring peak hours especially on existing roads.

32. Construction Safety. In order to guarantee construction safety, efficient lightingequipment and safety signs will be installed on temporary roads during the construction,and adequate traffic regulations will be adopted and implemented for temporary roads.During construction, the contractors will adopt effective safety and warning measures toavoid accidents, stipulate blasting time, signals and guarding line, and carefully checkbefore blasting. Management and use of blasting materials will strictly follow safetyrequirements of the Public Safety Department.

- 99 - ANNEX5

Operation Phase

33. Noise and Air Pollution. Unnecessary use of horns will be strictly restricted atnight. Noise barriers or other appropriate noise protection measures will be taken atlocations where noise exceeds standards significantly, based on the monitoring results.

34. Vehicle Management. Better vehicle maintenance and management will beenhanced to keep vehicles in good conditions. Vehicle noise and emission inspectionwill be strengthened and vehicles which do not meet noise and exhaust emissionstandards will not be allowed to use UKH and other roads in the region. Random vehicleemission inspections will be undertaken at the Urumqi, Shihezi and Kuitun toll stations.Public awareness campaigns and education will be undertaken to farniliarize people withair and noise pollution regulations. In order to avoid future noise and air pollutionproblems, development of residential areas and construction of sensitive buildings suchas schools and hospitals will be prohibited within 200 m from the roadside.

35. Risk of Hazardous Material Spill. Any vehicle transporting hazardous materialswill inform the Public Security Bureau (PSB) prior to the transportation. PSB stipulatestime and route of driving vehicles and parking places. The vehicle needs to havedangerous signs and the driver needs to be well experienced. Both of them will beinspected. Passengers cannot ride the vehicle transporting hazardous materials. Signswill be set up at environmentally sensitive sites to alert the drivers for traffic safety.Traffic peak hours will be avoided for transportation of hazardous materials.

E. ENVIRONMENTAL MONITORING

36. During the construction and operation of UKH and its linking roads,environmental monitoring will be carried out to verify the actual impacts on theenvironment, identify unexpected environmental problems at an early stage, and adjustenvironmental protection measures as appropriate. The Xinjiang EnvironmentalMonitoring Center will mainly carry out necessary environmental monitoring during theconstruction and operation phases. However, noise and dust will be monitored by theenvironmental supervisors at each of the construction contract sections. An annualmonitoring report would be furnished to the Bank during the construction phase and foreach of the first three years following completion of construction.

37. The major items to be monitored during the construction phase will include airquality, noise, lead in soil, crops and herbage and transmigration of livestock. In additionto the above items, vehicle exhaust will be inspected during the operation phase. Waterquality will not be monitored because the rivers in the project area are seasonal, and theconstruction activities besides the rivers will be carried out in dry seasons, and thereforewill not have impacts on river water quality. The detailed monitoring plan is presentedbelow.

38. Air Quality. Items to be monitored will include dust (by environmentalsupervisors) and total suspended particulates (TSP) during the construction phase and

-100 - ANNEX5

nitrogen oxides (NOJ), CO, TSP and hydrocarbons (HC) during the operation phase.During the construction phase, TSP will be monitored four times a year for fiveconsecutive days each time and fugitive dust every 10 days. Monitoring sites will beconstruction sites, quarries and material borrow sites, and major roads used for haulingconstruction materials. During the operation phase, NO,, CO, TSP and HC will bemonitored three times a year, each time for three consecutive days and four times a day atfive monitoring sites along UKH (Urumqi, Wugongtai, Shihezi, Shawan and Kuitun).

39. Noise. During the construction phase, noise monitoring will be carried out byenvironmental supervisors in each contract section in daytime and at night on a weeklybasis at construction sites, quarries, material borrow sites and major constructionmaterials hauling roads. Ad hoc monitoring will also be undertaken. During theoperation phase, noise monitoring will be carried out four times a year, in daytime and atnight at five sites along UKH. Ad hoc monitoring will also be undertaken.

40. Lead in Soil, Crops and Herbage. Sampling and analysis will be conducted atsites 0 m, 50 m, 100 m and 200 m away from the roadsides in Urumqi, Shihezi andKuitun once in two years during the construction and operation phases. Baselinemonitoring will also be carried out before construction works start.

41. Transmigration of Livestock. The environmental expert being familiar withanimal husbandry will make observation twice a year to check whether transmigration oflivestock is affected by the project in the Anjihai-Kuitun Section.

42. Vehicle Exhaust and Noise Inspection. Vehicle exhaust gasses (CO and HC ingasoline-powered vehicles, and smoke density in diesel-powered vehicles) will berandomly inspected at Urumqi, Shihezi and Kuitun toll stations during the operationphase.

F. INSTITUTIONAL ARRANGEMENTS

43. The following institutional arrangements for environmental protection will beundertaken for UKH:

(a) One Deputy Chief Supervision Engineer in the Chief SupervisionEngineer Representative Office, who will be responsible forenvironmental issues related to XHP2.

(b) Under the Chief Supervision Engineer Representative Office in theHeadquarters, an Environmental Supervision Unit (ESU), comprising onesenior environmental officer and one environmental expert, will beresponsible for environmental supervision of the project.

(c) At each of the three senior resident supervision offices, one well trainedenvironmental staff will be assigned to supervise the implementation of

-101- ANNEX5

environmental protection measures addressed in the EAP and guideenvironmental supervisors at contract sections.

(d) At each contract section, one environmental supervisor will be assigned tocarry out the environmental supervision of the construction activities toensure that all environmental protection measures stated in the contractdocuments will be carried out.

(e) XCD will entrust to the Xinjiang Environmental Monitoring Center thenecessary environmental monitoring of the project both during constructionand operation periods.

(f) For the operation period, an Environmental Unit with two to three staffwill be set up in XHGHAB. One to two environmental staff will beassigned for each of the Northern Urumqi, Shihezi and Kuitun Offices.

