IMPLEMENTATION COMPLETION REPORT CHINA BEIJING …documents.worldbank.org/curated/en/630041468025213591/pdf/mul… · Report No. 16389 IMPLEMENTATION COMPLETION REPORT CHINA BEIJING-TIANJIN-TANGGU

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 16389

IMPLEMENTATION COMPLETION REPORT

CHINA

BEIJING-TIANJIN-TANGGU EXPRESSWAY PROJECT

(LOAN 2811-CHA/CREDIT 1792-CHA)

March 11, 1997

Infrastructure Operations DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Yuan (Y)

1987 (appraisal) $1 = Y 3.721988 $1 = Y 3.721989 $1 = Y 3.761990 $1 = Y 4.781991 $1 = Y 5.321992 $1 = Y 5.531993 $1 = Y 5.761994 $1 = Y 8.601995 $1 = Y 8.50

FISCAL YEAR

January I - December 31

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet (ftI kilometer (km) 2 0.62 mile (mi)I square meter (m ) 2 = 10.76 square feet (ft)I square kilometer (km = 0.4 square miles (mi)I hectare (ha) = 0.01 km = 2.47 acr5s (ac) = 15 muI mu = 666.7 m = 0.0667 haI kilogram (kg) = 2.2046 pounds (Ibs)1 metric ton (t) = 2,204 pounds (Ibs)

ABBREVIATIONS AND ACRONYMS

8FYP - Eighth Five-Year Plan9FYP - Ninth Five-Year PlanADT - Average Daily TrafficBTTE Beijing-Tianjin-Tanggu ExpresswayBTTEUC - Beijing-Tianjin-Tanggu Expressway United CorporationDF - Diversion FactorE&M - Electronic, Electrical and MechanicalERR - Economic Rate of ReturnFRR - Financial Rate of ReturnHPDI - Highway Planning and Design InstituteHSRI Highway Scientific Research InstituteICB - International Competitive BiddingICR - Implementation Completion ReportMOC - Ministry of CommunicationsPMS - Pavement Management SystemSAR - Staff Appraisal ReportTOR - Terms of ReferenceVOC - Vehicle Operating Cost

Vice President Jean-Michel Severino, EAPDirector : Nicholas C. Hope, EA2Division Chief Richard Scurfield, EA21NStaff Member Otto Raggambi, Highway Engineer,

Consultant, EA21N

FOR OFFICIAL USE ONLY

CONTENTS

PREFACE ......................................................... iii

EVALUATION SUMMARY .......................................................... v

PART I: PROJECT IMPLEMENTATION ASSESSMENT ................................. 1A. Project Objectives and Description ....................................... 1B. Achievement of Project Objectives ........................................................ 2C. Major Factors Affecting the Project ......................................................... 18D. Project Sustainability ......................................................... 19E. Bank Performnance ......................................................... 20F. Borrower Performance ................................................ 22G. Assessment of Outcome ......................................................... 23H. Future Operation ......................................................... 24I. Key Lessons Learned ......................................................... 24

PART II: STATISTICAL TABLES ......................................................... 27Table 1: Summary of Assessments ......................................................... 27Table 2: Related Bank Loans/Credits ......................................................... 28Table 3: Project Timetable ......................................................... 29Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual ......... 29Table 5: Key Indicators for Project Implementation ...................................... 30Table 6: Key Indicators For Project Operations .............................................. 30Table 7: Studies included in Project ......................................................... 30Table 8a: Project Costs ......................................................... 31Table 8b: Project Costs ......................................................... 31Table 8c: Project Financing ......................................................... 32Table 9: Economic Costs and Benefits ......................................................... 32Table 10: Status of Legal Covenants ......................................................... 33Table 11: Compliance with Operational Manual Statements ......................... 34Table 12: Bank Resources: Staff Inputs ......................................................... 34Table 13: Bank Resources: Missions ......................................................... 34

ANNEX 1: ECONOMIC AND FINANCIAL EVALUATION ............................. 35

ANNEX 2: BORROWER'S CONTRIBUTION TO THE ICR ............................ 54

ANNEX 3: SUPERVISION/ICR MISSION'S AIDE MEMOIRE ....................... 65

MAP: Beijing-Tianjin-Tanggu Expressway-IBRD 19661R

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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IMPLEMENTATION COMPLETION REPORT

CHINA



PREFACE

This is the Implementation Completion Report (ICR) for the Beijing-Tianjin-Tanggu Expressway in China for which Loan 281 1-CHA, for $25.0 million, and Credit1792-CHA, for SDR 98.9 million ($125.0 million equivalent), was approved on May 12,1987. The credit and the loan were closed on December 31, 1995, and the lastdisbursement from the loan account was made on January 26, 1996.

