Report No. PID9278 Project Name China-Second Jiangxi Highway Project (@) Region East Asia and Pacific Region Sector Highways Project ID CNPE58845 Borrower(s) PEOPLE'S REPUBLIC OF CHINA Implementing Agency Address JIANGXI PROVINCIAL COMMUNICATION DEPT. Jiangxi Provincial High Grade Highway Administrative Bureau (JPHGHAB) No.12 Xi'er Road, Provincial Government Courtyard, 64 Beijing Road (W), Nanchang, Jiangxi, China Contact Person: Mr. Xia Zengyu, Director of World Bank Loan Project Office (PO) Tel: (0791) 6243046 Fax: (0791) 6281344 Email: Zengjy@public.nc.jx.cn Environment Category A Date PID Prepared March 30, 2001 Projected Appraisal Date March 16, 2001 Projected Board Date June 12, 2001 1. Country and Sector Background In the medium term, the main concerns of the central and provincial highway authorities are to ensure that the highway system helps to integrate China's national economy and facilitate mobility of goods and services. This should correspond to the comparative economic and technological advantages of highways vis-a-vis other modes of transport and to available financial resources. Under such strategy, the priorities for the highway sector during its Ninth Five-Year Plan (1996-2000) were identified as follows:1. High priority was given to rapidly developing the National Trunk Highway System. The Ministry of Communication (MOC) has identified about 35,000 km of highways throughout the country that would constitute a network of modern inter-provincial highways under the NTHS. These are targeted for completion by the year 2010. The first phase of the NTHS investment (totaling 17,000 km), concentrates on two vertical, two horizontal and three connections to seaports. According to MOC's estimates, the entire 17,000 km of NTHS Phase I should be completed by 2003. The construction of the second phase (an additional three vertical and five horizontal trunk highways), will continue until 2010 when the entire system is expected to be completed.2. The development of some 130,000 km of provincial and rural roads that feed into the NTHS was planned and undertaken simultaneously to maximize the benefit of NTHS investment. 3. High priority was also given to providing all-weather access roads to remote/ low income areas in the poor counties. 4. Policy and regulatory reforms were to be intensified, with priority attention given to financing issues and ensuring the efficient utilization of funds.This strategy is succeeding in several respects. Of the identified 17,000 km of NTHS Phase I, construction of about 12,000 km has been completed. Many provinces have been able to provide all weather road access to nearly all villages (9FYP and 1OFYP). However, institutional and policy reforms have lagged behind. The plan to introduce a fuel tax to replace the old system of road maintenance fees would represent an important step, along with increasing the decentralization of investment decisions from the central to provincial levels. However, these changes have been delayed and the date has yet to be confirmed for the introduction of the fuel tax.Under the Tenth Five-Year Plan (2001-2005), which is already been confirmed by the State Council, highway sector institutional reforms are expected to intensify in the context of the country's move towards a more open and competitive economy.The Country Assistance Strategy, which reflects the Bank's strategic objectives of fostering growth, reducing poverty, supporting better governance, and improving the environment, has identified infrastructure improvement as a key area of China's development agenda to be supported by the Bank.Jiangxi Province has an area of 160,000 km2 and a population of 42 million (1999). Its GDP per capita in 1999 was 4661 yuan, which is approximately 30t below China's average. Jiangxi is strong in agriculture (rice represents 80t of products produced) and rich in mineral resources including coal, copper, and iron. Jingdezhen is famous for its production of Chinese ceramics. To reach markets for its products, land-locked Jiangxi has long relied on transporting its products via poor quality class II roads to the major trade centers along the coast (Shenzhen and Guangzhou). The proposed Taihe-Gangzhou Expressway will correct this deficiency by serving as an important segment of the north-south transport corridor, part of the skeleton that makes the planned "big cross" transport network in Jiangxi and provides crucial links with the important industrial northern city of Wuhan. The project will help promote intra-city and inter-provincial trade and stimulate the economic development of the region. To meet the project's objectives, key sector issues identified will be addressed in the project: (a) expansion of highway capacity to remove bottlenecks and expedite socio-economic growth and economic integration; (b) relieving poverty; (c) highway safety; (d) developing institutional capacity; and (e) highway maintenance.Expansion of Highway Capacity. China's 9FYP (1996-2000) emphasized a reduction in transport bottlenecks that were recognized as a growing constraint on rapid economic development. The diversification and structural transformation of the economy, toward more light and agro-industry and more inter-provincial trade, coupled with severe capacity constraints of the railways, are causing an accelerating demand for road transport. This national pattern also applies to Jiangxi Province in general, and in particular to the heavily traveled corridor between Nanchang and Shenzhen, which is Jiangxi's major outlet to the