Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD 447 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$120 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE QINGHAI XINING URBAN TRANSPORT PROJECT November 20, 2013 China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective November 1, 2013) Currency Unit = RMB RMB 6.12 = US$1 US$ 0.163 = RMB1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ATC Area Traffic Control IDA International Development Association BP Bank Procedure ITS Intelligent Transport System CBD Central Business District LIBOR London Interbank Offered Rate CCTV Closed-Circuit Television NMT Non-motorized Transport CPS Country Partnership Strategy NPV Net Present Value CQS Selection Based on Consultants’ OP Operational Policy Qualifications PCO Project Coordination Office DA Designated Account PDO Project Development Objective DRC Development and Reform Commission PLG Project Leading Group EA Environmental Assessment PMO Project Management Office EIA Environmental Impact Assessment POD Pedestrian Oriented Design EIRR Economic Internal Rate of Return QBS Quality Based Selection EMP Environmental Management Plan QCBS Quality and Cost Based Selection FMM Financial Management Manual QPAO Qinghai Provincial Audit Office FY Fiscal Year QPFD Qinghai Provincial Finance Department FYP Five-Year Plan RAP Resettlement Action Plan GDP Gross Domestic Product RPF Resettlement Policy Framework GHG Green-House Gas TDM Travel Demand Management GoC Government of China TOD Transit Oriented Development IBRD International Bank for Reconstruction TOR Terms of Reference and Development XMFB Xining Municipal Finance Bureau ICM Integrated Corridor Management XMG Xining Municipal Government Regional Vice President: Axel van Trotsenburg, EAPVP Country Director: Klaus Rohland, EACCF Sector Director: John Roome, EASSD Sector Manager: Mark Lundell, EASCS Task Team Leader: Ke Fang, SASDT CHINA Qinghai Xining Urban Transport Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context .............................................................................................................. 1 B. Sectoral and Institutional Context................................................................................... 1 C. Higher Level Objectives to which the Project Contributes ............................................ 4 II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4 A. PDO................................................................................................................................. 4 B. Project Beneficiaries ....................................................................................................... 4 C. PDO Level Results Indicators ......................................................................................... 5 III. PROJECT DESCRIPTION ..............................................................................................5 A. Project Components ........................................................................................................ 5 B. Project Financing ............................................................................................................ 6 C. Lessons Learned and Reflected in the Project Design .................................................... 6 IV. IMPLEMENTATION .......................................................................................................8 A. Institutional and Implementation Arrangements ............................................................ 8 B. Results Monitoring and Evaluation ................................................................................ 9 C. Sustainability................................................................................................................... 9 V. KEY RISKS AND MITIGATION MEASURES ..........................................................10 A. Risk Ratings Summary Table ....................................................................................... 10 B. Overall Risk Rating Explanation .................................................................................. 10 VI. APPRAISAL SUMMARY ..............................................................................................11 A. Economic and Financial Analyses ................................................................................ 11 B. Technical ....................................................................................................................... 12 C. Financial Management .................................................................................................. 13 D. Procurement .................................................................................................................. 13 E. Social (including Safeguards) ....................................................................................... 14 F. Environment (including Safeguards) ............................................................................ 15 Annex 1: Results Framework and Monitoring .........................................................................17 Annex 2: Detailed Project Description .......................................................................................19 Annex 3: Implementation Arrangements ..................................................................................22 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................36 Annex 5: Implementation Support Plan ....................................................................................40 Annex 6: Financial Assessment...................................................................................................42 . PAD DATA SHEET China China: Qinghai Xining Urban Transport Project (P127867) PROJECT APPRAISAL DOCUMENT . EAST ASIA AND PACIFIC EASCS Report No.: PAD447 . Basic Information Project ID Lending Instrument EA Category Team Leader P127867 Investment Project B - Partial Assessment Ke Fang Financing Project Implementation Start Date Project Implementation End Date 27-Dec-2013 31-Mar-2019 Expected Effectiveness Date Expected Closing Date 26-May-2014 30-Sep-2019 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Mark R. Lundell John A. Roome Klaus Rohland Axel van Trotsenburg . Borrower: People’s Republic of China Responsible Agency: Xining Municipal Government Contact: Mr. Liu Yi Title: Deputy Director, Xining Construction Commission Telephone No.: (86-971) 613-8866 Email: xn_liuy@126.com . Project Financing Data(US$M) [X] Loan [ ] Grant [ ] Other [ ] Credit [ ] Guarantee For Loans/Credits/Others Total Project Cost (US$M): 250.66 Total Bank Financing (US$M): 120.00 . Financing Source Amount(US$M) Borrower 130.66 International Bank for Reconstruction and Development 120.00 Total 250.66 . Expected Disbursements (in USD Million) Fiscal Year 2015 2016 2017 2018 2019 2020 Annual 5.00 10.00 40.00 40.00 20.00 5.00 Cumulative 5.00 15.00 55.00 95.00 115.00 120.00 . Project Development Objective(s) Proposed Development Objective(s) To enable Xining residents to travel between the city center and the western part of Xining City in a fast, efficient, and safe manner, through strategic improvements to Wusixi Road, a major transport and urban development corridor. . Components Component Name Cost (USD Millions) Component 1: Urban Roads 156.82 Component 2: Public Transport 46.41 Component 3: Intelligent Traffic Management 9.39 Component 4: Institutional Capacity Building 3.81 . Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Team Composition Bank Staff Name Title Specialization Unit Ke Fang Sr. Urban Transport Spec. Task Team Lead SASDT Zhefu Liu Sr. Social Development Specialist Social Development EASCS Jingrong He Procurement Specialist Procurement Management EASR2 Kishor Uprety Senior Counsel Legal LEGES Alejandro Alcala Gerez Senior Counsel Legal LEGES Fang Zhang Financial Management Specialist Financial Management EASFM Feng Ji Sr. Environmental Specialist Environmental Safeguards EASCS Haiyan Wang Sr. Finance Officer Disbursement CTRLN Junxue Chu Sr. Finance Officer Disbursement CTRLN Xuan Peng Program Assistant Program Assistant EACCF Ruifeng Yuan Program Assistant Program Assistant EACCF Yi Yang Urban Transport Specialist Urban Transport EASCS Jean Paul Velez Urban Transport Specialist Urban Transport EASIN Teresita Ortega Program Assistant Program Assistant EASIN Non Bank Staff Name Title Office Phone City Peishen Wang Environment Consultant Winnipeg Xi Zhao Urban Transport Consultant Beijing Michael Chiu Sr. Public Transport Consultant Beijing Vincent Chan Sr. Traffic Management Hong Kong SAR, Consultant China Dianzhong Shen Public Participation Specialist Shenyang Shuai Ren Urban Transport Consultant Beijing . Locations Country First Administrative Division Location Planned Actual Comments China Qinghai Province Xining X . Institutional Data Sector Board Transport . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Mitigation Co- Co-benefits benefits % % Transportation Urban Transport 100 20 Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Urban development City-wide Infrastructure and Service 80 Delivery Environment and natural resources Climate change 20 management Total 100 I. STRATEGIC CONTEXT A. Country Context 1. Thirty years of rapid economic growth have supported unprecedented urbanization in China. According to the National Statistics Bureau, China’s urban population reached 690 million in 2011, accounting for 51 percent of the total population. However, it is noted that urbanization has happened disproportionally in different regions of China, with an urbanization ratio of 61 percent in the eastern region, 47 percent in the central region and 43 percent in the western region. 2. In 2000, the Government of China (GoC) launched the Western Development Strategy, a policy aimed at promoting the socio-economic development of the western region – understood to be lagging relative to the other national regions, i.e. the eastern coast, the northeast and the central region. Accordingly, from 2000 to 2009 the GoC invested heavily in the western region, supporting 120 key projects at a total cost of RMB 2.2 trillion (US$361 billion equivalent). During that period the western region registered an average annual Gross Domestic Product (GDP) growth of 11.9 percent, unprecedentedly surpassing the national GDP growth average. 3. The 12th Five-Year Plan (FYP) for China’s Economic and Social Development in 2011- 15 gives further impetus to the Western Development Strategy, with the aim of achieving a more coordinated and balanced national development. The plan proposes that the western region’s annual GDP growth continue to surpass the national average, its urbanization level exceed 45 percent, and investments be concentrated on infrastructure, energy, agriculture and tourism. B. Sectoral and Institutional Context 4. Urban transport demand will continue to increase in the next five years, especially in the western region where economic growth and urbanization are expected to be faster under the Western Development Strategy. The experience of the more developed cities of the eastern coast shows that rapid urbanization and increase in family incomes are normally accompanied with fast growing motorization, which in turn generates or increases problems such as traffic congestion, air pollution, greenhouse gas (GHG) emissions, dependence on fossil fuel, and traffic accidents. While it is perhaps unavoidable to construct new roads in order to accommodate rapid urban growth, building more roads alone, as evidenced in those more developed cities, would make those problems even worse, as more roads often lead to more motorized traffic. 5. To develop efficient and sustainable urban transport systems, it has been widely recognized at both national and city levels that a more comprehensive approach to urban transport is necessary. People, rather than cars, are the center of this new approach, which emphasizes aspects such as quality of public transport and non-motorized transport facilities, road safety, and mitigating climate change effects. 6. This change in urban transport planning and development has been reflected in new policies at the national level. The State Council, the highest governing body of the GoC, has issued two policy documents on urban public transport in recent years: (i) Directive 46 (October 2005) puts the improvement of urban public transport services as a national policy priority, and 1 (ii) Directive 64 (December 2012) sets up objectives and specific policy guidance for improving urban public transport. The 12th FYP, for the first time in the history, devotes one special session to discuss the importance of developing comprehensive public transport networks for cities. Based on the 12th FYP, the Ministry of Transport, the GoC’s line agency responsible for policy and technical guidance on urban transport, established specific public transport development targets for different categories of cities to achieve during the 12th FYP period. 1 Furthermore, three national agencies, i.e., the Ministry of Housing and Urban-Rural Development, the National Development and Reform Commission, and the Ministry of Finance, jointly promulgated a guidance note on promoting the development of pedestrian and bicycle transport in Chinese cities. 2 7. Compared to cities in East China, cities in West China have been slow to adopt the new approach to urban transport promoted by the national government. For illustration, eastern coast cities invested 24% of their urban infrastructure capital on developing and improving public transport services and 41% on road construction in 2009. However, western cities invested only 6% on public transport and 57% on road construction in 2009. This level of underinvestment in public transport, granted the current context of rapid urbanization and economic growth, would prevent public transport services from becoming a viable urban mobility alternative in western cities, and encourage the use of private vehicles. Introduction to the Project City: Xining, Qinghai Province 8. Xining, the capital city of Qinghai Province, is located in the Huang River Valley of the Qinghai-Tibet Plateau. The total population residing in the city’s 7,690 km2 is 2.2 million, out of which 25% are ethnic minorities, mainly Hui and Zang. The built-up area of the city covers 104 km2, concentrating a total population of 1.2 million. 9. The city is a key transportation node in West China, connected with other cities in China through railways and national and provincial highways. Its main industries are wool spinning and textiles, fur, meat, milk, salt, and light processing industries. The city also enjoys rich natural resources, including mineral deposits, ground water, wind power and solar energy, all of which have great potential to be explored. Additionally, Xining is a popular tourist destination in China, due to its scenic landscape, unique cultural traditions and numerous natural and cultural heritage sites. 10. In light of the Western Development Strategy, special policies supporting regions with concentration of ethnic minorities, and increasing economic activities between West China and other parts of China, Xining has experienced two-digit economic growth in the last decade. However, GDP and disposable income per capita (US$4,307 and US$2,134, respectively) remain below the national averages (US$4,496 and US$2,895), and lower than all provincial capitals in 1 For example, in cities with population between 1 and 3 million, the 12th FYP requires public transport services cover 75 % of the urban area. 2 This guidance note issued in September 2012 specifically requires that for medium to small cities with a built-up area below 120 km2 and population less than 2 million, a non-motorized transport (pedestrian+bicycle) mode share of over 65% is targeted by 2015. 2 China except Lanzhou in Gansu Province. The expectation, however, is that economic growth and household income in Xining and Qinghai will be accelerated during the 12th FYP period. 