People s Republic of China: Zhengzhou Xi an Railway Project

Transcription

1 Completion Report Project Number: Loan Number: 2182 July 2017 People s Republic of China: Zhengzhou Xi an Railway Project This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS Currency Unit yuan (CNY) At Appraisal At Project Completion 14 August January 2015 CNY1.00 = $ $ $1.00 = CNY CNY ABBREVIATIONS ADB Asian Development Bank CRC China Railway Corporation CRH China Railway Highspeed EIA environmental impact assessment EIRR economic internal rate of return EMP environmental management plan EMOP environmental monitoring plan EMR environmental monitoring report FCTIC foreign capital and technical import center FIRR financial internal rate of return ICB international competitive bidding LAR land acquisition and resettlement LIBOR London interbank offered rate MOR Ministry of Railways O&M operation and maintenance PDL passenger-dedicated line PRC People's Republic of China SDAP social development action plan SEIA summary environmental impact assessment SEPA State Environmental Protection Administration TA technical assistance WACC weighted average cost of capital ZXR Zhengzhou Xi an railway ZXRC Zhengzhou Xi an Passenger Dedicated Railway Line Company WEIGHTS AND MEASURES ha hectare km kilometer m 2 square meter mu Chinese unit of measurement: 1 mu = hectares km/h kilometer per hour t/y tons per year

3 NOTES (i) (ii) The fiscal year (FY) of the Government of the People s Republic of China and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2016 ends on 31 December In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Director R. Guild, Transport Division, EARD Team leader Team member S. Saxena, Principal Transport Specialist, EARD G. Gadiano, Senior Operations Assistant, EARD N. Kim, Senior Environment Specialist, EARD S. Kotagiri, Social Development Specialist (Safeguards), EARD J. Macrohon, Associate Project Analyst, EARD J. Sluijter, Transport Economist, EARD P. Striednig, Railway Specialist, EARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

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5 CONTENTS Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 8 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 9 D. Preliminary Assessment of Sustainability 10 E. Impact 11 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14 APPENDIXES 1. Design and Monitoring Framework Chronology of Major Events Project Costs and Financing Plan Projected and Actual Contract Awards and Disbursements Appraisal and Actual Project Implementation Schedule Organizational Chart (At Completion) Compliance with Loan Covenants Contract Packages Financed by the Asian Development Bank Economic Revaluation Financial Reevaluation Social Impact and Poverty Reduction Land Acquisition and Resettlement Environmental Impact Analysis 62

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7 BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 8. Terms of Relending (if any) Interest Rate Maturity (number of years) Grace Period (number of years) Second-Step Borrower People s Republic of China 2182-PRC Zhengzhou Xi an Railway Project People s Republic of China Ministry of Railways $400 million May May August August September April July August 2006 Two 30 June January 2015 Two LIBOR 1 -based 26 years 6 years Not Applicable 1 LIBOR = London interbank offered rate.

8 ii 9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 02 August December months Effective Date Original Closing Date Time Interval 22 August June months b. Amount ($ million) Category Original Last Revised Amount Net Amount Amount Undisbursed Allocation Allocation Canceled Available Disbursed Balance 01 Equipment Materials Consulting Services Unallocated Total C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost 1, Local Currency Cost 2, , Total 4, , Financing Plan ($ million) Cost Appraisal Estimate Actual Asian Development Bank China Development Bank 1, , MOR, HPG, SPG 2, , Total 4, , HPG = Henan provincial government, MOR = Ministry of Railways, SPG = Shaanxi provincial government. Source: China Railway Corporation.

9 iii 3. Cost Breakdown by Project Component ($ million) Cost Appraisal Estimate Actual A. Base Cost 1. Railway works, facilities, and equipment 3, , Administration, land acquisition, consulting services, and environmental protection Subtotal (A) 3, , B. Contingencies 1. Physical contingencies Price contingencies Subtotal (B) C. Interest during construction Total 4, , Numbers may not sum precisely because of rounding. Sources: China Railway Corporation, Zhengzhou Xi an Passenger Dedicated Line Railway Company. 4. Project Schedule Item Appraisal Estimate Actual Detailed design completed Jul 2005 Sep 2004 Commencement of land acquisition and resettlement activities Sep 2005 Dec 2005 (Shaanxi Province) and Mar 2006 (Henan Province ADB-financed contracts awarded Oct 2005 Feb 2007 Commencement of track laying Sep 2007 Mar 2009 Land acquisition and resettlement Sep 2008 Dec 2012 completed Civil works construction completed Sep 2009 Mar 2009 Track laying completed Mar 2010 Jun 2009 Telecommunications and signaling Aug 2010 Jul 2009 completed ADB = Asian Development Bank Sources: China Railway Corporation, Zhengzhou-Xi an Passenger Dedicated Line Railway Company. 5. Project Performance Report Ratings Implementation Period Development Objectives Ratings Implementation Progress From 30 Sep 2005 to 28 Feb 2006 Satisfactory Satisfactory From 01 Mar 2006 to 31 Mar 2006 Satisfactory Unsatisfactory From 30 Apr 2006 to 31 May 2010 Satisfactory Satisfactory From 30 Jun 2010 to 31 Dec 2010 Satisfactory Highly Satisfactory Technical / Contract Awards / Disbursements / Financial Management / Safeguards From 1 Jan 2011 to 31 Dec 2014 On track

