Project Administration Memorandum. Project Number: Loan Number: 2181 July PRC: Central Sichuan Roads Development Project

Transcription

1 Project Administration Memorandum Project Number: Loan Number: 2181 July 2006 PRC: Central Sichuan Roads Development Project

2 CURRENCY EQUIVALENTS (as of 31 August 2005) Currency Unit yuan (CNY) CNY1.00 = $ $1.00 = CNY The exchange rate of the yuan is determined under a floating exchange rate system. In this report, a rate of $1.00 = CNY8.277, the rate prevailing at appraisal for the Project, was used. ABBREVIATIONS ADB Asian Development Bank CDC center for disease control EIA environmental impact assessment EMP environmental management plan EIRR economic internal rate of return EMDP ethnic minority development plan FIRR financial internal rate of return GDP gross domestic product ha hectare HIV/AIDS human immunodeficiency virus/acquired immunodeficiency syndrome JBIC Japan Bank for International Cooperation km kilometer LIBOR London interbank offered rate MOC Ministry of Communications O&M operation and maintenance pcu passenger car unit PRC People s Republic of China PCR project completion report PPMS project performance management system SPCD Sichuan Provincial Communications Department SPG Sichuan provincial government SDAP social development action plan m 2 square meter TA technical assistance TAB transportation administration bureau VOC vehicle operating cost NOTES (i) (ii) The fiscal year (FY) of the Government ends on 31 December. In this report, "$" refers to US dollars.

3 CONTENTS Page i] I. PROJECT DESCRIPTION A. Project Area and Location 1 B. Objectives and Scope 1 C. Project Components 1 D. Special Features 2 II. COST ESTIMATES AND FINANCING PLAN A. Detailed Cost Estimates 3 B. Financing Plan 4 C. Allocation of Loan Proceeds 4 III. IMPLEMENTATION ARRANGEMENTS A. Executing and Implementing Agencies 5 IV. IMPLEMENTATION SCHEDULE 5 V. CONSULTANT RECRUITMENT 5 VI. PROCUREMENT 6 VII. DISBURSEMENT PROCEDURES 6 VIII. PROJECT MONITORING AND EVALUATION 6 IX. REPORTING REQUIREMENTS 7 X. AUDITING REQUIREMENTS 7 XI. MAJOR LOAN COVENANTS 7 XII. KEY PERSONS INVOLVED IN THE PROJECT 7 XIII. ANTICORRUPTION 8 APPENDIXES

4 LOAN PROCESSING HISTORY [Page ii] Date(s) a. Approval of project or program preparatory technical assistance, if any 18 Dec 2003 b. Feasibility study c. Fact-finding 24 Jan Feb 2005 d. Management review meeting (MRM) 11 Mar 2005 e. Appraisal mission Mar 2005 f. Staff review committee (SRC)/loan and technical assistance coordination 25 Apr 2005 committee (LTACC) g. Loan negotiations Aug 2005 h. Board circulation 1 Sep 2005 i. Board consideration and approval 22 Sep 2005 j. Loan agreement signing 3 Apr 2006 k. Cofinancing arrangement finalized and agreements signed, if any l. Loan effectiveness, including conditions (include available dates) 12 Jul 2006

5 DESIGN AND MONITORING FRAMEWORK [Page iii] Design Summary Impact An integrated road transport system supports sustainable economic growth in Sichuan Province Performance Targets/Indicators Gross domestic product (GDP) in the project area increased from 7% to 9% during Per capita rural income in the project area increased from CNY1,900 in 2004 to CNY3,400 in The poverty incidence in the project area reduced from 29% in 2004 to 10% in Access to social services, including schools and hospitals, improves. Data Sources/Reporting Mechanisms Statistics office at the provincial and county levels Project performance management system (PPMS) at inception, completion, and 3 years thereafter, with emphasis on socioeconomic improvement impacts Assumptions and Risks Assumptions Government investment projects are implemented as planned. Complementary activities are implemented. The Government is committed to reducing poverty in the western region based on the Western Development Strategy. Outcome Road transport efficiency and safety improved in the project area for the expressway and local roads The road system in Sichuan comprises expressways (1,758 km), class-i to class-iv road (74,643 km), and unclassified (36,642 km). The road network expands by 4% annually. Traffic volume for the expressway increases from 10,615 passenger car units (pcu) in 2011 to 20,495 pcu in Travel time for the expressway is reduced by 6 hours after the Project. Travel distance is reduced by 91 km after the Project. Bus fare and freight charges are reduced by 10% by Road accidents and fatalities in the project area are reduced by 20% by Annual reporting by the Sichuan Provincial Communications Department (SPCD) Collection of actual traffic volume data at the expressway through its automonitoring system by SPCD Traffic counts and travel time survey for the expressway by SPCD Monitoring of fares and rates by SPCD Accident statistics from the Public Security Bureau and hospitals SPCD s and local government s investment in the road sector is implemented as planned. Assumptions Assumed economic growth rates materialize. Transport operators and drivers realize the benefit of using expressways. SPCD demonstrates the capacity to implement the Project. High transport cost constrains economic activities and availability of social services. A better traffic enforcement and effective public awareness campaign promotes road safety. Road access improves, from 71% with paved road for townships and 17% for villages in 2004, to 100% and 90%, respectively, by Monitoring of accessibility by local communications bureaus Risks The nationwide road safety program may not be implemented effectively. Local communications bureaus may not have sufficient budget to implement the road development plan.

