Document of The World Bank FOR OFFICIAL USE ONLY Report No: 28142 IMPLEMENTATION COMPLETION REPORT (SCL-40990) ON A LOAN IN THE AMOUNT OF US$300.0 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SECOND XINJIANG HIGHWAY PROJECT June 25, 2004 Transport Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2003) Currency Unit = yuan (Y) Y1.00 = US$ 0.1208 US$ = Y8.2769 FISCAL YEAR January 1 -December 31 ABBREVIATIONS AND ACRONYMS 9FYP - 9th Five-Year Plan CAS - Country Assistance Strategy EAP - Environmental Action Plan EIRR - Economic Internal Rate of Return FIRR - Financial Internal Rate of Return HMP - Highway Maintenance Program ICR - Implementation Completion Report MOC - Ministry of Communications NPV - Net Present Value NTHS - National Trunk Highway System PEO - Project Execution Office ROW - Right-Of-Way QAG - Quality Assurance Group UKH - Urumqi-Kuitun Highway VOC - Vehicle Operating Costs XCD - Xinjiang Communications Department XHAB - Xinjiang Highway Administration Bureau XUAR - Xinjiang Uygur Autonomous Region Vice President: Jemal-ud-din Kassum, EAPVP Country Director Yukon Huang, EACCF Sector Director Jitendra N. Bajpai, EASTR Task Team Leader/Task Manager: Jacques M. Tollié, EASTR CHINA CN-Second Xinjiang Highway Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 11 8. Lessons Learned 13 9. Partner Comments 14 10. Additional Information 14 Annex 1. Key Performance Indicators/Log Frame Matrix 15 Annex 2. Project Costs and Financing 16 Annex 3. Economic Costs and Benefits 18 Annex 4. Bank Inputs 33 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 34 Annex 6. Ratings of Bank and Borrower Performance 35 Annex 7. List of Supporting Documents 36 MAP(S) 1. IBRD No. 33332 2. IBRD No. 27622 3. IBRD No. 27623R Project ID: P003643 Project Name: CN-Second Xinjiang Highway Project Team Leader: Jacques M. Tollie TL Unit: EASTR ICR Type: Core ICR Report Date: June 17, 2004 1. Project Data Name: CN-Second Xinjiang Highway Project L/C/TF Number: SCL-40990 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Roads and highways (98%); Mining and other extractive (1%); Vocational training (1%) Theme: Rural services and infrastructure (P); Municipal governance and institution building (P); Pollution management and environmental health (S); Regional integration (S) KEY DATES Original Revised/Actual PCD: 09/20/1995 Effective: 04/09/1997 04/09/1997 Appraisal: 03/29/1996 MTR: Approval: 10/10/1996 Closing: 12/31/2002 12/31/2003 Borrower/Implementing Agency: PRC/XINJIANG COMMUNICATIONS DEPT. Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Russell J. Cheetham Country Director: Yukon Huang Nicholas C. Hope Sector Director: Jitendra N. Bajpai Richard G. Scurfield Team Leader at ICR: Jacques M. Tollie Yasuhiro Kawabata ICR Primary Author: Jacques M. Tollie 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Project had the following objectives: (a) support development of road infrastructure to relieve congestion, and stimulate socio-economic development in the Urumqi-Kuitun Highway (UKH) corridor; (b) improve maintenance of the regional highway network; (c) promote development of institutional capacities of Xinjiang Communication Department (XCD), through training and other means; (d) increase highway safety; and (e) promote transport linkage with neighboring provinces and countries. These objectives were clear and reflected the current strategy of the Government of China designed to alleviate infrastructure bottlenecks by, inter alia, rapidly modernizing and expanding its highway system on a sustainable basis. The project would improve transport conditions in the Xinjiang Uygur Autonomous Region (XUAR), a remote province in Northwest China, and focus on the Urumqi-Kuitun segment of the National Trunk Highway System (NTHS). The project objectives were also in line with the Bank's Country Assistance Strategy (CAS) for China, presented to the Board on June 1, 1995, and the Progress Report discussed on March 26, 1996 which supported continued institutional development and sectoral reforms aimed at modernizing the highway system and its management. These objectives are still valid and are being pursued under the follow-on project. Furthermore, in line with the current CAS, the project by promoting long-distance and transit road traffic, supported the liberalization, facilitation and cost reduction of transport, key requirements for market-oriented reforms to succeed especially in as remote an area as Xinjiang. In this respect, the project was responsive to current priorities expressed in the Government's regional development policy for the Western Region. 3.2 Revised Objective: Project objectives remained the same throughout project implementation. 3.3 Original Components: The scope of the project components included: A. Construction of a 267.4 km Urumqi-Kuitun Highway (UKH) on new right-of-way (ROW) between Urumqi and Kuitun (Map, IBRD 27623), consisting of: (i) a 218.3 km 4-lane expressway between Urumqi and Kuitun; a 32.4 km bypass to the west of Urumqi, including an 18.5 km 2-lane Class 2 highway and a 13.9 km 4-lane Class 1 highway; and a 16.7 km 4-lane Class 1 highway linking UKH with the Turpan-Urumqi-Dahuangshan Highway (TUDH) built under the previous project; (ii) construction, rehabilitation and upgrading of 4 linking roads with a total length of 18.8 km; (iii) supply and installation of electrical, electronic and mechanical equipment for toll collection, telecommunication and lighting of bridges, interchanges and toll collection area; (iv) construction along UKH of management and maintenance buildings, parking and service areas; and (v) construction supervision of UKH including facilities and linking roads. B. Highway maintenance program to maintain and rehabilitate about 2,450 km of existing highway network during the 9FYP. - 2 - C. Institutional development consisting of strengthening relevant institutions affiliated with XCD through staff training and provision of equipment. D. A highway safety program consisting of identification and improvement of black spots, road signing and marking works, on-the-job training programs, and provision of specialized equipment. E. A strategic study of regional transport. 3.4 Revised Components: No major changes were made in the project components. However, the Loan Agreement was amended three times. The first time was in December 2000 to cancel US$60.00 million project cost savings from the loan. The second time was in August 2002 to extend the loan closing date from December 31, 2002 to December 2003 to enable the borrower to complete two important components dealing with (i) training and (ii) highway safety. Finally, the loan was amended in February 2003 to reallocate the proceeds between loan categories. There was also a change in the scope of the highway maintenance component which did not require a Loan amendment. The initial Highway Maintenance Program was composed of superficial overlays (61%) and pavement strengthening (39%). However during implementation the road sections were found more deteriorated than foreseen and required heavier treatment, so the program had to be adjusted (19% overlays and 81% strengthening) with reduced road lengths and higher costs. Together with the additional works funded domestically, the highway maintenance component was in the end over-achieved. 3.5 Quality at Entry: The project was assessed by the Bank Quality Assurance Group (QAG) as part of the quality of supervision assessment. The QAG, as part of its evaluation, retrospectively rated the project design as sound and ready for implementation at project approval. This Implementation Completion Report (ICR) assesses the quality at entry as satisfactory overall. The assessment is based on: (i) the consistency of project objectives with China's long-term priorities for the sector and region; (ii) attention given during preparation to lessons of experience, including past performance of the implementing agencies; and (iii) importance given to monitoring and evaluation in the design, through specific description of monitoring indicators, base line values, interim and target benchmarks. This was one of the first projects to internalize performance indicators (for earlier projects these indicators had to be retrofitted). 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: Overview. Despite some delays in implementation, the project objectives were substantially met, and the outcome rating is assessed as satisfactory. In terms of the overall goal of the Government, each of the five objectives may be equally weighted although, given the focus on opening the expressway as soon as possible, relieving congestion may be weighted slightly more. Overall, vehicle operating costs and travel time have declined over a significant part of the trunk network, and regional accessibility has improved. Moreover, a Staff Training program, a Road Safety program, a Highway Maintenance and Rehabilitation program, and a Strategic Study of Regional Transport have been satisfactorily completed with positive impacts in terms of number of staff using their new skills, institutions being strengthened and policies being improved in the highway sector, paving the way for future reforms. The improved road infrastructure has stimulated socio-economic development not only in the UKH corridor, but throughout the province, and - 3 - contributed to the Government policy of development of the Western Region. A. Support development of road infrastructure to relieve congestion, and stimulate socio-economic development in the UKH corridor This objective was overall satisfactorily achieved. The Urumqi-Kuitun Highway was opened to traffic in November 2000, about one year ahead of the contractual completion time. It provided a much improved connection with the arterial network east of Urumqi on the one side, and with the main economic development areas on the west on the other side. It was operated as a toll highway since then, and traffic has built up gradually. Traffic congestion along the corridor served by UKH and the existing National Highway (G312) has declined as expected, although traffic volumes on G312 have remained high, as shown in Annex 1, Part 1(a). There are two reasons for the latter: (i) the diversion ratio -measuring the transfer of traffic from G312 to UKH was too optimistic (in the first year of operation, the actual ratio was about one third of the 80% expected for that year at appraisal), and (ii) the condition was so bad on G312 that XCD decided in 2001 to rehabilitate it, thereby increasing substantially its capacity. If one relates the traffic volumes mentioned in Annex 1 to the capacity of the respective highway sections, then one realizes that congestion on G312 measured by the volume/capacity ratio averages 60%, which is about what was expected at appraisal. From a survey conducted during the October 2003 mission, it was found that most stakeholders appreciated the positive outcomes of the project in terms of increased economic opportunities and enhanced accessibility stemming from the construction of UKH and the four linking roads. Updated data on the economic development in the UKH corridor were also available in the feasibility study of the Kuitun-Sailimu Highway (a continuation of UKH towards the Kazakhstan border, financed under the follow-on project), showing a significant increase in the gross output value of agricultural and industrial activities in the corridor. B. Improve maintenance of the regional highway network This objective has been achieved with a highly satisfactory rating. The condition of the paved road network in the Region was strengthened and stabilized to a good maintainable standard. Surface rideability improved from a roughness index of 6.7 mm/m in 1997 to about 5 mm/m at the end of the project, exceeding expectations. Further, the component contributed to the institutional strengthening of XCD in an important area, through introduction of a computerized pavement management tool and through the practical training in procurement of contracts on a competitive basis as well as in contract management. The institutional strengthening in combination with practical implementation proved especially effective, as it provided hands-on experience in day to day management of a major road improvement effort. C. Promote development of institutional capacities of XCD, through training and other means This objective has been achieved satisfactorily. The capacity of the transport sector agencies selected under this project (these include training and research organizations already covered in the previous project, as well as organizations to be strengthened for the first time under this project) has improved. Through overseas and domestic trainings and study tours, and active participation in project implementation, the staff received exposure to new management, economic and technical approaches. Also the acquired equipment was put to good use, and contributed to the increased organizational efficiency. D. Increase highway safety The road safety objective was satisfactorily achieved, albeit to a lesser extent then expected. The main sub-components: blackspot identification and improvement, development of methods for measuring the economic losses due to traffic accidents, development of safety audit procedures, were designed to address the engineering dimension under the control of XCD, and as such were successfully completed. They contributed to enrich the experience of staff, bring agencies closer together, improve safety-engineering - 4 - practices, create access to high-quality advice, and raise community awareness. However the statistics on traffic accidents were only marginally improved . An independent Evaluation of the Highway Safety Component of this project was conducted by mid-term to assess the user perception of the improvements (drivers, pedestrians and traffic police). It was found that (i) the main causes of accidents included over-speeding, violation of traffic rules, and use of non road-worthy vehicles, and (ii) that the program needed to focus not only on the physical interventions but also on changes in the attitudes of drivers and pedestrians. Since safety enforcement and education were under the control of the Traffic Police, XCD made efforts towards a more effective cooperation with the Traffic Police. The information from the survey was used to design a more holistic approach for the safety component under the follow-on project. E. Promote transport linkage with neighboring provinces and countries The Regional Transport Study has had a positive impact on transport planning in the Region. The study identified the main gaps in transport linkages with neighboring provinces and countries and made recommendations for changes to the transport policy within the Region. Several recommendations of the study have been implemented, in particular those dealing with the expansion of the highway investment program. The study partly served to justify the upgrading of the main link with Kazakhstan, eventually financed under the follow-on Project. Recommendations on institutional reforms led to a more effective dialogue between XCD and other departments involved in trade facilitation, which is supported under the follow-on project. 