44. The following environmental training will be undertaken to provide adequatetraining for environmental staff at the Headquarters, senior resident supervisors officesand at contract sections:

(a) One environmental expert at ESU and seven environrnental staff at seniorresident supervision offices will take environmental training for about amonth in China;

(b) Environmental supervisors at contract sections will take environmentaltraining for about a month in Urumqi on environmental protectionmeasures during the construction phase, and noise and dust monitoringmethodologies.

45. The following environmental equipment will be procured under XHP2.

Equpme Number

Sound level detector 3

Tail gas inspection equipment 1

Computer 1

Monitoring vehicle I

-102 - ANNEXSAppendix 1

APPENDIX 1 TO ANNEX 5: KEY ELEMENTS OF THE EAPFOR THE URUMQI-KUITUN HIGHWAY (UKH)

Environmental Issues Action Taken/To Be Taken Responsibility

A. Design Phase

1. Route Selection The alignment was selected from a few alternatives In serveral sections, XCD/FHSDIwith due consideration to minimize land acquisition, impacts of airpollution and noise on residential areas, and to avoid unfavorablegeological conditions and archaeological sites.

2. Social Disruption 32 grade grade separations and 166 underpasses were designed to meet XCD/FHSDIthe requirements for crossing of local people, animals and vehicles. Inparticular, 3 medium and 14 small bridges, 32 passageways weredesigned in Anjihai-Kuitun Section (54 km) for transmigration oflivestock.

3. Soil Erosion Planting of trees and grass on median divider, sideslopes, and along the XCD/FHSDIroadside, was included in the design where appropriate.

Temporary and permanent drainage systems were designed to minimize XCD/FHSDIsoil erosion and alteration of hydrological regimes, including impacts onirrigation channels.

4. Water Pollution Waste water treatment facilities were designed for service areas. XCDIFHSDI

5. Noise Adequate measures such as resettlement, noise barriers, fences wereidentified and integrated in the design and bid documents.

6. Flooding Bridges and culverts were adequately sized to meet requirements for XCD/FHSDIsafe discharge of design flood (300 years for super-large bridges, 100years for other bridges and culverts).

7. Cultural Relics Cultural relics survey including field excavation was carried out and no XCD/FHSDIimportant cultural relics were found in the working area of the project.

8. Afforestatlon Afrorestation plan was developed to reduce sir pollution problems and XCD/FHSDIenhance better landscape.

3. Construction Phase

1. Protection of Land Forests will not be used for material borrow sites. Reforestation will be ContractorsResources undertaken upon completion of construction activities.

Arable land will be avoided as material borrow sites wherever possible.If excavation has to be done in arable land, top soil layer will be savedand returned after construction work is completed, so as to minimizeimpacts on ecosystem and agriculture.

Education of construction workers will be strengthened to protectnatural resources, wild plants and animals. Poaching will be strictlyprohibited.

2. Soil Erosion/Water Trees and grasses will be planted on side slope, and along the roadside, ContractorsPollution where appropriate. Appropriate measures, either rehabilitation or

reconstruction, will be taken, if the existing irrigation or drainage systemsare damaged.

All necessary measures will be taken to prevent earth & stones fromsilting up rivers, water channels, or existing irrigation and drainagesystems.

Temporary channel or conduit will be constructed for irrigation anddrainage, during the construction of permanent drainage systems.

All reasonable messurers will be taken to prevent direct discharge ofpolluted water from construction activities into rivers and irrigationchsnnels.

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Environmental Issues Action Taken/To Be Taken Responsibility

3. Construction Camps Septic tanks will be installed at the construction camp sites. Sludge in Contractorssewage treatment pits will be disposed of regularly. Drinking water willmeet the Chinese national drinking water standards.

Garbage will be collected In garbage cans at fixed locations and disposedof regularly.

4. Dust/Air Pollution All reasonable steps, includeuding watering, will be taken to minimize Contractorsdust pollution during construction, particularly in places near towns.

Stockpiles and storage areas will be located far away from residentialareas on the lee side of the wind direction. Stockpiles and storage areaswill be covered or watered to prevent dust pollution. Trucks to transportconstruction materials will be covered to minimize spills.

Asphalt and lime stone mixing sites will be located at least 500 m fromresidential areas on the lee side of the wind direction. Asphalt plants willbe equipped with adequate dust collectors.

5. Transportation Hauling route of construction materials will be selected in a careful ContractorsManagement manner to minimize interference with existing communications facilities,

and dust and noise. Construction materials hauling plans will bedeveloped to avoid hauling activities during the peak traffic hours.

Adequate actions to direct traMic will be taken in consultation withrelevant authorities, to prevent or minimize traffic jams during theconstruction period.

In the sections where existing roads are occupied, temporary roads will beconstructed before existing roads are occupied for construction of newhighway.

6. Noise Reasonable schedule of construction activities will be developed to avoid Contractorsnoisy construction activities during the night time (23:00 - 9:00),particularly in such sites within 200 m from residential areas.Maintenance of machines and trucks will be improved to minimize noise.

7. Cultural Relics Excavation will be stopped immediately if any cultural relics are found, Contractorsand the local cultural authority will be informed of such discovery.Excavation will not be resumed until identification of cultural relics by theauthorized institution is completed and necessary preservation measuresidentified.

8. Construction Safety In order to guarantee safety, efcient lighting equipment and safety signs Contractorswill be installed on temporary roads during the construction, andadequate traffic regulations will be adopted and implemented fortemporary roads. Effective safety and warning measures will be taken toavoid accidents. Blasting time, signals and guarding lines will beadequately set and careful check will be carried out before blasting.Management and use of blasting materials will strictly follow safetyrequirements.

C. Operation Phase

1. Noise and Air Unnecessary use of horns will be strictly restricted at night XHGHABPollution

Noise barriers or other appropriate noise protection measures will be XHGHABtaken at locations where noise exceeds standard, based on the results ofmonitoring.

2. Vehicle Management Better vehicle maintenance/management will be enhanced to keep vehicles XHGHABin good conditions. Vehicle noise and emissions inspection will bestrengthened. If a vehicle does not comply with the noise and/or emissionsstandards, the vehicle will not pass inspection on roads till the problem isrectified. Periodical and random exhaust gas emissions inspection will beundertaken at Urumqi, Shihezi and Kuitun toll stations.