6 Design Summary Outputs 1. Road infrastructure and associated equipment and facilities improved along the expressway between Ya an and Lugu Performance Targets/Indicators Bus service will increase, from 76% for townships and 33% for villages in 2004, to 100% and 90%, respectively, by An economic internal rate of return (EIRR) is maintained at 15.2%. Road capacity increases to 55,000 pcu per day at opening in 2011 by building a 244 km expressway. Vehicle operating cost savings account for 78% of the total economic benefits. Safety audits are implemented during project design and construction. Equipment is procured and installed for road safety, toll collection, communications, traffic management, and vehicleweighing stations. A land acquisition and resettlement plan is implemented. About 1,466 hectares (ha) of land is acquired, adversely affecting about 20,237 people, of whom about 2,634 are resettled. The welfare of those resettled is established to at least the same level as before land acquisition. Income is restored and compensation awarded. The environment at the project site is protected and adverse environmental impacts are minimized by mitigation measures included in the environmental impact assessment (EIA) and summary EIA. Mitigation measures are included in civil works contracts. Data Sources/Reporting Mechanisms Bus service data to be monitored by SPCD Reevaluation of the EIRR at a midterm review report and a project completion report (PCR) PPMS and PCR Direct measures of vehicle operating costs by SPCD Progress reports (PRs) and PCR Project administration missions (PAMs), PRs, and PCR Regular resettlement monitoring by an independent institute engaged by SPCD Regular monitoring by an independent institute engaged by SPCD during resettlement, at completion, and 2 years after Environmental monitoring reports, PAMs, and PCR Assumptions and Risks Assumptions Rural road infrastructure is improved according to the government s plan. Demand forecast materializes and there is no cost overrun. Risk Construction of tunnels may be delayed due to its complexity. Assumption Vehicle operating cost savings are passed onto road users through a competitive environment among road transport providers. Risk SPCD may not implement the safety audit recommendations. Assumptions Equipment procurement and installation are completed at project opening. Adequate land for new house sites is available in villages for resettlement. Risk Compensation may not be paid according to the resettlement plan. Assumption Project-affected people are able to restore their living standards. Risk Incomes may not be restored to pre-project levels. Assumptions Mitigation measures are adequate to address environmental impacts. SPCD and the contractors are committed to implement mitigation measures.

7 Design Summary 2. Road infrastructure and associated facilities improved for the local roads in the project area 3. Public transport centers rehabilitated in the project area 4. Corporate governance promoted in expressway operations in Sichuan 5. SPCD and domestic consultant capacity strengthened in project management, quality control, road safety, and monitoring and evaluation a Performance Targets/Indicators Minority people s welfare is protected and the Project s adverse impacts are minimized by an ethnic minorities development plan (EMDP). HIV/AIDS a and health risks for construction workers and service providers are controlled. Indicators include number of clinics, number of patients, number of posters, and number of tests. 678 km of local roads are upgraded in the project area. Road capacity is increased to 400 2,000 pcu per day for class IV, and to ,000 pcu per day for class II when the local roads open. Four public transport centers are completed, each having a capacity of 5,000 passengers per day. Expressway operations are separated from provincial government functions. The concession framework agreement is signed by 31 December 2007, and a corporate development plan prepared by 31 December The debt equity ratio does not exceed 55:45; the working ratio is not more than 15%; the debt service coverage ratio is not less than 1.2; and the financial internal rate of return is 5.4%. 53 person-months of international training will be provided for SPCD staff. Survey techniques are adopted to assess changes in work practices and behavior to measure the effectiveness of the capacity-building component. Data Sources/Reporting Mechanisms Monitoring reports of the EMDP, PAMs, and PCR Monitoring by the Health Bureau PPMS and PCR PPMS and PCR PRs and PCR Human immunodeficiency virus/acquired immunodeficiency syndrome. Midterm review missions and PCRs Midterm review missions and PCR Financial statements of the expressway, midterm review, and PCR A report by international consultants on the capacitybuilding component, including participants, subject areas, feedback from participants, and new skills applied by trainees Assumptions and Risks Mitigation measures are adequate to address impacts on minority communities. SPCD is committed to implement mitigation measures. Risk The capacity of the Health Bureau may not be sufficient to implement mitigation measures. Assumptions SPCD has the capacity to coordinate with local governments the timely implementation of local roads. Quality facilities are completed on time. Risk Adequate transport services may not be available in rural areas. Assumptions Demand for bus services is adequate. Provincial government approval will be given on time. Risk SPCD may interfere in expressway operations. Assumptions The revenue forecast materializes as envisaged, and the Project is implemented without cost overrun or implementation delays, including approval of project toll rates. Consultants are recruited on time and provide good training to SPCD. Trainees apply in their daily work what they have learned.