11. The concurrence of the city’s moderate level of household income in the past and the physical restrictions of its geographic location – in a valley, surrounded by mountains – has allowed Xining to grow in a very compact pattern around its Central Business District (CBD), leading to high level of modal shares for non-motorized transport (NMT) (42.7%) and public transport (40.0%). These spatial and transport development characters are crucial elements to form an efficient, high quality of life, and low GHG emissions city. 12. Yet, in recent years, amid two-digit economic growth, car ownership has increased at a fast pace (14.7% annual growth over the last decade).The city has begun to expand west (and also east) to areas where walking to the CBD is no longer a viable option, and new multilane roads that were built to serve those new developments led to expansion to further west (and further east). The quality of public transport services, meanwhile, has been declining because inadequate investment in public transport infrastructure, outdated bus route plans, aging bus fleets, and increasing traffic congestion on the main corridors caused by cars. Pedestrian environments have also deteriorated in recent years as a consequence of increased motorization, poor traffic, road safety and parking management, and lack of enforcement of existing regulations. Experiences from other cities in China and around the world indicate that, if strong actions are not taken now, the conditions are set in place for Xining to become yet another car- dependent, congested, sprawling, and GHG emissions intensive city. 13. As Xining is still at the early stage of fast urban development, there is great potential for Xining to grow as an exemplary city of sustainable transport practices, high quality of life and low GHG emissions, particularly given Xining’s current spatial development and transport characters. Urban growth has followed a linear development pattern forming a prolonged east- west axis and a relatively shorter north-south axis. Both growth axes are narrow, only about 2-4 km wide, and are well-served by a soundly planned road network including two east-west expressways, high capacity arterial roads, and sufficient local roads. Such a linear development pattern inherently forms transportation corridors along those axes. If higher priority is given to comprehensively improving public transport infrastructure and services, traffic and safety management, and NMT facilities on those corridors, travel demand of most people in the city can be easily met in a highly efficient and sustainable manner. Moreover, as the city expands west to new development areas, concepts such as transit oriented development (TOD) and pedestrian oriented design (POD) could be utilized to guide land use planning and development along the integrated transport corridors. 14. The Xining Municipal Government (XMG), aware of the challenges and opportunities that it faces, has sought out the technical and financial support of the Bank to a demonstration investment project on Wusixi Road – Xining’s main east-west corridor linking the existing city center to the western part of the city (Xichuan New Area), which is envisaged to become the city’s new center of development in the years to come. In support of the development of the new city area, it is designed that integrate improvements to the proposed corridor in roads, public transport infrastructure and services, traffic safety conditions, and traffic management will be carried out under the project. 3 C. Higher Level Objectives to which the Project Contributes 15. The Bank’s China Country Partnership Strategy (CPS) for FY2013-16, discussed by the Board on November 6, 2012, is aligned with China’s 12th FYP, which emphasizes the importance of actions to address urban transport issues. The CPS, in particular, designates “supporting greener growth” as one of its two strategic themes of action, with “the promotion of low carbon urban transport” chosen as a specific outcome to pursue under it. As such, the proposed Qinghai Xining Urban Transport Project contributes directly to the CPS, the 12th FYP, and the higher level objectives that they aim to achieve, through the development of high quality public transport services, non-motorized transport amenities, and supportive urban planning practices and policies that, combined, will help build a more sustainable low carbon path for the city. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 16. The proposed Project Development Objective (PDO) is to enable Xining residents to travel between the city center and the western part of Xining City in a fast, efficient and safe manner, through strategic improvements to Wusixi Road, a major transport and urban development corridor. A key focus of the Project will be demonstration of integrated improvements to public transport infrastructure and services, road safety management (particularly for pedestrians), and traffic management through an integrated corridor management (ICM) approach. B. Project Beneficiaries 17. Table 1 provides a list of beneficiaries and possible benefits derived by each of them from implementation of the project. The total number of people who will benefit directly from the project is expected to be more than 400,000 by 2019 (48.7% of them are women). Table 1: Beneficiaries and Project Benefits Beneficiaries Project benefits Public transport Faster and more reliable service; time and cost savings for travelers who passengers depend on public transport; higher user satisfaction; reduced accidents. Pedestrians and cyclists Provision of high quality facilities; safer and more efficient movement. Women Upgrade in service design and passenger experience that better serves women’s particular needs, such as security, safety, and comfort while waiting at bus stops or riding on buses. Residents of corridor Improved accessibility to CBD and other key areas of the city; enhanced safety conditions; better quality of life. General traffic Reduced congestion and accidents. Private sector Improved access to current business centers and retail enterprises; potential opportunities for investment in land development along the corridor in existing and new development areas. Government Strengthening of institutions to enable them to fulfill their statutory duties Departments/ Agencies in the urban transport domain. 4 C. PDO Level Results Indicators 18. The achievement of the PDO will be measured through a combination of the following indicators: (a) Reduced travel time of public transport users during the peak hour on the project corridor; (b) Increased daily public transport users on the project corridor; (c) Higher satisfaction rating by public transport users (by gender) on the project corridor; and (d) Reduced annual number of transport related fatalities and injuries on the project corridor. III. PROJECT DESCRIPTION A. Project Components 19. Component 1: Urban Roads. This component will finance construction of three short road sections (the total length is less than 10km), which are part of the proposed integrated public transport corridor and are necessary for providing good quality public transport services in the newly developed Xichuan District in the west of the city. Sufficient provisions for public transport and NMT will be included to these roads. All road works will also include underground utilities, e.g. drainage and sewerage pipes, and environmental protection measures. 20. Component 2: Public Transport. This component will finance improvements to public transport infrastructure, operations, and complementary facilities on the proposed integrated public transport corridor on Wusixi Road. Major improvements include: (i) construction of dedicated bus lanes and safe and accessible bus stops and terminals; provision of bus priority signals, safe and accessible pedestrian crossings, pedestrian paths, bicycle lanes and other non- motorized transport facilities; (ii) installation and operation of a new bus dispatching system utilizing intelligent transport systems (ITS) and advanced public transport management; (iii) procurement of new clean, safe and user-friendly buses; and (iv) construction of a public transport interchange at the western end of Wusixi Road which will provide fast, efficient, and comfort transfers between intra- and inter- city bus services, construction of two access roads to the interchange, and development of an advanced management and service system for the interchange. 21. Component 3: Intelligent Traffic Management. This component will finance the development of an intelligent traffic management system in support of the proposed integrated public transport corridor on Wusixi Road. It will include investments in installing and operating: (i) a traffic command center; (ii) an area traffic control (ATC) system; and (iii) equipment for advanced traffic monitoring, enforcement, and information services, such as closed-circuit television (CCTV) monitoring cameras, traffic enforcement cameras, variable message signs, a data collection and analysis system, and the fiber optical network. 5 22. Component 4: Institutional Capacity Building. This component will improve the city’s institutional capacity for urban transport planning and management through financing the following activities: (i) strategic studies in support of achieving the PDO and the city’s development goals; (ii) training and knowledge exchange for government officials and technical staff involved in urban transport planning, public transport service planning and management, and traffic and safety management; (iii) project management support including project monitoring and evaluation and technical consultancies for implementation of the ICM approach; and (iv) public communication on the project, particularly on the ICM approach. B. Project Financing 23. Lending Instrument. The proposed lending instrument for this project is an Investment Project Financing (IPF). The Borrower has selected a US Dollar denominated, commitment- linked variable spread loan based on six-month LIBOR plus an additional variable spread. It has also selected all available conversion options, level repayment of principal, and a repayment period of 30 years, including a 5-year grace period. 24. Project Cost and Financing. The total estimated project cost is RMB 1529.05 million, equivalent to US$250.66 million (at an exchange rate of US$1 to RMB6.1). It will be financed with an IBRD loan of US$120 million and counterpart funds of US$130.66 million equivalent from XMG. Table 2 below presents the distribution of project costs and financing by component. Table 2: Project Costs and Financing by Component Project Components Project Cost IBRD Financing % Financing Component 1: Urban Roads 156.82 76.81 49.0% Component 2: Public Transport 46.41 30.06 64.8% Component 3: Intelligent Traffic Management 9.39 9.02 96.1% Component 4: Institutional Capacity Building 3.81 3.81 100% Total Baseline Costs 216.43 119.70 55.3% Physical contingencies 18.23 0 Price contingencies 8.46 0 Total Project Costs 244.11 119.70 49.0% Interest During Implementation 6.25 0 Front-End Fees 0.30 0.30 Total Financing Required 250.66 120.00 47.9% C. Lessons Learned and Reflected in the Project Design 25. The Bank has long been actively involved in urban transport development in China and many other developing countries. Key lessons generated from the past and on-going Bank operations as well as global good practices have been reflected in the design of this project, including the following: (a) Applying an integrated corridor management approach. Some of the Bank’s earlier urban transport projects in China included actions to improve urban mobility, such as construction of roads and public transport infrastructure, public transport services 6 improvements, installation of traffic management systems, etc. However, their impact on efficiency of the urban transport system as a whole was limited and less visible because these actions were implemented separately by different agencies and they were often scattered geographically. Learning from good practices generated in cities such as London and New York, an ICM approach was developed in recent Bank’s urban transport operations in China, including Liaoning, Wuhan, Anhui, Changzhi and Xiangyang. This new approach concentrates all required interventions in one or a few selected corridor(s) in an integrated manner to seize on synergies and maximize benefits. The stark and visible contrast created between the chosen corridors with comprehensive and integrated improvements vis-à-vis those without, in turn, facilitates the building of support for engagement in additional corridors and the eventual improvements of urban transport in the entire city. Lessons in preparing and implementing the ICM approach in World Bank project cities have been frequently discussed and shared inside China through city-to-city knowledge exchange activities including group learning workshops, one-to-one discussions, and site visits, facilitated by the Bank team. Key lessons have been incorporated in the design of this Project, including particular measures to address the needs for effective coordination among different agencies involved, strong support from the traffic police, coordinated procurement schedules for various civil works, goods and consultancy activities, and active communication with the general public on the ICM approach. (b) Promoting the integration of transport and land use planning. In the last decade, numerous cities across China have invested heavily in their urban transport systems, constructing new roads, buying new buses, and building bus rapid transit and urban rail systems. Yet, in many instances public transport has failed to increase its modal shares, while traffic congestion and pollution have worsened. These mixed results are often rooted in the disconnection between the prevalent urban forms (e.g. single use superblocks) and the transport mode implemented (public transport). Conversely, some of the most renowned cities around the world in terms of transport efficiency and environmental sustainability (e.g., Curitiba, Copenhagen, and Stockholm) have made integrated transport and land use planning the core premise of their urban development agenda. But experiences from these good practice cities also show integrating land use and transport planning is not an easy job; it needs continued, persistent, hard, and long term efforts. Through this project, the aim is to plant seeds for integrating land use and transport planning in Xining with the introduction of TOD into land use plans and urban designs for new development areas along the Wusixi Road corridor. As part of project preparation, a 10-day urban design workshop was already carried out to explore specific strategies to adapt TOD to local context and discuss them with local officials. Pilots to demonstrate street designs of TOD and pedestrian environment improvement have been incorporated into the integrated corridor component. Additional analysis to consolidate that work will be conducted under the capacity building component. (c) Strengthening urban transport institutions. Institutional weaknesses are the sources of many urban transport problems observed in China and around the world. Urban transport institutions tend to be weak and inadequately staffed, and commonly fail to collaborate with one another in aligning policies and responsibilities. While the GoC, 7 through the Ministry of Transport, is making a significant effort to establish a national policy framework to guide cities in the promotion of efficient and low carbon urban transport, if local urban transport institutions are not ready to take on this challenge, much of the effort will be wasted. The Project places a high emphasis on capacity building and institutional strengthening. Throughout project preparation, every mission has included capacity building workshops on the ICM approach, traffic management, bus systems operation, and other relevant topics. The urban design workshop mentioned above also served as a capacity building activity on integrated transport and land use planning, and a reference document detailing key concepts and summarizing recommendations will soon be distributed to all relevant municipal and provincial government agencies. Moving forward, through the institutional capacity building component, the project will continue carrying out regular training seminars and workshops, and other relevant activities. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 26. Qinghai Province, as the Project Implementing Entity, acts through Xining Municipality to implement the Project. The detailed implementation arrangements are as follows: (a) A Project Leading Group (PLG) consisting of city leaders and senior officials from all relevant departments of XMG was established to oversee the preparation and implementation of the Project. The PLG will be maintained through the entire implementation period and key members will meet regularly for reviewing project progress and promptly addressing issues arising during implementation. (b) A Project Coordination Office (PCO) was established at Xining DRC, which is responsible for: (i) coordination among XMG’s different agencies; and (ii) Xining’s communication with the Bank and Xining’s communication with relevant agencies of the Qinghai Provincial Government during implementation. (c) A Project Management Office (PMO) was established at the Xining Construction Commission, which is responsible for overall project management, procurement management for all contracts under the project, financial management for all project funds, and supervision of all implementation activities (including safeguards), in accordance with Bank guidelines. (d) Three Sub-PMOs have been established respectively at the Xining Construction Commission, Xining Public Security Bureau, and Xining Transport Bureau, to carry out their respective part of the project. 27. According to the Bank’s experience with other World Bank project cities in China, the above arrangements normally work well, particularly when PLG members can meet regularly to review project progress. The city of Xining currently is implementing a Bank financed Xining Flood and Watershed Management Project with the similar organizational structure, and performance of the project implementation has been satisfactory. Substantial training has been 8 provided and will continue to be provided to the PMO and other involved government agencies throughout the project implementation. B. Results Monitoring and Evaluation 28. A results framework has been developed (see Annex 1) and provides the basis for project monitoring and evaluation. Baseline data for all indicators have been collected and target values have been set up. The PMO will be responsible to monitor implementation progress and collect actual data for each indicator regularly, and then report them in an annual project progress report. Details on the methodology of data collection are provided in Annex 3. C. Sustainability 29. Both Qinghai Provincial Government and XMG have shown strong commitment to achieving the PDO during project preparation. Moreover, XMG has been determined to follow the new national policies which give priority to public transport, NMT and road safety. 30. Nevertheless, sustainability of the project outcomes depends on: (a) whether the improvements on the project corridor could be replicated to the entire city; and (b) whether all project assets can be operated and maintained in a proper manner in the future. 31. The proposed project introduces best practices of public transport priority, physical improvements for NMT and public transport, traffic management measures and ITS, etc., and concentrates these interventions on the selected corridor to maximize the impact. Based on the experience in other cities, successful implementation of the ICM approach would create a strong and visible demonstration impact, which in turn would generate the interest in replicating the approach on other corridors in the city. It is also envisaged that relevant city agencies would acquire new knowledge and skills through implementing the integrated corridor component under the Project and develop their capacity for implementing the ICM approach on other corridors under the city’s own investment projects. Additional capacity building activities will be provided to relevant staff to further enhance their knowledge learning and capacity building. 32. Proper operation and maintenance of project assets requires sustained, adequate human and financial resources. The PMO and sub-PMOs have been expanded to meet the requirements for project implementation. XMG has committed to allocating sufficient human power and provide necessary training for them to maintain the infrastructure or equipment acquired under the project. A financial assessment conducted by the Bank team confirms that the city is capable for allocating adequate budget to maintain the infrastructure and services to be developed under the project (refer to paragraph 39 below). 9 V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Stakeholder Risk M Implementing Agency Risk - Capacity S - Governance L Project Risk - Design M - Social and Environmental M - Program and Donor L - Delivery Monitoring and Sustainability M Overall Implementation Risk M Note: L (Low), M (Moderate), S (Substantial) B. Overall Risk Rating Explanation 33. The overall implementation risk for the project has been rated “Moderate” (see details in Annex 4), due to the following considerations: (a) The PMO is still new to Bank projects and not very familiar with Bank’s fiduciary and safeguards policies. (b) Urban transport projects require close coordination and collaboration among various municipal agencies, which, in Xining’s case, have limited experience in working together in the past. Ineffective communication and coordination among them may cause delays in project implementation and may also affect the quality of the project results. (c) “Soft” elements of the project such as the ICM, ITS, TOD and travel demand management concepts and related management knowledge remain new to the PMO and the PMO may lack the capacity to implement them with high quality. Although these “soft” elements account for a small portion of total project investment, they are critical to the achievement of the PDO. 34. Following are the key measures proposed to mitigate the above risks: (a) Trainings on Bank’s procurement, financial management and safeguards policies have been provided to the PMO during project preparation and will continue through project implementation. Adequate resources will be allocated by the Bank team to monitor the PMO’s compliance with Bank’s relevant policies. (b) The PLG will be maintained through the entire project implementation period and meet regularly to ensure that the relevant agencies work closely with each other. (c) The Bank team will urge the PMO to hire experienced consultant to carry out further designs of the project with high quality. A TOD workshop was held in Xining 10 during preparation and more capacity building activities will be carried out during project implementation to enhance the PMO’s capacity. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 35. A cost-benefit analysis has been carried out for the physical investment components whose direct economic benefits could be quantified, i.e., component 1 (urban roads) and component 2 (public transport), which account for approximately 94% of the total investment. Project costs include the cost of construction, operation and maintenance over the assumed project life of 25 years, as well as the financing costs. The analysis also takes into account the following direct economic benefits: (i) passenger travel time savings; (ii) vehicle operating cost savings; and (iii) reduction of traffic accident costs. The project is also expected to generate other direct and indirect benefits, such as reduced vehicle pollution, improved air quality, improved institutional capacity for urban transport planning, operation and management, and improved urban competitiveness and attractiveness due to better transport efficiency and accessibility. However, since these benefits are difficult to quantify monetarily, they are not included in the cost-benefit analysis. 36. The direct economic benefits are estimated using the outputs from the travel demand model VISUM 3, through comparing the with-project and the without-project scenarios. A 12 percent economic discount rate is used. The overall economic internal rate of return (EIRR) of the project is estimated to be 16.1 percent and the net present value (NPV) is estimated to be US$ 67.90 million. The results produced from the cost-benefit analysis are summarized below. (US$ million) Component 1 Component 2 Overall Costs(discounted) 170.71 70.74 242.78 Benefits (discounted) 193.84 116.76 310.67 NPV 23.12 46.02 67.90 EIRR 14.4% 21.2% 16.1% 37. A sensitivity test has been conducted, assuming higher costs (including construction, operation, and maintenance) and lower benefits. Results of the sensitivity analysis as shown below indicate that the project is economically robust. Scenario EIRR NPV (US$ million) Base Scenario 16.1% 67.90 10% benefits decrease 14.3% 36.83 10% cost increase 14.5% 43.62 10% benefits decrease and 10% cost increase 12.7% 12.55 3 VISUM is a tool that has been widely used for transportation planning, travel demand modeling and analysis, and network data management. Designed for multimodal analysis, VISUM integrates all relevant modes of transportation (i.e., car, car passenger, goods vehicles, bus, train, motorcycles, bicycles and pedestrians) into one consistent network model. 11 38. A financial assessment was also carried out to analyze the financial requirements for this Bank financed project (see detailed discussion in Annex 6). The assessment concludes that with the expected GDP growth during the next few years and the continuous support from the national and provincial governments (as part of GoC’s West China Development Strategy), XMG would be able to provide sufficient counterpart funding to the Project. The requirement for counterpart financing is relative small (0.2-0.8% of total XMG disposable revenue) and would unlikely bring in serious pressure to XMG’s fiscal expenditure. 39. The assessment finds that the funding need for operation and maintenance of the project assets is also relatively low. In the peak year, maintenance and operation of the assets acquired under this project would account for 0.55% of XMG’s urban construction and maintenance fund available for that year, and the total government expenditure for project asset maintenance and loan repayment would account for 0.15% of XMG’s total disposable revenue of that year. B. Technical 40. The project design reflects Bank’s recent experience in improving urban transport through the ICM approach in China. It is focused on one major transport corridor of the city and integrate the design and implementation of all required physical improvements along the corridor (refer to Project Components section). Most of those physical improvements have already been included in the city’s Master Plan (covering a 20 years’ time line), but under the without-project scenario, they would have been designed and implemented separately by different agencies at different times during the next 20 years, based on those agencies’ own priorities and availability of funds. Some additional low-cost investments such as additional traffic management and safety measures, additional improvements to bus stops, etc., were added to the project to increase project benefits. 41. The feasibility study of the project was prepared by an international consulting firm with outstanding experience in preparing and implementing the ICM approach in Chinese cities. The consultants have also worked on other World Bank funded urban transport projects in China. The preliminary designs developed in the feasibility study highlights public transport priority, people- oriented infrastructure and services, and safety for all transport users. 42. A public transport user satisfactory survey was conducted by the feasibility study consultant and the result was analyzed to guide project design as well as to monitor and evaluate project improvements. Specifically, the analysis distinguished the results from women and men and concluded that: (i) women have a slightly higher average public transport satisfactory rating in Xining (3.28/5 by women and 3.24/5 by men); (ii) compared to men, women are more satisfied regarding transfer convenience, bus stop facilities and information provision, cleanness of the vehicles, etc.; and (iii) from the women’s perspective, the major concerns are bus waiting time, bus operation speed, bus service hours, and in-vehicle crowdedness, in which regards women show higher unsatisfactory ratio than men. About one-third of the women think the bus waiting time is too long and the buses are over-crowded. The improvements on Wusixi Road will address all these aspects through ICM approach: (i) bus priority will be provided, which will improve bus operation speed and reduce passenger waiting time due to bus delays; (ii) bus route rationalization plan takes into account the headways and occupancy, which will improve waiting time and in-vehicle crowdedness; and (iii) new buses purchased under the project will include 12 women-friendly designs, such as lower steps for women to climb onto the bus, designated seats for pregnant women and lower bus handle for women and children, into the technical specifications. 43. In addition, concepts such as travel demand management and TOD were discussed with XMG during project preparation and some elements of those concepts have been incorporated into the project design, aiming to further increase the use of public transport, discourage the use of private car usage, and help the city move towards a “public transport metropolis”. Various approaches were identified according to the different area of the city. In the city center, the approach is to focus on parking management, a proven effective tool to manage demand. In the new development areas, the approach is to encourage public transport and NMT usage through higher-density development, pedestrian friendly walking environment and unique urban design, etc. C. Financial Management 44. The Bank loan proceeds, including overseeing the Designated Account, will be managed by Qinghai Provincial Finance Department (QPFD). A financial management (FM) capacity assessment has been conducted by the Bank financial management specialists and actions to strengthen project’s financial management capacity are agreed with the relevant implementing agencies before appraisal. 45. With the implementation of the proposed actions, the FM arrangements will satisfy the World Bank’s minimum requirements under OP/BP 10.00. See Annex 3 for additional information. D. Procurement 46. According to the organizational arrangements for project implementation, the PMO will be responsible for all procurement work under the project with technical support from the respective sub-PMOs. A procurement capacity assessment was conducted on the PMO and the three sub-PMOs at Xining Construction Commission, Public Security Bureau, and Transport Bureau. The key findings of the assessment are that the PMO and the three sub-PMOs are new to Bank’s procurement policies and procedures which could lead to delays in processing procurement and non-compliance. Since the procurement work will involve large value civil works and goods contracts, the PMO will need to strengthen its procurement and contract management capacity through carrying out a series of mitigating measures which were discussed and agreed with the PMO. Further details on procurement are provided in Annex 3. 