Public awareness and education will be promoted to familiarize people XEPB/XHGHABwith the problems of air pollution and noise from vehicles and withrelated regulations.

3. Hazardous Materials Anybody transporting hazardous materials will inform the Public PSB/XHGHABSpills Security Bureau (PSB) prior to the transportation. PSB stipulates time,

route and parking places of driving vehicles. Both vehicles and driverswill be inspected by PSD. Vehicles will have danger signs. Signs will beset up at environmentally sensitive sites to alert drivers for traffic safety.Traffic peak hours will be avoided for transportation of hazardousmaterials. Contingency plans will be established to deal with accidents.

-104 - ANNEXSAppendix 1

Environmental Issues Action Taken/To Be Taken Responsibility

4. Others Construction of permanent buildings including schools and hospitals will XHGHABnot be allowed within 200 m from the roadside.

D. EnvironmentalMonitoring

1. Air Quality (1) Construction period:(a) Monitoring item: TSP and dust(b) Monitoring frequency: TSP: 4 times a year, consecutive 5 days,

4 times a dayDust: every 10 days(c) Monitoring points: construction sites, quarries, material

borrow sites, major hauling roads and asphalt mixing sites

(2) Operation period:(a) Monitoring items: NOx, CO, HC and TSP(b) Monitoring frequency: 3 times a year, 3 consecutive days, 4

times a day(c) Monitoring points: Urumqi, Wugongtai, Shihezi, Shawan,

Kuitun

(3) Monitoring technical criteria:Present Atmosphere Monitoring Standard Methods issued byNational Environmental Protection Agency (NEPA)

2. Noise (1) Monitoring frequency:(a) Construction period: once a week, 2 times a day. Ad hoc

monitoring will be undertaken as appropriate.(b) Operation period: 4 times a year, 3 consecutive days, once each

in daytime and at night. Ad hoc monitoring will be undertaken.

(2) Monitoring points:(a) Construction period: same as air quality monitoring(b) Operation period: same as air quality monitoring

(3) Monitoring technical criteria:Present Noise Standard Method issued by NEPA

D. EnvironmentalMonitoring

3. Lead in Soil, Crops (1) Monitoring frequency: once before construction activities start, andand Herbage once in two years during construction and operation phases.

(2) Monitoring points: Urumqi, Shihezi and Kuitun(3) Monitoring technical criteria:

Present Noise Standard Method issued by NEPA

4. Transmigration of (I) Monitoring frequency: twice a year (spring and autumn)Livestock (2) Monitoring points: Anjihai-Kuitun Section

(3) Monitoring methods: Observation by environmental experts withknowledge on animal husbandry

5. Vehicle Exhaust and (I) Inspection items: CO and HC (gasoline-powered vehicles), smokeNoise Inspection density (diesel-powered vehicles)

(2) Inspection frequency: random check during the operation phase(3) Inspection site: Urumqi, Shihezi and Kuitun toll stations

-105 - ANNEX6

ANNEX 6: LAND ACQUISITION AND RESETTLEMENT

1. This Annex describes the land acquisition and resettlement impacts associatedwith the Second Xinjiang Highways Project (XHP2) and the measures taken by XCD toaddress these impacts, as described in the Resettlement Action Plan (RAP) for theproject.

Project Components

2. XHP2 includes the following civil works components:

(a) The 267 km Urumqi-Kuitun Highway (UKH)

(b) Interchanges along the UKH

(c) The four linking roads interconnecting UKH with cities/towns along theexisting highway.

3. The construction of the UKH, interchanges and linking roads will require landacquisition and resettlement and rehabilitation of affected persons. In order to mitigatethe adverse impacts due to land acquisition and resettlement, XCD had prepared aResettlement Action Plan (RAP). The RAP describes the following aspects of landacquisition and resettlement planning and implementation:

(a) the scope and extent of project impacts;

(b) the legal framework and resettlement policies to compensate and resettle/rehabilitate the affected persons;

(c) the institutional arrangements for preparation, implementation andmonitoring of the RAP;

(d) costs and budget for RAP implementation;

(e) Implementation steps and schedule;

(f) Participation of affected persons in the resettlement program;

(g) Mechanisms for redress of grievances;

(h) Monitoring of RAP implementation.

-106- ANNEX6

Project Impacts

4. The land acquisition and resettlement impacts of the project were surveyed by theFirst Highway Survey and Design Institute (FHSDI), with the involvement of localgovernments and the affected people along the proposed route. About 17,088 mu(1,139.26 ha) of land will need to be acquired permanently. About 6,998 mu (466.54 ha)will be leased temporarily during the construction period for encampment, approachroads and quarries. Permanent land acquisition will affect 3,706 persons. To minimizethe land acquisition resettlement impacts of land-leasing, it will be restricted towastelands to the extent possible. About 265 families (1,106 persons) will be affecteddue to house relocation. Nine enterprises employing 243 workers will also be relocated.

5. In order to establish a baseline of the socioeconomic conditions of the affectedpersons, a detailed socioeconomic survey was carried out by the Xinjiang Academy ofSocial Sciences (XASS), and was completed by August 31, 1996.

Legal Framework and Resettlement Policies

6. The following laws, regulations and guidelines form the basis for preparation ofthe RAP.

(a) Land Management Law of China;

(b) Guidelines for enforcement of The Land Management Law of China in theXinjiang Uygur Autonomous Region;

(c) Regulations for Compensation and Resettlement for State ConstructionLand Acquisition in the Xinjiang Uygur Autonomous Region and theattached tables (specifying the compensation rates);

(d) Rules to enforce "the Management Regulation of House Removal inCities";

(e) Preferential policy of Land Acquisition and Resettlement of Urumqi-Kuitun Highway Construction.

Implementation of the resettlement program will be carried out in accordance with theprovisions of the RAP.