4.2 Outputs by components: A. Construction of Urumqi-Kuitun Highway (US$376.9 million, SAR; US$379.1 million, ICR) Works on the Urumqi - Kuitun Highway were substantially completed in November 2000, allowing for an early opening to traffic. However activities continued till September 2002 to complete all ancillary works, in particular drainage and slope protection along the mainline, and landscaping in the 13 interchange areas. Also repair works were needed in some sections where poor geological conditions led to serious settlements. A total of 266 km of highway (with technical standards adapted to the expected level of traffic: Expressway 218 km, Class I 30 km, Class II 18 km), plus the 18.5 km of linking roads were executed under 14 contracts. UKH traffic engineering. The works included the supply and installation of electrical, electronic and mechanical equipment for the toll collection, telecommunications and traffic monitoring, and lighting of bridges, interchanges and toll collections areas. These were satisfactorily completed to a good standard of installation. Administrative and service facilities along the line were completed at the opening of UKH, and all the works were accepted by the Quality Monitoring Station of XCD. Construction supervision (US$11.8 million, SAR; US$10.3 million, ICR). A total of 227 experts from one foreign and 11 domestic consulting firms participated in the supervision of the UKH and linking roads. Under a senior resident supervision engineer's office, three joint supervision teams were responsible for administering the contract conditions and specifications on a daily basis and reporting to the resident engineer. The foreign consultancy services also provided on the job training to the project staff besides supervision. B. Highway maintenance program (US$70.40 million, SAR; US$85.3 million, ICR) Under the four-year Highway Maintenance Program (HMP), a total of 310 km of roads was resurfaced and 1318 km strengthened at a total cost Y 707. 4 million. Total cost represents an increased effort of about 22 - 5 - percent compared to the agreed amount of Y 577.3 million for HMP. The main aspects of this successful implementation are as follows: l Xinjiang Highway Administration Bureau (XHAB, one of the agencies strengthened under the previous project) was the executing agency for the highway maintenance and rehabilitation component and responsible for the physical implementation of the HMP. The implementation was fully satisfactory. A total of 55 contracts had been completed as planned and within the time allocated, and generally to a very satisfactory quality. Most of the contractors commissioned for work under the HMP were enterprises established from previous highway maintenance general divisions. l Not only did the financial scope of HMP expand considerably, also the standard of construction changed during implementation. The strategy initially adopted was to overlay 1494 km (61%), and strengthen 957 km (39%). However the sections programmed for overlay had deteriorated to a point where this strategy was no longer feasible. The Bank and XCD agreed therefore in August 1997 to abandon the rest of the planned overlay sections in the HMP, and to carry out the rest of the program with strengthening only. The average cost of resurfacing (1997) was Y 160,279 per kilometer. The average cost per kilometer for strengthening increased from Y 433,941 in 1998, to Y 499,938 in 1999 and Y 717,187 in year 2000. l In addition to the HMP, the XHAB also implemented other rehabilitation works during the same period. About 261 km of roads had been resurfaced and 745.7 km strengthened at a cost of Y 438.5 million outside HMP. Including HMP a total of 563 km of roads in the Region had been resurfaced and 2064 km strengthened during the 4-year period from 1997 to 2000, at a total cost of Y 1145.5 million. Of this the Bank financed US$ 36.4 million, or about 26.5 percent, and XCD financed the rest. l The HMP contributed to stabilize the paved road network maintained by XHAB, and resulted in considerably improved road conditions on the most trafficked routes: the percentage of national and provincial roads falling under the definition of "fair roads" (i.e. XCD's categories of good and fair) increased during the period from 46.3 % in 1997 to 65% in 2000 and 80% in 2003. C. Institutional strengthening and staff training The training program (US$1.30 million, SAR; US$1.05 million, ICR) consisted of domestic training, training abroad and study tours covering 21 topics such as highway engineering, transport economics, highway maintenance management, traffic engineering, etc. The trainees were selected from ten agencies under XCD or affiliated to it, as identified during project preparation. The program was implemented substantially as planned, covering 955 persons (94% of plan) with 1,290 person months (90%) at a total cost of US$1.050 million (81%). All the modules of domestic training were implemented, covering 846 persons with 1019 person months, at a cost of US$220,000. Foreign training (training abroad and study tours) covered 109 persons for 272 person months, at a cost of US$830,000. There were some delays in the overseas training, mostly due to the lengthy visa application processes, leading in some cases to a modification of the program and in the end to a postponement of the Loan closing date. However, some modules had to be transferred for implementation under the follow-on project. Also the organizational restructuring of XCD occurring in the later part of the project led to the cancellation of some institutional strengthening activities. Both the delays and the reorganization explain the undercoverage of the program. Institutional Strengthening was also carried out through technical assistance activities under all other components: construction supervision, highway safety, maintenance management, transport study. Provision of equipment (US$11.30 million, SAR; US$25.25 million, ICR) Equipment was provided for (i) laboratory testing and construction control; (ii) operation and maintenance of UKH and of the regional highway network; (iii) institutional strengthening of XCD and related institutions; and (iv) the highway safety component. The amount actually procured under the project - 6 - exceeded the planned amount on two counts: l After the extensive damages to the local economy caused by the very harsh winter in 2000/01, it was agreed, upon XCD's request, to finance additional winter maintenance equipment (snow ploughs and blowers). l Some equipment were financed entirely with domestic funds, mostly for institutional strengthening and for Traffic Police activities under the highway safety program. D. Highway safety program (US$3.50 million, SAR; US$3.95 million, ICR) The Improvement of Traffic Signs and Markings Program consisted of safety works on 61 Km of Class II provincial highways. Of this work, 33 Km section of Highway S203 (Dahuangshan-Jimusar) was completed in 1999. The work on the remaining 28 Km section of Highway G218 was completed in 2000. The program was expanded in 2001 to improve safety on the UKH and some linking roads using the experience gained after one year of operation, consisting of additional signs, markings, barrier fences, safety retaining walls, pedestrian fly-over, traffic lights and minor changes to auxiliary roads. Regarding the Black Spot Improvement Program, 24 locations were included in the program, 12 spots to be improved and 12 spots to be retained as control spots for comparative purposes. Of the 12 spots to be improved, improvement work at 8 black spots was satisfactorily completed in 1999. Of the 4 remaining spots to be improved, three were transferred to the Western Development Program to be financed entirely from XCD funds. The remaining one black spot, which was in Urumqi, was transferred to the Urumqi Urban Transport Project being financed by the Bank and the work was satisfactorily completed in 2002. A good quality report on Safety Audit Procedures was completed. Ninety one black spots locations were identified on the six major highways of Xinjiang. The recommendations of this study was reviewed and led to a proposal for black spots improvements that was considered under the follow-on project. With regard to the economic analysis of highway traffic accidents, a report on a " Method for Measuring of Economic Losses due to Traffic Accidents" was completed and estimates of the economic losses due to traffic accidents were undertaken using the methodology developed. The findings of economic loses due to traffic accidents have been used for formulating future traffic safety policies and plans, particularly for setting targets for enhancing highway safety in Xinjiang. The independent Evaluation of the Highway Safety Component of this project was completed in 2001 by experts from Tongji University. The output was submitted to the Leading Group on Traffic Safety for its further action, and was used in the preparation of the follow-on project. E. Regional Transport Study (US$0.3 million, SAR; US$0.3 million, ICR). The strategic study of transport within Xinjiang and between Xinjiang and the neighboring provinces and countries was satisfactorily completed. The study covered a review and evaluation of the integrated transport system of Xinjiang, forecast of demand for passenger and freight traffic in the Region and conditions for the establishment of an intermodal transport system on the basis of the Region's basic transport network and needs. The principal outputs of the study were recommendations for changes to the transport policy within the Region, and indications for medium-and long-term transport investment program. The program was part of the list of provincial-based studies of transport sector issues, to be supported by Bank highway projects, as agreed between the Ministry of Communications and the Bank. 4.3 Net Present Value/Economic rate of return: The economic evaluation is comprised of two main components: the Urumqi- Kuitun Highway (UKH, including the four linking roads) and the Highway Maintenance Program (HMP, 33 subcomponents and - 7 - carried out in four phases). The economic evaluation covers all subcomponents as well as the entire project. The detailed analysis is in Annex 3. The economic internal rate of return (EIRR) of the UKH is estimated at 23.8 percent compared to the SAR estimate of 20.6 percent, and the net present value (NPV), at a discount rate of 12 percent, is estimated at RMB 4,340.8 million. The recalculated EIRR and NPV are higher than anticipated at appraisal mainly because of (i) substantial project cost savings, (ii) the total highway corridor traffic in 2003 being close to or exceeding the SAR's estimates, and (iii) the shortened completion time. The results are summarized in the following table. EIRR (in %) and NPV (12%, RMB million) OF THE UKH The SAR The ICR UKH The link roads Total UKH The link roads Total EIRR 20.5 26.4 20.6 23.9 16.9 23.8 NPV 484.34 15.87 N/A 4,317.9 32.2 4,340.8 The EIRR for the HMP is estimated at 79.2 percent compared to the SAR estimate of 92.0 percent, and the NPV, at a discount rate of 12 percent, is estimated to be Y 2,120.6 million. The EIRR stated in the SAR covered only phase 1 of the program, while the EIRR for the ICR covers all four phases. The results are summarized in the following table. EIRR AND NPV OF THE HMP EIRR (in %) NPV (12%, RMB million) The SAR The ICR The SAR The ICR Phase 1 92 124.5 -- 1,156.1 Phase 2 -- 63.2 -- 2,312.1 Phase 3 -- 36.7 -- 1,126.6 Phase 4 -- 26.3 -- 1,086.0 Total -- 79.2 -- 2,120.6 The EIRR for the entire project (the UKH and HMP) is estimated at 29.0 percent. There was no EIRR for the entire project in the SAR. The NPV, at a discount rate of 12 percent, is RMB 6,461.4 million. The following table summarizes the results. EIRR (in %) and NPV (12%, RMB million) Summary The SAR The ICR EIRR NPV EIRR NPV Total UKH 20.6 -- 23.8 4,340.8 Total HMP 92.0 -- 79.2 2,120.6 Total Project -- -- 29.0 6,461.4 4.4 Financial rate of return: The financial evaluation is comprised of three parts: · assessing the revenue earning entity (the UKH and the four link roads, tolled); · assessing the non-revenue