10 iv D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person-Days Specialization of Members a Fact-Finding Mar a,b,c,d,e,f,g Inception Oct h,i Review and Nov h,i Midterm Review 3 11 Nov j,k,l,m,n Review Nov j,m Review Jul a Review Dec a Review Aug a Review Dec n Review Nov n Project Completion Review April i,o,p,q,r Note: a a = transport specialist (railways)/project team leader; b = principal transport economist; c = resettlement specialist, d = environment specialist; e = financial specialist; f = economist; g = counsel; h = senior transport specialist (railways)/mission leader; i = associate project analyst; j = transport specialist/team leader; k = senior social development specialist (resettlement); l = transport specialist (for environment protection); m = operations officer; n = senior transport specialist; n = senior transport specialist/team leader; o = senior operations assistant; p = principal transport specialist/team leader, q = railway specialist; r = resettlement specialist (staff consultant).

11 I. PROJECT DESCRIPTION 1. People s Republic of China (PRC) railway sector has been vital to the country s economic and social development. The PRC s vast area requires the movement of people and goods over long distances, and railways are an efficient and economic means of transport, with a competitive advantage in moving passengers and freight over medium to long distances. During , the rail network expanded by 65%, from 73,000 kilometers (km) to 121,000 km. Passenger and freight railway traffic also grew substantially. The PRC has also developed the world s longest high-speed rail network (19,000 km). The government s plan for railway development prioritizes the expansion of the rail network and the construction of new rail lines in the central and western regions to enhance economic growth and reduce inequality Planning for a high-speed rail network. High-speed express train services allow more trains to share tracks and improve rail transport capacity. But in the PRC, high-speed trains often had to share tracks with slower, heavy freight trains, in some cases with limited intervals between trains. To increase both speed and transport capacity, planners in the PRC proposed a passenger-dedicated high-speed rail network. After committing to conventional-track high-speed rail in 2006, the PRC began work on several passenger-dedicated high-speed rail lines. In 2007, the Qinhuangdao Shenyang high-speed railway line, which carried trains at a top speed of 250 kilometers per hour (km/h) along the Liaoxi Corridor in the Northeast, was the only passenger-dedicated high-speed railway line in the PRC. The PRC embarked on an ambitious high-speed railway program, and planned for a national grid composed of eight high-speed rail corridors, four running north south and four east west. The envisioned network, together with upgraded existing lines, would total 12,000 km in length. Most of the new lines followed the routes of existing trunk lines and were designated for passenger travel only. They became known as passenger-dedicated lines (PDLs); development plans have since been expanded from 8 to 16 corridors. 3. The project. The Zhengzhou Xi an railway (ZXR) line was included in the Eleventh Five- Year Plan ( ) of the PRC, and considered a key investment to address the area s inadequate transport infrastructure. 2 It is one of the eight passenger-dedicated corridors to be developed by The ZXR has a total length of 459 km, and connects Henan and Shaanxi provinces (both large regional centers). The ZXR is also the main east west corridor linking Beijing, Shanghai, and other major cities and ports in the east with Baoji, Chengdu, Chongqing, Lanzhou, Urumqi, Xi an, and other population and economic centers in the western region of the PRC. 4. The ZXR runs parallel with the Longhai railway line, which has the highest transport density in the PRC railways. During project appraisal, the Longhai railway line was at full capacity, with both freight and passenger transported on the same line. This resulted in limited train speeds and restricted traffic flow. The ZXR was designed to free capacity on the existing Longhai railway line by separating the passenger and freight corridors and enabling an increase in route density. The ZXR was expected to (i) reduce the cost of transport to and from the poor northern and northwestern part of Henan and Shaanxi; (ii) support the growth of freight and container traffic; and (iii) stimulate tourism and related industries, through the railway line s associated developments. 1 Government of the People s Republic of China, National Development and Reform Commission Outline of the Tenth Five-Year Plan. Beijing. and Government of the People s Republic of China Railway Development Plan. Beijing. 2 Government of the People s Republic of China, National Development and Reform Commission Outline of the Eleventh Five-Year Plan. Beijing. and Government of the People s Republic of China.