7. The main objective of the resettlement program is to ensure that all affectedpersons are able to improve or at least restore their existing standards of living. Thisobject will be attained by following established principles of resettlement in China anddelivering specific entitlements of the persons affected by land acquisition's resettlement.The resettlement principles aim to avoid or minimize resettlement; restore or improve thestandards of living of the adversely affected people; consult affected localities duringproject design, compensate villages for the land acquired from them and to compensate

-107 - ANNEX6

project design, compensate villages for the land acquired from them and to compensateindividuals for houses, standing crops, or other individually held assets; provide land toaffected persons through land redistribution; and to entrust the implementation ofresettlement programs to the local governments. These principles substantially meet theBank's requirements on resettlement. Based on national laws and regulations onresettlement, Xinjiang Autonomous Region will issue land acquisition, compensation andresettlement guidelines for XHP2.

Compensation and Resettlement Policies

8. The various types of impacts and the compensation or resettlement strategies andpolicies for each category of impact are given below:

(a) Farmland Acquisition. Persons affected by land acquisition will beprovided with alternative agricultural land by bringing additional landunder cultivation or by redistributing the total land available in thevillages/production teams. The minimum per capita landholding whichmust be maintained in all the villages is 1.5 mu (1,000 m). If thelandholding in any production team or village falls below this level, theaffected persons are entitled to be provided jobs in enterprises. However,in this project, there is no case where the per capita landholding fallsbelow this minimum level and therefore, all affected persons will berehabilitated through provision of altemative land. Affected farmland willbe compensated at six times the average annual productivity of the land.Standing crops will be compensated at their market value.

(b) Temporary land leasing. Efforts will be made to lease only wasteland sothat there are no adverse land acquisition impacts. Land leasedtemporarily will be compensated at its actual productive value for theduration of the lease. Compensation will include: (i) crop compensation;(ii) land compensation; (iii) cost of restoration of the land to its originalcondition after project completion. No buildings will need to be relocateddue to temporary leasing.

(c) Affected houses. Compensation for affected houses and buildings, ownedby enterprises or individuals, will be paid at replacement rates, asdescribed in the RAP. No deduction will be made for depreciation or thecost of salvageable materials while calculating the total compensationpayable.

(d) Affected enterprises. The affected enterprises will be relocated close totheir existing locations on land provided by the villages. Affected assetswill be compensated at replacement rates. Workers will be employed inthe same reconstructed enterprises and will be paid a work stoppageallowance equivalent to their wages for the duration of work stoppage.The affected enterprises will be provided a production stoppage allowance,

-108- ANNEX6

for the duration of work stoppage based on the average net profit in theprevious six months.

(e) Infrastructure and other assets. Compensation for infrastructure andother affected assets will be paid at replacement cost to the affectedindividuals, collectives or governments, depending on the ownership ofthese assets.

(f) Moving and Transition allowance. Each affected household will be paida moving allowance and a transition allowance for a period of fourmonths.

(g) Payment of Compensation. Compensation for standing crops, housesand other private structures will be paid directly to the affected persons.All allowances will also be paid to the affected persons. Compensation foraffected land, public infrastructure, and the resettlement subsidy will bepaid to the county government.

Institutional Responsibility

9. In the PEO, a Resettlement and Monitoring Office (RMO) has been formed tocarry out the coordination of the planning, implementation and monitoring of landacquisition and resettlement activities under the project. The actual implementation willbe carried out by the local county and township governments in accordance with theagreements signed with XCD (PEO), based on the provisions of the RAP. A Lead Groupon resettlement has already been formed for XHP1 (TUDH) and the same group will beresponsible for overseeing the implementation of the RAP for XHP2 (UKH).

10. The FHSDI is responsible for conducting further detailed surveys based ondetailed engineering designs. Monitoring and Evaluation of RAP implementation will becarried out by XASS who will also be responsible for conducting baseline and follow upsocioeconomic surveys of the affected people.

11. Resettlement staff from RMO, the local communications bureau and the otherbureaus in the local government will be given training on resettlement implementationand monitoring as a part of the project.

Implementation Schedule

12. The RAP will be implemented from April 1996 to February 1997, in accordancewith the detailed implementation schedule incorporated into the RAP. The resettlementimplementation schedule and the project construction schedule will be linked in order toensure that the implementation of land acquisition and resettlement activities iscompleted at least one month before the start of project construction. The RAPimplementation schedule is detailed in the project file.

-109 - ANNEX6

Costs and Budgets

13. The cost of land acquisition and resettlement is included as a part of the overallproject budget. The annual requirement of funds for RAP implementation will beincluded in the annual investment plans. An item-wise cost table of all land acquisitionand resettlement activities is shown in the project file as well. The cost estimates includea contingency allowance at 6 percent of the total LAR budget has been provided for.Similarly, a 5 percent allowance is made for inflation during project implementation.Compensation amounts payable to the affected persons will be adjusted every year by theannual inflation factor. However, since compensation payment is expected to take placewithin one year, inflation is not expected to be significant. An amount of 4 percent of thetotal budget will be paid to the land management bureaus at various levels asmanagement fee for implementing the RAP.

Redress of Grievances

14. In case any affected person is dissatisfied with any aspect of the resettlementprogram, their grievance can be lodged with the local land management bureau at thetownship or the county level. In case the issue is not resolved satisfactorily within threeweeks, a formal application can be made to the Lead Group on resettlement. The issuewill be resolved by the Lead Group within four weeks. If the affected person is notsatisfied with the decision of the Lead Group, he or she can lodge a written appeal to thecounty level peoples court. If the decision of the county level court does not satisfy theaffected person, a second appeal can be lodged in the court of the city/prefecture. Thedecision of this court will be final and binding.

Information Dissemination, Participation and Consultations

15. The affected persons will be informed through various media about the projectand the expected land acquisition and resettlement program. The LAR institutions willalso disseminate information through meetings, and notices about the proposedcompensation rates and compensation strategies. The affected people will participate in(a) efforts to minimize land acquisition and resettlement through choice of appropriatealignment alternatives; (b) survey of affected persons; (c) selection of new residentialsites; (d) construction of new houses; and (e) monitoring and evaluation of resettlementactivities.