earning entity (HMP, non-tolled roads); and · assessing the financial capacity of XCD to sustain highway activities. For the revenue earning entity, the results of the financial evaluation show that the FIRR for the UKH and the four link roads, which constitutes about 85% of the total project investment, is expected to be -0.9 percent. The NPV, at a 4.6 percent discount rate, would be RMB -1,834.8 million (US$221.7 million - 8 - equivalent). This reflects XCD's low toll rate policy based on the need to generate enough cash for repayment of debt only (financial contributions from the central or provincial governments are not recovered), as well as for operation and maintenance expenditures. This maximizes the economic return at the expenses of the financial return. For the non revenue earning entities (i.e., HMP -- about 15% of the total project investment)- the financial evaluation, given the nature of financial risks on those investments, focuses on the availability of sufficient counterpart funds and the operating expenses. All the indicators show that the financial risks are modest. The detailed financial analysis is in Annex 3. There was no financial evaluation in the SAR. 4.5 Institutional development impact: The institutional development impact is rated as substantial. There was significant transfer of technology and knowledge throughout the implementation of all components. Sector policies were also improved and recommendations from the transport or traffic safety studies are being applied under the follow-on project. These achievements strengthened XCD's capacity to manage the provincial highway network efficiently and improve the sustainability of provincial highway sector financing. This in turn has promoted the efficient use of public funds and enhanced the contribution of the highway sector to economic development and its responsiveness to social needs. This also prepared XCD for a more ambitious Institutional Development and Reform Component under the follow-on project, that built on achievements under the previous two projects. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Low inflation. The loan amount was amended in December 2000 to accommodate a request for cancellation of US$60 million. The main reasons for such savings were twofold: (i) a large amount had been reserved for price contingencies (about US$110 million) because at appraisal in 1996, local inflation was very high; and (ii) bid prices for the main component (Urumqi-Kuitun Highway) were lower than expected. 5.2 Factors generally subject to government control: Orderly completion of civil works. The pressure to shorten the completion date for the construction of UKH was dictated by the desire to open to traffic this important gap in the corridor from Horgas at the border with Kazakhstan to Lianyungang, a coastal port between Beijing and Shanghai. The pressure came also from an increasing congestion on the existing National Highway G312. This may have led the implementing agency to overlook the risk of further settlements in the poor soil areas, and to minimize the consolidation time required for full stabilization. The risk materialized soon after opening, with the very harsh winter in 2000/01 causing extensive thawing in spring/summer, and then a very wet rainy season causing prolonged floodings in the fall of 2001. Damages were important in some settled sections and repair works were only completed in late 2003. 5.3 Factors generally subject to implementing agency control: Assumptions for traffic forecast studies. The feasibility study made overly optimistic assumptions about traffic growth on the new highway, in particular regarding diversion ratios from the existing G312. It was assumed that in view of the congestion prevailing on G312, about 80% of the traffic would be diverted to UKH at the opening. This was grossly incorrect, overlooking the following factors which led to a much lower diversion ratio: (i) the need to rehabilitate G312 when congestion became untenable, (ii) the decision to toll the rehabilitated G312, and (iii) the low affordability in Xinjiang leading to a high sensitivity to the - 9 - toll levels. XCD is now adopting a more gradual diversion assumption, and is aware of the importance to monitor closely traffic volumes and toll rates in the corridor to keep a proper balance between UKH and G312. 5.4 Costs and financing: The estimated cost of the project at appraisal was US$658.1 million, comprising a total baseline cost of US$501.2 million and contingencies amounting to US$156.9 million or 31% of base cost. The actual project cost is US$532.34 million, representing contingencies equivalent to 6% of the base cost. As a result of much lower than expected inflation, a total of US$60 million was cancelled from the loan in 2000. The main reasons for the actual cost increases were the physical contingencies on: l the Highway Maintenance Component (US$85.28 million versus a base cost of US$70.40 million), and l the Equipment under the Institutional Strengthening Component (US$25.53 million versus a base cost of US$11.30 million). This reflected the importance attached to these objectives by the implementing agency. On the financing side, the Central Government increased the share of its grant to the province, as part of its Western Region Development policy. This benefitted the province by increasing its equity and reducing the debt portion that was to be recovered from tolls, thus enhancing the local affordability. 6. Sustainability 6.1 Rationale for sustainability rating: The project is likely to be sustainable on the following grounds: 1. The completion of UKH and associated linking roads has relieved congestion in the corridor and has improved the efficiency of the road transport in the province. The quality of the civil works completed is now satisfactory after the thorough repair works in the damaged sections. The economic re-evaluation has demonstrated the robustness of the economic return : the EIRR of 23.8% is higher than the appraisal estimate of 20.6%, and the probabilistic risk analysis performed in Annex 3 shows that (i) the EIRR for the most likely scenario is 24.1 percent and (ii) the range of EIRR between the worst-case and the best-case scenario of the analysis is 16.9% to 31.4%. 2. On the financial side, the analysis performed in Annex 3 indicates that the toll revenues will be able to provide sufficient funds to support the loan repayments and the operation and maintenance related to the investment. 3. The four-year highway maintenance program besides improving the condition of the road network provided transfer of technology, equipment and know-how for future highway maintenance operations. Here also the economic re-evaluation has demonstrated the robustness of the economic return: over the four-year program, the EIRR was estimated to be 79%, and if total benefits were to be reduced by 25%, the return would still be 56%. 4. The institutional development impact has been substantial, and further capacity strengthening is being pursued under the follow-on project. This contributes to enhance the sustainability of achievements under this project. 6.2 Transition arrangement to regular operations: The project was fully operational at closing. The UKH was opened to traffic in November 2000, and the period till closing in December 2003 was put to good use in improving the conditions for regular operation: l the tolling, telecommunications, and surveillance systems have been installed and are operating satisfactorily; l the traffic safety facilities have been completed; and l the sections where settlements occurred have been repaired. - 10 - The operation and maintenance of the UKH has been generally satisfactory except for the slow diversion of traffic from G312. There is good understanding now in XCD on the importance of monitoring traffic in the whole corridor to keep a proper balance between the two parallel highways, and on the need for tolls to be adjusted if and when required to maintain the allocation of traffic at an economic optimum. Adequate maintenance equipment has been purchased for dealing with the main highway network. Monitoring measurement for road safety, environmental impacts and quality of the civil works have been instituted. These arrangements augur well for a sustainable operation of the highway network in Xinjiang. 7. Bank and Borrower Performance Bank 7.1 Lending: Identification of the project was satisfactory. The project team focused on relevance, making sure that the project objectives were in line with the Bank's Country Assistance Strategy and met the Government's priorities. Bank assistance to project preparation was highly satisfactory. The Bank assigned a highly qualified team with the appropriate skill mix in the areas of engineering, environment, resettlement, road safety, highway maintenance, procurement, institutional development and training, contributing to the soundness of the design. The partnership approach in the preparation of the project helped to transfer technical knowledge to the Chinese counterparts. Performance at appraisal was satisfactory, with a focus on clarification of outcomes and agreement on performance indicators. Special attention was paid on identifying and assessing the key risks: implementation delays, counterpart funds and institutional capacity to deal with fiduciary and safeguard aspects. Reviews of technical designs by international consultants were undertaken, and implementation arrangements were duly refined. 7.2 Supervision: Bank performance in supervision is assessed as satisfactory. The QAG in its 1999 review, assessed the quality of supervision also as satisfactory, highlighting the good approach in the identification of problems and the constructive advice offered to the borrower. Over the life of the project two task managers were assigned on supervision of the project. There was adequate overlap and no issue arose due to lack of continuity. Key contributions from the Bank supervision team were in the areas of promoting quality of the civil works, attention to proper operation and maintenance of the completed infrastructure, and critical review of studies that significantly enhanced the transfer of knowledge and strengthened capacity. 7.3 Overall Bank performance: Overall, the Bank's performance was satisfactory. The assistance provided by the Bank ensured quality at entry, supported implementation through responsive supervision, and ensured adequate transition arrangements for regular operation of the project. - 11 - Borrower 7.4 Preparation: Borrower commitment was satisfactory. It assigned a dedicated team to prepare the project, with experience gained from involvement in the previous project. At an early stage of the project, it submitted feasibility studies to the Bank, allowing for ample time to discuss and refine the designs. It also carried out early census surveys of affected people and properties, so that safeguard aspects could be incorporated in the designs and action plans were relatively advanced at pre-appraisal. As a result, the project was ready for implementation at Board presentation. Also, in its efforts to better match the revenues and expenditures expected from the project, the Borrower designed a customized loan amortization schedule that reflected the expected revenue stream from tolls, thus enhancing the resilience to financial risks. 7.5 Government implementation performance: Government performance was overall satisfactory. In its desire to ease the increasing congestion on the main National Highway G312, it put pressure for an acceleration of the construction works. This led to an early opening of the UKH to traffic, however more time was then needed to complete all ancillary works and repairs to damaged sections. The Government was also supportive of the institutional development objectives. In areas where multiple agencies were involved such as traffic safety and transport facilitation, it encouraged XCD and other relevant Departments in the province to improve their coordination for further achievements in these important areas. 7.6 Implementing Agency: The performance of XCD was satisfactory. Its management of the project was flexible and relatively quick to adapt to new conditions and take appropriate measures. When serious settlements appeared on UKH, it promptly assumed responsibility to restore quality to the fullest extent. Regarding the maintenance and rehabilitation component, it was indeed due to the commitment of XCD that this component became a success story with lasting effects. When it became clear that the traffic safety component and the training component could not be completed on time, XCD requested a one-year extension of the loan closing date, demonstrating it was no less committed to the institutional development aspects. There was full compliance with safeguard requirements. As for resettlement, the main objectives have been met, i.e. restoration of income, livelihood and productivity. Monitoring was done by both internal (project management) and external (Xinjiang Social Academy of Sciences) agencies. Some issues were identified by the Bank's resettlement thematic supervision mission which visited the site in 1999, regarding (i) withholding of land compensation by some county and township officials, and (ii) compensation rates for some agricultural land being lower than the rates agreed in the RAP. These were promptly addressed to the satisfaction of the Bank. As for environment, the implementation of the Environmental Management Plan (EMP) was overall satisfactory for the construction phase as well as the operation phase. The Highway Environmental Monitoring Unit of XCD submitted periodic reports to monitor compliance with the environmental impact indicators regarding air and noise pollution and the ecology. It was found that the project had not caused significant air and noise pollution except in the initial construction period. Contractors had to be reminded to take measures stipulated in the EMP - asphalt and cement stabilization mixing sites to be located at least 500 meters from residential areas on the side of the wind direction, and to be equipped with adequate dust collectors. Ecological monitoring was concerned with livestock migration, vegetation restoration and - 12 - borrow pits protection. Proper attention was paid to maintaining the traditional corridors for livestock transmigration, in particular through construction of underpasses at selected locations. Lead content in soil and crops and grasses was monitored on both sides of UKH and no significant pollution was found. Borrow pits were initially left unattended and clearly posed a threat of environmental safety along the UKH alignment. Upon Bank mission insistence, XCD installed fences and warning signs and formulated site specific restoration plans that were implemented satisfactorily. 