47. Although this is the first Bank-financed project to be implemented by the PMO established at Xining Construction Commission, it is the second Bank-financed project to be implemented by XMG. The Xining Flood and Watershed Management Project (P101829) has been under implementation since 2009. In general, the procurement work carried out by the PMOs set up at the Xining Water Affairs Bureau and water affairs departments of the three project counties have been implemented smoothly and in accordance with the Bank’s procurement policies and requirements. It is notable that the local bid evaluation committees have been pragmatic and have respected the Bank’s procurement requirements and have 13 understood the differences between the Bank’s procurement policies and procedures and the domestic regulations and practices. In sum, from the procurement perspective, the working style of the XMG is conducive to effective and efficient implementation of Bank-financed projects. Based on the design prepared and project activities proposed in the feasibility study, a Procurement Plan covering procurement activities of the first 18 months of project implementation was prepared by the PMO. The Bank team reviewed it and found it acceptable. E. Social (including Safeguards) 48. OP 4.12 Involuntary Resettlement Policy has been triggered. Land acquisition and resettlement involved in this project consists of two types. The first type relates to the activities that were considered relevant to the project and carried out prior to the project identification. A due diligence review process was carried out for all relevant land acquisition and resettlement activities that have taken place during 2010 to 2012, including: demolishing 520,487 square meters of houses; acquisition of 368 hectares of land; and resettling 760 households. It was concluded that these resettlement activities were carried out in accordance with Chinese land law, Qinghai provincial land administrative management regulation and local regulation. The living conditions of the resettled people have been restored to the conditions prior to their rehabilitation program in compliance with the substantive aspects of Bank involuntary resettlement policy. The second type relates to the proposed land acquisition and resettlement activities under the project and other linked activities that would simultaneously take place prior to the Closure of the Bank loan. According to the OP4.12, a Resettlement Action Plan (RAP) and a Resettlement Policy Framework (RPF) were prepared to cover possible impacts of all land acquisition and resettlement activities that may take place prior to the Closure of the Bank loan. 49. A number of individual family tombs are to be relocated due to road construction. It is concluded that these scattered graves belong to individual families, and do not have archaeological, paleontological, architectural, religious, aesthetic or cultural significance. Following the consultation with the World Bank Physical Cultural Resources Advisor on recent projects, it is agreed that these graves are considered as physical cultural resources as per OP4.11 Physical Culture Resources and therefore OP4.11 is triggered. . As there are well established national/local regulations governing the consultation, relocation and compensation that have been fully incorporated into the RAP process in line with OP4.12: Involuntary Resettlement, it is also agreed that the relocation of those tombs under the Project is addressed under OP4.12. 50. During preparation of the RAP, possible resettlement impacts of the Project were identified and analyzed. Through discussions between the RAP consultants and the feasibility study consultants, and broad consultations with relevant agencies and affected villages/families, the project designs were refined to avoid or minimize land acquisition and housing demolition. Views and preferences of project affected villages and families regarding resettlement impacts and mitigation measures, including land compensation and livelihood restoration programs, have been taken into account during the preparation of the RAP. 51. At the Appraisal stage, the proposed urban roads and one bus interchange under the Project will require 52.8 hectares of land, including 52.3 hectares of collective land, and 0.5 hectares of state owned land. The displaced families affected by land acquisition will be 481 households with 1921 persons. The project will demolish 150,661 square meters of structures 14 and thus displace 121 households (including 527 people). Additionally, the project will also demolish 5,792 square meters of building structures in 7 enterprises. 52. A gender impact analysis through RAP preparation was conducted for the project. Concerns raised by stakeholders during this analysis included: i) potential employment in the bus hub and the area where the village community will be converted as urban citizen community; ii) availability of private career development programs; iii) women’s education programs; iv) provision of family living improvements in relocated sites; v) provision of education and health care facilities; vi)inclusion of community members in decision making of entitlements to resettlement schemes: and vii) enhancing women’s roles in their families investment and the use of their compensation. These concerns raised by women through consultations have been incorporated into RAP and specific funds will be allocated to support women career development and continued engagement in economic activities. 53. The project-affected districts and counties will set up resettlement offices under the management of the PMO to implement land acquisition and resettlement activities as defined in the RAP for project affected families. The PMO will carry out monitoring and evaluation, and follow up with municipal agencies, districts and counties in the events that RAP is not fully complied with and remedial actions need to be undertaken. An independent organization will be commissioned by the city to serve as an external monitoring agency to monitor, document, and evaluate the process and results of the RAP implementation. The external and internal resettlement monitoring reports will be submitted to the Bank regularly, and the livelihood of project-affected families will be evaluated over the course of project implementation. 54. The Chinese versions of RAP and RPF have been disclosed in Xining municipal website since March 26, 2013. The English versions were disclosed in InfoShop on July 11, 2013. F. Environment (including Safeguards) 55. The project has triggered the OP4.01 Environmental Assessment, and is classified as Category B project. 56. The Project is located in the peri-urban area of Xining City where the land use is comprised of farmland and rural residential land. Main sensitive sites include a Huangshuihe River and a small Yunguchuan River where the project roads will cross via bridge/culvert, and a few of individual households’ tombs to be relocated. The environmental impacts of the Project are mainly construction related impacts, e.g. nuisance of dust and noise, wastewater and spoil materials, disturbance to traffic and local communities along the roads, etc. There are also limited impacts during operation stage, such as noise, road safety, vehicle emission, disposal of waste and wastewater generated at the bus interchange hub etc. These potential impacts are common for urban transport infrastructure projects. In this project, these impacts are small-scale, site-specific, and can be readily mitigated with well-known engineering design and good construction management practices. 57. These impacts have been clearly identified and addressed in the Environmental Impact Assessment (EIA) documents. Adequate mitigation measures have been included in the Environmental Management Plan (EMP) which addresses environmental management and 15 supervision organizations and responsibilities, mitigation measures, capacity training plan, monitoring plan, and budget estimates of EMP implementation. EMP measures to be implemented by the contractors will also be incorporated into bidding documents and contracts to ensure effective implementation. 58. Public consultations were conducted with project-affected families and organizations in the areas of influence of the Project, following the requirements of both national regulations and OP4.01. The main public concerns (e.g. land acquisition/resettlement compensation, noise, dust etc.) have been incorporated in the project design, RAP, and EMP. 59. The Chinese versions of EIA and EMP have been locally disclosed since January 30, 2013 (and again on April 25, 2013) in the website of Xining Construction Commission and public offices of local villages, with announcement published in Xining Wanbao newspaper on Jan 31, 2013. The English versions of EIA and EMP have been disclosed in InfoShop on June 24, 2013. 16 Annex 1: Results Framework and Monitoring CHINA: Qinghai Xining Urban Transport Project Project Development Objective (PDO): The development objective of the proposed project is to enable Xining residents to travel between the city center and the western part of Xining City in a fast, efficient and safe manner, through strategic improvements to Wusixi Road, a major transport and urban development corridor. Cumulative Target Values** Responsibility Description Core Unit of Data Source/ (indicator PDO Level Results Indicators* Baseline Frequency for Data Measure Methodology definition etc.) YR 1 YR 2 YR3 YR 4 YR 5 YR6 Collection Indicator One: Reduced travel time minutes of public transport users during the 19.2 15.4 Year 6 on-site PMO and bus Morning peak peak hour on the project corridor observation company hour travel time on Wusixi Road from Changjiang Road to Haihu Road Indicator Two: Increased daily persons public transport users on the project 440,000 704,000 Year 6 bus PMO and bus Daily public corridor company company transport users on operations Wusixi Road on statistics the weekdays Indicator Three: Higher satisfaction score Year 6 public PMO and bus rating by public transport users on the out of 5 transport company project corridor user satisfaction survey rating Sub-Indicator 3.1: rating by male 3.24 3.75 Sub-Indicator 3.2: rating by female 3.28 3.75 Indicator Four: Reduced annual number 0.75 0.70 Year 6 traffic PMO and Wusixi Road number of transport related injuries per km police traffic police and fatalities on the project corridor statistics INTERMEDIATE RESULTS Intermediate Result (Component One): Urban Road km Intermediate Result indicator One: 0 0 0 0 3 6 8 annually project PMO Length of urban roads constructed progress report 17 Intermediate Result (Component Two): Public Transport Intermediate Result indicator One: Number of bus stops improved number 0 0 0 20 35 50 56 annually project PMO progress report Intermediate Result indicator Two: number 0 0 0 10 20 30 32 annually project PMO Number of bus priority junctions progress implemented report Intermediate Result indicator Three: Number of buses procured number 0 0 0 0 60 120 145 annually project PMO progress report Intermediate Result indicator Four: number 146,800 189,400 Year 6 project PMO number of jobs accessible along progress Wusixi Road report Intermediate Result (Component Three): Intelligent Traffic Management Intermediate Result indicator One: number 0 0 0 0 15 35 42 annually project PMO Number of signalized junctions progress installed/upgraded report Intermediate Result indicator Two: Number of traffic enforcement number 0 0 0 0 40 80 98 annually project PMO cameras installed progress report Intermediate Result (Component Four): Institutional Capacity Building Intermediate Result indicator One: number 0 0 2 4 5 5 5 annually project PMO Number of technical studies progress completed report Intermediate Result indicator Two: number 0 40 80 120 160 200 250 annually project PMO Number of officials and technical progress staff trained report 18 Annex 2: Detailed Project Description CHINA: Qinghai Xining Urban Transport Project 1. The project consists of four components: (a) Urban Roads; (b) Public Transport; (c) Intelligent Traffic Management; and (d) Institutional Capacity Building. The total cost is US$250.66 million, to be financed by an IBRD loan of US$120.0 million and counterpart funding of US$130.66 million equivalent. Detailed costs of each component (inclusive of contingency and interest during construction) and financing arrangements are listed below (see Table A2.1). 2. The proposed Bank loan will finance (i) civil works; (ii) equipment; (iii) technical assistance; and (iv) front-end fee, which altogether account for about 50% of the total financing required. Counterpart funds will finance the remainder, including: (i) land acquisition and resettlement; (ii) buses; (iii) other costs (detailed design, site preparation, construction supervision, environmental monitoring, etc.); (iv) contingencies; and (v) loan interest. Table A2.1: Project Cost % IBRD Project Component Total WB Financing 1 Urban Roads 182.98 76.81 42.0% UR1 Xicheng Avenue 103.56 43.27 UR2 Wusixi Road 66.29 28.25 UR3 No.5 Road 13.14 5.30 2 Public Transport 53.94 30.06 55.7% PT1 Physical Improvements 8.25 5.56 PT2 Advanced Public Transport System 8.73 6.57 PT3 Bus Procurement 12.24 0.00 PT4 Public Transport Interchange 24.72 17.92 3 Intelligent Transport Management 9.63 9.02 93.7% ITS1 Traffic Command Center 1.72 1.61 ITS2 ATC System 2.14 2.00 ITS3 Equipment for Traffic M/E/I 5.84 5.41 4 Institutional Capacity Building 3.81 3.81 100.0% CB1 Urban Transport related Studies 0.90 0.90 CB2 Technical Trainings and Knowledge Exchange 0.35 0.35 CB3 Project Management and Technical Consultancy 2.16 2.16 CB4 Public Communication 0.40 0.40 Total project costs 250.36 119.70 47.8% Front-end Fee 0.30 0.30 Total Financing Required 250.66 120.00 47.9% 3. Component 1: Urban Roads. This component includes the construction of three short urban road sections (the total length is less than 10km), which are part of the proposed integrated public transport corridor and are necessary for providing good quality public transport services in the newly developed Xichuan District in the west of the city. Sufficient provisions for public 19 transport and NMT will be included to these roads. All road works will also include underground utilities, e.g. drainage and sewage pipes, and environmental protection measures. (a) UR1: Xicheng Avenue. This will support the construction of Xicheng Avenue from Southern Bypass to Chaidamu Road, totaling 3.64km, including 3 bridges and 1 underpass along the alignment. Xicheng Avenue is planned as an urban primary road going north-south, which crosses Huangshui River and Qinghai-Tibet Railway. (b) UR2: West Extension of Wusixi Road. This will support the construction of the west extension of Wusixi Road from No. 4 Road to Xicheng Avenue, totaling 3.43km. It is planned as an urban primary road going east-west, which links the new development area, Xichuan District, to the existing city core. (c) UR3: No. 5 Road. This will support the construction of No. 5 Road from Wusixi Road to Chaidamu Road, totaling 1.02km. It is planned as an urban primary road going north-south, which links the public transport interchange (under Component 2) to the Wusixi Road corridor. 4. Component 2: Public Transport. The component aims at improving public transport infrastructure and services, as well as complementary facilities along Wusixi Road. Based on assessment of public transport performance on the corridor, the component will implement a combination of integrated public transport improvements on Wusixi Road. (a) PT1: Physical Improvements on the Public Transport Corridor. This will include constructing dedicated bus lanes, providing safe and accessible bus stops and terminals, installing bus priority signals, providing safe and accessible pedestrian crossings, pedestrian paths, bicycle lanes and other non-motorized transport facilities, enforcing parking management on Wusixi Road, as well as rationalizing the bus routes along the corridor. (b) PT2: Advanced Public Transport System. This will support the upgrade of the bus dispatching and management system of the Bus Company and the provision of electronic signs and surveillance cameras at the bus stops. (c) PT3: Bus Procurement. This will purchase new buses to operate on the public transport corridor, which are cleaner, safer and more user-friendly than the existing buses. (d) PT4: Public Transport Interchange. This will include the construction of a public transport interchange at Yanxiaocun for fast, efficient and comfortable transfers between intra- and inter-city bus services, and two access roads to the interchange, as well as the development of an advanced management and service system for the interchange. 5. Component 3: Intelligent Traffic Management. This component aims at improving traffic management and road safety in support of the proposed integrated public transport corridor on Wusixi Road and the area in vicinity through the implementation of intelligent traffic management systems. 20 (a) ITS1: Traffic Command Center. This will support the upgrade of the existing traffic command center housed at the Traffic Police Brigade. (b) ITS2: Area Traffic Control (ATC) System. This will support the development of an ATC system and procurement and installation of traffic signal controllers, lights and detectors on Wusixi Road corridor and selected junctions in vicinity. (c) ITS3: Equipment for Traffic Monitoring, Enforcement and Information Services. This will support the procurement of a traffic data collection and analysis system, CCTV monitoring cameras, traffic enforcement cameras, a Variable Message Sign system, focusing on the area covered by the ATC system, as well as the provision of fiber optical network and other auxiliary equipment for Wusixi Road. 6. Component 4: Institutional Capacity Building. This component aims to improve the city’s human resources and institutional capacity for urban transport planning and management. (a) CB1: Urban Transport related Studies. This will carry out strategic studies in support of achieving the PDO and the city’s development goals: (i) bus route optimization; (ii) TOD study; (iii) transit metropolis strategy; (iv) public transport user satisfactory surveys; (v) parking strategy and planning study. (b) CB2: Technical Trainings and Knowledge Exchange. This will include workshops and trainings for the government officials and technical staff on urban transport topics such as transport planning, public transport service planning and management, road safety, traffic management and slow mode transport. (c) CB3: Project Management and Technical Consultancy. This will provide project management support including project monitoring and evaluation and technical consultancies for implementation of the ICM approach. (d) CB4: Public Communication. This will include public awareness campaigns on the project, particularly on the ICM approach, and public consultation activities. 