south. Relieving Poverty. One of the main strategic objectives of the project is to enhance the government's poverty alleviation efforts through accelerated improvement of accessibility and opening up of employment and product market access at lower costs. About 5t of the people in Jiangxi live below the poverty line of annual 700 RMB per capita. Most of these poor people live in southern Jiangxi, the project impact area. The government has increased its investments in the provision of basic access in recent years, especially during the 9FYP (1996-2000). It is estimated that all the villages will have all-weather basic road access by the end of the 1OFYP (2001-2004). However, there still remains an urgent need to improve and -2 - upgrade major roads in the poor counties.The project will focus on 4 counties, 3 of which are designated poor counties. The proposed "Road Improvement in the Poor Counties (RIPC)" is designed to assist the poor in increasing their incomes, by providing improved access to employment opportunities, product markets, social services and facilities at a lower travel time and cost. The RIPC consists of improving and upgrading selected highways in these counties, as detailed in Annex 3. In the long term, these improvements will benefit the poor by decreasing their travel time and cost as well as increasing their incomes and social welfare because of enhanced access. Highway Safety. Traffic accidents are now a major problem in China, and by most measures it has the world's highest road accident rate. In recent years, the Bank, as well as ADB and other institutions, have become increasingly concerned about the growing problems of highway safety. Under the proposed project, highway safety would be addressed in a sustained fashion through development and implementation of a broad highway safety program consisting of, inter-alia: developing safety audit procedures for new highway design; conducting a highway safety seminar; and developing a manual for roadwork safety during construction and maintenance of roads. The program would also include a physical road safety enhancement component, which will include the development of a black-spot program, identification of remedial measures and the implementation of such measures.Developing Institutional Capacity. The recent decentralization of much administrative decision-making from MOC to provincial PCDs will greatly tax the organizational and human resource capacity of JPCD. Also, due to the expanded mandate of JPCD and its lower level authorities, a new cadre of agency officials will need to be trained to administer, regulate, manage, operate and monitor its new responsibilities. The project will address the issues of decentralization and organizational changes. Highway Maintenance. On the highway sector in China, a vertical administrative and management system prevails. The Highway Administration Bureau (JPHAB), as a unit of JPCD and Highway Divisions at the Prefecture and County levels as subsidiary units, maintain the national and provincial highways. Under the Highway Divisions, maintenance groups are assigned certain rights of road maintenance operation efficiency and quality are often poor because the maintenance groups are too small and not well equipped. Furthermore, employee qualifications are poor and often there is a surplus of labor. Often supervision and monitoring work is not done properly as there is no "arms length" relationship between maintenance groups and quality inspection groups. The project will address the issues of adequacy and quality of maintenance as well as potential for competition. 2. Objectives The project aims to provide more efficient, safe and effective transport infrastructure in support of social and economic development in Jiangxi Province. To meet the above development objective, the project will produce the following outcomes:(a) Traffic congestion relieved and mobility increased in the Nanchang-Shenzhen transport corridor, a key section of the Beijing-Shenzhen expressway;(b) Accessibility to low-income areas in the province improved; (c) Safety of road transport improved; and (d) Institutional capacity of the Jiangxi Provincial Communications Department (JPCD) and related sector institutions strengthened, through policy, institutional and organizational reform, provision of training, technical assistance and equipment. - 3- 3. Rationale for Bank's Involvement The involvement of the Bank would result in much needed additional financial resources to help remove highway bottlenecks and increase traffic capacity in this high priority transport corridor. Bank involvement would accelerate policy, institutional and manpower development in highway planning, design, supervision, construction, operation, maintenance and finance. Bank involvement would also be expected to benefit the design and the quality of construction of the roads to be undertaken. Furthermore, the Bank would help JPCD to emphasize the need for proper maintenance of the highway network through the introduction of modern maintenance equipment, training of staff and allocation of adequate maintenance funds. In addition, it would raise the awareness of the highway safety problem and make improvements in this regard. Similarly, Bank involvement would improve provincial practices in the analyses and implementation of environmental, land acquisition and resettlement, and participatory aspects of highway projects. 