16. In order to facilitate complete understanding of the resettlement program and oftheir entitlements, a Resettlement Information Booklet (RIB) will be distributed toaffected people and their representatives within two months of completion of projectnegotiations. The RIB will contain: (a) a brief description of the project and its landacquisition and resettlement impacts; (b) brief review of the land acquisition andresettlement program; (c) detailed entitlement policies for the various categories ofaffected people; (d) institutions responsible for delivery of entitlements; (e) grievanceredresses mechanism; and (f) arrangements for monitoring and evaluation of theresettlement program.

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Monitoring and Evaluation

17. The implementation of the RAPs will be carried out both internally (by RMO andthe local communications bureau) and externally (by XASS, specially engaged by XCDfor this purpose).

(a) Internal Monitoring. Internal monitoring will be monitored by the stafffrom RMO and those from the local (city/county, and township)communications bureaus. Detailed formats for internal monitoring havebeen prepared and attached as annexes to the RAP. Internal monitoringwill ensure that: (i) compensation is paid as per the established standardsin the RAP; (ii) land redistribution is carried out in a timely manner and tothe full satisfaction of the affected people; (iii) employees of affectedenterprises are reabsorbed in the same enterprises after relocation;(iv) adequate compensation has been paid to the persons without residenceregistration certificates or those who have built their houses illegally; and(v) the information dissemination and grievance redress process isimplemented efficiently. Data regarding affected households will becollected and stored for subsequent comparisons. The internal monitoringreports will be prepared every three months and summary of internalreporting will be submitted to the Bank every six months. Internalmonitoring will concentrate on the physical progress of RAPimplementation.

(b) External Monitoring. External monitoring will be carried out by XASSand reports will be submitted every six months, until one year after thecompletion of RAP implementation. External monitoring will verify theresults of internal monitoring and focus on qualitative issues in RAPimplementation. XASS will select random, representative samples ofaffected persons from all categories (at least 25 percent), hold discussionsin the affected areas or resettlement sites, collect secondary informationfrom project agencies and the internal monitoring agencies as inputs forpreparation of their reports. External monitoring should identify problemsin the implementation process and make recommendations to addressthese problems. The first report of the external monitoring agency shouldbe received by the Bank by December 31, 1996. External monitoring willcontinue until one year after completion of RAP implementation. Theneed to carry out further monitoring, if necessary, will be reviewed at thatstage. A follow-up socioeconomic survey will be carried out by XASS todetermine the impact of the project on the standards of living of theaffected people. This survey will be carried out one year after thecompletion of the project.

-111- ANNEX7

ANNEX 7: IMPLEMENTATION SCHEDULE

This Annex presents the implementation schedule for the various components ofthe project. Table I summarizes the overall implementation schedule for the projects as awhole. Table 2 shows the detailed implementation schedule for the 14 civil workscontract sections of UKH to be constructed by ICB; stabilization of abandoned mines;administration and maintenance buildings, and service areas and electrical andmechanical works for UKH. Table 3 depicts the detailed implementation schedule for thesupervision of construction of UKH. Table 4 shows the first year (1997) implementationschedule for the Highway Maintenance and Rehabilitation Program (MRP). Theseschedules show the estimated time requirements for construction activities as well as forpreconstruction activities such as preparation of bid documents, prequalification process,bidding process, evaluation of bids, negotiations and signing of contracts.

TABLE 1: IMPLEMENTATION SCHEDULE

1995 1996 1997 1998 1999 2000 2001

I. Urumqi-Kuitun Highway (UKH)(a) Civil works-lCB contrcts * i(b) Stabilization of abandoned mines

(c) E&M supply & installation-lCB contract _ _

(d) Service & admin. facilities (Buildings)

(e) Highway maintenance -(e Highway safety -

Sunervision of ConstructionI UKH & Linking Roads _

Procumment of EquinmetI UKH

(a) Lab. apparatus

(b) Operation & maintenance

2 Highway Maintenance(a) Maintenance

3. Institutional Strengthening

Institutonal Strengthenina & Trainin,I Institutional Strengthening

2. Supervision Training

audvI. Strategic Study of Regional Transport

2. Highway Safety

Lgend:

gn_ Prequalificationlreparation of Bidding DocumentslTOR.Bidding Proceas/Competition Among ConsultantsConatruction/Supervision/Delivery/Execution of StudiesTrainingtTechnical Asistance.

-112 - ANNEX7

Table 2: IMPLEMENTATION PROGRAM FOR CONSTRUCTION OF UKH

I. Civil WorksA. 14 Civil Works Contract Sections (ICB)

Prequalification document available for sale on Dec. 25, 1995Last date to submit PQ documents Mar. 5, 1996Review bidding documents by consultants and Bank Mar. 15, 1996Complete PQ evaluation report Jun. 10, 1996Bank review and no objection to PQ evaluation report Aug. 10, 1996Sell bidding documents to prequalified contractors Aug. 10, 1996Last date to receive bidding documents Nov. 10, 1996Complete bid evaluation report and government review Dec. 10, 1996Bank review bid evaluation report and no objection Jan. 10, 1997Negotiate and sign contracts Feb. 10, 1997Start construction on Apr. 10, 1997Complete construction by Aug. 30, 2000

B. Stabilization of Abandoned Mines (NCB)Complete bid document Dec. 15, 1995Bank review bid document and no objection Jan. 20, 1996Invite bids Feb. 10, 1996Receive bids Mar.25, 1996Complete bids evaluation Apr. 15, 1996Bank review bid evaluation report and no objection May 15, 1996Negotiate and sign contract May 20, 1996Start construction on May 25, 1996Complete construction by Nov. 30, 1996

C. Administration and Maintenance Buildings ServiceAreas and Parking Areas, and Toll Plazas (NCB)Complete bid documents Oct. 1, 1997Bank review bid documents and no objection Dec. 1, 1997Invite bids Dec. 10, 1997Receive bids Feb. 10, 1998Complete bids evaluation Mar. 20, 1998Bank review bids evaluation report and no objection Apr. 20, 1998Negotiate and sign contracts Apr. 30, 1998Start construction on May. 20, 1998Complete construction by Aug. 30, 1999