The ICR was prepared by Messrs. Otto Raggambi (Highway Engineer,Consultant) and Han-Kang Yen (Research Analyst), and Ms. Alla Weinstein (TransportSpecialist, Consultant) in the Infrastructure Operations Division, China and MongoliaDepartment of the East Asia and Pacific Region of the Bank, and reviewed by Messrs.Richard Scurfield, Chief, EA2IN and Yo Kimura, Project Advisor, EA2DR. Theborrower's implementation evaluation summary for the project is annexed to the ICR.

Preparation of this ICR began in April 1995, and an ICR mission had discussionswith representatives of the Ministry of Communications (MOC) and the Beijing-TianjinTanggu Expressway United Corporation (BTTEUC) in July 1995. Further consultationwas held between MOC, BTTEUC and Bank personnel regarding the preparation of theICR in Beijing in November 1996. The ICR is based on discussions held in the field,materials available in the project file and additional data provided by BTTEUC.BTTEUC also submitted to the Bank a copy of its evaluation report for the expresswayand other project components.

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CHINA



EVALUATION SUMMARY

Introduction and Project Objectives

1. The Chinese economy, which started accelerating in the early 1980s, greatlyincreased road transport demand. To address the problem of road transport constraints,the Chinese Government had decided to accord high priority to increasing road capacityon the heavily trafficked segments of the national and provincial road networks. TheBeijing-Tianjin-Tanggu Expressway (BTTE) reflects this priority, along with theproject's much needed transfer of technology to municipal/provincial transportdepartments through acquisition of modern equipment and staff training, and addressingbroader subsectoral issues, such as highway finance, better use of local bitumen andmanagement of tolled highways.

2. The project's objectives were to assist the Government in meeting the roadtransport needs in one of the most important and congested corridors in China, and inincreasing the efficiency and cost effectiveness of the highway subsector. To achievesuch objectives the scope of the project was formulated as follows: (a) construction of ahigh-standard tolled expressway (143 km) and two connecting roads; (b) technicalassistance for improving the planning, development and maintenance of the highwaysystem by setting up a road data bank on the highway network; (c) the undertaking ofstudies on (i) methods of financing the expansion and improvement of the highwaynetwork; (ii) upgrading the quality of local bitumen to be used for high-class roadpavement, and (iii) identifying appropriate procedures for operating and maintaining theexpressway; (d) staff training in the area of transportation planning; and (e) continuingassistance in highway-related research and modernization of design, construction andmaterials specifications, and civil works contract documentation.

3. The major component of the project aimed at reducing congestion and travel timefor road traffic in the key corridor between Beijing and Tanggu, through Tianjin, one ofthe largest industrial centers in the country, by the construction of a tolled expressway ona more direct route than available along the sections of the arterial road network. Theproject's other components reflected the broader institutional priorities for the highwaysubsector, which conformed to the strategy of the Central Government and the assistancestrategy of the Bank Group.

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Implementation Experience and Results

4. The project's key objective of constructing a new tolled expressway between Beijingand Tanggu was achieved but with a substantially higher cost and a marginally highereconomic rate of return (ERR) than originally estimated. More specifically: (a) theeconomic cost in the ICR, at December 1995 constant prices, is about 116 percent higherthan the SAR estimate due to quantity variations, design changes and price escalation; and(b) the ERR increased from the appraisal estimate of 14.5 percent to 15.7 percent, indicatingthat the higher benefits, generated by the higher-than-forecast volume of traffic using theBTTE, more than offset the higher than estimated investment cost.