7.7 Overall Borrower performance: Overall, the Borrower performance is rated as satisfactory. The Borrower assumed ownership and responsibility to ensure quality of preparation and implementation, and complied overall with covenants and agreements. It demonstrated commitment towards the achievement of all development objectives and sustainability. 8. Lessons Learned Impact of pavement settlements and their technical treatment. A special deep treatment by churning pile method was carried out on some sections of UKH where poor geological soils had led to serious settlements. XCD has made arrangements for the continuous monitoring of these sections to check the actual effectiveness of such treatment. The experience and lessons of the settlement issue, monitoring work and treatment method were useful to provide some guidance and reference to the Kuitun-Sailimu Highway financed under the follow-on project. It was suggested that the lessons and implementation experience on UKH could also provide a significant contribution to improving the management of highway projects in other provinces, by demonstrating the seriousness of the settlement issue and the importance of (i) adequate surveys at the design stage, (ii) sufficient amount of time needed for achieving final consolidation, and (iii) serious monitoring work to assess the extent of settlement and the effectiveness of the treatments. Institutional Strengthening. It is recognized that capacity building and the process of change take time, if they are to be sustainable. There were a few good practices worth noting under this project: l at the concept stage, recognize that there is so much that can be achieved under any one operation, and be gradual in the objectives from one operation to the other; l at the design stage, devise action plans for short term and for longer term implementation; and l during implementation, combine institutional strengthening activities with practical execution of a major task, as was done under the Highway Maintenance component. This combination was successful in internalizing good concepts and practices in highway management and maintenance within XCD. Toll rate setting. There are many possible objectives in building toll roads. In the case of Xinjiang, these were (i) maximizing users benefits and (ii) reducing congestion. Accordingly the level of toll should be as low as possible, taking into account the need to cover the financial costs. An interesting compromise between economic and financial returns was used under this project which is worth noting: l financial costs were not fully covered, only debt; l the amortization schedule was customized to better reflect revenues; l tolls were applied to the parallel, congested road in an effort to maintain the allocation of traffic between the two highways at an economic optimum, while generating more revenues; and l to deal with the equity issue, local exemptions were granted (agricultural vehicles are exempt from toll). This "package" of measures may be seen as a good practice in a situation of low affordability of tolls to prospective users as is the case in Xinjiang. - 13 - 9. Partner Comments (a) Borrower/implementing agency: The Borrower contributed to the ICR through (i) their own assessment of the project achievements and (ii) comments on the Bank's draft ICR. These contributions are presented below. Supporting documents are in Annex 7. (i) Borrower's Contribution I. Background 1. Urumqi ~ Kuitun Highway Project (hereinafter as "UKH") is the second project in Xinjiang financed by the World Bank. The initial preparation commenced from 1992. During August 25 ~ September 10, 1996, the negotiation delegation formed by the Ministry of Finance, the State Planning Committee, Ministry of Communication, Xinjiang Financial Department, Xinjiang Planning Committee, Xinjiang Communication Department, and the PEO visited the headquarter of the World Bank in Washington to negotiate the Loan Agreement and Project Agreement. On January 23, 1997, the Ministry of Finance of P. R. China signed the loan Agreement and Project Agreement respectively with the World Bank. The loan Agreement became effective by then. The closing date of the Loan was December 31, 2003. The activities of the Project are all described in the Staff Appraisal Report and have been carried out according to the Loan Agreement and Project Agreement. In addition, these works and activities are evaluated in this Report. A. Project Description 2. The major objective of the Project is to complete construction of the important trunkway from Lianyungang ~ Korgas Pass, which is of the national highway network ---"Two Transverses and Two Longitudes" (It is one important component in National Road 312, too). The construction of the Project can greatly accelerate the development of the major economic belts in north of Tianshan in Xinjiang. The Project is financed with the loan of the World Bank and implemented with the international clauses of "FIDIC". It is the expressway with largest construction scale, greatest investment and highest technical indexes. 3. The Project includes: a) Construction of a 266.01km highway (UKH) on new right-of-way (ROW) between Urumqi and Kuitun which consists of: Wulapo ~ Xishan: 18.45km 2-lane Class II road; Xishan ~ West Railway Station: 13.85km 4-lane Class I road; West Railway Station ~ Kuitun: 216.97km 4-lane expressway; Shangshahe of TUDH ~ West Railway Station: 16.74km 4-lane Class I road which links UKH with the Turpan~Urumqi~Dahuangshan Highway (TUDH); Four linking roads: 21.5km in total length. Both Class I road and expressway are of 4-lane and with total closed interchanges. b) E & M Systems: Monitoring system of UKH comprises of 1 General Monitoring Center, 4 Monitoring Centers and site equipment. Each monitoring center is equipped with closed-circuit television (CCTV); Tolling system consists of 9 toll plazas. There are a total of 66 feeder toll lanes for the entire Project with 4 tolling centers and one General Tolling Center. The tolling system belongs to the mixed tolling system, with vehicle types manually judged, tolling manually collected; managed with computers and monitored with video. Telecommunication system consists of cable digital transmission system, program control digital - 14 - exchanging system, emergency telephone system and telecommunication power supply. The emergency telephone control centers are respectively located in the 4 monitoring centers. Equipment of lightening system is installed in the 9 toll plazas, two interchanges of Xishan and Kuitun and the 4 service areas. The whole line is equipped with signs, markings and guardrails according to the international regulations. c) Management/maintenance buildings and parking/service areas: 4 management divisions and 4 service areas. d) Other Components: (1) Highway maintenance program: having maintained and rehabilitated about 1600km of the existing highway network with US$30 million of the World Bank loan (included in the total loan for the Project) and the counterpart fund from XCD which is equivalent to US $40 million; (2) Regional Transport Study: the strategy study of transport connection within Xinjiang an between Xinjiang and neighboring provinces and countries; (3) Highway Safety Program: study of black spots; (4) Institutional Strengthening and Training. B. The Objectives Achieved 4. The major objectives of each component under the Project have all realized. The details are as below: a) Completion of the UKH with total length of 266.01km, including the relevant telecommunication, lightening, tolling, monitoring, landscaping of interchange areas and the facilities of traffic safety, management and service; b) Completion of the four linking roads with the total length of 21.5km; c) Completion of the highway maintenance with total length of 1622.6km (55 contracts) during 1997 ~ 2000. The total investment is RMB Y705.4 million; d) Completion of the final report "The Strategy Study of Transport Connection within Xinjiang and between Xinjiang and Neighboring Provinces and Countries"; e) Completion and submission of reports on traffic safety; f) Completion of 955 persons ~ 1290 person/month training for institutional strengthening and staff training for XCD; g) Completion of equipment procurement; f) Completion of land acquisition and resettlement; h) Completion of environmental protection. C. Project Formulation and Preparation 5. November 14 ~ 15, 1992: project preparation; April 15 ~ 28, 1995: project identification; October 26 ~ November 4, 1995: project pre-evaluation; April 1996: project evaluation; August 25 ~ September 10, 1996, negotiation in Washington; January 23, 1997: signed "Project Agreement" and "Loan Agreement"; the loan became effective. D. Planning and Designing of the Project 6. According to the planning objectives in "Project Agreement" and the SAR, the Project should: a) Make road infrastructure developed continuously and solve bottle-neck problems in traffic transportation so as to realize smooth traffic and improve efficiency and safety of road transport. With all these, the social and economic development of the economic belt in the south of Tianshan in Xinjiang can be accelerated; b) Accelerate and optimize development programs and investment decisions of traffic transport in Xinjiang; - 15 - c) Improve passing capacity and service level of the trunkway network in Xinjiang; d) Strengthen and improve maintenance of the rehabilitated roads. E. Project Implementation 7. Civil Works. The UKH is divided into 19 contracts, among which Contracts 1 ~ 14 are for civil works; Contract 15 is for E &M; and Contracts 16 ~ 9 are for facilities of management and service. The civil works of UKH commenced on April 1, 1997 and completed and opened to traffic on November 3, 2000. Contracts 1 ~ 15 were bid with International Competition Bid (ICB) and Contract 16 ~ 19 were bid with National Competition Bid (NCB). 8. Construction Supervision and Consultant Service a) Foreign Consultant Supervision Based on the 7 consultant companies from the shortlist provided by the World Bank and with evaluation, Louis Berger International, Inc won the bid and was approved by the Bank to undertake foreign consultant supervision for UKH. The Company arranged 10 experts to the Project for supervision. b) Domestic Supervision With NCB, 11 domestic supervision companies won the bids for supervision of civil works and 4 companies won the bids for E&M and facilities of management and service. The 15 supervision companies supervised the construction of UKH from the beginning to the end, with participation of 312 supervision engineers. 9. Regional Transport Studies (1) "Strategy Study of Transport within Xinjiang and between Xinjiang and Neighboring Provinces and Countries". The Study was undertaken in 1996, directed by the Comprehensive Transportation Research Institute of the State Planning Committee and participated by the relevant units of Xinjiang (departments of railway, highway and civil aviation). According to the requirement of the TOR approved by the World Bank, the Study commenced in November 1996. The phase report was submitted in April 1997. The experts from the World Bank were invited to Beijing for instruction. Meanwhile, domestic experts were invited to Urumqi for consultation. The final report was completed in October 1997 and the English version of the Report was submitted to the Bank. It was completed one year earlier than scheduled. (2) Study on Highway Safety The Study is to continue the Study under Xinjiang I Highway Project. About 20 places (black spots) where more traffic accidents occurred were selected and analyzed. 10 from the 20 black spots were improved. In addition, 60km of arterial highway were selected to make marking lines so as to reduce traffic accidents and decrease economic loss. (3) According to the results of the Study under Xinjiang I Highway Project, about 66 roads with total length of 1622.6km in the existing highway network were maintained and rehabilitated during 1997 ~ 2000 under Xinjiang II Highway Project with US$36.5064 million of the World Bank loan (included in the total loan for the Project) and the counterpart fund from XCD which is equivalent to US $48.3923 million. 