21 Annex 3: Implementation Arrangements CHINA: Qinghai Xining Urban Transport Project Organizational Arrangements for Project Implementation 1. As agreed between the World Bank and Government of China, Qinghai Province, as the Project Implementing Entity, acts through Xining Municipality to implement the Project. The detailed implementation arrangements are as follows: (a) A Project Leading Group (PLG), chaired by the Mayor of Xining, and comprised department heads from relevant municipal agencies, including DRC, Finance Bureau, Environmental Protection Bureau, Audit Bureau, Inspection Bureau, Construction Commission, Transport Bureau, Public Security Bureau, Land Resources Bureau, City Planning Bureau, Water Resources Bureau, City Investment Company, Bus Company and district governments, was established to oversee the preparation of the Project. The PLG will be maintained throughout project implementation and key members will meet regularly or upon particular request from PCO and/or PMO to review project progress and promptly addressing issues arising during implementation. (b) A Project Coordination Office (PCO) was established at Xining Development and Reform Commission, which is responsible for: (i) coordination among XMG’s different agencies; and (ii) Xining’s communication with the Bank and Xining’s communication with relevant agencies of the Qinghai Provincial Government during implementation. (c) A Project Management Office (PMO) was established at the Xining Construction Commission, which is responsible for overall project management, procurement management for all contracts under the project, financial management for all project funds, and supervision of all implementation activities (including safeguards), in accordance with Bank guidelines. (d) Three Sub-PMOs have been established respectively at the Xining Construction Commission, Xining Public Security Bureau and Xining Transport Bureau, to carry out their respective part of the project. 2. According to the Bank’s experience with other World Bank project cities in China, the above arrangements normally work, particularly when the PLG is active and PLG members can meet regularly to review project progress. The city of Xining is currently implementing a Bank financed Xining Flood and Watershed Management Project with the similar organizational structure, and performance of the project implementation has been satisfactory. Substantial training has been provided and will continue to be provided to the PMO throughout the project preparation and implementation. 3. Similar to most other Chinese cities, urban transport management functions in Xining are dispersed in several agencies under the municipal government. National and provincial 22 governments primarily play the role of overall policy and technical guidance. The chart below summarizes the institutional structure of urban transport management in Xining. Policy & Technical Guidance National and Provincial Governments Strategic Functions Xining Municipal Government Infrastructure Planning Regulation Service Planning Planning Bureau and Transport Bureau and Police Transport Bureau Construction Commission Infrastructure Construction Traffic Management & Public Transport & Maintenance Enforcement Operations 1 Construction Commission Traffic Police Xining Bus Company2 Note 1: Transport infrastructure construction in Xining is managed by Xining Urban Construction and Development Ltd., a 100% government-owned enterprise under Xining Construction Commission. Transport infrastructure maintenance is implemented by the Municipal Service Management Division under Xining Construction Commission. Note 2: In 2011, Xining Bus Company, a 100% XMG owned company, operates 69 routes with 2,254 buses. In addition to Xining Bus Company, there are another two joint-ventures that operates a small number of bus fleets in the city, i.e., Xining Transportation Company and Xining Transport Investment Company. The former operates 21 routes with 549 buses, most of which are suburban lines that go to the counties/villages within Xining Municipality. The latter operates four rapid lines that connect the city center with Xichuan New Area, where it has a major transport hub to be constructed by the company under this proposed project, and only stops at the busiest bus stops. 4. The various components will be implemented by the PMO and the sub-PMOs, as illustrated in the organizational chart below. 23 Project Leading Group (Xining Municipal Government) Project Coordination Office (Xining DRC) Project Construction Office Component 4 (Xining Construction Commission) Sub-PMO Sub-PMO Sub-PMO (Construction Commission) (Transport Bureau) (Public Security Bureau) Component 1 Component 2: Component 3 Investment Company PT1 City Transport Bus Company Component 2: Component 2: PT2/PT3 PT4 5. The sub-PMO at the Construction Commission will be responsible for the implementation of the Urban Roads component. Previous experience with Chinese cities shows that the local construction agencies have adequate capacity in implementing road civil works. 6. The sub-PMO at the Transport Bureau will be responsible for the implementation of the Public Transport component. Specifically, PT 1 will be implemented by the Transport Bureau; PT2&PT3 will be implemented by the Xining Bus Company; and PT4 will be implemented by the Xining City Transport Investment Company. All entities have shown strong interests in improving their operations and services, but their management and financial capacity are relatively low. 7. The sub-PMO at Xining Traffic Police under the Public Security Bureau will be responsible for the Intelligent Traffic Management component. It currently has relatively low technical capacity and limited human resources for traffic management and enforcement. It has proposed to take an incremental approach to developing the intelligent traffic management system for the city. The Wusixi Road corridor has been included to the Project as the first phase of such development, and extensive capacity building will be provided during project preparation and implementation. It is hoped that with their enhanced capacity through implementing this project, they will be able to expand the intelligent traffic management system to cover the entire city in the near future. 8. Implementation of Wusixi Road consists of new road construction of the western extension of Wusixi Road, physical improvement of the existing Wusixi Road and the associated 24 ITS for traffic management and public transport operations. The design of all these elements will be undertaken as a whole by one consultant. The implementation of the civil works and procurement of the ITS equipment will be carried out by the various agencies as defined above. 9. The PMO will be responsible for the overall coordination of Institutional Capacity Building component, with technical inputs from the sub-PMOs on their respective activities. This component will fill the institutional capacity gap with necessary technical support and training activities in the course of project implementation. Additional support will also be provided by the Bank team to ensure that the PDO would be satisfactorily achieved. Financial Management 10. The FM capacity assessment concluded that the project FM arrangements satisfy Bank requirements and identified the following principal risk: lack of knowledge and experience in managing Bank financed projects by project financial staff in the PMO. 11. Mitigation measures agreed include: (a) a Financial Management Manual (FMM) to standardize project FM procedures was reviewed and accepted to the Bank; (b) in addition to extensive FM training from the Bank, QPFD and Xining Municipal Finance Bureau (XMFB) who have experience with Bank financed operations will arrange more extensive workshops and experience sharing. 12. Overall, the residual project FM risk after mitigation is assessed as Moderate. 13. The PMO established under Xining Municipal Construction Commission will be responsible for the project management and implementation including project FM related day-to- day works including project accounting and financial reporting. The PMO has three financial staff. One financial manager, one accountant, and one cashier are already in place. Based on discussions, observation and review of educational background and work experience of the staff identified for financial and accounting positions in the Project Company, the task team noted that they are qualified and appropriate to the work they are expected to assume. 14. Budgeting. The PMO will prepare the annual project implementation plan, including the funding resources and budget. The budget for counterpart funds committed by local governments will be reviewed and approved by local People’s Congress and be included in their sectoral budget. Budget variance analysis will be conducted semi-annually by the PMO and necessary actions will be taken to make sure the project could be implemented as planned. 15. Funds Flow. The Bank loan proceeds will flow from the Bank into project Designated Account (DA) to be set up at and managed by QPFD. QPFD will be directly responsible for the management, maintenance and reconciliation of DA activities. Supporting documents required for Bank disbursements will be prepared and submitted by the PMO through XMFB for review and verification before sending to QPFD for further disbursement processing. QPFD will, from DA, reimburse the funds to the XMFB or the PMO, or disburse the funds to contractors directly for payment of eligible expenditures. 25 16. The World Bank Loan Agreement will be signed between the World Bank and the People’s Republic of China through the Ministry of Finance (MOF). The Project Agreement will be signed between the World Bank and the Qinghai Province. The on-lending agreement will be entered into by MOF and Qinghai Provincial Government through QPFD, which will be further on-lent to XMG through XMFB. XMG will be the final debtor. 17. Accounting and Financial Reporting. The administration, accounting and reporting of the project will be set up in accordance with Circular #13: “Accounting Regulations for World Bank Financed Projects” issued in January 2000 by MOF. The standard set of project financial statements has been agreed between the Bank and MOF. 18. The PMO will be responsible for the overall project implementation, management, monitoring and coordination. Original accounting documents for project activities will be retained by the PMO. The PMO will be responsible for preparing the project financial statements to be submitted to QPFD for review through XMFB. The unaudited semi-annual project interim financial reports (IFRs) (format in accordance with the aforementioned Circular #13 agreed with MOF) will be prepared by the PMO and furnished to the Bank through XMFB no later than 60 days following each semester, in form and substance satisfactory to the Bank. 19. Internal Control. The PMO has adequate FM regulations in place. In addition, the project related accounting policy, procedures and regulations were issued by MOF, and the FMM has been prepared and issued to standardize the project FM procedures. 20. Audit. Qinghai Provincial Audit Office (QPAO) has been identified as the auditor for the project. QPAO has extensive experience auditing Bank-financed projects. The annual audit reports will be issued by QPAO and will be due to the World Bank within six months after the end of each calendar year. The Bank and the Government will make them available to the public in accordance with the Bank Policy on Access to Information. Disbursements 21. Four disbursement methods are all available for the project: advance, reimbursement, direct payment and special commitment. Supporting documents required for Bank disbursement under different disbursement methods will be documented in the Disbursement Letter issued by the Bank. 22. One DA in US dollar will be opened at a commercial bank acceptable to the Bank and will be managed by QPFD. The ceiling of the DA will be determined and documented in the Disbursement Letter. Upon the PMO’s withdrawal application, QPFD will reimburse funds to XMFB or the PMO, or disburse funds to the contractors directly for payment of eligible expenditures. The ceiling of the DA will be determined and documented in the Disbursement Letter. 23. The Bank loan would be disbursed against eligible expenditures (taxes inclusive) as in the following table: 26 IBRD Loan Allocated Percentage of Amount Expenditures Category (in US$) to be financed (inclusive of taxes) (1) Works 97,483,000 100% (2) Goods* 18,412,000 100% (3) Consultants’ services, non- 3,805,000 100% consulting services, training and Workshops and incremental operating costs (4) Front-end fee 300,000 Amount payable pursuant to Section 2.03 of the Loan Agreement in accordance with Section 2.07 (b) of the General Conditions (5) Interest rate cap or interest rate 0 Amount due pursuant to collar premium Section 2.07(c) of the Loan Agreement Total 120,000,000 *Note: Goods under Category (2) does not include bus procurement, which will be 100% financed by counterpart funds. 24. Retroactive financing will be applied for this project. Retroactive financing of up to US$10.0 million will be available for payments made on or after January 1, 2014 for all eligible expenditures according to the requirements specified in the Loan Agreement. Procurement 25. Capacity Assessment. The procurement capacity assessment identified the lack of experience with World Bank-financed project of the PMO and sub-PMOs as the principal risk. Mitigation measures include: (a) procurement training has been provided during project preparation and will be continued periodically during implementation; and (b) a procurement agent experienced in World Bank procurement procedures to be recruited to assist with procurement planning and implementation. Other risks include possible use of biased technical requirements in equipment and ITS procurement; and issuance of large value variation orders due to bidding on the basis of preliminary designs. Mitigating measures will include: (a) market analysis to be conducted early in the process to identify available technology from several reputable manufacturers and the likely supplier base; (b) prior review of bid documents by 27 ITS/bus experts to ensure that the technical specifications are not restrictive; (c) a good complaints reporting and resolution system to be established ; (d) qualified and experienced Design Institute(s) acceptable to the Bank to be selected to prepare designs and technical requirements for all procurement and (e) Bidding Documents to be prepared on the basis of detailed designs; and (f) project management consultant to be hired to assist with design review, document quality control and implementation monitoring. The overall procurement risk is rated substantial. 26. Applicable Guidelines. Procurement will be carried out in accordance with the “Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; and the provisions stipulated in the Loan Agreement. NCB shall be carried out in accordance with the Law on Tendering and Bidding of the People’s Republic of China promulgated by Order of the President of the People’s Republic of China on August 30, 1999 subject to the modifications stipulated in the Legal Agreement in order to ensure consistency with Bank Procurement Guidelines. 