II. Electrical and Mechanical Works (ICB)Complete bid documents and review by MOC Jul. 30, 1997Review bid documents by Bank and no objection Aug.30, 1997Invite bids Sep. 30, 1997Last date to receive bid (stage 1) Jan. 1, 1998Evaluate bid documents Apr. 1, 1998Contractor prepare financial bids (stage 2) Apr. 10, 1998Last date to submit financial bids May 10, 1998Prepare bid evaluation report and MOC review Jun. 10, 1998Review bid evaluation report by Bank and no objection Jul. 10, 1998Negotiate and sign contract Jul. 20, 1998Start construction on Aug. 1, 1998Complete construction by Jul. 30, 2000

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Table 3: IMPLEMENTATION PROGRAM FOR SUPERVISION OF CONSTRUCTION OF UKH

(1) Review and no objection of Bank to terms of reference, letterof invitation and short list of consultants Jan. 15, 1996

(2) Issue invitations to consultants May 15, 1996

(3) Last date to receive proposals Jul. 15, 1996

(4) Complete proposal evaluation report and MOC review Aug. 15, 1996

(5) Bank review proposal evaluation report and no objection Sep. 15, 1996

(6) Negotiations with consultant and sign contract Oct. 15, 1996

(7) Prepare training material by consultant Oct. 15-Dec. 30, 1996

(8) Train local staff Feb. 15-Apr. 15, 1997

(9) Supervision works Mar. 1, 1997-Sep. 1, 2000

Table 4: IMPLEMENTATION PROGRAM FOR FIRST YEAR (1997) OFHIGHWAY MAINTENANCE AND REHABILITATION PROGRAM (MRP)

(1) Start design May 3, 1996

(2) Complete bid documents Jul. 31, 1996

(3) Review by XCD/XHAB/PEO Aug. 31, 1996

(4) Bank review bid documents and no objection Nov. 30, 1996

(5) Invite bids Dec. 5, 1996

(6) Receive bids Jan. 20, 1997

(7) Complete bid evaluation Feb. 20, 1997

(8) Bank review bid evaluation report and no objection Mar. 20, 1997

(9) Negotiate and sign contracts Apr. 15, 1997

(10) First Year (1997) start construction May. 1, 1997

(11) First Year (1997) complete construction Oct. 31, 1997

-114- ANNEX8

ANNEX 8: SUPERVISION MISSION PLAN

Timing Main Activities Skill Requirements Staff-weeks

04/97 Eroject LaunchReview of all key procedures for interactions between Highway Engineering 6the Bank and project executing agencies, including Highway Safetyprocurement, disbursement, and project reporting Highway Economicsrequirements. Overall project implementation Institutional Strengthening/schedule will be reviewed, including early stage Trainingactivities for environmental protection and Procurementresettlement. Disbursement

Environment/ResettlementSpecial emphasis on:-Resettlement and environmental measures andmonitoring.-Contractors and Supervision consultants for UKH.-Highway Maintenance first-year package.-Highway Safety first-year package.-Training proposals for 1998-Study of regional transport.-Procurement.

10/97 General Supervision(i) review progress for each project component, Highway Engineering 2identify pending issues, and agree on follow-up Procurementactions;

(ii) reach agreement on resettlement monitoringarrangements; and

(iii) review proposals for second-year package formaintenance of highway network.

Special emphasis on:-Procurement of laboratory, research, environmental,and highway maintenance-related equipment.-Monitoring of maintenance of highway network.-Construction of stabilization of abandoned mines.

-115 - ANNEX8

Timing Main Activities Skill Requirements Staff-weeks

04/98 Major SupervisionIn-depth review of implementation status with Highway Engineering 4particular emphasis on: Highway Safety(i) contractor's performance; Highway Economics

Procurement(ii) effectiveness of supervision; Environment/Resettlement

(iii) adequacy of environmental protection measuresand environmental monitoring;

(iv) monitoring of resettlement;

(v) review proposal for equipment procurement forthe operation and maintenance of the highwaynetwork; and

(vi) review activities on design/bid documents forE&M supply and installation contract for UKH.

Special emphasis on:-Highway Safety Program-black spots.-Procurement of equipment for institutionalstrengthening.

10/98 General S(i) review overall progress for each component, Highway Engineering 2identify pending issues, and agree on follow-up Procurementactions; and

(ii) review proposal for procurement of equipmentfor operation and maintenance of Expressway.

Special emphasis on:-Monitoring of maintenance of highway network.-Environmental protection measures.-Highway Maintenance third-year package.

04/99 Major SupervisionIn-depth review of implementation status with Highway Engineering/ 4particular emphasis on: Maintenance(i) contractor's performance; Highway Economics

Procurement(ii) effectiveness of supervision Training

Environment/Resettlement(iii) adequacy of environmental protection measures;and

(iv) staff training programs.

Special emphasis on:-Expressway construction, quality and supervision.-Electrical and Mechanical Works: procurement.-Monitoring of maintenance of highway network.

-116- ANNEX8

Timing Main Activities Skill Requirements Staff-weeks

10/99 General SupervisionReview overall progress for each component and Highway Engineering 2identifying pending issues and agreeing on follow-upactions.

Special emphasis on:-Review of project resettlement actions and finalmonitoring report.

04/2000 Major SupervisionIn-depth review of implementation status with Highway Engineering 3particular emphasis on: Transport Economics(i) contractor's performance; Highway Safety

Environment/Resettlement(ii) effectiveness of supervision;

(iii) adequacy of environmental protection measures;and

(iv) staff training program.

Special emphasis on:-Progress on E&M contracts.-Toll arrangements for UKH.

10/2000 General SupervisionReviewing overall progress for each component and Highway Engineering 2identifying pending issues and agreeing on follow-upactions. Preliminary arrangements for preparation ofthe Implementation Completion Report will bediscussed.

04/2001 Implementation Completion Report MissionA consolidated review of project implementation. Highway Engineering/ 4

MaintenanceTransport EconomicsEnvironmentResettlement

Implementation ReviewPreparation of Project Implementation CompletionReport.