8 Activities with Milestones 1. Expressway civil works Civil works contracts awarded by April 2006 and completed by September Equipment Road operating equipment procured by September Resettlement Resettlement completed by December Consulting and training Consultants recruited by April 2006 and their work completed services by September Local roads Civil works contracts awarded by April 2006, and completed by September 2011 Inputs Asian Development Bank: $600 million, of which: $506.9 million for civil works $2.1 million for consultants $18.9 million for contingencies $72.1 million for interest and other charges Ministry of Communications: $272 million SPCD: $660 million China Development Bank: $545 million

9 A. Project Area and Location I. PROJECT DESCRIPTION 1. Sichuan is in southwestern PRC, surrounded by mountains. Its isolation has been reduced by improved navigation on the Yangtze River, railway construction, and the construction of several major highways. Most of the population is concentrated on the flat, fertile plain in the east and central east, but the province contains several poverty-stricken areas in its mountainous periphery, where the Project is located. Despite rapid development in recent years, Sichuan ranks seventh lowest of all provinces in terms of gross domestic product (GDP) per capita: CNY7,514 in 2004, or 72% of the national average. The per capita rural income was CNY2,580, or 88% of the national average. About one third of the counties are officially designated as poor. There are 282,500 poor people in the project area, equivalent to 29% of the total population, living below the income levels of CNY900 per year in rural areas and the minimum living standards in urban areas. 2. Based on the findings of the feasibility study under an ADB-financed technical assistance (TA), 1 one reason for high poverty is slow economic growth, partly because of inadequate infrastructure. Despite the considerable investments, the road network in the project area is still inadequate and does not provide efficient transport access to markets and social services such as education and health. Around 30% of villages in Hanyuan and Mianning still have no road access. Over the whole project area, over 60% of villages have paved road access but only one third have bus services. The proportions in Shimian and Mianning are much lower, with under a quarter of villages having paved road access and less than 20% having bus services. In the last 3 years, local governments have improved access to 13 townships (10% of the total) and 29 villages (4%). These road improvements have led to the provision of bus services to these communities. Bus services are a vital element in the rural transport system of the project area due to low vehicle ownership. Despite these improvements, the quality of access to many villages remains unsatisfactory, with low-standard and poorly maintained roads often susceptible to closure due to landslides, flooding, and snow falls. Bus service to townships off the main roads is infrequent, with about only three or four trips per day. Between villages and townships, small buses operate where road conditions permit, but travel is mostly by small truck, foot, or horse. B. Objectives and Scope 3. The Project will develop an integrated road transport system to support sustainable economic development in Sichuan. Local roads will complement the expressway in bringing benefits to rural residents. The Project will (i) reduce traffic accidents and vehicle operating costs; (ii) improve access between Chengdu and Kunming, two major growth centers in southwestern PRC; (iii) provide additional transport capacity to accommodate growing traffic; (iv) improve access to jobs, markets, and social services; and (v) develop the capacity of local communications bureaus C. Project Components 4. The Project integrates the expressway and local roads in its design to benefit townships and villages. The Project has the following components: (i) construction of a 244 km, four-lane 1 ADB Technical Assistance to the People s Republic of China for Preparing the Central Sichuan Roads Development Project. Manila.

10 2 access-controlled toll expressway from Ya an to Lugu, including access roads, interchanges with toll stations, tunnels, bridges, administrative stations, and service areas; (ii) upgrading of 678 km of local roads to improve access to poor remote areas, and roadside stations; (iii) rehabilitation of four public transport centers; (iv) procurement of equipment for road maintenance, toll collection, surveillance and communications, tunnel operation facilities, vehicle weigh stations, road safety, and office administration; (v) land acquisition and resettlement; (vi) consulting services for construction supervision, road safety audit, monitoring and evaluation, and capacity building; and (vii) developing capacity of local communications bureaus for maintenance. D. Special Features 5. Public Transport Center. Because of the poor road infrastructure in the project area, public transport service is inadequate, given the limited routes and bus service in remote poor areas. Many towns and villages with poor or no road access still have no direct bus service. For example, only 63% of towns are served by bus in Mianning county. Bus service in villages is even more limited, from 17% in Mianning to 50% in Hanyuan county. No cross-county routes provide direct connections across township boundaries without going through township centers. In order to provide poor, remote areas with better public transport services, Sichuan plans to develop 9 provincial public transport centers by 2015, with 90 county public transport centers, including rehabilitation of 4 that are included in the Project. Each center will have a handling capacity of 5,000 passengers per day, enable longer public transport routes that can reach towns and villages, improve the quality of service, reduce costs to users, and ensure more efficient use of bus fleet. 6. Intelligent Transport System. An intelligent transport system (ITS) 2 on expressways is being introduced in accordance with the national ITS architecture prepared by the National ITS Center. In Sichuan, an expressway ITS policy is being drafted to (i) introduce a network-wide expressway tolling system; (ii) reduce toll payment delay; (iii) improve safety through enhanced monitoring; (iv) improve traveler information; (v) assist in emergencies; and (vi) improve traffic enforcement, infrastructure maintenance, and computerized management of urgent incidents. The use of an ITS will be built into the Project through procurement of equipment and training and will be implemented with the help of the international consultants. ITS includes (i) fewer traffic control centers; (ii) advanced toll payment; (iii) variable message displays to improve driver information; (iv) use of surveillance technology; and (v) detection of blackspot locations and weather conditions; (vi) monitoring of speed limit, overloaded vehicles, and toll payment; and (vii) provision of current information to improve road safety (Appendix 1). 7. Asset Management. Expressway companies in Sichuan do not make significant use of modern techniques in their asset management and road maintenance programs. The Project Company will use a computerized database, which will have the following merits: (i) more robust decision making based on a greater pool of data, (ii) the ability to share information and experiences with external agencies, (iii) enhance professional skills, and (iv) better information to encourage policy makers to prioritize asset management and maintenance. A number of measures will be introduced with the help of the international consultants to facilitate implementation. They will meet three strategic objectives: (i) almost immediate: measures for 2 The application of the information technology to transport is referred to as ITS, which provides the ability to gather, organize, analyze, use, and share information about transport systems and their efficient use. ITS for developing countries was prepared by the World Bank (World Bank ITS for Developing Countries. ITS Technical Note 1. Washington, DC) and will be used as a guide.