10. Equipment Procurement According to the SAR, the preliminary total equipment cost is estimated at about RMBY91.8 million (US$11.3 million), of which US$9.5 million would be in foreign currencies. The equipment is required for operation and maintenance of UKH, maintenance of highway network and institutional strengthening. The total actual cost of the equipment is USD16,280,254.25. The transport charges are RMBY6,755,104.99. In addition, we procured some maintenance equipment locally under NCB, valued up to RMB Y18,480,200.00. The transport charges are RMB Y742,170.31. - 16 - 11. Institutional Strengthening and Staff Training According to the SAR, the training program of Xinjiang II Highway Project is: a) Institutional Strengthening: Abroad training and study tour for staff development (49 person-months) of XCD. The estimated total cost of this element is RMBY10.9 million (of which US$0.93 million is in foreign currencies); b) Staff Training: This element covers skills upgrading and specialized training for 710 persons (897 person-month) in Xinjiang, in other parts of China and abroad. The estimated cost is RMBY2.6 million (of which US$0.05 million is in foreign currencies); c) Technical Assistance: This element includes support for the training of trainers at three technical training institutions of XCD, for an estimated total cost of RMBY1.5 million (of which US$0.15 is in foreign currencies). The actual status of this component is as below: By December 25, 2003, staff training for the UKH Project had completed 955 persons for a total of 1290 man-month, which account for 93.1% and 89.8% respectively. The actual training expenditures are RMB Y1,838,398 and US$ 828,011.1, which is equivalent to US$ 1,049,505 in total. The actual training abroad and oversea study tours are 109 persons, 271.5 man/month have been completed. The actual training expenditure is US$ 828,011.1. Training in China and training in Xinjiang under staff training/institutional strengthening component for UKH Project has been completed, with 846 persons and 1018.5 man-month. The actual disbursed amount is RMB Y1,838,398. Of which, PEO disbursed RMB Y499,000. F. Operation Experiences 12. Each component under Xinjiang II Highway Project all operates well. UKH (Xinjiang II Highway Project) opened the traffic on November 3, 2000. The technical status of the Highway is good. The accumulated tolling amount by the end of December 31, 2003 was RMB Y363.96 million. UKH is maintained by the experienced XHGHAB which was set up in March 1995. Prior to construction of UKH, traffic was very crowded on the existing road from Urumqi ~Kuitun of National Road 312. With the completion of UKH, traffic volume has been diverted from the existing road to certain extent. Because UKH is a tolled expressway, while the National Road 312 was free, there was still a great deal of traffic remaining on it, resulting it was seriously damaged with too much traffic. Based on the actual status of the road, it was decided to rehabilitate the old road during 2001 ~ 2002. Among which, the section from Urumqi ~ Xiaodiwopu rehabilitated from Class I road to expressway; the section from Xiaodiwopu ~ Changji rehabilitated major with more facilities of traffic engineering; the section from Changji ~ Kuitun rehabilitated with increased technical index, which is from 10m ­12m subgrade and 7m ­ 8m pavement to 12m subgrade and 11.5m pavement with perfecting traffic engineering. After the rehabilitation, it commenced to toll. The rehabilitation and tolling of the road has made traffic volume diversion more reasonable in Urumqi ~ Kuitun traffic corridor. Traffic volume on UKH increases year by year, while traffic volume on the old road decreases year by year. Take Manasi Toll Station as an example, the daily tolled traffic volume during January ~ February 2003 was 3438, however, the daily tolled traffic volume during January ~ February 2004 was 4188, with increasing rate of 21.8%. It has released the problem of traffic jams on the old road. It has remained the enough space for traffic increase in the future, which supports social and economic development in the economic belt of Northern Slope of Tianshan Mountains. G. Performance of Contractors and Consultant Experts 13. Contracting. Xinjiang II Highway Project (UKH) was procured with both ICB and NCB. ICB was applied for Contracts 1 ~ 14 of civil works and Contract 15 of E & M and construction maintenance equipment. NCB was applied for Contract 16 ~ 19 of facilities of management and service along the line. The contract construction period is 42 months, which have all been completed as scheduled. The major - 17 - engineering qualities completed by the contractors are: 24,270.00m3 of subgrade earth/stone; 110,000 m3 of protection work; 464,510.00 m3 of sand gravel base; 525,830.00m3 of lower layer with asphalt coarse granular; 508,410.00m3 of upper layer with asphalt medium granular; 508,500.00 m3 of anti-skid surface; 8 big bridges; 4 medium bridges; 59 small bridges; 643 culverts; 174 underpasses; 74 grade separation; 15 interchanges; 95,410 m2 of buildings for management and service areas and buildings for toll plazas (of which 4 management divisions, 4 service areas and 9 toll plazas); 1066.283km of wavy guardrails; 2421 pieces of reflective traffic signs; 252.98km of markings; 34.34km2 of contours; and 318km2 of telecom cables. 14. Performances of Consultant Experts There were 10 foreign experts working as consultant experts on UKH during 42 months of construction period. They participated in all supervision activities throughout the construction period. They had good cooperation with the 312 domestic supervision engineers and strictly supervised engineering of the contractors according to the clauses of "FIDIC". The PEO highly praises the scientific attitude and the serious and practical spirits of the foreign experts. 15. Performances of Domestic Supervision Engineers The supervision contracts of Xinjiang II Highway Project were bid with two methods--- ICB and NCB. According to the clauses of "FIDIC", the supervision procedures and methods, the supervision engineers are responsible for the four tasks of contract management, quality control, progress control and payment control. In order to realize the four tasks, "Supervision Methods for UKH" was specially prepared, with a complete supervision system of "Before Construction, During Construction and After Construction". No work is allowed to commence before the Engineer approves the materials and equipment after testing. During construction, there arranged the stand-by supervision engineers. After proving to be qualified with tests and examinations, the next work sequence can be allowed to start. Any unqualified work must be reworked till meeting satisfaction. With control of various links, engineering quality, construction period and investment can be effectively controlled so as to guarantee complete implementation of the contracts. 16. Experiences With the implementation of Xinjiang highway projects with the loan of the World Bank, we have accumulated many experiences. The experiences are mainly as below: a) Strengthen organization coordination; actively seek support of policies, which are the guarantee for smooth implementation of construction; b) Pay great attention to designs of alternatives and alignments, to application of new techniques and to testing and research so as to guarantee quality of project design; c) The key point for realization of the three engineering objectives is to select highly qualified contractors and supervision engineers; d) Contracts must be taken as the core of construction; strictly carry out the management module of international "FIDIC" clauses; e) Quality must be strictly controlled so as to continuously strengthen quality sense and improve engineering quality; f) Organize experience exchanges and competitions so as to accelerate construction quality and progress; g) It is the guarantee for full completion of the Project to accept supervision of the World Bank and to offer active cooperation. H. Performances of the PEO 17. Preparation of the PEO Xinjiang Uygur Autonomous Region made full preparation for Xinjiang II Highway Project. In 1992, the Bank Mission for Xinjiang I Highway Project was invited to make site visit of Xinjiang II Highway Project. - 18 - The engineering feasibility studies report of the Project was completed in December 1993. In January 1994, the State Planning Committee formally approved the Project and listed it into the major national highway projects. The Highway was designed by the First Highway Survey & Design Institute of Ministry of Communications. Both Highway Engineering International Consultant Company of China and Italconsult of Italy reviewed the design and the bidding documents of the Project. The approval, pre-evaluation, evaluation and negotiation of the Project were completed during April 1995 ~ October 1996. The loan became effective on January 23, 1997. 18. Implementation of the Project A construction authority was established for the implementation of Xinjiang I Highway Project, under which there was a project executive office (PEO). After being adjusted and strengthened, the organization continued to implement Xinjiang II Highway Project, including bidding, management, coordination, land acquisition, resettlement, planning, financial management and supply of construction materials. The implementation of the Project is very smooth. 19. Experiences Achieved from Xinjiang II Highway Project The Client of the Project realized the effective control on construction quality, progress and cost based on the clauses of "FIDIC" and according to the contracts. During the implementation of the Project, the PEO organized a series of technical meetings and seminars to solve the difficult technical problems. It has been proved that whenever the Client pays great attention to quality control, engineering quality will be good. The Client paid special attention on the following issues: a) subgrade stabilization in crop fields; b) subgrade stabilization in subsidence area; c) quality of crushed stones for pavement; d) transverse and longitude cracks on CSB; e) compaction of subgrade; f) expansion joints of bridges; g) backfilling and compaction of abutment. I. Performances of the World Bank 20. Project Preparation The World Bank has participated in the Project since 1992. From April 1995 ~ April 1996, the World Bank sent the missions of identification, preparation, site visits, evaluation and negotiation to Xinjiang II Highway Project. The missions made discussions in respect of the feasibility studies report, economic analysis, engineering design, contract division, equipment procurement, plan implementation, engineering supervision, environmental protection, institutional strengthening/staff training, land acquisition/resettlement, highway maintenance, highway safety, studies and etc. The Bank made a complete evaluation of the Project. The SAR describes in details the scope, economic benefits and organization arrangement of the Project. During preparation and implementation of the Project, the missions of the World Bank made great contribution and offered great help to the units of the Project. The cooperation is very smooth. 21. During implementation of the Project, the Bank Missions made supervision for many times and made a great deal of practical suggestions in respect of quality, financial management and institutional aspects. With the help of the World Bank, a joint supervision team of foreign and domestic engineers was set up to supervise civil works of the Project. With this method, not only construction quality can be guaranteed, but also local engineers can be well trained. 22. Cooperation of the World Bank and the PEO The World Bank cooperated with the PEO quite well and smoothly. The officials from the Bank could well understand development requirement of traffic infrastructure facilities in Xinjiang, China and offered a great deal of help and assistance. The Government of Xinjiang Uygur Autonomous Region and the Xinjiang Communications Department express the faithful thankfulness to cooperation and assistance from - 19 - the World Bank. In addition, it is expected to have opportunity to cooperate better with the World Bank and achieve more assistance. 23. Overall Achievements The major achievements obtained from implementation of Xinjiang II Highway Project are: a) The Project is the expressway with largest scale and highest technical class which was financed with the loan of the World Bank. It was constructed with the contract management module of international "FIDIC" clauses. With the wide application of "FIDIC" in infrastructure construction, it makes it possible to effectively control quality, progress and cost of highway construction in Xinjiang; b) With staff training program, working efficiency and professional capacity in the communication sector have been greatly improved. A group of professional staff have been trained in respect of road management, planning, design, finance, management, maintenance, traffic engineering and teaching and etc. The level has been improved and the training results are good; c) With the application of the research results of highway maintenance under Xinjiang I Highway Project, 1600km of highway have been maintained under the Project, which improves passing capacity and service level of the highway network in Xinjiang; d) The results of the studies have been applied into projects of traffic planning and development and treatment of "Black Spots" for traffic safety, which have greatly accelerated highway transportation and highway safety in Xinjiang. J. Annexes All tables and appendices are in the project file (see Annex 7 below). (ii) Borrower's Comments on the Bank's Draft ICR See Borrower's letter of June 11, 2004 overleaf. These comments have been considered in the ICR. - 20 - To: Mr. Jacques Tollie, Sr. Highway Engineer, EASTR Transport Sector Unit, EASTR, World Bank From: Li Zhinong, Deputy Director, PEO of XHHCA Date: June 11, 2004 Subject: CHINA: Second Xinjiang Highway Project (Loan No. 4099-CHA) Implementation Completion Report (ICR) _________________________________________________________________________________ MESSAGE: Dear Mr. Tollie: We have reviewed the ICR referred in the subject dated on May 31, 2004. Our comments are as below: General Comments: 1. The Report is prepared satisfactorily with high quality, in particular, the analysis on economic assessment. Comments on Details: 2. Loan number: the one we used is 4099-CHA instead of SCL-40990 in your report. 