4. Description The project's primary objective is to provide more efficient, safe and effective highway infrastructure in the most important transport corridor in Jiangxi, between the provincial capital, Nanchang, and the coastal cities of Shenzhen and Guangzhou in Guangdong Province. The project will help stimulate social and economic development, reduce poverty and thus decrease disparities within the region. To meet the proposed objective, the project will address these issues in the following components. Component 1. Highway capacity expansion (development objective (a) in 2. above) - Construction of TGE - Construction of Interconnecting roads - Equipment - Construction supervision Component 2. Road Improvement in the Poor Counties (RIPC) (development objective (b) in 2. above) Component 3. Highway safety including black spot improvements and supporting guidelines (development objective (c) in 2. above) Component 4. Institutional strengthening/capacity building including training and establishment of maintenance centers (development objective (d) in 2. above) Land acquisition cost 5. Financing Total ( US$m) Total Project Cost 535.7 6. Implementation The Jiangxi Provincial Communications Department (JPCD) has the overall responsibility for project preparation and implementation. The proposed project would be implemented by the World Bank Loan Project Office (PO) of JPCD. The PO is responsible for project preparation, implementation, and coordination of all project components, and is staffed by a Director and three full time Deputy Directors. One of Deputy Directors is the - 4 - Deputy Director of JPHAB. The PO will be organized into 8 units/divisions with about 60 staff. The project would be implemented during 2001-2006. After the TGE construction is completed, it will be operated and maintained by an Expressway Company, which currently manages 240 km of expressways in Jiangxi. The International Tendering Company (ITC) has been retained as the procurement agent for all aspects of civil, electrical and mechanical works of the project requiring ICB and for equipment to be procured from abroad. The supervision of construction of the TGE and interconnecting roads would be carried out by a joint foreign/domestic supervision team. Overall direction of the project at the central level would rest with the Ministry of Communication (MOC) in Beijing. The Borrower is the People's Republic of China, which in turn would onlend the loan proceeds through the Ministry of Finance (MOF) to Jiangxi Province on the same conditions as the Bank would lend to MOF. 7. Sustainability Experience from completed and ongoing Bank-financed highway projects in China demonstrates a high borrower commitment towards implementation of the physical components of the project, which accounts for the majority of the project cost. In addition, JPCD has shown strong commitment to the institutional and policy objectives of the project. Toll levels and the need for their periodic review are important for: 1) the financial viability of the expressway, 2) the ability to repay the Bank loan, and 3) the provision of timely and needed maintenance. More generally, project sustainability would be enhanced by an early enactment of fuel tax reform.A study on toll rates will be undertaken prior to opening the TGE to traffic, taking into account the findings of similar studies about this issue under other Bank-financed highway projects in China and the results of a survey of user responses to tolls. 8. Lessons learned from past operations in the country/sector The summary of lessons learned and reflected in the design of the proposed new project includes those principal and relevant lessons as recorded in the ICR for the Jiangxi Provincial Highway Project (Credit 1984-CHA) dated December 20, 1996. This first Bank highway project in Jiangxi Province was approved on February 7, 1989 and closed on December 31, 1995.While the overall performance of the large Bank highway portfolio in China (25 projects to date), is by and large satisfactory, a number of problems have occurred, which were taken into consideration in the design of the proposed project. These problems primarily include: inadequate engineering designs and bidding documents, including the costing of civil works; quality control of construction; late commencement of electrical and mechanical facilities work (which has delayed completion of some projects and necessitated the extension of the closing date of several Bank loans); and a lack in the scope and speed of policy and institutional reforms, specifically relating to road maintenance, improved high-grade highway management and operation, and traffic safety. Engineering designs and bidding documents were reviewed by an external local design institute and a foreign expert team. The implementation schedule of all project work components was discussed in detail during project preparation.A recent OED assessment on the China portfolio has clearly stated that the policy dialogue between China and the Bank in the highway sector needs to be further strengthened. During preparation of the proposed project, JPCD was engaged in a continuing policy dialogue which had started with the identification of the proposed project. While the results of these - 5- efforts are encouraging, in that policy and institutional reforms now enjoy a higher degree of visibility and ownership with JPCD, much remains to be done during implementation of the new project to make policy and institutional reform components as important as road construction and network capacity expansion. Rural roads were improved under the Second Shaanxi Highway Project and the Second Henan Highway Project in China. Improvement of local roads through the provision of all-weather roads, combined with programs for socio-economic development, are effective means of reducing poverty in rural areas. The RIPC component was included in the project. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues : Environmental Assessment (EA) activities for the preparation of the project started in December 1999 with the completion of the Feasibility Study Report of the Taihe-Ganzhou Section of the Gan-Yue Expressway and the appointment of the Highway Research Institute of the Ministry of Communications to prepare the EA for the TGE and the interconnecting roads. The EA is prepared as per the Chinese national procedures and the World Bank's OP 4.01. The Environmental Impact Assessment (EIA), the Environmental Action Plan (EAP) and the EA Summary reports were discussed with JPCD during the preparation and preappraisal missions in 2000. The availability of the draft EA reports was advertised in local newspapers in September and October 2000 and complete sets of the reports and documents were delivered to all Cities and County and Township Resettlement Offices in September 2000. The final EA reports for the TGE, the interconnecting roads and the RIPC components were submitted to the Bank in January 2001. The reports were reviewed by the Bank and were found satisfactory. The major findings and discussions are summarized below. The major issues associated with the project are: (i) the selection of an optimal alignment, to avoid and minimize impacts on villages and communities along the alignment; (ii) minimization of the use of agricultural land; (iii) avoidance of cultural relic sites and unstable geological terrain; (iv) adequate public consultation; and (v) integration of the proposed environmental mitigation measures in the Environmental Action Plan (EAP). The EIA report found that the proposed highway would not affect ecologically sensitive areas, and that its construction and operation would have no significant impact on the environment provided the mitigation measures as given in the EAP are properly implemented. The final selected alignment minimizes the loss of agriculture land and loss of residences; minimizes the impacts and disruptions on the livelihood and day-to-day activities of the affected people and communities, and decreases the potential risks of landslides and erosion in the mountain areas. It also avoids disturbing cultural heritage sites along the alignment. The nearest cultural relics found were about 0.7 km from the selected alignment. The major environmental impacts which may occur during the construction of the Expressway and the other roads are: increase in noise, potential increase in soil erosion and generation of dust during construction and transportation of materials. Lesser impacts include alteration of hydrogeological regimes, interference with the local people and traffic and impacts on local ecology and irrigation system. The impact of construction materials hauled in traffic (noise, dust, congestion, traffic safety, etc.) using the existing highways is also a potential concern. Safe disposal of excess excavated material from cuts - 6 - and tunnels in the mountain areas will require close attention and supervision during construction. Traffic noise, air pollution from vehicle exhaust emission, soil erosion and water pollution from service and administration areas are identified as potential major adverse impacts during the operation period. The key project stakeholders are the Jiangxi Provincial Communication Department (JPCD), farmers who may lose land and livelihoods, villagers and communities that may be displaced or impacted because of the alignment passing through or near their villages, communities which may become divided by the alignment, and hospitals, schools, libraries and individual households which may be impacted by the construction and operation of the proposed Expressway and interconnecting roads. Extensive consultation was carried out with the affected people, and information and documents were provided at the village/townhall meetings.Public consultation and feedback. Beginning with the preparation of the Terms of Reference in November 1999 and the preparation of the draft final EA reports in November 2000, consultants carried out four public consultation and participation surveys. The consultations and surveys were carried out either through family or individual interviews, group interviews or discussion meetings attended by governmental and non-governmental organizations. The main expressway involved consultation with 586 persons, 75 villages/towns and 12 organizations. For the three interconnecting roads, seven group interviews were conducted involving 178 families and three discussion meetings were held. For the four RIPC roads, five group interviews were carried out. Resettlement related issues figured prominently in all the consultations. Information disclosure. Final EIA, EAP and EA Summary reports were submitted to the Bank in January 2001 and were disclosed in the PIC. In Jiangxi, the documents were made public on September 10, 2000 in the resettlement offices and libraries in Nanchang City, Ji'an City, Ganzhou City, Taihe County, Suichuan County, Wan'an County, Nankang City and Zhanggong District. 11. Contact Point: Task Manager Yasuhiro Kawabata The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 458-4033 Fax: (202) 522-3573 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending April 13, 2001. - 7 -