11 3 implementation when the Project Company s organizational structure is put in place; (ii) short term: measures for implementation before expressway completion; and (iii) medium term: measures for implementation within the first 2 3 years of expressway operations. 8. Roadside Stations. Road projects have traditionally focused on expanding transport capacity to maximize economic impact. Achieving the Millennium Development Goals by developing transport requires innovative approaches that enhance the multisector and multipurpose dimensions of infrastructure investment. The Project s roadside stations 3 will link roads with community activities and encourage safe driving. Roadside stations normally provide parking areas and ancillary facilities such as bus terminals; gasoline stations; information centers about roads, road safety, and tourism; local specialty markets; restaurants; and agroprocessing facilities. Details of facilities will be firmed up during project implementation. The Project will develop roadside stations along the project local roads. Appendix 2 list the local road component under ADB and Government financing. 9. Stakeholder Consultations. During the feasibility study, EIA, resettlement planning, and TA implementation, consultations were conducted with 4,200 representatives of local government agencies, civil society, and project-affected people to discuss project alternatives, environmental concerns, land acquisition and resettlement issues, and economic development potential. The consultations indicated that local residents supported the Project because they would have better access to jobs, markets, and social services. These processes enabled local stakeholders to express their opinions, including on alignment selection, resettlement, and compensation, and to make suggestions to improve project design and implementation. II. COST ESTIMATES AND FINANCING PLAN A. Detailed Cost Estimates 10. The total cost of the Project is estimated at $2,077 million, with a foreign exchange cost of $931 million (45%) and a local currency cost of $1,146 million (55%). The total costs include physical contingencies, price contingencies, and interest and other charges during construction. Detailed cost estimates are in Appendix 3. Table 1: Cost Estimates ($ million) Foreign Local Total Items Exchange Currency Cost A. Base Costs 1. Expressway Civil Works , Equipment Land Acquisition and Resettlement Consulting Services and Training Local Roads Public Transport Centers Subtotal (A) , The concept of roadside stations was developed in Japan to link road users and communities, thereby facilitating local economic development. They are different from ordinary service areas because they (i) are designed with the involvement of local communities; (ii) link road users and local communities; (iii) provide business opportunities for local people; and (iv) can provide possible public services, including health care, education, and cultural activities, in addition to the normal restaurant and commercial services. SPCD will use the World Bank s Guidelines for Roadside Stations.

12 4 B. Contingencies 1. Physical Contingencies Price Contingencies Subtotal (B) C. Interest and Other Charges during Construction Total , ,077.0 Source: Asian Development Bank estimates. B. Financing Plan 11. The Government has requested a $600 million loan from ADB s ordinary capital resources to help finance the Project. The loan will have a 26-year term, including a grace period of 6 years, an interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.75% per annum, and such other terms and conditions set forth in the draft loan and project agreements. The loan will finance about 64% of the foreign exchange cost of the Project and 29% of the total project cost. The remaining foreign exchange cost will be financed by the Sichuan provincial government (SPG). The local currency cost will be financed by MOC, SPG, and cofinancing through a loan from the China Development Bank, which has issued a commitment letter to SPCD. MOC and SPG have made budgetary provisions for the counterpart funds. The loan from the China Development Bank is repayable over 26 years, including a grace period of 6 years, and at a lending rate at 5.76% per annum. The ADB loan proceeds will be made available to SPG, and through SPG, to the Project Company on the same financial terms and conditions as those of the ADB loan. A financing plan for the Project is in Table 2. Table 2: Financing Plan ($ million) Item Foreign Local Total Percent Exchange Currency Cost Asian Development Bank Ministry of Communications Sichuan Provincial Government China Development Bank Total , , Source: Asian Development Bank estimates. C. Allocation of Loan Proceeds 12. The allocation of loan proceeds and the basis for withdrawal from the loan account are in Table 3. This can also be found in the Attachment to Schedule 3 of the Loan Agreement. Table 3: Allocation of Loan Proceeds Category Percentage of ADB Financing No. Description Category Subcategory % Basis for Withdrawal from the Loan Account 1 Civil Works 506,900,000 1A Expressway and local roads 505,900, percent of total expenditure (40% for foreign and 0% for local) 1B Public Transport Centers 1,000, percent of total expenditure