3. It is suggested adding (f) under 3.1 on Page 2: (f) completed construction of major sections of national trunkway in Xinjiang. 4. It is suggested adding one sentence "In addition, it has provided a number of management and technical staff with new notions for large-scale technical improvement in Xinjiang" under 4.1 C (Page 4) after "... economic and technical approaches". 5. The figure of resurfaced road should be 310km instead of 302km under 4.2 B. Best regards, (Signed) Li Zhinong, Deputy Director Project Execution Office, XHHCA (b) Cofinanciers: No outside cofinanciers. (c) Other partners (NGOs/private sector): 10. Additional Information - 21 - Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate (1a) Reduced traffic congestion on roads As of 12/31/2003 parallel to the proposed road Traffic Volume Section Urumqi-Changji 12,600 13,280 Section Changji-Hutubi 9,600 9,373 Section Hutubi-Shawan 4,500 9,730 Section Shawan-Kuitun 4,800 8,427 (1b) Increased average travel speed on roads parallel to the proposed road Travel speed (km/hr) Section Urumqi-Changji 48 60 Section Changji-Hutubi 38 50 Section Hutubi-Shawan 33 50 Section Shawan-Kuitun 38 50 (2a) Improved road surface roughness on the paved road network IRI 5.3 5.0 ( 2b) Increase in % of segments of national and provincial roads in fair and good condition Condition of national and provincial road is: Good: 15% 15% Fair: 80% 80% Bad: 5% 5% (3a) Reduced number of traffic accidents involving fatalities Number of accidents with fatalities per 21/10000 21/10000 number of vehicles: Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate % of civil works completed on UKH 100 100 % of roads under maintenance and 100 100 rehabilitation program Number of man-months of completed training 1,300 1,290 Highway safety: Improved black spots 10 10 Km of highway with signing and markings 60 60 completed 1End of project - 22 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million A. New Construction 1. UKH and Linking Roads 376.90 379.14 100.5 2. Supervision of Construction 11.80 10.34 87.6 B. Highway Maintenance 70.40 85.28 121.1 C. Capacity Building 1. Institutional Strengthening and Training 1.30 1.05 80.8 2. Equipment 11.30 25.25 223.4 D. Highway Safety 3.50 3.95 112.8 E. Regional Transport Study 0.30 0.30 100 Land Acquisition and Resettlement 25.70 27.03 105.1 Total Baseline Cost 501.20 532.34 Physical Contingencies 46.20 Price Contingencies 110.70 Total Project Costs 658.10 532.34 Front-end fee Total Financing Required 658.10 532.34 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 473.30 128.10 0.90 602.30 (224.80) (57.80) (0.40) () (283.00) 2. Goods 8.60 3.90 0.30 12.80 (7.90) () (3.00) (0.00) (10.90) 3. Services 17.30 17.30 () () (6.10) () (6.10) Land Acquisition and 25.70 25.70 Resettlement () () () (0.00) (0.00) Total 481.90 128.10 22.10 26.00 658.10 (232.70) (57.80) (9.50) (0.00) (300.00) - 23 - Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 331.87 117.79 3.95 14.44 468.05 (161.53) (56.91) (1.49) (0.00) (219.93) 2. Goods 17.10 6.20 2.23 25.53 (12.68) (3.36) () (0.00) (16.04) 3. Services 11.73 11.73 () () (4.03) () (4.03) Land Acquisition and 27.03 27.03 Resettlement () () () (0.00) (0.00) Total 348.97 123.99 15.68 43.70 532.34 (174.21) (60.27) (5.52) (0.00) (240.00) 1/Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. A. New Construction 1. UKH and Linking 192.00 88.60 96.30 183.52 47.29 149.82 95.6 53.4 155.6 roads 2. Supervision of 3.50 8.30 3.21 7.13 91.7 85.9 Construction B. Highway Maintenance 30.00 40.40 36.41 48.87 121.4 121.0 C. Capacity Building 1. Institutional 1.00 0.30 0.30 0.82 0.27 82.0 90.0 0.0 Strengthening and Training 2. Equipment 9.50 1.80 16.04 9.49 168.8 527.2 D. Highway Safety 1.70 1.80 2.14 0.0 118.9 E. Regional Transport 0.20 0.10 0.30 0.0 300.0 Study Contingencies 62.10 94.80 0.0 0.0 Land Acquisition and 25.70 27.03 105.2 Resettlement Total Project Cost 300.00 261.80 96.30 240.00 142.52 149.82 80.0 54.4 155.6 Govt. - XUAR CoF - Central Government - 24 - Annex 3. Economic Costs and Benefits Preface 1. The economic evaluation of the project covers the following two components: (a) construction of the Urumqi-Kuitun Highway (UKH) and the four link roads; and (b) rehabilitation of thirty three rural roads under the highway maintenance program (HMP). 2. The economic analysis is based on the re-evaluation of data on traffic, operational performance, costs and benefits of project components. The methodology used was similar to that employed by the SAR and is summarized as follows: (a) capital investment and maintenance costs were revised to reflect December 2003 prices and are included in the cost streams; (b) the benefit, also in December 2003 prices, consist of savings in vehicle operating costs (VOC), travel time savings, reduced traffic congestion on existing roads, and enhanced road safety; (c) a project life of 20 Years has been assumed and the capital investment period for all components was from 1996 to 2003, depending on the construction phases; and 3. During project implementation, some project components were modified. The economic analysis reflects the final outputs of the project. 4. This annex is comprised of four parts. the economic evaluations of the UKH, including the four link roads; the economic evaluation of the HMP; the overall economic evaluation of the project, including sensitivity analysis and probabilistic risk analysis; and the financial evaluation of the project. ECONOMIC EVALUATION 0F UKH AND THE FOUR LINK ROADS 5. The UKH was further divided into three sections for economic evaluation. UKH: Section 1: Urumqi - Hutubi Section 2: Hutubi - Shawan Section 3: Shawan - Kuitun Subtotal The four link roads: 1. Urumqi link road (old road upgrading) 2. Changji link road (new road) 3. Manasi link road (new road) 4. Shihezi link road (new road) - 25 - Highway Corridor Traffic 6. The UKH was opened to traffic in November 2000. The first full operating year was 2001. The opening of the four link roads were in 2001 and 2002. The highway corridor traffic and its distribution between the old and the new highway are presented in the following table, indicating SAR forecast and actual traffic census data: NUMBER OF MOTORIZED VEHICLES PER DAY FOR UKH The Old Road The New Highway Total Corridor Diversion AADT MTE AADT MTE AADT MTE Ratio (1) (2) (3=1+2) (4=2/3) 2001: SAR: Section 1 -- 2,580 -- 15,095 - 17,675 85.4% Section 2 -- 2,824 -- 10,928 - 13,752 79.5% Section 3 -- 1,611 -- 8,134 - 9,745 83.5% ICR: Section 1 9,802 8,534 3,219 2,440 13,021 10,973 22.2% Section 2 9,190 8,032 3,034 2,311 12,224 10,342 22.3% Section 3 8,794 7,604 1,976 1,579 10,770 9,183 17.2% Ratios (ICR/SAR): Section 1 -- 230.8% -- -83.8% -- -37.9% -- Section 2 -- 184.4% -- -78.9% -- -24.8% -- Section 3 -- 372.0% -- -80.6% -- -5.8% -- 2003: SAR: Section 1 -- 3,269 -- 17,164 - 20,433 84.0% Section 2 -- 3,155 -- 12,861 - 16,016 80.3% Section 3 -- 1,877 -- 9,490 - 11,367 83.5% ICR: Section 1 11,463 10,021 10,905 8,638 22,368 18,659 46.3% Section 2 9,730 8,352 6,583 5,282 16,313 13,634 38.7% Section 3 8,427 7,250 6,179 4,910 14,606 12,160 40.4% Ratios (ICR/SAR): Section 1 -- 206.6% -- -49.7% -- -8.7% -- Section 2 -- 164.7% -- -58.9% -- -14.9% -- Section 3 -- 286.3% -- -48.3% -- 7.0% -- Sources: XCD and the Bank staff. 7. When opening the new toll highway in 2001, the total corridor traffic, except for Section 3, was much lower than estimated at appraisal by about 25-38 percent. The old road traffic, however, was much higher than estimated at appraisal by about 1.8- 3.7 times, which indicated that the users would prefer to stay on the old road rather than use the new road. In 2003, the total highway corridor traffic has been close to or exceeded the SAR's estimates for this highway corridor. The main reason for the low traffic on the new highway was because the XCD also took the initiative to upgrade the pavement condition of the old road, free from the toll, while operating the new toll road. 8. Despite the toll free policy on the old road, the diversion ratio has been increasing for all the three sections of the highway over the three years of operation (2001 ­2003). The latest record shows that the diversion ratio has been more than doubled, from 17- 22 percent to around 39- 46 percent. The increasing trend of the diversion ratio clearly reveals that more and more road users on this corridor choose the new highway as their travel route. Starting October 2003, the XCD began collecting tolls from both the old and the now roads. This policy is expecting to expedite the diversion ratio to around 50 percent, but it still will be lower than the SAR's estimate (over 80 percent). - 26 - 9. The construction of the four link roads started in 2000 and 2001. The project was completed in 2002. Three out of the four roads are the completely new roads and one road is renovation of an existing road. There are no other alternative routes. All the travelers are using the new roads. Traffic Projection 10. The increase in traffic on a new highway, particularly when it is operated as a toll facility, is gradual in the initial operational years and then the diversion accelerates. The average traffic growth rate (during 2001-2003) on the new highway was almost 73 percent. Despite the increasing diversion ratio and the fast traffic growth rate in the initial operational years, the long-term traffic growth rates on the new highway was estimated to be slightly lower than the SAR's forecast. The traffic forecast for the new highway, by section, is summarized in the following table: TRAFFIC FORECAST COMPARISON FOR THE NEW HIGHWAY BY SECTIONS Section 1 Section 2 Section 3 Section 4 Total Total Total Total AADT MTE AADT MTE AADT MTE AADT MTE UKH: SAR 2001 -- 15,095 -- 10,928 -- 8,134 -- -- 2002 -- 16,096 -- 11,855 -- 8,786 -- -- 2003 -- 17,164 -- 12,861 -- 9,490 -- -- 2010 -- 26,907 -- 22,739 -- 16,276 -- -- 2020 -- 33,478 -- 31,889 -- 23,802 -- -- Average growth p.a. 2003-2020 -- 4.0% -- 5.5% -- 5.6% -- -- ICR 2001 3,219 2,440 3,034 2,311 1,976 1,579 -- -- 2002 8,598 6,917 4,962 4,041 4,435 3,578 -- -- 2003 10,905 8,638 6,583 5,282 6,179 4,910 -- -- 2010 15,269 11,827 9,816 7,710 9,865 7,670 -- -- 2020 21,553 16,143 15,176 11,540 16,046 12,276 -- -- Average growth p.a. 2003-2020 4.1% 3.7% 5.0% 4.7% 5.8% 5.5% -- -- The Four Link Roads: /1 ICR 2001 9,391 8,523 2,646 2,237 148 131 1,200 1,023 2002 9,986 9,052 2,694 2,278 153 135 1,402 1,195 2003 12,477 11,177 3,393 2,829 192 167 1,765 1,483 2010 17,097 15,048 4,703 3,843 264 226 2,447 2,015 2020 23,367 20,003 6,539 5,178 363 302 3,402 2,714 Average growth p.a. 2003-2020 3.8% 3.5% 3.9% 3.6% 3.8% 3.5% 3.9% 3.6% /_1: In the SAR, there were no traffic projections for the four link roads. Sources: XCD and the Bank staff. Economic Costs 12. Financial construction costs were converted to economic costs by applying shadow prices for each of the input items. The total economic cost of the highway and the four link roads at end of project implementation in constant December 2003 prices was 22.4 percent lower than the SAR's estimate. - 27 - Economic Cost Comparison (Y million) SAR ICR ICR/ SAR (Dec. 2003 prices) (Dec. 2003 prices) (in %) UKH 4,646.3 3,639.84 78.3% The four link roads 142.9 75.93 53.1% Total 4,789.2 3,715.77 77.6% Sources: XCD and the Bank staff. Economic Benefits 13. The economic analysis includes the benefits derived from: (a) VOC savings on the new highway (summarized in the following tables); (b) time savings through relieved congestion on the existing road; and (c) lower accident costs. The value of passenger time savings was estimated at RMB 1.0 per passenger-hour, on the basis of the report on the feasibility study methodology for highways in China (Rust PPK, Australia Feasibility Study methodology Report, March 1996). The same source was used for vehicle accident rates on different classes of roads. Economic Vehicle Operating Cost (RMB per 1,000 veh.-km, December 2003 prices) Section 1 Section 2 Section 3 New road Old road New road Old road New road Old road Car 0.604 0.860 0.604 1.113 0.604 1.113 Medium bus 1.075 1.486 1.075 1.959 1.075 1.959 Large bus 2.421 3.107 2.421 3.765 2.421 3.765 Small truck 1.174 1.522 1.174 1.860 1.174 1.860 Medium truck 1.425 1.782 1.425 2.153 1.425 2.153 Large truck 2.182 2.636 2.182 3.137 2.182 3.137 Tractor/trailer 3.721 4.554 3.721 5.421 3.721 5.421 Sample of Economic Vehicle Operating Cost Calculation (RMB per 1,000 veh.