27. Procurement of Works. Works procured under this project will include: construction of road section, dedicated bus lanes, bus stops, terminals and public transport interchange, etc. Procurement will be conducted using the Bank’s Standard Bidding Documents for all International Competitive Bidding (ICB) and National Model Bidding Documents agreed with or satisfactory to the Bank for all National Competitive Bidding (NCB). 28. Procurement of Goods. Goods procured under this project will include procurement of buses, area traffic control system, traffic enforcement camera, etc. Procurement will be done using the Bank’s Standard Bidding Documents for all ICB and National Model Bidding Documents agreed with or satisfactory to the Bank for all NCB. 29. Selection of Consultants. Consulting services will include: strategic studies in support of achieving the PDO and the city’s development goals, project management support including project monitoring and evaluation and technical consultancies for implementation of the ICM approach; and public communication on the ICM approach. 30. Universities and research institutes may be included in shortlists as a source of consultants, provided they possess the relevant qualifications and they are not in a conflict of interest situation. In such cases, QBS or CQS (for small assignments) would be used, if the shortlist also includes consulting firms. The shortlist may comprise entirely national consultants (firms registered or incorporated in the country), if the assignment is below USD500, 000. 31. Training and Workshops. Plans for training and workshops will be developed by the PMO, and included in project annual work plan for Bank review. Actual expenditures incurred in accordance with the approved plans for training and workshops will be the basis for reimbursement. 28 32. Procurement Plan. A Procurement Plan for the first 18 months of project implementation has been prepared by the PMO. It will be made available on the Bank’s external website. The procurement plan shall set forth those contracts subject to prior review. The remaining contracts will be subject to procurement post review on a sample basis. The Procurement Plan will be updated annually or as required to reflect implementation needs and improvements in institutional capacity. 33. Frequency of Procurement Supervision. In addition to prior review, the Bank mission will also carry out procurement post review on an annual basis with a sampling rate of one in fifteen contracts. 34. Thresholds for Procurement Methods and Prior Review. The indicative thresholds are shown in the table below. Thresholds for Procurement Methods and Prior Review Contract Value Prior Review Threshold Expenditure Category Threshold Procurement Method (US$ thousands) 1/ (US$ thousands) 1. Goods and Non- ≥3,000 ICB All Consulting Services <3,000 NCB First 2 NCB contracts and all contracts valued ≥1,000 <100 Shopping 1stcontract of the project. -- Direct Contracting All 2. Works and Supply and ≥25,000 ICB ALL Installation of Plant and Equipment <25,000 NCB First 2 NCB contracts and all contracts valued ≥10,000 <200 Shopping 1st contract of the project. 3. Consultants Services ≥300 QCBS/QBS All <300 CQS 1st contract of the project. -- Individual Consultant Only in exceptional cases. -- Single-Source All Selection (firm) -- Single-Source ≥20 Selection (individual) 29 1/ All contracts to be financed through retroactive financing will be subject to prior review. A contract whose cost estimate was below the Bank prior review threshold is subject to prior review if the price of the lowest evaluated responsive bid (or, in the case of consulting services, the financial offer of the selected firm) exceeds such threshold at the bid/proposal evaluation stage. 35. Advance Contracting and Retroactive Financing. The procurement plan shall set forth those contracts which will be signed in advance of loan signing together with the relevant Bank review procedures. The starting date of eligible expenditures for retroactive financing is January 1, 2014 and the amount shall not exceed US$10.0 million. Payments will be eligible only for contracts procured in accordance with applicable Bank procurement procedures. Environmental (including safeguards) 36. The proposed project includes construction of three new urban roads with a total length of 8.1km, one bus interchange and improvement of a bus corridor. The project area is peri-urban area of Xining City where land use is farmland and rural residential areas. 37. The physical construction activities will have potential adverse environmental impacts, e.g. nuisance of dust and noise, wastewater and spoil materials, disturbance to traffic and local communities along the roads, etc. Environmental impacts during operation mainly include noise, road safety, vehicle emission, disposal of waste and wastewater generated at the bus interchange, etc. However, these potential impacts are common issues for urban infrastructure construction. They are small scale, site-specific, and can be readily mitigated with well-known engineering design and good construction management practice. Considering the type, location, sensitivity, and small scale of the project and the nature and magnitude of its potential environmental impacts, the project is proposed as a category B project. 38. Xining PMO has commissioned Hubei Academy of Environmental Science, a Class A licensed EIA consultant in China, to conduct the EIA preparation, with guidance and advice from the Bank’s environmental team. The Terms of Reference (TOR) of EIA was developed in January 2012, and reviewed/commented by Bank task team. Draft EIA report has been reviewed by the Bank during project preparation period, and the final EA documents (in both English and Chinese) are submitted in April 2013, which include the following: • Environmental Impact Assessment Report • Environmental Management Plan 39. The preparation of EA documents followed relevant national laws, regulations, guidelines and standards applicable to the project as well as ten Bank safeguards policies. Based on screening, three safeguards policies are triggered: (i) OP4.01 Environmental Assessment; (ii) OP4.11 Physical Cultural Resources; and (iii) OP4.12 Involuntary Resettlement. 40. The EIA report thoroughly addressed the potential environmental and social impacts envisaged for the project, based on which an EMP was developed to avoid, minimize, mitigate 30 and compensate the potential adverse impacts. Among potential environmental impacts, the concerns and mitigation measures include: • Crossing sensitive sites: The project road Xicheng Avenue will cross Huangshui River (classified as water source protection area) via bridge. Alternative bridge schemes were studied with overall consideration of environmental, social, technical and economic aspects. The final scheme selected has no in-water piers to avoid disturbance of waterbody during construction. The Wusixi Road will cross a small creek Yunguchuan, where two alternatives were compared. The selected culvert scheme maintained the original river channel with minimum disturbance. Strict construction management will be enforced during construction stage to minimize the potential impact on water quality and hydrology. In addition, a few individual family tombs are to be relocated due to road construction. These tombs were identified and consultations were conducted with concerned families. The relocation of these tombs under OP4.11 is addressed under OP4.12. • Construction related impacts: The main impacts of the project will be the nuisance related to construction activities, including dust, noise, wastewater and solid waste management, social disturbance, traffic safety etc. Cumulative impacts from Southern Bypass, Wusixi Road and expansion of Chaidamu Road are also considered in the EIA. These impacts are of temporary feature and can be readily mitigated with sound planning and construction management. The key measures include: proper planning of road traffic diversion; coordination with police department, and prior notice through public media; proper relocation of public utility facilities without interrupting usual life of local community; arrangement of temporary access with adequate safety measures (temporary bridge, protection net, night light etc.) for local residents, business, schools etc.; bulletin board information disclosure; use of low noise equipment and proper maintenance; installation of temporary noise reduction facility if necessary; night-time construction will be restricted, and prior public notice as well as Environmental Protection Bureau approval are required for activities that need continuous construction over nighttime; frequent water spraying on construction site and access road to suppress dust; covering of trucks transporting bulk materials and timely site clean up after construction; careful balance of excavation and backfilling and fully reuse of spoil material; etc. 41. A stand-alone EMP has been developed. The EMP addressed environmental management and supervision organizations and responsibilities, mitigation measures, capacity training plan, monitoring plan, and budget estimates of EMP implementation. It also includes a generic Environmental Code of Practices (ECOPs) for contractors for inclusion in the bidding documents and contracts to ensure effective implementation. 42. EMP implementation will be managed by Xining PMO. An environmental management unit will be established in the PMO with dedicated environmental staff. The contractors and supervision engineers will be required to assign qualified environmental staff to their team to ensure effective implementation of the EMP. 43. During the EA preparation, public consultations were conducted in accordance with the Bank’s OP4.01. These were supplemented by a combination of opinion surveys and public 31 meetings with general public along the transport corridors and the communities around the bus interchange. Information about the project, potential environmental and social impacts, and planned mitigation measures were provided to the public during consultation. Main concerns from the public (e.g. construction nuisance of noise and dust, land acquisition compensation, provision of temporary access, and timely road restoration) have been addressed in the project design and EMP mitigation measures. 44. The EIA and EMP have been locally disclosed since Jan 30, 2013 (and again on April 25, 2013) in the website of Xining Construction Commission and public offices of local villages, with announcement published in Xining Wanbao newspaper on January 31, 2013. The English versions of EIA and EMP have been disclosed in InfoShop on June 24, 2013. Social (including safeguards) 45. The project has significant social benefits, as it supports the city development and provide better city infrastructure for citizens. The public consultation and participation process undertaken during preparation enables the project to address the public needs to local economic development and their engagement into the project development process. 46. Both the Bank and Xining Municipality recognized the successful implementation of the RAP requires that there be a mechanism wherein the people affected by the project can be informed of their rights, lodge complaints and be confident that they will be acted on. 47. Land Acquisition and Resettlement. The proposed project will require collective and state owned land, structures in six villages and seven enterprises in one district and one county. The project will require 52.8 hectares of land, including 52.3 hectares of collective land and 0.5 hectares of state owned land. The land acquisition will affect 481 households with 1921 rural populations. The project will require the demolition of 150.661 square meters of structures and the displaced families affected by housing demolition will be 121 households with 527 persons. Additionally, the project will demolish the structures of 5,792 square meters in 7 enterprises. 48. A number of individual family tombs are to be relocated due to road construction. These tombs were identified and consultations with concerned families were conducted. It is concluded that these scattered graves belong to individual families, and do not have archaeological, paleontological, architectural, religious, aesthetic or cultural significance. Following the consultation with the World Bank Physical Cultural Resources Advisor for recent projects, it is agreed that these graves are considered as physical cultural resources as per OP4.11 Physical Culture Resources and therefore OP4.11 is triggered. As individual household tombs are a common issue under infrastructure projects in China, there are well established national/local regulations governing the consultation, relocation and compensation that have been fully incorporated into the RAP process in line with OP4.12. 49. The RAP prepared by the project entity provides details regarding resettlement policy principles and regulations to be followed, compensation rates and budget, mitigation measures to restore incomes where necessary, and institutional and monitoring arrangements. The analytical 32 works were undertaken, the project negative impacts were minimized, and the mitigation measures were developed according to the Bank requirement. 50. Indigenous People. A socioeconomic impact survey was conducted and it found that there is not any minority community in the affected villages in the project area. It was thus determined that OP 4.10 on Indigenous Peoples is not triggered. 51. Information Dissemination. All the affected families and villages have been identified through the census survey. Xining PMO has disclosed the RAP at the municipal website since March 26, 2013 and again on June 15, 2013 for those who are interested in the project information and resettlement policy, and made it available for reading in the PMO and branches of the resettlement offices free of charge. Relevant project information has been provided to the affected villages through newspaper reports, posters and public meetings. A resettlement information booklet providing details regarding compensation rates, social security policies and other entitlement policies and grievance procedures will be distributed to the displaced people prior to resettlement implementation. 52. Participation Strategy. Public consultations were undertaken by the consulting institute and the project entity to address the importance of the safeguards policy. The project preparation was a well-done process to disseminate the Bank requirement on social safeguards and incorporated the people’s concerns into the RAP, and also an important process to provide on- job training courses to the staff of the PMO and at the village level. 53. Focus group discussions and key informant interviews have been used to consult with potentially affected persons and obtain views and preferences regarding resettlement impacts and mitigation measures, including land compensation, opportunities of employment, training courses and social security programs, etc. These views and preferences have been taken into account during RAP preparation, and the majority of potentially affected persons agree that the resettlement and rehabilitation measures planned under the RAP will be adequate to address and mitigate any adverse impacts. 54. The affected villages are to play a key role in determining and implementing their livelihood restoration programs. For example, after land compensation amounts are calculated, each community will determine how land compensation can best be used to improve, or at least restore, local income-earning potential. 55. The project entity will set up procedures to supervise land compensation use, and address any complains associated to the resettlement activities. Both internal and independent monitoring of the resettlement program would be conducted regularly during project implementation. 56. Institutional Arrangements. A resettlement office will be established and 5 full-time staff in the PMO will be assigned to carry out the resettlement supervision. The resettlement offices at the affected county and district will carry out the implementation of the resettlement activities. An experienced institute, independent from the PMO, will be contracted to serve as the independent monitoring agency of the resettlement program. The project will be monitored and the living standards of the project-affected people will be evaluated over the course of project 33 implementation. The monitoring results will be regularly reported twice a year and, if needed, remedial actions will be devised. 