13 5 Category Percentage of ADB Financing No. Description Category Subcategory % Basis for Withdrawal from the Loan Account (40% for foreign and 0% for local) 2 Consulting Services and 2,100, Percent of foreign expenditure Training 3 Interest and Commitment 72,100, Percent of amount due Charge 4 Unallocated 18,900,000 Total 600,000,000 III. IMPLEMENTATION ARRANGEMENTS A. Executing and Implementing Agencies 1. Project Management 13. SPCD will be the Executing Agency responsible for overall implementation of the Project. Part of SPCD has been corporatized to form the Project Company to be the Project s Implementing Agency. A project director will be responsible for overall project management, approval of contracts, and payments while a project manager is responsible for the daily physical implementation and the preparation of progress reports. The Project Company will have sufficient technical capability to handle the Project as its engineers have experience in implementing internationally financed road projects. The financial management assessment of SPCD shows that the Project will have in place an adequate financial management system. Organization charts for SPCD and the project company are in Appendix 4. IV. IMPLEMENTATION SCHEDULE 14. The Project will be implemented over about 6 years from April 2006 to September (Appendix 5). 15. Organization chart showing construction supervision arrangements will be developed before the commencement of the civil works in December The Government requested ADB s approval of advance procurement action for civil works. Advance action covers the prequalification of contractors, bidding, and bid evaluation, but will not include contract awards. The advance action will be undertaken in accordance with ADB s Guidelines for Procurement. The Government has been advised that approval of the advance action, if granted, does not commit ADB to financing the Project. V. CONSULTANT RECRUITMENT 17. Construction supervision activities, involving 5,520 person-months of consulting services, will be undertaken by domestic consulting teams under government financing, headed by a chief supervision engineer. Besides construction supervision, domestic consultants for a project performance management system, including the monitoring of the social development action plan, will be engaged.

14 6 18. The Project will provide 66 person-months of international consulting services to (i) help with project management during the construction period; (ii) provide expertise in tunnel and bridge construction; (iii) conduct a safety audit of the project design, and make safety recommendations on the completed construction works; (iv) help set up and implement quality control procedures; (v) monitor the environmental impact of the project and provide guidance on environmental mitigation measures as well as help develop capacity in vehicle emissions; (vi) assist in formulating a human resource development and training program; and (vii) help establish and implement a project performance management system. The team leader will be in the field during the construction period and will act as assistant chief supervision engineer, (i) helping the chief supervision engineer certify variation orders, contractor s monthly payments, and subcontracting documents; and (ii) helping establish a contracts management system. All consultants to be financed under the ADB loan will be selected and engaged based on the quality- and cost-based selection method in accordance with ADB s Guidelines on the Use of Consultants by the Asian Development Bank and Its Borrowers. Outline terms of reference for consultants are in Appendix The approval of the technical evaluation of the consulting services will be provided by ADB on 26 July 2006 and the financial proposal opening will be on 30 July VI. PROCUREMENT 20. All ADB-financed procurement will be carried out in accordance with the ADB Procurement Guidelines. The civil works for the expressway financed by ADB will be divided into 20 packages to be procured through international competitive bidding. Equipment packages will be procured under domestic financing through national competitive bidding for traffic engineering, tunnel monitoring and emergency systems, communications and toll plaza systems and road maintenance. Ancillary buildings, and facilities and roadside greening will be procured through local competitive bidding, using domestic financing. The local roads component will be procured through local competitive bidding using domestic financing. A well qualified tendering company will handle international competitive bidding. Procurement plans is in Appendix 7 while the contract awards projection by years is in Appendix The prequalification evaluation report together with the bidding documents for the 27 civil works packages is being reviewed by ADB. VII. DISBURSEMENT PROCEDURES 22. All disbursements under the ADB loan will be carried out in accordance with ADB s Loan Disbursement Handbook. Since most payments will be made for large contracts well above $100,000, direct payment and commitment procedures will be used to withdraw the loan funds. If the government funds are used first for eligible expenditures, ADB's reimbursement procedure will be used. Statement of expenditures will be applied to reimburse eligible expenditures for any individual payment not exceeding $100,000 to expedite fund flows. The Disbursement Projection by Years is in Appendix 9. VIII. PROJECT MONITORING AND EVALUATION 23. To demonstrate the development effectiveness of its operation and to be accountable for

