Page 1 CONFORMED COPY LOAN NUMBER 7880-CN Project Agreement (Ningxia Highway Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NINGXIA HUI AUTONOMOUS REGION Dated July 22, 2010 Page 2 PROJECT AGREEMENT AGREEMENT dated July 22, 2010, entered into between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ( “Bank”) and NINGXIA HUI AUTONOMOUS REGION (“Ningxia” or “Project Implementing Entity”) (“Project Agreement”) in connection with the Loan Agreement (“Loan Agreement”) of same date between PEOPLE’S REPUBLIC OF CHINA (“Borrower”) and the Bank. The Bank and Ningxia hereby agree as follows: ARTICLE I – GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to the Loan Agreement) constitute an integral part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Loan Agreement or the General Conditions. ARTICLE II – PROJECT 2.01. Ningxia declares its commitment to the objectives of the Project. To this end, Ningxia shall: (a) carry out the Project in accordance with the provisions of Article V of the General Conditions; and (b) provide promptly as needed, the funds, facilities, services and other resources required for the Project. 2.02. Without limitation upon the provisions of Section 2.01 of this Agreement, and except as the Bank and Ningxia shall otherwise agree, Ningxia shall carry out the Project in accordance with the provisions of the Schedule to this Agreement. ARTICLE III – REPRESENTATIVE; ADDRESSES 3.01. Ningxia ’s Representative is the Governor or Vice Governor or such other person or persons as the Governor or Vice Governor shall designate in writing. 3.02. The Bank’s Address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Page 3 - 2 - Cable: Telex: Facsimile: INTBAFRAD 248423(MCI) or 1-202-477-6391 Washington, D.C. 64145(MCI) 3.03. Ningxia ’s Address is: Finance Department 416 Jiefang West Street, Yinchuan City Ningxia Hui Autonomous Region People’s Republic of China Facsimile: 0951-5069404 AGREED in Beijing, People’s Republic of China, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Klaus Rohland Authorized Representative NINGXIA HUI AUTONOMOUS REGION By /s/ Wang Zhengwei Authorized Representative Page 4 - 3 - SCHEDULE Execution of the Project Section I. Implementation Arrangements A. Institutional Arrangements 1. Ningxia shall maintain, at all times during the implementation of the Project, FDMLGO, NTD, PMO, NHCAB, NHAB and NTAB, with terms of reference, powers, functions, and resources satisfactory to the Bank, and competent staff in adequate numbers, for the purpose of assisting in implementing the Project. 2. Ningxia shall cause NTD to: (a) implement, through NHCAB, construction of the Expressway under Part A of the Project, including coordination and supervision of procurement, construction and contract management; (b) carry out, through NHCAB, improvement of local roads under Part B.1 of the Project and improvement of national highway G211 under Part B.2 of the Project, including coordination and supervision of procurement, construction and contract management; (c) carry out the institutional strengthening activities under Part C of the Project, including the selection of consulting services and contract management, through the PMO in coordination with NHAB, NTAB and NHCAB; and (d) manage and coordinate the overall implementation of the Project through the PMO. 3. Ningxia shall operate and maintain the facilities constructed under the Project through NHAB except for smaller size rural roads under Part B.1 of the Project which shall be operated and maintained by the relevant municipalities and counties, all under arrangements satisfactory to the Bank. B. Anti-Corruption 1. Ningxia shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. Page 5 - 4 - C. Safeguards 1. Ningxia shall in the carrying out of the Project implement or cause to be implemented the RAP, the RPF, each RP, the EMP, the ESF and each EP, all in a manner and substance satisfactory to the Bank. Without limitation to the foregoing Ningxia shall: (a) take, all necessary actions to minimize to the extent possible the acquisition of land or assets of people, any involuntary loss by persons of shelter, productive assets or access to productive assets or income or means of livelihood, temporarily or permanently, and the displacement of said people in the carrying out the Project or any Part thereof; (b) where the acquisition of land or assets or the displacement of people is unavoidable, before initiating the implementation of any works which would result in such acquisition or displacement, provide to such people compensation and, as applicable, relocate and rehabilitate the displaced