57. Gender Considerations. A gender impact analysis through RAP preparation was conducted for the project. Concerns raised by stakeholders during this analysis included: i) potential employment in the bus hub and the area where the village community will be converted as urban citizen community; ii) availability of private career development programs; iii) women’s education programs; iv) provision of family living improvements in relocated sites; v) provision of education and health care facilities; vi) inclusion of community members in decision making of entitlements to resettlement schemes; and vii) enhancing women’s roles in their families investment and the use of their compensation. These concerns raised by women through consultations have been incorporated into RAP and specific funds will be allocated to support women career development and continued engagement in economic activities. 58. In addition, a public transport user satisfactory survey was conducted by the feasibility study consultant. The analysis distinguished the results from male and female in order to identify the specific concerns from female passenger’s perspective. The project design has addressed those major concerns such as bus waiting time, bus operation speed, bus service hours, and in- vehicle crowdedness. 59. Due Diligence Review. Due diligence review was conducted by the RAP consulting team and concluded that the resettlement activities linked to this project were carried out in accordance with Chinese land law, Qinghai provincial land administrative management regulation and local regulation. The living conditions of the resettled people have been restored in compliance with the substantive aspects of Bank involuntary resettlement policy. Xining land and resources bureau will supervise the resettlement activities. 60. Another two roads linked to the Bank supported project, i.e., the Western Extension of Wusixi Road and the widening of Chaidamu Road, might be implemented prior to the Closure of the Bank loan. A RPF was prepared to address the resettlement issues to take place based on the Bank OP 4.12 and the RPF provided the resettlement procedures and guidelines. 61. Information Disclosure. The Chinese versions of the RAP and RPF have been disclosed at Xining municipal website since March 26, 2013 and the English versions in the Bank’s InfoShop on July 11, 2013. Monitoring & Evaluation 62. The project has developed 4 PDO-level results indicators for monitoring progress towards achieving the PDO. The responsibility of data collection will lie with the PMO, through collaboration with the relevant local agencies. The collection of indicator two and four will use the existing mechanism in the Bus Company and Traffic Police and the incremental cost associated is minimal. For the other two indicators, modern data collection method will be introduced and financed by the project. 34 63. Reduced journey time of public transport users during the peak hour on the project corridor. Bus journey time from Changjiang Road to Haihu Road on Wusixi Road during morning peak hour on weekdays is used as the indicator. The baseline data adopts the journey time generated from the VISUM model under the without-project scenario for year 6, which is 19.2 minutes. Through implementation of the improvements on Wusixi Road with dedicated bus lane, it is envisaged that the journey time will be reduced by 20%, i.e., to 15.4 minutes. 64. After project implementation, bus journey time from Changjiang Road to Haihu Road will be recorded by the GPS device to be procured under the project and installed on the buses operating on the corridor. The PMO will be responsible to report the journey time of year 6 with inputs from the Bus Company. 65. Increased daily public transport users on the project corridor. According to the statistics of the Bus Company, the total daily passenger ridership of the bus routes that run on Wusixi Road is 440,000 today. It is expected that this will increase by 60% in year 6, i.e., 704,000 passengers. The PMO will be responsible to report the number of public transport users on Wusixi Road in year 6 with inputs from the Bus Company. 66. Higher satisfaction rating by pedestrians and public transport users on the project corridor. A user satisfactory survey was conducted by the feasibility study consultant during project preparation. The survey questionnaire and methodology was reviewed by the Bank team and shared with XMG, which covers bus service aspects such as waiting time, travel speed, transfer distance, etc. The survey results show an average rating of 3.24 out of 5 by men and 3.28 out of 5 by women, prior to project implementation. 67. A user satisfaction survey will be conducted by the end of project implementation, using the same questionnaire and methodology. The analysis will distinguish the results from men and women, in order to ascertain that women are at least equally satisfied with the bus service as opposed to men. The project has allocated a TA financing of about US$250,000 for the PMO and Bus Company to conduct this survey. It is expected that this will become a regular mechanism in Xining to monitor residents’ feedback on public transport services. 68. Reduced annual number of transport related fatalities + injuries on the project corridor. In 2012, the Traffic Police recorded 0 fatality and 3 injuries on Wusixi Road from Changjiang Road to Haihu Road (about 4km), i.e., 0.75 injuries per kilometer. Total vehicle-km travelled on this section of Wusixi Road in 2012 is about 17.54 million. Compared to international standard, the ratio of 0 fatality per 100 million vehicle-km travelled and 17.1 fatalities + injuries per 100 million vehicle-km travelled is considered as good performance in transport safety. The project will make sure that the extension of Wusixi Road to the new development area in the west remains such good performance. The entire Wusixi Road will be 15.7km after extension and the target is lower than 0.70 fatalities + injuries per kilometer in Year Six. The Traffic Police keeps the records of all traffic-related accidents in Xining. The PMO will be responsible to report the number of fatalities and injuries on Wusixi corridor in year 6, with inputs from the Traffic Police. 35 Annex 4: Operational Risk Assessment Framework (ORAF) CHINA: Qinghai Xining Urban Transport Project Stage: Negotiations Project Stakeholder Risks Stakeholder Risk Rating Moderate Description: Risk Management: The key stakeholders include local residents, the XMG and (a) Substantial capacity building has been provided during project preparation and will be relevant municipal agencies including the construction continued during implementation. commission, the bus company, the city transport investment company, and the traffic police. (b) The XMG would develop a communication mechanism to fully communicate the project concept and design to the local residents. (a) The quality of the project preparation and implementation might be adversely affected by the existing low capacity of the XMG and the desire for quickly completing the project implementation. (b) Project implementation might be delayed if local residents, especially ethnic minorities, do not cooperate due Due Date : Status: In to inadequate consideration of their interests and concerns. Resp: Client Stage: Imp progress Recurring While the local residents are envisaged to benefit from the urban transport improvements, some project activities, such as land acquisition and demolition of buildings, might to some extent affect their daily lives or even their livelihoods. Implementing Agency Risks (including fiduciary) Capacity Rating: Substantial Description: Risk Management : (a) The implementation of the project might be delayed (a) Training will be provided to the PMO by World Bank technical, procurement, because the PMO has limited experience with Bank funded financial management, and safeguard specialists. Peer learning program will be provided projects. Although Xining has prior experience with the through sending key PCO and PMO staff to visit some World Bank project cities, e.g., World Bank in the Xining Flood and Watershed Management Wuhan, Shenyang, Guangzhou, etc., and learn experience from PMOs in those cities, or Project, the PMO under the construction commission for the invite PMO staff from those cities to visit Xining and share their experience. Project is new and unfamiliar with Bank procurement, financial management and social and environmental (b) The project will provide capacity building to the municipal agencies, especially safeguard policies. This is balanced by a strong commitment focusing on planning and operation of a modern public transport system and modern exhibited by the PCO, who also conducted the coordination methods for traffic management and improving road safety. work in the above mentioned project. 36 (b) Delays in and poor quality of project implementation may occur because the low technical capacity of the local agencies directly involved in the project, especially the bus company Resp: Client and Due Status: In and traffic police. The technical capacity of the relevant Stage: Imp Bank Date :Recurring progress municipal agencies is relatively low, especially in terms of public transport development and traffic management. Governance Rating: Low Description: Risk Management: The lead implementation agency is the municipal construction The PLG and PCO will provide support to the PMO to ensure its overall governance over commission where the PMO is established. It may lack the respective municipal agencies. ownership, appropriate decision making and accountability in certain components such as public transport improvement and traffic management and road safety, thus hampering the overall achievement of the PDO. Strong leadership exhibited by city leaders and the PCO chaired by the Director of Xining Due Date : Status: In Resp: Client Stage: Imp DRC during the Project preparation phase is a strong Recurring progress indicator for continued leadership and support during preparation and implementation. Project Risks Design Rating: Moderate Description: Risk Management: (a) There is a likely difficulty with ‘soft’ elements of the (a) The city has been suggested to hire more experienced consultants with international project. According to Bank’s previous experience with the experience to prepare all project designs. The Bank will also mobilize international and urban transport projects in China, the cities are more domestic experts to assist the city with the design and implementation of project. enthusiastic in implementing the major physical investments than those “soft” elements such as improvements in (b) Substantial capacity building will be provided to help the city prepare and implement operations and services, enforcement, and capacity building. the project. The impact of the project, however, is largely dependent on the “soft” elements. (b) There is a small risk that the proposed integrated Resp: Client and Due Date : Status: In improvements on the project corridor may not achieve the Stage: Imp Bank Recurring progress expected high quality results, as this corridor improvement concept is quite new to the city. 37 Social & Environmental Rating: Moderate Description : Risk Management: The project will involve a significant program of civil works The Bank social and environmental safeguard specialists will ensure that the required including road construction and public transport facility safeguard documents are specific and comprehensive yet practical and achievable. construction, which may entail negative social and Sufficient training and adequate resources will be allocated for implementation of the environmental impacts. EMP/RAP and monitoring. Environmental: If the EMP is not properly followed during construction and operation, negative impacts on local environment will occur. Experience in previous urban transport projects highlights the issue of weak EMP implementation during construction, which may occur in this Project. Due Date : Status: In Resp: Client Stage: Imp Recurring progress Social: The project is likely to involve land acquisition and resettlement, If the RAP is not properly followed during project implementation, negative impact on local residents livelihood will occur. Program & Donor Rating: Low Description : Risk Management : The project is free standing. It is neither a part of a larger n/a program nor does it involve other donors. Resp: n/a Stage: n/a Due Date : n/h Status: n/a Delivery Monitoring & Sustainability Rating: Moderate Risk Management: Description: (a) There is risk that the quality of “soft” elements of the (a) Technical assistance and capacity building will help develop capacity of bus project may be low. Although the investment of these companies, traffic police, as well as PMO in implementing non-infrastructure project activities may be small compared to the infrastructure component. investment, they are vital to the achievement of the PDO. Particularly, the quality of public transport and traffic (b) The Bank’s team will carry out more intensive supervision during project management components may be poor, as the bus company implementation and continue dialogues with the city’s decision makers. and the traffic police have low capacity in implementation of investment projects. (b) Sustainability of the Project may be hampered in the near Due Date : Status: In future by change in the city’s priority from “people” to Resp: Bank Stage: Imp Recurring progress “vehicles” as more officials and city planners go to work by car rather than by bus or by foot. 38 Overall Risk Implementation Risk Rating: Moderate Description: The major implementation risks are related to (i) The PMO is new to Bank projects and unfamiliar with Bank’s fiduciary and safeguards policies; (ii) Urban transport projects require close collaboration among various municipal agencies, who, in Xining’s case, have little experience in working together with each other. (iii) “Soft” elements of the project such as integrated corridor management, TOD and travel demand management remain new concepts to the PMO and the PMO may lack the capacity to implement them with high quality. 39 Annex 5: Implementation Support Plan CHINA: Qinghai Xining Urban Transport Project Strategy and Approach for Implementation Support 1. The strategy for implementation support plan has been developed based on the risk assessment through the ORAF process. The following risk categories have been rated as “Moderate” or “Substantial”: (i) stakeholder; (ii) sector; (iii) capacity; (iv) design; (v) social and environmental. 2. Stakeholder. The proposed strategy is to provide all the necessary technical support to the XMG agencies in charge of preparing and implementing the project through the strategic deployment of consultants as well as the Bank’s Team supervision. In addition, periodical capacity building activities will be conducted through project preparation and implementation. With regards to ensuring local cooperation, a public communication and participation strategy will be devised and carefully implemented. 3. Sector. As a complement to the technical support and capacity building provided through preparation and implementation, sector risk will be mitigated by the formation of a PLG tasked with supervising project development and ensuring efficient coordination among the different XMG agencies involved in the project. The PLG will be chaired by the Mayor of Xining and include senior officials from relevant municipal agencies. 4. Capacity. The project will provide a comprehensive capacity building program, including: (i) training activities to the PMO by World Bank technical, procurement, financial management, and safeguard specialists; (ii) a peer learning program, sending key PCO and PMO staff to visit other World Bank project cities (e.g., Wuhan, Shenyang, Guangzhou, etc.) to learn from those PMO and their experiences; and (iii) capacity building activities to the municipal agencies, especially focusing on planning and operation of a modern public transport system and modern methods for traffic management and improving road safety. 5. Design. To ensure high quality in project design the Bank will mobilize international and domestic experts to assist the city in its preparation. In addition, periodical capacity building activities will be conducted through project preparation to ensure that key staff in the XMG understand all elements of project design, so that they in turn can guarantee that they are well adapted to the specificities of the local context. 