12 2 5. On 22 September 2005, the Asian Development Bank (ADB) approved a loan of $400 million from its ordinary capital resources to finance the project. 3 The loan agreement was signed on 3 April 2006 and became effective on 22 August 2006, with an original closing date of 30 June The loan was closed on 20 January 2015, nearly 30 months after of the original loan closing date. At appraisal, the project was to comprise: (i) construction of 459 km of doubletrack electrified standard gauge class I passenger-dedicated railway between Zhengzhou and Xi an; (ii) construction of 9 new railway stations complete with facilities; (iii) safety initiatives, including provision of modern technology and equipment for enhancing safety; (iv) an e- governance and operating dispatch information system; (v) provision of training on the use and maintenance of modern equipment; (vi) consulting services for construction supervision, monitoring and evaluation, and marketing and business development; and (vii) strengthening of institutional capabilities. The project design and monitoring framework is in Appendix 1 and the chronology of major events is in Appendix 2. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 6. The project design aligned fully with government development priorities and ADB s country strategy. 4 As a priority project in the plan, the project contributed to the PRC s Western Development Strategy, which aims to narrow development disparities between western and coastal regions. ADB s country strategy sought to promote pro-poor economic growth by enabling the poor to access the benefits of economic prosperity. 5 In the railway sector, ADB s country strategy focused on helping to (i) expand the railway system by constructing new lines in unserved, less-developed areas; (ii) modernize and increase capacity to improve efficiency on key national railway routes; (iii) commercialize railway operations to improve efficiency; and (iv) increase the competitiveness of railways in the transport sector through restructuring and reform. The project was one of several ADB-financed railway development assistance programs and projects in lessdeveloped inland provinces. 7. The project design was sound. During preparation, the project alignment was assessed based on construction costs and environmental and socioeconomic considerations, such as access to natural resources; the impact of land acquisition and resettlement; and the preservation of cultural relics, historical sites, and protected areas. The design standards considered the need to integrate this railway line with other railway lines in the region. The interface (including physical connections, signaling, and communications) was designed to ensure uninterrupted transit for passenger trains. Train dispatching, ticket reservation, and other management information systems complied with national railway standards. B. Project Outputs 8. Railway infrastructure and associated facilities constructed along the Zhengzhou Xi an railway corridor. Construction of the ZXR commenced on 25 September 2005, and all civil works were completed by July The completed project includes km of double-track 3 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People s Republic of China for the Zhengzhou-Xi an Railway Project. Manila. 4 ADB Country Strategy and Program Update ( ), The People s Republic of China 5 Government of the People s Republic of China Western Development Strategy of the People s Republic of China. Beijing.

13 3 electrified standard gauge passenger-dedicated railway line between Zhengzhou and Xi an built to the new standards of high-speed train operations. It has 134 bridges with a total length of 252 km, and 38 tunnels with a total length of 77 km. Bridges and tunnels make up 72% of the alignment. The longest bridge is 5.30 km long, and the longest tunnel the Qingdong tunnel is 7.7 km long. Several safety initiatives, including provision of modern technology and equipment for enhancing safety, were introduced. Train operations use automatic block control systems. The signal system use a centralized traffic control system, which consolidates train routing decisions and ensures a higher level of safety. Equipment and facilities for power supply, signaling, a management information system, telecommunication, and train control systems were installed and fully commissioned. A modern train reservation and ticketing system comprising an operating dispatch information arrangement, which links the trains on the ZXR line with the national train reservation systems, has been implemented. The project built nine stations, including eight passenger stations and one passing station The project design followed the Ministry of Railway (MOR) PDL technical standards and used a design speed of 350 km per hour (km/h). 7 Train operations were initially conducted at 350 km/h, but after a train accident in Wenzhou the operational speed was reduced to 310 km/h. The design of the railway line includes several features that enhance railway safety and served to mitigate environmental impacts during project construction. Construction of the ZXR project was of high quality and has received multiple awards. 8 The ZXR (i) used innovative techniques for subgrade settlement control and tunnel excavation in areas with loess (soil composed of fine, windblown sediment); (ii) piloted the application of pre-stressed continuous concrete bridges, ballastless track-laying, and associated equipment; and (iii) introduced modern communication and signaling technologies such as centralized traffic control systems. The project s technical design, which was innovative and sound, was successfully implemented in accordance with prevailing national and international technical standards and best practices. 10. The MOR issued its provisional acceptance of the project in January 2010 after verifying construction quality and completing a transportation safety assessment. Before the ZXR line opened, public safety campaigns were conducted to familiarize people with safety issues related to the electrified railway. Local governments also established offices to assist in the safety efforts. During the project completion review, the telecommunications, signaling, electrification, and traffic control equipment were found to be in good operational condition. All integrated testing and commissioning were completed and the ZXR line began commercial operations on 6 February The design speed of 350 km/h has been achieved. Currently, 56 pairs of passenger trains per day are operating on the ZXR line. 11. With the completion of the Zhengzhou Xuzhou section and the expected completion of the Chengdu Xi an section in 2017, the high-speed railway network will be able to connect many important destinations, allowing passengers to travel on high-speed trains over long distances. This has resulted in a considerable increase in railway traffic. It is projected that the ZXR will be handling 118 pairs of passenger trains per day by 2018 and 171 pairs of passenger trains by The passenger stations included Gongyi South Station, Luoyang Longmen Station, Mianchi South Station, Sanmenxia South Station, Huashan North Station and Weinan North Station, Lingbao West Station and Xingyang Station. Lintong Station is a passing station included for operational purposes (it is not used for passengers). 7 In 2013, the Ministry of Railways was dissolved and its duties turned over to the Ministry of Transport (safety and regulation), State Railways Administration (inspection), and China Railway Corporation (railway operations). 8 The ZXR has been awarded the PRC Railway s Top 10 Excellent Scientific and Technology Achievements in the Twelfth Five-Year Plan in 2016, National Scientific Progress Second Prize in 2015, China Railway Engineering Corporation Scientific Technology Special Award in 2009, and China Railway Society Scientific and Technology Award First Prize in 2010.