people in permanent sites with adequate facilities, including providing all related assistance required in respect thereof, based on adequate consultation with said people all in accordance with the RAP, the RPF and each RP, and in a manner satisfactory to the Bank; in those instances where said relocation and rehabilitation assistance provided are of a transitory nature, make arrangements prior to implementing any such works for the permanent and adequate relocation and rehabilitation of such people based on adequate consultation with said people in accordance with the RAP, the RPF and each RP, and implement such arrangements in a manner and in accordance with a time schedule satisfactory to the Bank; 2. Ningxia shall, prior to carrying out any works under Part B.1 of the Project related to the rehabilitation and upgrading of any other local roads that may later be included in the LRIP during Project implementation, prepare a RP pursuant to the RPF, carry out an environment impact assessment under terms of reference satisfactory to the Bank, and prepare an EP pursuant to the ESF satisfactory to the Bank, and shall implement such RP and EP in a manner satisfactory to the Bank. 3. Ningxia shall not amend, suspend, fail to enforce or waive the RAP, the RPF, any RP, the ESF, the EMP or any EP, or any provision of any such document, without the prior concurrence of the Bank. 4. Ningxia shall: (a) carry out measures satisfactory to the Bank for improving the living standard of Displaced Persons affected by the implementation of the Project in accordance with the provisions of the RAP, the RPF and each RP; and (b) include appropriate and adequate provisions in the contracts entered into for implementing the Project to ensure the fulfillment of the requirements set out in the Page 6 - 5 - EMP and any EP together with specification of sanctions to be imposed or other measures to be taken for failure to carry out said requirements. 5. Ningxia shall monitor and evaluate, on a semi-annual basis, through independent consultants or other agencies satisfactory to the Bank, under terms of reference satisfactory to the Bank, compliance with the implementation of the RAP, the RPF, the EMP and the ESF as well as any RP and EP and provide to the Bank written reports of findings and recommendations within forty-five (45) days of each semi- annual monitoring review detailing the measures, if any, to be taken to improve compliance with the implementation of said documents; provided, however, that after the completion of all activities under the RAP, the RPF and any RP, said monitoring and reporting shall take place on an annual basis. Ningxia shall implement the measures recommended in the reports referred to in this paragraph, as may be approved by the Bank, in a manner satisfactory to the Bank. D. LRIP Assessment, Training and Studies 1. Ningxia shall: (a) carry out under terms of reference satisfactory to the Bank: (i) an assessment of the social impacts of the LRIP and furnish the completed assessment to the Bank by December 31, 2014; and (ii) the studies referred to in Part C.1(a) of the Project and furnish the completed studies to the Bank no later than December 31, 2014; (b) taking into account the Bank ’s review and comments thereon, prepare and finalize action plans satisfactory to the Bank, within forty-five (45) days of receiving the Bank’s comments, to implement the recommendations of said assessment and studies; and (c) implement said action plans in a manner satisfactory to the Bank. 2. Ningxia shall carry out training activities under Part C.1(b) of the Project in accordance with an annual training program satisfactory to the Bank. Section II. Project Monitoring, Reporting and Evaluation A. Project Reports 1. Ningxia shall monitor and evaluate the progress of the Project and prepare Project Reports for the Project in accordance with the provisions of Section 5.08(b) of the General Conditions and on the basis of the indicators set forth in the Annex to this Schedule. Each such Project Report shall cover the period of one (1) calendar Page 7 - 6 - semester, and shall be furnished to the Bank not later than forty-five (45) days after the end of the period covered by such report. 2. Ningxia shall provide to the Borrower not later than three (3) months after the Closing Date, for incorporation in the report referred to in Section 5.08(c) of the General Conditions all such information as the Borrower or the Bank shall reasonably request for the purposes of that Section. 