Total 2X

-117- ANNEX9

ANNEX 9: PROPOSED MONITORING INDICATORS

A. PROJECT MONITORING

1. The effectiveness of project implementation in terms of alleviating infrastructurebottlenecks of Xinjiang at which the project is targeted, will be measured by reference toa number of monitoring indicators. The specific project objectives and the associatedmonitoring indicators are listed in Table 1. Each indicator requires a baseline levelagainst which the effectiveness of the project in achieving the design objectives can bemeasured. XCD obtained the necessary baseline data (as of July 1996) and developed thenecessary methodologies for monitoring. The parameters, baseline and targeted valuesshown in the table were set out during the appraisal and were finalized duringnegotiations.

2. The achievement of project output will be monitored by monitoring indicators.The current monitorable targets are set as shown in Table 2.

B. MONITORING INDICATORS FOR ENVIRONMENT

Construction Period

3. Environmental Supervision: One of the environmental supervisors in eachcontract section will be assigned or nominated to carry out the supervision of theenvironmental protection measures addressed in the Environmental Action Plans (EAP)and integrated in the bid documents. The results will be included in the engineeringsupervision reports and reported periodically to the environmental protection staff at thedistrict level. The results of environmental supervision will be annually reported to theBank in the annual report. The monitoring items will include:

(a) brief description on environmuental protection measures supervised/inspected during the reporting period; and

(b) brief description of problems regarding environmental protection measuresand their reasons and possible solutions.

4. Environmental Monitoring: Environmental monitoring items, methods,frequencies, monitoring sites have been clearly decided in the EAP (see Annex 4).Environmental monitoring will be carried out by the Xinjiang Environmental MonitoringCenter except noise and dust, which will be conducted by environmental supervisors atrespective contract sections. The results will be reported to the environmental protectionstaff at the district level. The results of environmental monitoring will also be annuallyreported to the Bank in the annual report.

-118 - ANNEX9

Table 1: DEVELOPMENT INDICATORS

2002Benchmark

Project Monitoring 1999 (Ist year of 2005Objectives Indicators 1996 Baseline Benchmark operation) Benchmark

Development Reduced traffic Traffic volumeof road congestion on Section A-B = 17,800 20,300 4,500 4,600infrastructure roads parallel to Section B-C = 14,000 15,400 4,300 4,400

the proposed road Section C-D = 6,100 6,800 1,200 1,300Section D-E = 5,900 7,000 1,100 1,200

Increased average Travel speed (km/hr)travel speed on Section A-B = 50 45 60 55roads parallel to Section B-C = 40 35 50 45the proposed road Section C-D = 35 30 45 40

Section D-E = 40 35 50 45

Improve Improved road IRI IRI IRI IRImaintenance surface roughness 6.4 6.1 5.6 5.3of highway on the paved roadnetwork network

Increase in % of Condition of nationalsegments of and provincial road is:national andprovincial roads Good: 21% 22% 24% 15%in fair and good Fair: 67% 68% 69% 80%condition Bad: 12% 10% 7% 5%

Increase Reduced number Number of accidents Number of Number of Number ofhighway of traffic with fatalities per accidents accidents accidentssafety accidents number of vehicles: with with with

involving 25/10,000 vehicles fatalities per fatalities per fatalities perfatalities: number of number of number of

vehicles: vehicles: vehicles:24/10,000 21/10,000 19/10,000vehicles vehicles vehicles

Note: A-B: Urumqi-Changji; B-C: Changji-Hutubi; C-D: Hutubi-Shihezi; D-E: Shihezi-Kuitun.

-119- ANNEX9

Table 2: IMPLEMENTATION INDICATORS FOR KEY PROJECT COMPONENTS

Key Monitoring 2003Indicators 1997 1998 1999 2000 2001 2002 ICR Year

% of civil works 15 45 80 100 -- -- 100completed on UKH

% of roads under 25 50 75 100 -- -- 100maintenance andrehabilitationprogram

Number of man- 400 800 1,300 -- -- -- 1,300months of completedtraining

Highway safety: -- 3 8 10 -- -- 10Improved black spots

Km of highway with -- 20 40 60 -- -- 60signing and markingscompletedNote: UKH = Urumqi-Kuitun Highway

-120 - ANNEX9

5. Environmental monitoring items during the construction period wouldinclude air quality (TSP and dust), noise, lead in soil, crops and herbage andtransmigration of livestock.

Operation Period

6. Environmental Monitoring: Environmental monitoring items, methods,frequencies, monitoring sites have been clearly decided in the EAP (see Annex 4).Environmental monitoring will be carried out by the same agency as the one during theconstruction phase. Based on the monitoring results, environmental protection measures(to be carried out during the operation period) will be adjusted as appropriate.

7. Environmental monitoring items during the operation period would includethe same items which would be monitored during the construction phase and the vehicleexhaust gas.

C. MONITORING OF LAND ACQUISITION AND RESETTLEMENT

8. The monitoring and evaluation of the Resettlement Action Plans (RAP) agreedbetween the Bank and XCD will be carried out both intemally and extemally (Anne.x5).Internal monitoring will be carried out by the RMO and the local communications bureaus.An internal monitoring report will be submitted to the Bank every six months, with the firstone due on September 30, 1996 and the last one on the completion of the land acquisitionand resettlement activities. XASS will conduct the extemal monitoring of resettlement andwill submit a monitoring report every six months, with the first one to be submitted by July1, 1996 and the last one at the completion of the project (December 31, 2000).

9. The main indicators of land acquisition and resettlement monitoring have beenidentified and are included in the RAPs. They are:

(a) Timely payment of compensation to affected entities of various categoriesaccording to the levels described in the RAP;

(b) Progress of construction of new houses and quality of construction, alsodistance from old houses;

(c) Progress in land redistribution;

(d) The type of productive use to which compensation amounts have been putby the local (township and village) govemments;

(e) Restoration of production/ business activities of affected enterprises.Payment of all types of compensation (in accordance with RAP) to affectedenterprises and workers;

-121- ANNEX9

(f) Propose linkage of resettlement activities with the project implementationschedule (resettlement to be completed at least one month before start ofconstruction);

(g) Restoration of civic infrastructure at the new sites;

(h) Levels of satisfaction of the affected persons; and

(i) Income levels and standards of living after resettlement.