14 4 12. Two large intermodal logistics container terminals are under construction in Zhengzhou and Xi an to attract high-value traffic on the railways. These logistics terminals will encourage private sector shippers and freight forwarders to use the railways for export and import of cargo to other parts of the PRC, ports in east and central Asia, Europe, and elsewhere. 13. Employment opportunities generated for poor and vulnerable groups. Local employment was promoted during project construction. At appraisal, it was anticipated that 353,000 person-years of work would be created per year during construction, with about 60% for unskilled laborers, of which 50% or more would be targeted to poor, resettlement-affected people, women, ethnic minorities, and other vulnerable people. Through coordination by construction headquarters and the anti-poverty sectors of the local governments along the ZXR line, a large number of non-technical employment opportunities were made available for local villagers, including women, during railway construction. Based on external monitoring reports, the project provided employment opportunities totaling 143,750 person-years; 21,550 person-years, or 15%, of employment was filled by villagers along the ZXR line, and mainly involved unskilled labor. Of the unskilled labor employment that was generated, 65% went to laborers from poor households, and 3,250 person-years (or 15%) went to women. The smaller amount of actual employment created and the lower percentage of unskilled work can be attributed to better construction organization and the increased mechanization of construction work. Local poor villagers employed in railway construction earned CNY60 CNY100 per day. Therefore, the total income of local laborers was at least CNY258.6 million. Jobs generated during project construction helped reduce poverty and contributed to gender development in the project area. When the ZXR started operations, a total of 2,509 new jobs were offered in various positions in locomotive and vehicle operation, electrical engineering, maintenance and repair, and other station jobs such as security guards, attendants, and ticket conductors. By 2016, total employment relating to ZXR operations had reached 3, Corporate governance promoted. The Zhengzhou Xi an Passenger Dedicated Railway Line Company (ZXRC), the project company, was established on 18 January 2006 with MOR and the Henan and Shaanxi provincial governments as shareholders. During project preparation, it was planned that ZXRC would be responsible for construction and operation. Although ZXRC is an independent company that managed construction of the railway line, operation of the ZXR has not been separated from MOR as anticipated at appraisal; MOR was dissolved in 2013, with its operational functions now managed by China Railway Corporation (CRC). 15. The railway operation is governed by an agreement between MOR and ZXRC under which the ZXRC owns the project assets, assumes responsibility for debt payment, and gains revenues from track access fees, while the Zhengzhou and Xi an railway bureaus are responsible for train service and maintenance operations. 16. Institutional capacity strengthened. At appraisal, an institutional strengthening component was included to enhance construction supervision, monitoring and evaluation, marketing and business development, and overall institutional capacity of ZXRC. However, the amount for engaging consulting services was re-allocated to the equipment category in July 2014 (the inputs needed for institutional strengthening were made available by another ADB-financed railway project). 9 Also, MOR was already implementing a long-term training program for managing the passenger-dedicated railway systems using domestic funding, so project funds were not needed. 9 ADB Project Completion Report for the Ganzhou Longyan Railway Project. Manila.