15 7 its performance to stakeholders, ADB uses the project performance management system, 4 which is a coherent and results-based approach to monitoring and evaluating implementation performance and development impact at various stages of the project cycle. For this purpose, a set of indicators for evaluating project performance in relation to the project impact, outcome, and outputs has been agreed with SPCD. These indicators will refined at the start of project implementation and may include (i) economic development and poverty indicators for the project area, (ii) industrial and agricultural outputs, (iii) transport costs and time, (iv) transport services and charges, (v) accident rates, (vi) accessibility by roads and buses in the project area, and (vii) and jobs created in construction and maintenance. Employment impact indicators will include information about unskilled laborers, poor laborers, and women laborers, and will be monitored through an annual report. At the beginning of project implementation, SPCD will establish a baseline and target values for the indicators. The indicators will be measured at project completion and 3 years later, and will be compared with the baseline, and a report summarizing the key findings will be submitted to ADB. A full-time staff of SPCD will be designated to undertake monitoring and evaluation with the consultants. IX. REPORTING REQUIREMENTS 24. During project implementation, SPCD will submit quarterly progress reports. To facilitate project post evaluation, SPCD will furnish to ADB a completion report within 3 months of the end of the Project. The suggested format and content of EA progress reports is provided in Appendix 10. X. AUDITING REQUIREMENTS 25. SPCD will maintain separate accounts for the Project and related financial statements and will have them audited annually in accordance with appropriate auditing standards consistently applied by independent auditors, whose qualifications, experience, and terms of reference are acceptable to ADB. SPCD will submit to ADB within 6 months of the end of each related fiscal year, certified copies of audited project accounts and financial statements and an auditor s report on the Project, all in the English language. A separate audit opinion on the use of the statement of expenditures, if any, will be included as part of the auditor s report. Sample audit letter is in Appendix 11. XI. MAJOR LOAN COVENANTS 26. The list of the major and project specific covenants and action plans are in Appendix 12. XII. KEY PERSONS INVOLVED IN THE PROJECT 27. List the names, positions, and addresses, including , telephone, and facsimile numbers, of the key personnel of the borrowers, EA, implementing agency, cofinanciers, and ADB. (Appendix 13). 4 A review of the project performance management system was undertaken by the Operations Evaluation Department in 2003 and its findings and recommendations are available in ADB Special Evaluation Study on Project Performance Management in the Asian Development Bank and its Projects in Development Member Countries. Manila. Based on the findings of this report, a Project Performance Management System (PPMS) Action Plan was issued for implementation during The PPMS comprises five components: project framework (Appendix 1), project performance report, government monitoring and evaluation, project completion report, and project performance audit report.

16 8 XIII. ANTICORRUPTION 28. The Government has made significant efforts to address corruption in the road sector. To date, 15 government officials from 10 provincial communications departments 5 have been found to be involved in corruption. Information related to these corruption cases is in the public domain. There is no evidence that any of the reported corruption was related to ADB-financed road projects 6 according to the China National Audit Office. During project processing, ADB s anticorruption policy was explained to central and local government officials. Attention was drawn to the section on fraud and corruption that was added to ADB s Guidelines for Procurement and Guidelines on the Use of Consultants, particularly the need for bidders, suppliers, contractors, and consultants to observe the highest standards of ethics in the procurement and execution of ADB-financed contracts, and the sanctions if fraud and corruption are discovered. 29. Based on Project Company s experience in fighting corruption, the following actions will be taken to prevent corruption for the Project: (i) officials from the Discipline and Inspection Bureau will be resident in project offices for bidding, construction, and operations; (ii) an internal audit unit will be established in the Project Company; (iii) a two-contract system will be adopted where the winner of a civil works contract must also sign an anticorruption contract with the employer; (iv) liaison meetings between SPCD and the Prosecutor's Office are held on a regular basis where warnings about or information on corrupt practices can be discussed; and (v) periodic inspections of contractors will be undertaken to ensure procedures related to fund withdrawals and settlements are being followed. APPENDIXES The following core appendixes are to be attached. 1. Road Safety and Vehicle Emissions 2. Local Road Component 3. Detailed Cost Estimates, Financing Plan 4. Project Organization Chart 5. Implementation Schedule by Years (graph for appraisal estimate versus actual) 6. Terms of Reference for Consulting Services 7. Procurement Plans 8. Contract Awards Projections by Years (graph for appraisal estimate versus actual) 9. Disbursement Projections by Years (graph for appraisal estimate versus actual) 10. Sample Progress Report 11. Sample Audit Letter 12. Major Loan Covenants 13. Key Persons Involved in the Project 5 Namely, Anhui, Guangdong, Guangxi, Guizhou, Henan, Hunan, Jiangsu, Sichuan, Xinjiang, and Yunnan. 6 Road projects in Hebei province and Ningxia region were investigated by ADB to detect and prevent corruption. The investigation found no conclusive evidence that these projects had involved any fraud or corruption.