6. Social and Environmental. Social and environmental risks will be mitigated through the development of EIA/EMP and RAP (and if necessary RPF), devised by qualified and experienced consultants. The Bank social and environmental safeguard specialists will ensure that the required safeguard documents are specific and comprehensive yet practical and achievable. Complementary, the Team will make sure that sufficient training on safeguards issues are conducted, and that adequate resources will be allocated for implementation of the EMP/RAP and monitoring. 7. Delivery Monitoring and Sustainability. The Bank will closely monitor the implementation of the project components to ensure the quality of delivery. In addition, the 40 capacity building activities and technical assistance offered to the bus companies, traffic police, and PMO will be planned to facilitate quality of delivery as well as the project’s long term sustainability. Implementation Support Plan Primary Focus of Implementation Support Time Focus Skills Needed Resource Estimate Partner Role First twelve • TOR preparation • Technical (public 8 staff, two trips months • Project design transport planning per staff per year • Procurement and operations, • Safeguards TOD, NMT, ITS) • Safeguards • Financial management • Procurement 12-48 months • Procurement • Technical (public 6 staff, two trips • Project transport planning per staff per year implementation public transport • Monitoring and operations, TOD supervision and NMT, ITS) • Safeguards • Financial management • Procurement Skills Mix Required Skills Needed Number of Staff Weeks Number of Trips Comments Public transport 1 staff members: 9 weeks 4 planning and operations TOD and NMT 1 staff member: 4 weeks 4 ITS 1 staff member: 5 weeks 4 Safeguards 1 staff member: 4 weeks 2x2 Financial Management 1 staff member: 4 weeks 2 Procurement 1 staff member: 4 weeks 2 8. Location of Staff Expertise. Team leadership, safeguards, financial management, and procurement contributions will be provided by the Bank’s country office-based staff. Additional technical expertise will be provided by Bank Headquarter-based staff. 41 Annex 6: Financial Assessment CHINA: Qinghai Xining Urban Transport Project A. Objective and Approach 1. A rapid financial assessment was conducted during preparation of the proposed Qinghai Xining Urban Transport Project. The purpose of the assessment is to describe the financial requirements for this proposed World Bank financed project and to confirm that the Xining Municipality which will utilize the entire World Bank loan and is responsible for repaying all the principals and interests of the loan has sufficient financial resources to afford the investments of the Project. Specifically, the city should have sufficient resources to: 1) contribute required counterpart funds; 2) repay the amount loan borrowed from the Bank; and 3) maintain and operate the assets created under the Project. 2. In the assessment, general socioeconomic development of Xining Municipality, including its economy, fiscal status and urban infrastructure development, is reviewed and analyzed; the government debt level and its debt service ability is assessed; then, the project fund requirement and availability is estimated; at last, general assessment and conclusion on the financial issues of the Project is addressed. 3. Similar to other Chinese cities, the financial planning for urban infrastructure investment in Xining currently is based on a fairly aggressive strategy with possible long-term debt implications and an unknown risk associated with contingent liabilities of off-balance sheet state- owned investment companies; besides, the Xining's financing structure relies to a large degree on the special transfers from the upper level of government and proceeds of urban land leases. As is well understood, a more stable long-term pattern of public finance will need to be developed in the coming years. A potential reform agenda would include introduction of more stable tax structures with incentives to consume land efficiently, a reduction of dependence on one-time taxes and sources, access to markets for long-term low-cost financing and addressing differential property rights for urban and rural residents. These are bigger than one single infrastructure project and are being addressed as part of the World Bank’s broader policy and analytical engagement with China. Ongoing activities include China: Efficient, Inclusive and Sustainable Urbanization Study and the study for China: Municipal Financing and Debt Management, etc. B. Socioeconomic Development of Xining Municipality 4. As discussed in Section I, Xining Municipality has experienced rapid socioeconomic development in recent years. The GDP in Xining Municipality has increased from RMB 34.31 billion in 2007 to RMB 85.11 billion in 2012 with an average annual growth rate of 19.9%. In Xining’s 12th FYP for Economic and Social Development, GDP is expected to grow at an average rate of 14% per annum during 2011 to 2015. Year 2011 registered a much higher annual growth rate of 22.7% than the 12th FYP while GDP growth in Year 2012 slowed down to 10.4% which is still higher than national average (7.5%). The table below lists the main indicators of socioeconomic development of Xining Municipality in the past six years as well as general plan for the period of 2011 to 2015. 42 Actual 12th Unit 2007 2008 2009 2010 2011 2012 FYP Population million 2.15 2.18 2.20 2.21 2.23 2.25 Urban population million 1.29 1.33 1.35 1.42 1.46 1.52 1.54 Rural population million 0.86 0.85 0.85 0.81 0.77 0.73 GDP RMB bn 34.31 44.22 50.11 62.83 77.07 85.11 GDP growth rate 28.9% 13.3% 25.4% 22.7% 10.4% 14% GDP per capita RMB 16,029 19,494 22,865 28,428 34,743 38,034 Urban disposable income RMB 10,636 11,929 12,911 14,085 15,842 17,634 Urban disposable income growth rate 12.2% 8.2% 9.1% 12.5% 11.3% 10% Source: National Statistics Books. C. Government Fiscal Status 5. Along with rapid economic development in Xining Municipality, the government fiscal revenue also increased sharply. Local fiscal revenue increased from RMB 2.292 billion in 2007 to RMB 9.272 billion in 2012, about 4 times higher than 2007. General budgetary revenue increased from RMB 1.841 billion in 2007 to RMB 5.477 billion in 2012 with an average annual growth rate of 24.4%. In Xining’s 12th FYP, it is expected that the average growth rate of general budgetary revenue from 2011 to 2015 will be 17% per annum. However, the actual growth rate is 31.1%in 2011and 21% in 2012, much higher than the projection. Fund revenue (mainly from government issued infrastructure bonds and land transfer) accounted for about25% of total local fiscal revenue during 2010 to 2012, which is relatively lower than many other similar size Chinese cities where fund revenue accounted for about 40-50% of total local fiscal revenue. As part of GoC’s Western Development Strategy, Xining also received financial transfers from the national government and subsidies (through special programs) from the provincial government in order to meet the needs of infrastructure development and poverty alleviation. 6. Local fiscal expenditure has expanded significantly from RMB 4.505 billion in 2007 to RMB 18.532 billion in 2012. The gap between the local fiscal revenue and the local fiscal expenditure has been covered by the financial transfers and subsidies from the national and provincial governments. Among all expenditures, urban infrastructure expenditure (covering construction and maintenance) has increased from 746.30 million in 2007 to 1.9 billion in 2012, but the share of urban infrastructure expenditure in the total local expenditure slightly decreased from 16.6% in 2007 to 13.2% in 2011. The table below lists the statistics of government fiscal revenue and expenditure of Xining Municipality for the period of 2007 to 2012. 43 Actual 12th Unit 2007 2008 2009 2010 2011 2012 FYP Total fiscal revenue RMB bn 4.363 5.642 6.862 9.922 12.428 14.132 Annual growth rate 29.3% 21.6% 44.6% 25.% 13.7% Local fiscal revenue RMB bn 2.292 2.946 4.352 6.647 8.683 9.272 Annual growth rate 28.5% 47.7% 52.7% 30.6% 6.8% General budget revenue RMB bn 1.841 2.345 2.815 3.452 4.525 5.477 Annual growth rate 27.4% 20.0% 22.6% 31.1% 21.0% 17.0% Tax revenue RMB bn 1.538 2.034 2.505 3.073 4.022 4.814 Non-tax revenue RMB bn 0.303 0.311 0.310 0.379 0.503 0.663 Fund revenue RMB bn 0.451 0.601 1.537 3.195 4.158 3.795 Land transfer RMB bn 0.407 0.506 1.467 2.937 3.790 3.380 Local disposable revenue RMB bn 4.505 6.729 8.512 10.870 15.004 18.532 Local fiscal expenditure RMB bn 4.505 6.725 8.512 10.870 15.004 18.532 Annual growth rate 49.3% 26.6% 27.7% 38.0% 23.5% 18.0% Infrastructure construction RMB mn 746.30 778.81 820.57 1205.71 1974.02 N/A & maintenance Annual growth rate Fixed asset RMB mn 497.96 526.14 562.84 850.29 1375.32 N/A Maintenance RMB mn 194.86 198.67 201.73 293.42 583.70 N/A Other RMB mn 53.48 54.00 56.00 62.00 15.00 N/A Source: National Statistics Books, and Xining Finance Bureau Note: * Disposable revenue includes budgeted ordinary and fund revenue, plus transfers/subsidies from upper level governments, last year left-over, state bond, etc. 7. As Xining has received a large amount of financial transfers and subsidies from the upper level governments, the government’s debt level (accumulated government debt balance against total disposable revenue) has been kept lower than 0.3:1, which is considered very low compared to the similar size of Chinese cities. 4In the next few years (2010-2015), the municipal government will continue to utilize local revenue and funds from the upper governments as the major sources of funding to support urban infrastructure development. Although the 12th FYP proposes to increase the utilization of government debt (national bonds, domestic bank loan and foreign loan) for urban infrastructure development in the next few years, the plan also requests the government control new government debt and keep the debt level to a reasonable level. D. Project Fund Requirement and Availability 8. The total construction cost of the project (excluding interest during construction and World Bank front-end fee) is estimated to be RMB 1489.08 million. Project funds will come from: (i) an IBRD loan of US$ 120 million; and (ii) local disposable revenue of XMG. According to the feasibility study, year-by-year investment is planned to be 10%, 25%, 35%, 20% and 10% of the total construction cost from 2014 to 2018, respectively. 4 The government debt level was reportedly over 1:1in many Chinese cities in recent years. 44 9. Based on the above assumption, the project fund requirement for each year is estimated and broken down by different sources. Such fund requirements were compared with the expected local disposable revenue (projected to grow at 17% in the 12FYP) and total infrastructure investment of Xining Municipality during the five years respectively. A general observation of the analysis is that the total requirement for government fund would be relatively small, only about 0.5% of the government disposable revenue. The total project investment would only account for 2.2% of total infrastructure investment in five-year time. At the peak year in 2016, the project investment would be 3.9% of total infrastructure investment of the year. Unit Total 2014 2015 2016 2017 2018 Project investment RMB mn 1489.08 148.91 372.27 521.18 297.82 148.91 IBRD loan RMB mn 730.13 71.33 183.00 256.20 146.40 73.20 XMG expenditure RMB mn 758.96 77.58 189.27 264.98 151.42 75.71 Local disposable revenue RMB bn 159.2 24.08 27.46 31.3 35.68 40.68 Infrastructure investment RMB bn 67.02 9.55 11.18 13.08 15.3 17.9 Project expenditure/local 0.5% 0.3% 0.7% 0.8% 0.4% 0.2% disposable revenue Total project investment/ XMG 2.2% 1.5% 3.3% 3.9% 1.9% 0.8% infrastructure investment 10. Government expenditure for maintaining and operating the project assets as well as repaying the loan during the project cycle of 25 years after project completion is also analyzed. The feasibility study assumes regular maintenance of the road assets costs RMB 500,000 per km in the first year, and increases by 6% per year; major maintenance takes place every 10 years at a cost of RMB 5 million per km. It also assumes management of the roads costs RMB 13 million in the first year and increase by 6% per year. The general maintenance and operation cost is compared with the expected urban construction and maintenance fund of each year; the total government expenditure is compared with the expected disposable revenue of each year. In the peak year, maintenance and operation of the assets acquired under this project would account for 0.55% of urban construction and maintenance fund available for that year (Year 2028 when the first major maintenance takes place); total government expenditure for project asset maintenance and loan repayment would account for 0.15% of total disposable revenue of that year (Year 2019, first year after construction completion). 11. The Project includes purchasing of 145 new buses which are more comfort, cleaner and safer than the buses currently in operation in Xining. The investment in these new buses will be fully financed by counterpart funds (from the provincial government), but the operation and maintenance of these buses is fully responsible by Xining Bus Company, a 100% of government owned enterprise. As these buses are to replace the same amount of old buses currently in operation, and new buses require lower operation and maintenance costs than the existing old buses (according to the feasibility study), the project would not increase the operation and maintenance costs to the bus company. On the other side, as the project would significantly improve the quality of bus services and thus would increase the bus ridership, the Project is likely to increase the bus fare revenue of the bus company. As the result, the project would unlikely to increase the level of subsidy which the municipality has been providing to the bus company. In 2012, the total subsidies provided by the municipality to public transport is RMB 45 127.9 million, which accounted for 0.69% of total local expenditure, which is lower than many other large size Chinese cities. 5 E. Assessment and Conclusion 12. According to the available data and the analysis above, general assessment and conclusion on the financial capability for supporting the Project are listed below: • The economic development of Xining Municipality would keep robust development and provide sufficient support to the Project in various respects. The GDP growth during the 12th FYP period (2011-2015) would likely to maintain a high level, at 14% per year. • The government fiscal revenue would likely keep high increase rate in near future, about 20-30% per year, which would provide adequate financial support for the Project fund requirement. The requirement for counterpart financing is relative small (0.2-0.8% of total government disposable revenue) and would unlikely bring in serious pressure to the government fiscal expenditure. • The infrastructure investments to be financed under the Project require relatively low operation and maintenance costs compared to other alternatives, and thus the Project would not create significant financial pressure to Xining Municipality in the future. In the peak year, maintenance and operation of the assets acquired under this project would account for 0.55% of urban construction and maintenance fund available for that year, and the total government expenditure for project asset maintenance and loan repayment would account for 0.15% of total disposable revenue of that year. • The government debt level is low in comparison with many other cities in China and no serious immediate risk could be seen. The repayment for the World Bank loan would be fairly affordable to the government. However, the government should pay enough attention to the level of financial dependency to the upper level governments, and start to explore other sources to raise funds for urban infrastructure development. 5 For example, the subsidy provided by Beijing Municipal Government to public transport is about RMB 15.7 billion in 2011, of which RMB 9.1 billion came from local general budget, accounted for 3.1% of total local expenditure in that year. Source: Report to the Beijing Municipal People’s Congress, Beijing Finance Bureau, January 12, 2012. 46