15 5 C. Project Costs 17. The project cost at completion was $6, million, 67% higher than the appraisal estimate of $4, million. A portion of the increase in dollar terms was caused by a difference in the exchange rate, which changed from $1 = CNY8.1 at appraisal to $1 = CNY6.22 at completion. 18. In local currency, the project cost at completion was CNY42,935 million, 28% higher than the appraisal estimate of CNY33,456 million. The ZXR was one of the PRC s initial high-speed railway line projects (only one high-speed line, the Qinhuangdao Shenyang railway line, was built previously), and MOR had a limited database of unit costs. The cost increase can be attributed to a change in design specification following appraisal a higher proportion of the track was built on elevated structures to avoid using arable land for railway construction and to ensure safety. 19. The original financing plan included an ADB loan of $400.0 million (9.7% of the total project cost), a loan of $1.67 billion from a domestic bank (40.4% of the project cost), and counterpart funds of $2.06 billion (49.9% of the project cost). Upon project completion, ADB financed $ million (5.70% of the project cost). 20. Actual counterpart funds included an equity investment of $3, million (47.36% of the project cost), and loans and railway bonds from domestic banks of $3, million (46.95% of the project cost). The MOR and the Henan and Shaanxi provincial governments provided sufficient counterpart funds to complete the project as scheduled. The project costs and financing plan are in Appendix 3. D. Disbursements 21. All ADB-financed contract packages were procured following international competitive bidding (ICB) procedures for materials and equipment. The MOR and ZXRC formed a capable team to process and prepare withdrawal applications in accordance with ADB s Loan Disbursement Handbook, and the overall disbursement control was satisfactory. The total value of awarded contracts is $ million. The project had loan savings of $7.61 million, which were canceled on 20 January The initial disbursement was made on 02 August 2007, and the final disbursement on 11 December The executing agency applied the appropriate disbursement procedures and ADB s disbursement process was efficient. The loan closing date was extended twice and the loan account was closed on 20 January 2015, almost 3 years after the original closing date of 30 June The projected and actual contract awards and disbursements are in Appendix 4. E. Project Schedule 22. At appraisal the project was expected to be implemented over 6 years, from August 2005 to December Physical completion was envisaged on 31 December 2011, with loan closing originally scheduled for 30 June The project implementation was smooth and well ahead of the original schedule. Construction of civil works began on 25 September 2005 and was completed on 20 March Track laying for the main line commenced by sections in 5 March 2009 and was completed on 29 June The installation of telecommunications, signaling, and electrification equipment was completed in 30 July Land acquisition and resettlement activities began in December 2005 in Shaanxi, and in March 2006 in Henan, with most relocation activities completed in Final relocation activities and last compensation payments were completed in December The acceptance tests commenced in May 2009, and trial operation

16 6 started in September 2009, both earlier than originally planned. A preliminary acceptance opinion was issued by an acceptance committee of the MOR in January Commercial operations of the ZXR began in February As requested by the government, the loan closing date was extended twice, from 30 June 2012 to 30 June 2013, and subsequently to 31 December After the rail accident in Wenzhou in 2011, the MOR decided to further review and revise the technical safety criteria and conduct dynamic stability testing of the delivered equipment, resulting in disbursements delays. 10 A second extension was needed because technical specifications for important rescue and restoration equipment took considerable time to finalize. The appraisal and actual project implementation schedule is in Appendix 5. F. Implementation Arrangements 24. The implementation arrangements were appropriate. MOR served as the executing agency responsible for overall project implementation. The Foreign Capital and Technical Import Center (FCTIC), under MOR, coordinated the project management office's tasks and was responsible for procurement, withdrawals, and reporting to ADB. 25. ZXRC was established in January 2006, with headquarters in Zhengzhou, and was responsible for project implementation. ZXRC managed the construction of the project railway, opened the line for operations in February 2010, and developed and implemented adequate business development mechanisms and accounting and reporting systems. 26. ZXRC is headed by a general manager assisted by an adequate number of suitably qualified professional staff with experience in railway engineering, financial and administrative matters, and implementation of projects financed by international financial institutions. The company established onsite construction management offices along the project route. During construction, ZXRC comprised five departments general administration, engineering, safety and quality control, material and equipment, and finance and accounting. The organizational chart (at completion) is in Appendix ZXRC was responsible for environmental management and supervision during implementation. Effective institutional arrangements were established to implement the environmental management plan (EMP). During construction, the safety and quality control department closely coordinated with the engineering management unit under ZXRC in implementing environmental management matters and supervising contractors with regard to compliance with environmental safeguards as required in the EMP. An environmental protection steering team led by a ZXRC deputy general manager was established to supervise EMP implementation. Local environmental monitoring stations were engaged to monitor onsite surface water, air quality, and noise. The Third Railway Design Institute was engaged as an independent external monitor to oversee overall project environmental monitoring, and periodically submit a monitoring report to ADB. From the start of commercial operations in February 2010, the Zhengzhou and Xi an railway bureaus assumed responsibility for all environmental monitoring in their respective sections. 28. ZXRC set up land acquisition and resettlement (LAR) offices in Zhengzhou and Xi an to coordinate with local governments and government entities in Henan and Shaanxi provinces to implement the resettlement plan. The affected county and/or district governments established 10 On 23 July 2011, two high-speed trains travelling on the Yongtaiwen railway line collided on a viaduct in the suburbs of Wenzhou, Zhejiang Province, PRC.