17 Appendix 1 9 ROAD SAFETY AND VEHICLE EMISSIONS A. Road Safety 1. Background 1. The Rapid economic development accompanied by increasing vehicular growth has resulted in a tremendous demand on the fragile road system, substantial number of road accidents and loss of life of a large number of people in the PRC. In 2004, there were 567,753 road accidents, involving 451,810 injuries and 99,217 fatalities, 1 fatality every 5 minutes is the highest such rate in the world. If not arrested, the fatalities will reach 200,000 per annum by 2010 and the number of injuries will double. Economic losses from accidents are between 1 3 % GDP per annum. The poor, who are usually pedestrians, non-motorized transport (NMT) users and public bus users, are disproportionately represented among those dying in motor vehicle accidents. A TRL report 1 indicates that under-reporting of traffic accident fatalities in the PRC may be about 42%, which adds to the concern. In Sichuan, accident rates over the last few years have also been rising significantly. In 2004 there were 28,484 reported accidents, with 4,890 fatalities and 28,218 injuries. 2. Many of the problems encountered with road safety are predominantly institutional in nature. Effective strategy and action plan are required to address road safety problems, and optimize utilization of road infrastructure facilities. 2. Institution 3. The Ministry of Public Security (MPS) and its provincial public security bureaus (PSB) have overall responsibility for road safety and traffic management, while the Ministry of Communications (MOC) and its provincial communication departments and local governments (LG) are in charge of the road planning, development and safety issues related to the design and construction. The MPS needs assistance to introduce new technologies, continue building capacity, and train its 200,000 traffic police, in planning and management to improve road safety, while MOC needs to develop a uniform road program and guidelines and better investment plan to maximize safety of the road infrastructure. 4. To help improve road safety an advisory TA was approved in Among others, the TA helped the Government to issue the 1 st comprehensive road safety law which became effective in Road Design Standards and Traffic Management 5. Road safety is one of the major factors, which will be taken into consideration during the design of the Project in conjunction with others such as mobility, economy and environmental impact, in order to achieve balanced design standards. 3 The geometric design of the expressway will be chosen to ensure that speed limits are chosen to suit the geometric design rather than the design speed. Signs, markings, interchange structure, and accident barriers will also be selected carefully. The service/rest areas will be used as long distance bus stops to 1 Transport Research Laboratory (TRL) Report 445, Estimating Global Road Fatalities, UK. 2 ADB Technical Assistance to the People s Republic of China for Capacity Building in Traffic Safety, Planning, and Management. Manila. 3 ADB Technical Assistance to the People s Republic of China for the Review of Highway Design Standards. Manila.

18 10 Appendix 1 provide convenient services for the passengers. 4 Monitoring of overloaded vehicles will help reduce traffic accident risk, and pavement damage and maintenance cost. 5 The MOC has produced a Handbook for Road Safety Audits in 2005, and this will be used in the design of the project roads. 6. Construction of the proposed project expressway to a high standard will reduce accidents in the Ya an to Lugu corridor. Traffic will divert from NR108 to the expressway and will travel on a high standard road in safe conditions. The NR108 will have less traffic; this will relieve congestion, reduce road damage and will make the NR108 a safer road for the user and so reducing accident numbers in the corridor and the ass 4. Action Plan 7. To address road safety in Sichuan, Road Safety Council has been established, with Director General of public security bureau (PSB) as chairman, and comprises officials of the PSB, SPCD, design institute, and other relevant organisations. Its role is to investigate road accidents and prepare codes and standards for accident prevention. Current ADB-financed TA 6 has formulated a focused, comprehensive, well-planned and multi-dimensional national and provincial road safety program of ten components, and this will be utilized by all involved agencies to improve road safety in the Project area and Province. Due to the interdisciplinary nature of road safety the program will stress on the involvement of all stakeholders, working towards a common goal, with a strong support from political leaders, based on the integration of the 4 'Es' of (i) Education, for the leaders and general public; (ii) Engineering, to introduce safe road system; (iii) Enforcement, to introduce policies aimed at deter unsafe road user behavior; and (iv) Emergency, to provide better accident response service and promote coordination between the health, fire, ambulance and other agencies. All involved agencies will practice the 3'Cs'of (i) Cooperation, in developing joint activities; (ii) Coordination, in sharing information; and (iii) Collaboration, in developing problem-solving approach and monitor effectiveness. 8. A comprehensive strategy will be implemented to improve road safety in the Project area and in the Province. The strategy also is in line with the outcome of September 2003 meeting which organised by the State Council and involved 15 ministries and agencies to address the escalating problem of road accidents across the country. It is anticipated that the strategy will contribute into reduction of road accidents and enhancement of road safety conditions significantly. The strategy includes: (i) (ii) (iii) (iv) (v) Establish a dedicated highway patrol teams by the PSB to enforce traffic law in the Project area; Provide assistance to strengthen the capacity of the Road Safety Council and the highway patrol team of the Project, under the consulting services program of the Project; Develop provincial road safety guidelines to strengthen interdepartmental road safety initiatives; Develop road safety action plan for the Project; Develop ongoing accident blackspots program, to address causes and 4 MOC, in its 2004 road design standards and guidelines now allow bus stops and terminals on expressways and it is proposed that these be included in final design of the project expressway. 5 A recent program to reduce overloading on roads has incorporated higher penalties for overloading vehicles and also reduced road charges for trucks carrying essential goods (e.g. agriculture and coal). 6 TA 3341-PRC: Capacity Building in Traffic Safety, Planning, and Management, for $600,000, approved on 14 December 1999.