-km, December 2003 prices) Medium Large Small Medium Large Trailer/ Car Bus bus Truck truck truck container The New Road: Fuel 200 293 630 450 518 567 609 Tires 25 47 211 78 199 702 1,596 Maintenance 284 347 680 563 604 663 866 Crew 23 36 50 36 45 45 50 Depreciation 42 102 279 47 59 205 600 Subtotal 574 825 1,850 1,174 1,425 2,182 3,721 Time value of passengers 30 250 571 Total 604 1,075 2,421 1,174 1,425 2,182 3,721 The Old Road: Fuel 350 428 840 695 745 819 1,069 Tires 29 53 234 85 222 774 1,778 Maintenance 315 385 756 626 671 737 962 Crew 52 63 78 63 78 78 78 Depreciation 47 113 310 53 66 228 667 Subtotal 793 1,042 2,218 1,522 1,782 2,636 4,554 Time value of passengers 67 444 889 Total 860 1,486 3,107 1,522 1,782 2,636 4,554 Sources: XCD and the Bank staff. - 28 - Accident Rates and Costs in China Road class Accidents per 100 million vehicle km Damage (RMB/ accident) Expressway -40 + 0.005 AADT 12,000 Motorway Class I 37 + 0.003 AADT 9,000 Motorway Class II 83 + 0.0065 AADT 7,000 Highway Class II 133 + 0.007 AADT 6,000 Highway Class III 140 + 0.03 AADT 4,000 Economic Evaluation 14. The economic internal rate of return (EIRR) of the new highway and its four link roads is estimated at 23.8 percent, which is higher than the 20.6 percent estimated in the SAR. The higher EIRR is primarily due to: (a) substantial cost savings (par. 12), (b) the total highway corridor traffic in 2003 being close to or exceeding the SAR's estimates (par. 7), and (c) the on time completion (par. 6). The EIRRs and net present value (NPV) are summarized in the following table. EIRR (in %) and NPV (12%, RMB million) Summary The SAR The ICR The four The four UKH link roads Total UKH link roads Total EIRR 20.5 26.4 20.6 23.9 16.9 23.8 NPV /_1 484.34 15.87 N/A 4,317.9 32.2 4,340.8 Sensitivity Analysis 15. The EIRRs with different scenarios show that changes in assumptions to be made in the evaluation could alter the yield on the investment. Because the operation and maintenance costs of the new highway is relatively small in the investment, any variation in these costs would have minimum discernible impact on EIRR. The impacts of changes in traffic volumes was analyzed under the two traffic growth scenarios. The results of the sensitivity test show that the reduction of passenger time savings to zero has the greatest impact while the reduction of road congestion savings has the least impact on the EIRR. SENSITIVITY TEST EIRR (%) NPV (12%, RMB million) VOC savings reduced by 20% 20.7 2,960.5 Passenger time savings reduced to zero 20.8 3,015.3 Congestion savings reduced to zero 23.7 4,312.3 Total benefits reduced by 15% 21.5 3,290.8 Switching values % increase Cost increase to reduce EIRR to 12% 185 % Benefit reduction to reduce EIRR to 12% 70 % Scenario Analysis 16. Besides the normal traffic growth scenario, two traffic growth alternatives have also been considered: a lower traffic growth projection (25 percent lower than the normal traffic) and a higher traffic growth projection (25 percent higher than the normal traffic growth). The traffic growth and average annual average growth rate under these two scenarios are as follows: - 29 - TRAFFIC FORECAST SCENARIOS High Growth Rate Low Growth Rate Average growth rate pa 6% ~ 10% 3% ~ 6% 17. The overall EIRR for the different traffic growth scenarios are summarized in the following table. It shows that the overall EIRR for a higher traffic growth rate is 26.2% and for a lower traffic growth rate is 21.3 percent. TRAFFIC GROWTH RATE SCENARIO TEST EIRR (in%) NPV (12%, RMB million) The high traffic growth rate scenario 26.2 6,195.1 The low traffic growth rate scenario 21.3 2,934.8 ECONOMIC EVALUATION OF HMP Background and Traffic 18. In the SAR, 2, 450 km of rural roads were planned to be implemented in phases. The SAR specified that the first phase would cover thirty roads (total 562 km). During implementation, the HMP was carried out in four phases with 33 subcomponents (total 1,619.3 km). The HMP program commenced in 1997 and was completed in 2000- by undertaking one phase every year. HMP PRPGRAM The SAR The ICR Length (km) Subcomponent Length (km) Subcomponent Completion Date Phase 1 562 30 554.3 11 1997 Phase 2 -- -- 393.8 9 1998 Phase 3 -- -- 318.4 4 1999 Phase 4 -- -- 352.9 9 2000 Total 2,450 -- 1,619.3 33 Sources: The SAR and XCD. 19. The original plan of the HMP was to perform the simple overlay tasks on the existing roads. The average investment budgeted RMB 0.25 million per km. During the implementation, the XCD found that many roads' conditions were worse than they expected. The average actual investment was Y 0.44 million per km, increased by 76 percent. Because all the HMP subcomponents were in the same region, the economic development and traffic patterns were very similar. Based on traffic performance, the traffic growth rates were assumed to be 2.5 percent per year for motor vehicles and 1.0 percent for tractors for 2001 - 2010, to be reduced by 1 percent for the next ten years beyond 2010. In the SAR, there are no traffic descriptions for the roads under the HMP program. Economic Costs 20. Financial costs were converted to economic costs using a methodology similar to that applied to the UKH. All input items have been evaluated to constant December 2003 economic prices. The overall economic cost is about 88 percent of the financial costs. - 30 - 21. Because of the need for major repairing work, the total actual cost of HMP at a constant December 2003 price was about 2.8 percent higher than the SAR's estimate, despite the total distance being about one thirds shorter than the original plan. ECONOMIC COST (RMB million, December 2003 prices) The SAR (A) The ICR (B) (B)/(A) Phase 1 108.53 113.34 -- Phase 2 -- 150.63 -- Phase 3 -- 140.38 -- Phase 4 -- 216.76 -- Total 604.1/_1 621.11 102.8% /_1. The Dec 1995 prices (the SAR) has been updated to December 2003 prices. Economic Benefits 22. The economic benefits of HMP were derived mainly from VOC savings due to shorter distance (if applicable), normal traffic, and maintenance cost savings. 23. As a result of the project, the road classifications of all 33 subcomponents were upgraded. The better surface pavement reduced VOC and yielded the major portion of the project benefits. No generated traffic was assumed. In addition, the better paved roads increased vehicle speed and reduced congestion. These benefits were quantified also as part of operating cost savings. Economic Evaluation 24. The EIRRs of the four phases range from 26.3 percent to 124.5 percent. The overall EIRR for the HMP is 79.2 percent. In the SAR, the mean EIRR for the first phase was estimated to be 92 percent, ranging from 14 percent to more than 400 percent. EIRR AND NPV OF THE HMP EIRR (in %) NPV (12%, RMB million) The SAR The ICR The SAR The ICR Phase 1 92 124.5 -- 1,156.1 Phase 2 -- 63.2 -- 2,312.1 Phase 3 -- 36.7 -- 1,126.6 Phase 4 -- 26.3 -- 1,086.0 Total -- 79.2 -- 2,120.6 Sources: The SAR and XCD. Sensitivity Analysis 25. The risks considered for the sensitivity analysis are: (a) slower than projected growth of traffic, (b) less VOC savings, and (c) less than expected benefits. The results of the sensitivity test show that the reduction of total VOC savings by 25% has the greatest impact, while slower than projected growth of traffic has the least impact on the EIRR. SENSITIVITY TEST FOR HMP EIRR (in %) NPV(12%, RMB million) Traffic growth rates reduced by 25% 79.0 2,041.4 VOC savings reduced by 25% 55.5 1,457.7 Total benefits reduced by 25% 56.6 1,460.3 - 31 - THE OVERALL ECONOMIC EVALUATION OF THE PROJECT Overall Economic Internal Rate of Return (EIRR) 26. The overall EIRR of the entire project (including UKH, the four link roads and HMP) is 29.0 percent and the NPV (12 percent) is about Y 6,461.4 million. In the SAR, the EIRR for the entire project is not available. EIRR (in %) and NPV (12%, RMB million) Summary The SAR The ICR EIRR NPV EIRR NPV Total UKH 20.5 484.3 23.9 4,317.9 Total link roads 26.4 15.9 16.9 32.2 Subtotal 20.6 -- 23.8 4,340.8 Total HMP 92 /_1 -- 79.2 2,120.6 Total Project -- -- 29.0 6,461.4 /_1: The first phase. The Project Risks 27. The overall EIRR of the project is economically justifiable despite the lower traffic volume. The higher EIRR for UKH was mainly due to cost savings and on time completion. It is suggested that the project should have had better cost estimate and traffic origin- destination survey during the feasibility study stage. Probabilistic Risk Analysis (Economic Simulation) 28. To determine the degree of the project uncertainty, a probabilistic risk analysis using Monte Carlo techniques was carried out. In a Monte Carlo analysis, each uncertain factor is allowed to vary at random between set limits and all uncertain factors are allowed to change simultaneously. The Monte Carlo simulation provides probability distributions of the potential outcomes of decisions. By analyzing these distributions, it is possible to assess the risk associated with making various decisions (or probabilistic risk analysis). The product of the analysis is a judgment on the possible range of the decision variable and on the likelihood of each value within this range. 29. For the HMP, the sum of capital costs constitutes less than 15 percent of the total capital investment. In view of the higher EIRR and lower capital investment of the HMP, the probabilistic risk analysis for the project focused on the construction of the UKH and its four link roads. The most uncertainty factors associated with the economic evaluation were identified as the traffic growth rate and the value of VOC. The results of the probabilistic risk analysis for the project show that the EIRR for the most likely scenario is 24.1 percent. The worst- case scenario of the analysis is 16.9 percent and for the best case scenario, 31.4 percent. The standard error of the mean is 0.4 percent. The results of the Monte Carlo test and probabilistic analyses (Appendix A) are summarized in the following table. - 32 - Summary of Probabilistic Risk Analysis Range of EIRR Most likely EIRR Standard error of the mean UKH 16.8% ~ 31.4% 23.9% 0.4% The four link roads 10.2% ~ 25.7% 17.5% 0.4% Total 16.9% ~ 31.4% 24.1% 0.4% FINANCIAL EVALUATION 30. The financial evaluation of the project is comprised of three sections: (a) an assessment of the revenue- earning entity (the UKH and the four link roads), focusing on consolidated financial statements; (b) an assessment of the non-revenue-earning entity (HMP), focusing on financial risk in terms of construction, operation and maintenance; and (c) an assessment the financial capacity of XCD to sustain highway activities, focusing on the adequacy of funding allocations in road development plan in the region. The financial cost of capital is assumed to be 4.6 percent for the project (40 percent from the Bank at 4 percent and 60 percent from the grants at 5 percent). FINANCIAL EVALUATION OF TOLL HIGHWAY (the revenue- earning entity) 31. Operating entities have been established by XCD to operate the toll highway. The entities are responsible for the day to day management, operation, maintenance, and development of the highway. The toll charges are strictly controlled by the government. The toll charges forecast were assumed to be increasing once (15 percent) every five years (or an average of 2.8 percent p.a.). Financial Assessment 32. Tolls. The toll is charged on the basis of vehicle size (small vehicle, medium vehicle, large vehicle and extra large vehicle) and distance traveled. During 2000-2003, the Bank delivered the highway project completion report for seven Chinese provinces, including the Xinjiang Highway I Project. The toll rate for Xinjiang Highway II Project, although is higher than Xinjiang Highway I Project, but still only about 69 percent of the overall average toll charged by other highway projects. These toll charges are listed as below: - 33 - Highway Toll Charges (Y /Vehicle-km) Small Medium Large Heavy Extra Overall vehicle vehicle vehicle vehicle large average Xinjiang II (a) 0.250 0.375 0.500 1.000 -- 0.531 Other highway projects: 1. Guangdong 0.450 0.900 1.462 2.138 -- 1.238 2. Zhejiang * 0.450 0.800 1.200 1.600 -- 1.013 3. Shanghai* 0.600 0.550 0.600 0.600 0.600 0.588 4. Hebei 0.280 0.460 0.740 0.930 0.5 Y/tkm 0.603 5. Henan 0.280 0.460 0.740 0.930 0.5 Y/tkm 0.603 6. Xinjiang I 0.200 0.350 0.400 0.800 -- 0.438 7. Shaanxi ** a. 0.431 0.689 0.819 1.121 -- 0.765 b. 0.338 0.540 0.675 0.946 -- 0.625 c. 0.293 0.440 0.733 1.026 -- 0.623 d. 0.625 1.250 1.875 2.500 -- 1.563 e. 0.294 0.441 0.588 0.735 -- 0.515 f. 0.412 0.619 0.825 1.031 -- 0.722 Shaanxi average 0.396 0.672 0.938 1.266 -- 0.818 Overall average (b) 0.388 0.625 0.888 1.196 -- 0.774 Ratios: (a)/(b) 64.5% 60.0% 56.3% 83.6% -- 68.6% *: Excludes the basic fees. **: Different highways using different tolls. Sources: XCD and the Bank staff 33. Operations. The operating costs of the UKH can be divided into working costs (wage and benefits; maintenance; operating materials and supplies; administration; others) and depreciation (the XCD make no depreciation reserves for highway which will lead to the underestimation of the total operation cost and causes the overestimation of the profit for the project). To reflect the total cost of operations, all the cost items have been included in this financial evaluation). For other expenses, including interest payments on the loan, are also taken into account in the calculation of the UKH profitability. 34. Profitability. The UKH will generate enough revenue over the project life. However, lower profits took place in 2000- 2002. The main reasons were that depreciation and repayment of the Bank loan started in 2002 and it created financial pressure on the UKH. In addition, because of the low toll growth assumptions, the rate of return on average net fixed assets for the early years of operation is low (Income Statements are available in the Project File). 35. Cash flow. The low toll growth assumption may cause lower profit, but it will not affect the cash flow of the UKH. This is because of the large sum of depreciation reserves. In 2002, for example, the total depreciation reserve (RMB 113.94 million) was 1.75 times higher than the total financial obligations (RMB 65.04 million), or equivalent to 5.15 times of total working costs in that year. The strong internal cash generation capacity will be able to provide sufficient funds to support the operations, loan repayments, even the major maintenance expenditures. On the basis of the revenue forecast, it is estimated that the UKH will not need any external cash injection over the life of the project (Sources and Applications of Funds are available in the Project File). 