17 7 relevant steering groups and coordinating offices for the LAR work and involved other relevant government agencies (e.g., finance bureaus; land resource bureaus; poverty reduction offices; the All-China Women s Federation; and health, civil affairs, and ethnic affairs bureaus). The Research Institute of Foreign Capital Introduction and Utilization of Southwest Jiaotong University was engaged to carry out independent monitoring and evaluation of LAR implementation. 29. The Zhengzhou and Xi an railway bureaus are responsible for operation and maintenance (O&M). ZXRC continues to own the infrastructure. Until 2015, ZXRC was responsible for collecting ticket fares from passengers and paying the railway bureaus for train operations. Beginning in 2016, the railway bureaus have assumed the responsibility of collecting all passenger ticket revenues and paying ZXRC track access charges. G. Conditions and Covenants 30. All covenants were complied with. The project railway was built in accordance with the national technical standards, as assessed during the preliminary acceptance tests in Tariffs were set in accordance to national standards. Connecting railway lines either have been completed, such as the Beijing Guangzhou and Zhengzhou Xuzhou PDLs, or are to be completed soon, such as the Chengdu Xi an and Boaji Lanzhou PDLs. Access roads connecting the passenger stations to city centers and nearby counties or villages were constructed and made operational. Two large intermodal logistics terminals are presently under construction in Zhengzhou and Xi an. Covenants related to safeguards requirements were followed, and the project s reporting requirements were generally complied with, including the submission of progress reports and external monitoring reports for environment, resettlement, and socioeconomic impact. The project accounts and related financial statements were audited annually by an independent auditor the PRC s National Audit Office Audit Service Center for Foreign Loan and Assistance Projects and audit reports were periodically submitted to ADB in a timely manner. Loan review mission reports found that all major loan covenants that were due have been complied with (project-specific loan covenants are in Appendix 7). H. Related Technical Assistance 31. ADB-financed project preparatory technical assistance (TA) of $500,000 equivalent was provided on a grant basis from ADB s TA Special Fund to help the government assess the project s technical, environmental, financial, economic, social, and institutional feasibility. 11 The TA helped the government review and strengthen the feasibility study, the environmental impact assessment, and the resettlement plan to satisfy the requirements for ADB financing of the project. The TA started in September 2004 and was completed in June The performance of the TA consultants was satisfactory. I. Consultant Recruitment and Procurement 32. Financed by counterpart funds, a consortium composed of DE-Consult, Deutsche Bahn International, and Parsons Brinckerhoff, under the Third Railway Survey and Design Institute Group Corporation, was engaged for a total of 4,328 person-months. The consortium, occasionally together with other national supervision companies, was responsible for (i) design and survey; (ii) construction supervision, electrification and signaling engineering, and environmental protection measures; and (iii) the independent monitoring of environmental safeguards and resettlement implementation. In addition, various consulting service 11 ADB Xi'an-Zhengzhou Passenger Railway Development. Manila.

18 8 assignments including materials testing, terrain survey, design review, risk assessment, geotechnical drilling, and testing and commissioning were entrusted or outsourced to national design institutes, consultants, and relevant institutes during project implementation. Consultant engagement was timely and followed procedures acceptable to ADB. 33. ADB-financed procurement packages followed the ICB method and ADB's Procurement Guidelines (1999, as amended from time to time). Relevant sections of ADB's anticorruption policy were incorporated in the bidding documents and contracts. The CRC was responsible for the procurement of ADB-financed contracts and engaged a national procurement agent to assist with procurement activities. ADB financed 52 ICB contracts for a total of $ million. All civil works were financed by counterpart funds. All bids were processed on time and within the project implementation schedule. The ADB-financed packages are listed in Appendix 8. J. Performance of Consultants, Contractors, and Suppliers 34. The overall performance of consultants, contractors, and suppliers was satisfactory. The preliminary and final engineering designs were completed on time and in accordance with national railway standards. Onsite supervision, internal and external monitoring, and periodic inspections were conducted effectively. Civil works contractors performed well and successfully constructed challenging tunnels and bridges. Risk management was exercised and systematic measures taken to ensure worker safety at construction sites. Material and equipment suppliers also performed well and all equipment was installed and commissioned as required. The project passed the MOR s preliminary construction quality check in December The ZXR is fully operational as a PDL for high-speed trains, and the design speed has been achieved. K. Performance of the Borrower and the Executing Agency 35. The performance of the borrower and MOR (as the executing agency) and ZXRC (implementing agency) was satisfactory. As assessed at appraisal, an adequate organizational framework was established for efficient and timely project management. MOR exercised coordination and monitoring of project progress. FCTIC was responsible for day-to-day project management and facilitated project implementation. FCTIC, with assistance from the consultants, prepared the required progress reports. The project accounts and financial statements were audited by an external chartered accountant acceptable to ADB, and the audit reports were submitted to ADB as required. MOR and FCTIC facilitated and supported all ADB review missions during implementation and at completion. L. Performance of the Asian Development Bank 36. Overall, the performance of ADB was satisfactory. The project was administered and supervised from ADB headquarters with active assistance from the ADB PRC Resident Mission. During implementation, ADB provided substantial guidance and support to the government and FCTIC in all aspects of project implementation, such as promptly reviewing all procurement and safeguards documents and evaluation reports. ADB conducted 1 inception mission, 8 project review and administration missions and 1 project completion review mission. ADB was closely involved in identifying and resolving potential problems relating to project implementation, particularly the safeguards issues. The role of ADB in promptly advising on project implementation and technical issues was well recognized by the government.