19 Appendix 1 11 (vi) (vii) (viii) (ix) preventive measures; Tailoring of the 2004 MOC Handbook for Safety Audits, to strengthen the design and implementation process of the Project; Provide vehicle weighing stations at selected sites; Provide capacity building and staff training; Develop public awareness and educational campaigns. 9. The strategy will be carried out with the assistance of the team leader and short term road safety specialists financed under the loan. B. Vehicle Emissions 1. Background 10. With the rapid increase in vehicle ownership, vehicle emission has become a serious issue in PRC and will deteriorate further if no mitigation measures are taken. The fragmentation of responsibility, lack of interdepartmental coordination, together with inadequate base data and monitoring system prevent the formulation of any specific targets for reduction in key pollutants such as CO, NO x, PM 10, and non-methane hydrocarbons (NMHC). 11. At present Chengdu ranks among the top 10 polluted cities in PRC. There is an annual program for testing vehicle emissions in Sichuan Province, and a roadside testing is also carried out in some cities where the ADB-financed project alignment passes. In Sichuan, vehicle emission testing and random spot checks are conducted by Environment Protection Bureaus (EPB), with assistance from transport agencies and PSB. Owners whose vehicles fail the emission tests now receive fines ranging between Y200 and Y1,000, and are given a limited time to carry out repairs to meet the emission standard. Drivers licenses may also be confiscated. The Sichuan emission and safety check is mandatory for all motor vehicles registered in the province. All buses and public taxis in Chengdu are now powered by CNG and there is a strong push toward increasing the use of electric over petrol-powered two-wheeler vehicles. More CNG filling stations are being built throughout the urban areas of the province. All buses and taxis in Chengdu are CNG-powered and motorcycles have been banned from the urban area. 12. To help the Government in reducing vehicle emissions, a regional TA was approved in SPCD and EPB are committed to addressing the issues of vehicle emissions control. International consultants will provide training and action plan to control vehicle emissions in the Project area, in light of the findings of the ADB-financed TA on vehicle emissions, and government programs. 2. Action Plan 13. An action plan has been developed to promote an efficient vehicle emission reduction measures in the project area. This includes: (i) (ii) (iii) An integrated approach and involvement of various agencies to facilitate the implementation of the action plan; Encourage participation of the fuel companies, private sector and NGO groups; Optimisation of the current programs of the EPB in line with the project 7 ADB Regional Technical Assistance on Action Plans for Reducing Vehicle Emissions. Manila.

20 12 Appendix 1 (iv) (v) (vi) (vii) (viii) requirements; Assess current fine system and other measures to support the program. Provide mobile emission testing units and equipment under the loan, for use in the Project area. Provide assistance under the consulting services to facilitate the action plan development, and to motor implementation. Provide assistance under the consulting services program for capacity building and training; Formulate general provincial guidelines for vehicle emissions control.

21 Appendix 2 13 RURAL ROAD DEVELOPMENT AND LOCAL ROAD COMPONENT 1. The rural road forms the basic element of the national road network and provides basic access to rural populations. The Government invests about CNY20 billion in rural road development annually, compared with only CNY1 billion 2 billion annually before Total mileage of newly built rural road every year is about 50,000 kilometers (km) and that of reconstruction is about 150,000 km. In 2004, total mileage of rural road reached 1.42 million km. The Government built 102,000 km of rural roads in 2003, and 250,000 km in 2004, building about 192,000 km of paved rural roads. In 2004, along with building roads connecting to 123 townships and 11,200 villages, the Government built paved roads connecting to 1,690 townships and 57,500 villages. 2. The State Council approved the Rural Road Development Plan in February The overall objective of the plan aimed at 2020 is that the townships and villages will be accessible to paved roads, forming a rural road network with high service level, making travel more rapid, safe, and comfortable for farmers. The development goal is that by 2010, all townships in the People s Republic of China will be connected to paved roads and all villages in eastern and central regions will be connected to paved roads by In 2010, total mileage of rural roads will be 3.1 million km. This is expected to increase to 3.7 million km by 2020, improving density and service level of rural roads. 3. The project expressway is supported by the local road component, thereby improving access to townships and villages in the project area. By lowering transport costs and travel times, the Project will foster trade, economic development, growth, and incomes in the region. In doing so, it will help reduce the prices of daily necessities in local markets and villages served by its interchanges and improve access to external markets, information, services, and incomeearning opportunities. These benefits will be increased and more widely distributed by integrating the 678 km of local road upgrading to the project design (Table A2). The importance of improving local roads is in line with the Government s policies. According to the Rural Poverty Reduction Development Outline, road construction projects will be extended to poor areas to link their townships to national and provincial trunk roads. 4. Under the technical assistance, 1 the local road component was formulated based on the following principles: (i) it will explicitly target the improvement of access to poor townships and villages and connecting them to the national and provincial road network in the project area, (ii) the prime emphasis will be on providing all-weather access to the remaining centers and improving all-weather roads to poor villages, and (iii) the program should recognize the local priorities for road improvement. The component was prioritized by the number of the poor served by the road. Township and village roads were ranked separately because a township s population includes the populations of villages in its administrative area. Once ranked, the top two thirds in each category were selected. A road survey followed the initial screening process to confirm the selections. 1 ADB Technical Assistance to the People s Republic of China for Preparing the Central Sichuan Roads Development Project. Manila.