36. Leverage and Liquidity. The low profit in the early years of operation will not affect the financial leverage of the UKH because of the high proportion of equity (government grants weighted about 60 percent of the total project cost), which generates a healthy debt- to- equity ratio and debt- to- capital - 34 - ratio (the financial leverage of the entity) throughout the life of the project. Because there are not any current liabilities on the account, there are no short-term solvency or liquidity problem concerns (the Balance Sheet as well as the major assumptions for financial evaluation are available in the Project File). Financial Internal Rate of Return 37. Based on the present financial status, the UKH may not need any external financial assistance. However, the low profit margin produces a large negative impact on the financial internal rate of return (FIRR). The result of the financial evaluation for the UKH shows that the FIRR for the UKH will be -0.9 percent with a NPV (4.6 percent) of RMB -1,834.8 million. Sensitivity Analysis 38. The financial sensitivity analysis tested two scenarios: the higher traffic growth rate and the lower traffic growth rate for the UKH. The results for the traffic growth scenarios are shown in the following table. FINANCIAL SENSITIVITY ANALYSIS FIRR (in %) NPV (RMB million, 4.6%) Higher Traffic Growth Rate (+25) 2.2 -944.7 Lower Traffic Growth Rate (-25%) -4.6 -2,321.5 Project Risks 39. XCD completed the project on time with less cost. The field visit also confirmed that XCD can provide quality services to the road users while maintaining the roads in good condition. The only remaining tangible risks are the unforeseeable mixed factors (or degree of uncertainty) that will affect the results of the financial evaluation. This is discussed in the probabilistic risk analysis below. Probabilistic Risk Analysis (Financial Simulation) 40. To determine the degree of financial uncertainty for the project, a probabilistic risk analysis using Monte Carlo techniques was carried out. The three most uncertain factors that may affect the financial evaluation have been identified as traffic growth rate, toll level, and growth of total working costs. The risk analysis revealed that the most likely FIRR would be -1.2 percent, while the worst and the best FIRR would be -2.1 percent and -0.3 percent, respectively. Details are in Appendix B and summarized in the following table. Summary of Financial Sensitivity and Probabilistic Risk Analysis Financial Simulation and Risk Analysis Range of Most Likely Std. Error of FIRR / NPV FIRR / NPV The Mean FIRR (in %) -2.1 ~ -0.3 -1.2 0.0 NPV (4.6%, RMB million) - 2,101 ~ -1,678 -1,898 11.8 Scenario Analysis (Financial Alternatives) 41. There are two special features for the current Xinjiang highway's accounting practice: (a) the adoption of a low toll charge policy, because XCD has no intention of recovering any part of capital - 35 - investment if it is funded from the government, and (b) the treatment of all maintenance expenditures as a substitute for depreciation (they have no depreciation reserves for highway). Three financial scenarios have been tested on the bases of these two features. 42. The first scenario is to double the current toll charges. This would increase the toll charges to a level similar to the coastal provinces in China. The result shows, except for 2000- 2002, that UKH would be able pay all its expenses, including total daily operating cost, the full cost of depreciation and financial charges. The FIRR would expected to be 7.2%. 42. The second scenario is to not count the depreciation which is the current practice of Xinjiang highway. The result shows that UKH would be able pay all its operating expenses. But, due to the low toll policy, the FIRR of the project would be much lower than the first scenario (about 2.7%). 44. The third scenario is to combine the first and second scenarios by increasing the toll by 50% and charging only 50% of normal depreciation. The result shows that UKH would be able to balance its income statement after 2000. The FIRR would be 5.3%. 45. Comments: The first scenario (double the current toll charges) is a financially desirable solution because it has a very limited operating losses period (2000- 2002). With a full depreciation reserves, UKH will not require any forms of subsidies from XCD when the road needs rehabilitation in the future. The second scenario (without the depreciation) is a less financially desirable solution because the new highway may drain off its internal cash generation very quickly once it needs major repair works. The third scenario is a compromise between the first two. It limits the period of operating losses in 2000 and also covers part of depreciation. And yet, the highway toll level still remains on the lower side of all the Bank's financed Chinese highway projects. 46. Recommendations: Depreciation is the cost of fixed assets over its useful life. To some extent, maintenance may partially arrest or offset wear and deterioration, but not replace depreciation. For the long term development of UKH, it is recommended that XCD should consider reserving proper depreciation when it adjusts the toll rates from time to time. THE FINANCIAL EVALUATION OF HMP (the non-revenue-earning entity) 47. All of the 33 subcomponents under HMP are toll free roads. The financial evaluation of these non-revenue earnings entities focuses on the XCD's capacity to minimize financial risks, i.e., the lack of counterpart funds for construction and repairs, including the future operating expenses for the project roads. 48. XCD's budget (actual and forecasts) shows that the investment and maintenance expenditures for the HMP constitute only a small fraction of XCD's fund flow. Therefore the fiscal impact is minimal. Based on the available information, capital investment of HMP is less than 7.0 percent of the total annual XCD revenue. In addition, the required maintenance expenditure of HMP is less than 5.0 percent of the total maintenance expenditure of XCD. These low ratios indicate that the project presents a low financial risks regarding construction and maintenance of the project roads. Details (available in the Project File) are summarized in the following table: - 36 - XCD: Investments, Revenue and Maintenance Expenditures (RMB million) 1997 1998 1999 2000 2001 2002 2003 Investments and Revenue: HMP investments (a) 128.57 170.90 159.27 245.92 - - - Total revenue (b) 2,496.77 2,670.09 2,557.83 3,640.54 4,237.76 4,321.86 4,371.04 Ratios (a)/(b) 5.1% 6.4% 6.2% 6.8% - - - Maintenance Expenditures: HMP (c) - 4.04 9.68 14.50 23.92 25.28 30.60 Total maintenance expenditures (d) 238.50 238.95 341.79 400.60 530.20 576.00 716.12 Ratios (c)/(d) - 1.7% 2.8% 3.6% 4.5% 4.4% 4.3% Sources: XCD and the Bank staff. THE FINANCIAL EVALUATION OF XCD 49. XCD has provided its financing plan on total revenue and expenditures for the Ninth Five- Year Plan (9th FYP, 1996 - 2000) and the Tenth Five Year Plan (10th FYP, 2001 - 2005). According to the Xinjiang highway development plan, XCD has acquired sufficient funds to finance yearly increases in the length of the regional road network and has allocated resources for the maintenance of the existing road network. In addition, a moderate self-financing ratio (58.9 percent for the 10th FYP) will ensure the implementation of the highway development plan (details are available in the Project File). 50. To avoid a capital squeeze effect (i.e., limited annual capital resources forcing an emphasis on new road construction and reduced maintenance on existing roads), XCD has given special attention to road maintenance. As for the sustainability of road maintenance with the resources allocated to it, the average yearly increase in maintenance expenditures during the 9th FYP (10.4 percent) far exceeded the growth of the road network (2.1 percent), which means an increase in average maintenance expenditure per kilometer. A similar trend also is expected during the 10th FYP. XCD: Average Increase in the Road Network and Road Maintenance Expenditures (in %) 9th FYP 10th FYP (1996 - 2000) (2001 - 2005) Average annual increase in the road network 2.1 2.2 Average annual increase in maintenance expenditures 10.4 5.8 Sources: XCD and the Bank staff. - 37 - APPENDIX A EIRR SIMULATION AND PROBABILISTIC RISK ANALYSIS Summary: Display Range is from -10.0% to 60.0% (%) Entire Range is from -1.4% to 74.0% (%) After 1,150 Trials, the Std. Error of the Mean is 0.4% Statistics: Value Percentiles: Trials 1150 Percentile (%) Mean 24.7% 0% -1.4% Median 24.1% 10% 8.0% Mode --- Low Scenario 20% 12.7% Standard Deviation 13.1% 30% 16.9% Variance 1.7% Most Likely 40% 20.4% Skewness 0.40 50% 24.1% Kurtosis 3.08 High Scenario 60% 27.6% Coeff. of Variability 0.53 70% 31.4% Range Minimum -1.4% 80% 35.8% Range Maximum 74.0% 90% 41.2% Range Width 75.4% 100% 74.0% Mean Std. Error 0.39% Forecast: EIRR- Total the expressway 1,150 Trials Frequency Chart 11 Outliers .026 30 .020 22.5 .013 15 .007 7.5 .000 0 -10.0% 7.5% 25.0% 42.5% 60.0% (%) Assumptions Traffic growth rate VOC value Normal distribution with parameters: Triangular distribution with parameters: Mean 100.0% Minimum 90.0% Standard Dev. 10.0% Likeliest 95.0% Selected range is from -Infinity to +Infinity Maximum 110.0% Mean value in simulation was 99.8% Selected range is from 90.0% to 110.0% Mean value in simulation was 98.4% - 38 - APPENDIX B FIRR SIMULATION AND PROBABILISTIC ANALYSIS Summary: Display Range is from -6.0% to 4.0% (%) Entire Range is from -7.0% to 4.0% (%) After 1,200 Trials, the Std. Error of the Mean is 0.0% Statistics: Value Percentiles: Trials 1200 Percentile (%) Mean -1.3% 0% -7.0% Median -1.2% 10% -3.5% Mode --- Low Scenario 20% -2.7% Standard Deviation 1.7% 30% -2.1% Variance 0.0% Most Likely 40% -1.6% Skewness -0.18 50% -1.2% Kurtosis 2.90 High Scenario 60% -0.8% Coeff. of Variability -1.35 70% -0.3% Range Minimum -7.0% 80% 0.2% Range Maximum 4.0% 90% 0.8% Range Width 11.0% 100% 4.0% Mean Std. Error 0.05% Forecast: Xinjiang Highway II Project: FIRR 1,200 Trials Frequency Chart 7 Outliers .028 34 .021 25.5 .014 17 .007 8.5 .000 0 -6.0% -3.5% -1.0% 1.5% 4.0% (%) Assumptions Toll Charges Working Costs Triangular distribution with parameters: Triangular distribution with parameters: Minimum 90.0% Minimum 90.0% Likeliest 100.0% Likeliest 100.0% Maximum 110.0% Maximum 110.0% Selected range is from 90.0% to 110.0% Selected range is from 90.0% to 110.0% Mean value in simulation was 100.0% Mean value in simulation was 99.8% Traffic Growth Rate Normal distribution with parameters: Mean 100.0% Standard Dev. 10.0% Selected range is from -Infinity to +Infinity Mean value in simulation was 99.8% - 39 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 07/31/1994 3 TM, HE, ES 04/28/1995 4 TM, HE, ES, RS 08/02/1995 1 ES Appraisal/Negotiation 11/04/1995 6 TM, TE, ISTS, ES, RS, HSS 04/1996 6 TM, TE, ISTS, RS, HMS, OA Supervision 05/11/1997 6 TE, ISTS, 2 ES, TM, RS S S 11/19/1997 1 TM S S 09/21/1998 2 TM, ES S S 06/14/1999 5 TM, ES, HE, HS, HMS S S 07/15/2000 5 TM, HE, EE, RS, HC S S 11/04/2000 3 TM, RS, ISTS S S 05/23/2001 6 TM, ISTS, TE, EE, RS, HMS S S 11/17/2001 9 TM, TE, SDS, RS, ES, ISTS, S S HMS, PC, DS 05/06/2002 2 TM, RS S S 11/08/2002 7 TM, ES, SDS, RS, HC, PC, DS S S 04/16/2003 3 TM, ISTS, HMS S S ICR 11/17/2003 5 TM, ES, SDS, HE, FA S S EE=Environmental Engineer; ES=Environmental Specialist; HE=Highway Engineer; HMS=Highway Maintenance Specialist; HSS=Highway Safety Specialist; ISTS=Institutional Strengthening/Training Specialist; OA=Operational Assistant; PC=Procurement Specialist; RS=Resettlement Specialist; SDS=Social Development Specialist; TM=Task Manager (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 36.9 145.5 Appraisal/Negotiation 16.1 58.5 Supervision 79.5 344.7 ICR 5.0 10.0 Total 137.5 558.7 At appraisal - 40 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Resettlement Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA Traffic Safety - 41 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 42 - Annex 7. List of Supporting Documents The World Bank, Staff Appraisal Report, Second Xinjiang Highway Report, August 30, 1996. The World Bank, Project Agreement (Second Xinjiang Highway Project) between People's Republic of China and IBRD, January 23, 1997. The World Bank, Memorandum and Recommendation of the President of the IBRD to the Executive Directors on the Proposed Loan in an Amount of $300 Million to the People's Republic of China for the Second Xinjiang Highway Project, August 30, 1996. Xinjiang Highway Grade Highway Construction Authority, Implementation Completion Report with Annexes, March 2004. Project Implementation Office, High-Grade Highway Construction Quarter of Xinjiang Uygur Autonomous Region, Xinjiang Highway Project-II Resettlement Summary Report, May 2002. Xinjiang Highway Grade Highway Construction Authority, Measurement of Economic Losses of Traffic Accidents at Black Spots Along Main Highways in Xinjiang, October 2000. Xinjiang Uygur Autonomous Region, Xinjiang Highway Project, Resettlement Summary Report, May 2002. Xinjiang Uygur Autonomous Regions, Xinjiang Communications Department, Study of Training Needs and Resources, Final Report, December, 2003. Institute of Comprehensive Transportation of the State Planning Commission, Development of the Transport System between Xinjiang and the neighboring Provinces and Countries & Related Policies, June 1997. The World Bank, Economic and Financial Re-Evaluation with Annexes, March 2004. - 43 - - 44 -