19 9 III. EVALUATION OF PERFORMANCE A. Relevance 37. The project was highly relevant to the government s Western Development Strategy and the Railway Development Plan, which sought to scale up investment in railway networks in the PRC s western regions, to boost economic growth, and increase opportunities for people to improve their living standards. 12 It was also consistent with ADB country and sector strategies, which focused on reducing railway network constraints and promoting sustainable economic growth in poor areas not served by railways. 38. The project significantly promoted pro-poor economic growth and poverty reduction along the railway line and in the region, confirming its rationale. The project represented a continuation of ADB s sustained involvement in the sector. The project aligned with ADB s country strategy and program for the PRC, both at the time of approval and for the current period, which has prioritized inclusive growth and balanced development In addition, MOR has been implementing institutional reforms to provide the means to improve the commercial viability of operations. B. Effectiveness in Achieving Outcome 40. The project was effective in achieving its intended outcome to develop an efficient, safe, reliable, and affordable railway system in the region and promote local economic development. 41. At appraisal, the railway capacity in the project area connecting the cities of Zhengzhou and Xi an was highly limited. The existing Longhai railway line, handling both freight and passenger traffic, was fully saturated. This limited speeds and restricted traffic flow, and there was an urgent need to release capacity on the Longhai railway line to support the growth of freight traffic, while simultaneously improving passenger transport services. The project has successfully transferred passenger traffic to the high-speed ZXR line and supported the growth of freight traffic on the Longhai line. In so doing, it supported industrial development, stimulated tourism, generated employment, increased mobility and living standards, and reduced poverty. 42. The project has significantly reduced travel time and costs. Travel time from Zhengzhou to Xi an has been reduced from 8 hours to 2.5 hours, and from Beijing to Xi an via Zhengzhou from 15 hours to 4.4 hours. People from the project area can now easily travel to the major cities in the PRC by high-speed train. Traveling by train has become faster, safer, and more convenient, and has become the preferred mode for people frequently traveling between different destinations within and beyond the project area. C. Efficiency in Achieving Outcome and Outputs 43. The project is rated efficient based on the economic and financial reevaluation, which found the ZXR both economically and financially viable. 12 Government of the People s Republic of China Railway Development Plan of the People s Republic of China. Beijing. 13 ADB People s Republic of China: Country Partnership Strategy ( ). Manila.