D. MONITORING PLAN FOR INSTITUTIONAL STRENGTHENING

Component Implementation Indicators Impact Indicator| Remarks &Elements Process Completion Shorl-term Lung-term Comments

Strenattened Institutional INDICATOR INDICATOR Completion INDICATOR INDICATOR Improvement Baseline Performtance inCagasil Number of Staff of training planned under Staff trained are sharing new of performance in specific sector functions are

Development program Staff development program knowledge and functions and activities specilied in TrainingIntensive institutional candidates selected and SOURCE execising new skills targeted by stuff Needs Profiles which arestrengthening programs at sent for training * Mid-term Training SOURCE development program kept on file in Project

SOURCE Report * Reports of workshops held SOURCE Execution Office SampleIntenaive mstitutional * Annual Training Plan * Project Implementation by relurning trainees Implementation Completion of these Training Needsstrengthening programs at * TORs for Study Abroad Completion Report Supervision intcrviews Review Profiles ace provided as partthe Support nd Research * TORs for Investigation and their reports on trainees * Assesment of of Annual Training Planunits Study Tours INDICATOR Equipment performarnce institutional performance in submission

procured in operation Activities identified at startIntensive mntitutional INDICATOR Equipment SOURCE INDICATOR Equipment used of project as requiring Additional baseline dta restrengthening programs at procured within time and I Equipment Sttu successfully for purposes Training and other included inthe Schools and Training budget allowed repors intended institutional strengthening TORs for Study Abroadmstitutions SOURCE SOURCE measures and TORs for

* Annual * Reported use of I-tesiagationsStsdyProcurement Plan equipment Abroad.

Both of these are incladedas part of Annudasubmission of a 2-kgrrolling Training Plan

Traiuing INDICATOR INDICATOR Training INDICATOR Trainees INDICATOR Critical Performance on unticalTrining in Xinjiang b of Trainees selected and programs completed in assigned to jobs where new Function and activiLies (for functions and activites

sent for timely training in timely manner (as per skills are effectively utilized which training was assessed through InterviewsTraining in Other Chins China and abroad periodic Plins provided by identified as key factor) with Supervisors of Units

XCD) demonstrate improved which requested tmining -SOURCE SOURCE performance e g type of analyses

Short-Term Training Abroad Annual Training Report SOURCE Repors from inierviris SOURCE underaken successfulAnnual Training Plan Mid-term Report of former trainees Assessment of institutional completion of certain tasks.,

Investigation Study Tour Implementation * Reports from former performance (as above) operation of cenrtn kind ofComplesion Repon trainees supervisors equipment. etc (information

included as part of TrainingNeeds PronilesInterviews are conducted aspan of assessment ofinstitutional performancefor Function (activities)identified at start of projectas requiring Trauning andother institutionalstrengthening measures

New rIssdJtutinaj INDICATOR INDICATOR Systems is INDICATOR Co!lected Data INDICATORFmetionn Training of stff Equipment place and operating used a part of Project

procured properly execution, to guide I -Data collection andHighway Maintenance SOURCE implementation reporting continued after

* Training Report project completionSemiannual SOURCE SOURCE

Highway Safety implementation reports n Data specified in Periodic Summaries provided 2- Data used as part ofcovering (construction, monitoring plans are to XCD and PEO Directors continuing system ofsupervision, maintenance) collected and periodic monitoring, supervision of

Environmental Monitoring reports for each component new investments in XCDnd Supervision INDICATOR produced.

Proposed data-collectionsystems designed nd data 0 Project

Resettlement Monitoring and collected Implementation ReponSupervision SOURCE

Annual MonitoringSummaries

-122 - ANNEX 10

ANNEX 10: SELECTED DOCUMENTS AVAILABLE IN THEPROJECT FILE

Economic Studies

1. Engineering Feasibility Study Report: Urumqi-Kuitun Highway Project, MOC'sNo. I Highway Survey and Design Institute (FHSDI), and Highway Planning andDesign Institute (HPDI), August 1995 (5 volumes).

2. Replies to "Comments on Engineering Feasibility Study Report for UKH":FHSDI and HPDI, April 1995.

Engineering

3. Review of Engineering Design (Phase I Final Report) - Xinjiang II HighwayProject, Italconsult, July 1995.

4. Review of Engineering Design (Phase 11 Final Report) - Xinjiang II HighwayProject, Italconsult, April 1996.

Environment and Resettlement

5. Environmental Impact Assessment for Urumqi-Kuitun Highway Project, ResearchAcademy of Environmental Science, November 1995.

6. Environmental Action Plan for UKH Project, Xinjiang CommunicationsDepartment (XCD), November 1995.

7. EA Summary of the UKH Project, XCD, November 1995.

8. Report on the Emergency Archaeological Excavation along the route of UKH,Xinjiang Institute of Archaeology, April 1995.

9. Resettlement Action Plan for Urumqi-Kuitun Highway, Project Execution Office-Resettlement and Monitoring Office, June 1996.

Highway Maintenance and Regional Transport Studies

10. Proposal for "A Strategic Study of Regional Transport between Xinjiang andNeighboring Provinces and Countries."

11. Report on Highway Network Maintenance Study in Xinjiang Region, XHAB,MOC's Highway Research Institute and FINNRA, January 1996.

-123 - ANNEX 10

Highway Safety

12. Report from preappraisal mission for the Highway Safety Component of theXinjiang II Highway Project, Richard Muskaug, Institute of Transport Economics,Oslo, Norway, November 1995.

13. Report on the Highway Safety Component (for the Preappraisal of Xinjiang IIHighway Project), PEO, August 1995.

Equipment

14. Equipment List for UKH, Project Execution Office, Urumqi, July 1995.

Institutional Strengthening/Training

15. Institutional Strengthening and Staff Training Report: Xinjiang II HighwayProject, October 1995.

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