3. Without limitation to the foregoing, Ningxia shall: (a) by February 15 and August 15 of each year, starting with February 15, 2011, furnish to the Bank semi- annual progress reports on implementation of the Project prepared in accordance with terms of reference satisfactory to the Bank; and (b) based on the recommendations of said reports and the Bank’s reviews and comments thereon, take actions, satisfactory to the Bank, to address any emerging implementation issues in order to ensure efficient, timely and effective implementation of the Project and to further the objectives thereof. B. Financial Management, Financial Reports and Audits 1. Ningxia shall maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, in a manner adequate to reflect the operations, resources and expenditures related to the Project. 2. Without limitation on the provisions of Part A.1 of this Section, Ningxia shall prepare and furnish to the Bank as part of the Project Report not later than forty-five (45) days after the end of each calendar semester, interim un-audited financial reports for the Project covering the calendar semester period of each Project Report, in form and substance satisfactory to the Bank. 3. Ningxia shall have its financial statements referred to above audited by independent auditors acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank. Each audit of these financial statements shall cover the period of one (1) fiscal year of Ningxia. The audited financial statements for each period shall be furnished to the Borrower and the Bank not later than six (6) months after the end of the period. 4. Ningxia shall carry out the Project in accordance with the provisions of the Financial Management Manual. Ningxia shall implement said Manual in a manner satisfactory to the Bank and shall not amend, abrogate, repeal, waive or fail to enforce any provision of said Manual. Page 8 - 7 - Section III. Procurement All works and services required for the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Section III of Schedule 2 to the Loan Agreement and as further elaborated in the Procurement Plan. Ningxia shall not amend, suspend, abrogate or waive the Procurement Plan or any provision thereof without the prior approval of the Bank. Page 9 - 8 - ANNEX Performance Monitoring Indicators Results Framework PDO Project Outcome Indicators Use of Project Outcome Information The objective of the Project is to provide high-capacity and quality transport connections between targeted development zones and urban areas in Ningxia, as well as develop all-weather road access in selected rural areas of Ningxia Traffic volume along the Expressway (GQE) corridor Increased rural population with access to all-weather road Assess impact of improved road network and effective transfer of benefits to road users Intermediate Objectives Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Part A (1) Enhanced travel conditions between the east-west regions, linking its key industrial, administrative and hub cities. Reduced average travel times between Qingtongxia and Guyaozi Reduced accident rates on corridor after opening of GQE Evaluate level of use of upgraded of road conditions along GQE corridor, in a faster and safer manner Part B (2) Improved accessibility to poor counties. (3) Improved travel and safety conditions along NHG211 Traffic volumes on rural roads increased Reduced average travel time and increase accessibility with road rehabilitation efforts. Reduced accident rates on National Highway G211 Assess level of use of upgraded infrastructure, including the provision of accessibility to social services and economic activities and reduction of traffic accidents Part C (4) Enhanced knowledge and application of road safety management and transport services. Traffic safety improvement action plan established and applied in selected corridors Framework and action-plan to improve the efficiency of transport services established. Assessment on Ningxia road maintenance completed and recommendations on sustainability provided. Effective completion of training programs. Verify the impact of capacity building at NTD and demonstrate application of the recommendations from technical assistance in provincial’s policies, investments, or work programs. Page 10 9 A r r a n g e m e n t s f o r r e s u l t s m o n i t o r i n g T a r g e t V a l u e s D a t a C o l l e c t i o n a n d R e p o r t i n g P r o j e c t O u t c o m e I n d i c a t o r s U n i t s B a s e - l i n e Y R 1 Y R 2 Y R 3 Y R 4 Y R 5 F r e q u e n c y a n d R e p o r t s D a t a C o l l e c t i o n I n s t r u m e n t s R e s p o n s i b i l i t y f o r D a t a C o l l e c t i o n T r a f f i c v o l u m e a l o n g G Q E T r a f f i c v