20 Economic reevaluation. The reevaluated economic internal rate of return (EIRR) is 13.12%, lower than the 17.43% estimated at appraisal, because of the (i) higher capital cost; and (ii) the absence of economic benefits related to freight operation, and lower initial passenger traffic compared with appraisal estimates. The higher unit value of time based on the latest average wage of residents contributed positively. The project is considered economically viable, with an EIRR of 13.12% compared to the economic opportunity cost of capital of 9.0%. A sensitivity analysis was carried out to test the impact of (i) a decrease in forecasted traffic, and (ii) an increase in O&M costs; it found the project will continue to be economically viable given a 10% decrease in passenger traffic or a 20% increase in O&M costs. A 20% benefit reduction will reduce the EIRR to 12.0%. The economic reevaluation is in Appendix Financial reevaluation. The financial internal rate of return (FIRR) after tax was recalculated at 4.24%, lower than the 7.0% estimated at appraisal. This is mainly due to the higher capital cost, and lower initial passenger traffic. The actual applied tariff is very close to the appraisal estimate. The after-tax weighted average cost of capital (WACC) in real terms was calculated using the actual capital mix and costs of various financing sources. The WACC was recalculated at 3.17%, slightly higher than the appraisal estimate. The FIRR is higher than the WACC, and the project is considered financially viable, but with a small margin. The sensitivity analysis indicated that adverse changes in O&M costs or revenue levels would reduce the FIRR below the WACC. The financial reevaluation is in Appendix 10. D. Preliminary Assessment of Sustainability 46. The project is considered likely sustainable. The ZXR is technically and financially sound and will be self-sustaining. The ZXR is 50 km shorter than the existing Longhai railway line. Being a high-speed PDL, it will continue to attract passenger traffic due to the benefits it offers in time savings. The ZXR line was planned because the Longhai line, which has the highest transport density in the PRC railways, was fully saturated. Once the ZXR line became operational, it successfully attracted passenger traffic from both the east and west due to time and cost savings. The railway s capacity and competitive advantages over road and waterway transport make it the preferred mode of transportation for passengers. 47. The project was designed using proven technologies, used good-quality construction, and was provided with adequate capacity to accommodate demand. The project introduced technologies such as a centralized traffic control system, which enable train movements to be dispatched and controlled more efficiently and reliably, while accommodating the increased speeds without compromising safety. The ZXRC has the necessary capacity to efficiently operate and maintain the project facilities. Operation of the ZXR has been integrated into the national railway network through established railway administration bureaus that demonstrate the capacity to operate efficiently, provide adequate rolling stock, and maintain assets in good condition. 48. The completion of the wider high-speed railway network is allowing passengers to travel longer distances and is resulting in a higher patronage of the railway line. The passenger train services on this line have steadily increased and are expected to continue growing, enabling ZXRC s profitability to continue to improve. 49. In early 2013, the PRC government announced institutional reform measures in the railway sector. The reforms included the dissolution of MOR and the merging of MOR s functions of planning and policy making with the Ministry of Transport; establishment of a state railway administration, responsible for railway standards development and supervision of rail transport safety; and the establishment of CRC, which succeeded MOR for other functions. The thrust of

21 11 the reforms was to separate government functions from business operations, improve transport planning and railway safety, diversify the investment channels, speed railway construction, and advance modern logistics development. These reforms are expected to have a profoundly positive impact on the project s long-term sustainability. E. Impact 50. The project aimed to promote equitable and sustainable economic growth and development by providing increased connectivity and affordability. 51. Socioeconomic impact. The project has had a significant impact on regional socioeconomic development. The ZXR passes through some of the poorest areas in the PRC. Socioeconomic data show that conditions in the project area have improved during the project implementation period. Rapid economic growth and increased fiscal revenues have improved living standards and local incomes, particularly for the poor. Per capita rural income in the project area increased from CNY2,575 in 2004 to CNY7,575 in With better fiscal capacity, governments at all levels continue to invest in public infrastructure to provide road access to villages, drinking water, and telephone and electricity services. The ZXR provides affordable, much faster and safer transport services than were previously available, particularly benefitting the poor. The upgraded services have improved local mobility and changed both lifestyles and social behaviors. 52. The project area has 12 major tourism attractions. Despite the rich tourism potential, poor accessibility previously constrained tourism development. ZXR has stimulated the development of industry and tourism in the region, as all major tourist sites can now be accessed with 1 day of travel. Tourism income grew by 130% from 2009 to After the ZXR became operational, tourism income increased by as much as 60% in a single year. 53. Access to railway facilities was recognized as a precondition for external investment in the region. Following project implementation, external investment has increased significantly in areas previously without a railway connection, while a growing number of enterprises have started or expanded operations along the railway line; these impacts generate jobs and long-term socioeconomic development. 54. Local employment was promoted during construction. The project provided 143,750 person-years of employment opportunities, of which 21,550 person-years, or 15%, were filled by villagers along the ZXR line, mostly in the form of unskilled labor. Of the unskilled labor employment generated, 14,000 person-years, or 65%, went to laborers from poor households, and 3,250 person-years, or 15%, went to women. Local poor villagers employed in railway construction earned CNY60 CNY100 per day, and the total income of local laborers was at least CNY258.6 million. The main ethnic minority group in the project area (the Hui) share the benefits of the ZXR; they are located in the cities of Xi an and Zhengzhou, and integrated with the Han people. 55. The ZXR has provided affordable, time-saving, and safer transport service for local people and migrant laborers. The cost of high-speed train travel from Zhengzhou to Xi an is only CNY200, and the journey takes just 2.5 hours; this contrasts with 13 hours by bus. A detailed assessment of the implementation of the social development action plan is in Appendix Land acquisition and resettlement impact. The LAR commenced in December 2005 and relocation activities were completed in December The project permanently