o l u m e a l o n g e x i s t i n g r o a d s G u y a o z i – L i n g w u L i n g w u – W u z h o n g W u z h o n g – Q i n g t o n g x i a P C U 6 9 6 7 1 5 4 8 1 4 2 5 4 1 3 1 7 0 5 5 0 0 1 4 0 0 8 6 0 0 A n n u a l T r a f f i c S u r v e y N T D I n c r e a s e d n u m b e r o f r u r a l p e o p l e w i t h a c c e s s t o a l l - w e a t h e r r o a d i n p r o j e c t a f f e c t e d a r e a s N u m b e r 0 2 4 0 , 0 0 0 A n n u a l A n n u a l S u r v e y N T D P a r t A ( 1 ) E n h a n c e d t r a v e l c o n d i t i o n s b e t w e e n t h e e a s t - w e s t r e g i o n s , l i n k i n g i t s k e y i n d u s t r i a l , a d m i n i s t r a t i v e a n d h u b c i t i e s T r a v e l t i m e s o n G Q E h o u r s 2 0 . 8 A n n u a l T r a f f i c S u r v e y N T D A c c i d e n t r a t e a l o n g G Q E c o r r i d o r L i n g w u - G 3 0 7 W u z h o n g - W u l i n g q i n g A c c i d e n t s ( f a t a l ) p e r y e a r 1 2 ( 3 ) 8 ( 1 ) 9 ( 2 ) 6 ( 1 ) A n n u a l T r a f f i c S u r v e y s T r a f f i c P o l i c e D e p a r t m e n t Page 11 1 0 P r o j e c t O u t c o m e I n d i c a t o r s U n i t s B a s e - l i n e Y R 1 Y R 2 Y R 3 Y R 4 Y R 5 F r e q u e n c y a n d R e p o r t s D a t a C o l l e c t i o n I n s t r u m e n t s R e s p o n s i b i l i t y f o r D a t a C o l l e c t i o n P a r t B ( 2 ) I m p r o v e n e t w o r k s a n d a c c e s s i b i l i t y t o p o o r c o u n t i e s . T r a f f i c V o l u m e s o n s e l e c t e d r u r a l r o a d s ƒ S h a b a t o u - N o n g c h a n g 2 ƒ M a j i a t a n z h e n - d a y a n g q i c u n ƒ W a n g l e j i n g - N i u m a o j i n g ƒ D a o d u n z i – W a n g c h a o l i n g ƒ N a n l i a n g - L i z h u a n g z i ƒ L i u j i a p u - L i j i a g o u ƒ H o n g x i n g - Y a n g l i u ƒ S 1 0 1 – Y u j i a l i a n g ƒ G a o x i n g - X i n s h e n g P C U 2 2 7 1 8 0 4 0 0 1 8 0 3 4 0 2 0 0 2 2 0 3 6 0 3 0 0 3 5 0 2 8 0 6 4 0 2 8 0 5 2 0 3 1 0 3 4 0 5 5 0 4 6 0 A n n u a l S u r v e y N T D N T D A v e r a g e T r a v e l T i m e ƒ S h a b a t o u - N o n g c h a n g 2 ƒ M a j i a t a n z h e n - d a y a n g q i c u n ƒ W a n g l e j i n g - N i u m a o j i n g ƒ D a o d u n z i – W a n g c h a o l i n g ƒ N a n l i a n g - L i z h u a n g z i M i n u t e s 1 8 3 3 6 0 5 0 3 3 1 5 2 7 5 1 4 2 2 8 A n n u a l S u r v e y N T D N T D Page 12 1 1 ƒ L i u j i a p u - L i j i a g o u ƒ H o n g x i n g - Y a n g l i u ƒ S 1 0 1 – Y u j i a l i a n g ƒ G a o x i n g - X i n s h e n g 3 0 3 6 1 9 2 2 2 5 3 0 1 6 1 9 A c c i d e n t r a t e s o n N H G 2 1 1 A c c i d e n t s ( f a t a l ) p e r y e a r 1 3 ( 5 ) 1 0 ( 3 ) A n n u a l T r a f f i c S u r v e y s T r a f f i c P o l i c e D e p a r t m e n t P a r t C ( 3 ) E n h a n c e d m a n a g e m e n t a n d u t i l i z a t i o n o f t h e r o a d n e t w o r k E s t a b l i s h m e n t o f T r a f f i c s a f e t y i m p r o v e m e n t a c t i o n p l a n a n d a p p l i c a t i o n i n s e l e c t e d c o r r i d o r s T r a f f i c s a f e t y i m p r o v e m e n t a c t i o n p l a n e s t a b l i s h e d A c t i o n s a p p l i e d i n s e l e c t e d c o r r i d o r s A n n u a l P r o j e c t P r o g r e s s R e p o r t N T D E s t a b l i s h m e n t o f F r a m e w o r k a n d a c t i o n - p l a n t o i m p r o v e t h e e f f i c i e n c y o f t r a n s p o r t s e r v i c e s F r a m e w o r k a n d A c t i o n p l a n e s t a b l i s h e d A n n u a l P r o j e c t P r o g r e s s R e p o r t N T D C o m p l e t i o n o f R o a d M a i n t e n a n c e A s s e s s m e n t a n d l o n g - t e r m R o a d M a i n t e n a n c e S t r a t e g y A s s e s s m e n t c o m p l e t e d S t r a t e g y f i n a l i z e d A n n u a l P r o j e c t P r o g r e s s R e p o r t N T D Page 13 1 2 P r o j e c t O u t c o m e I n d i c a t o r s U n i t s B a s e - l i n e Y R 1 Y R 2 Y R 3 Y R 4 Y R 5 F r e q u e n c y a n d R e p o r t s D a t a C o l l e c t i o n I n s t r u m e n t s R e s p o n s i b i l i t y f o r D a t a C o l l e c t i o n T r a i n i n g a n d S t u d y P r o g r a m s D o m e s t i c # T r a i n e d % S a t i s f i e d 1 O v e r s e a s # T r a i n e d % S a t i s f i e d n u m b e r p e r c e n t n u m b e r p e r c e n t 6 0 8 0 % 2 0 8 0 % 1 3 0 8 0 % 5 0 8 0 % 2 0 0 8 5 % 7 0 8 5 % 2 7 0 8 5 % 1 0 0 8 5 % 3 3 1 8 5 % 1 2 0 8 5 % E a c h t r a i n i n g o r s t u d y t o u r S u r v e y f o r m s N T D 1 T h e p e r c e n t s a t i s f i e d w i l l b e d e t e r m i n e d b a s e d o n f o r m s t o b e f i l l e d o u t u p o n c o m p l e t i o n o f t h e t r a i n i n g o r s t u d y t o u r Page 14 13