5. Originally, the construction of the BTTE was scheduled to start in October 1987 andto be completed in about 38 months, by December 31, 1990. Although the construction ofthe Expressway commenced at the end of December 1987, with a slightly less than twomonths delay, it was completed only in April 1995. However, civil works were completedin September 1993, which allowed the opening of the expressway to traffic over its fulllength. The implementation schedule of the civil works was adversely affected by (a)delays in land acquisition and the removal of obstructions from the right-of way, (b) avariety of design changes, some of them substantive, (c) exceptionally heavy rainfallsduring 1988, and (d) poor subsoil conditions, particularly on the Tianjin-Tanggu section ofthe BTTE. Also, in mid-1990, resources from other sections of the Expressway weretransferred to the Beijing-Tianjin segment in order to assure that this section could beopened to meet the transport needs of the Asian Games in September/October 1990. Such ameasure was disruptive, and contributed to the overall delay to the execution of the civilworks. However, the major delay in full completion of the BTTE was caused by theprotracted preparation and procurement process for supply and installation of the electricaland mechanical (E&M) works, covering tolling, telecommunications, traffic monitoring andlighting systems for the BTTE. The Bank, in recognition of the implementation difficultiesencountered, extended the loan/credit closing date by three years from December 31, 1992to December 31, 1995.

6. In addition to the above impediments there have been other factors which adverselyaffected the implementation of the BTTE, particularly in its initial phase: (a) deficiency ofengineering design and technical specifications, (b) the poor performance of the contractors,and (c) the lack of experience of the employers, contractors and most of the supervisionstaff in the construction of high-class highway with magnitude, complexity andadministrative and technical requirements similar to that of the BTTE. As a combinedeffect of such shortcomings, the execution and the quality of works were not controlledeffectively, and a substantial portion of the civil works carried out in 1988 failed to meet thetechnical specifications. However, the Bank Group, in recognition of the seriousness of thesituation initiated the introduction of remedial measures in early 1989, followingconsultation with the Borrower. It was agreed that MOC would: (a) sign a formal contractagreement for supervision services with each of the three Resident Supervision Units; (b) ensurethat the units would be operating fully independently from the municipal/provincial authoritiesand report directly to the Engineer's Representative, (c) insist that contractors prepare realistic

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work programs and submit those to the Engineer for his consent, and (d) keep the Bank fullyinformed about the progress of works and compliance with quality requirements and otherconditionalities under the contracts. Furthermore, it was agreed that no disbursement requestswould be submitted to the Bank Group until the Office of the Engineer's Representative certifiedthat, after a complete reassessment of the quality of the works executed during 1988 and in early1989, all substandard works had been rectified. Also, MOC, BTTEUC and the supervision unitstook steps to strengthen the supervision organization through employing additional staff,extensive staff training, acquisition of transport vehicles and the provision of test laboratories.The defective works carried out during 1988 were subsequently remedied and the Bank Group'sdisbursement resumed in the second half of 1989.

7. Although quality problems emerged throughout, the effectiveness of suchmeasures resulted in a gradual but substantive improvement in contract management andquality control by the construction supervision units. From 1989 onward an acceptablemodus operandi emerged in the course of the execution of the BTTE, within theconstraints of the ability and preparedness of the employers, contractors and constructionsupervision units. While it would be unrealistic to assume that all elements of the workson the BTTE were executed without quality shortfalls, the BTTE may be regarded as oneof the best major highways constructed in China to date.

8. In retrospect, there are a number of mitigating circumstances regarding the delaysand the deficiencies encountered during the implementation of the BTTE. It is apparentthat the contracting period of 30-36 months for civil works was too short, considering thecomplexity of the engineering requirements, and the generally poor sub-soil conditionsalong several section of the Expressway's alignment over which the embankmentsconstructed required a minimum of 12 months to settle. Regarding the E&M componentof the BTTE, it could be argued that a much earlier start on the preparation of thiscomponent could have preempted the excessive implementation delay of the BTTE andthe project as a whole. In this regard, it may be noted that this was the first time that suchkind of E&M works had been undertaken in China. The complexity of the task,combined with the overall management requirements for the implementation of the BTTEcivil works, to which a higher priority had been given, understandably led to the delayencountered in the completion of the E&M component. Overall, considering that theBTTE was the first high-class highway project applying principles of international projectadministration, and despite the delays and other difficulties during implementation of thecivil works, the satisfactory completion of the BTTE has been a commendableachievement. It provided an excellent opportunity for acquiring technological andmanagerial experience for a large group of highway engineers and technicians, and,furthermore, the very satisfactory performance of the Expressway during several years ofservice is good indication of the successful outcome of the efforts of all the entitiesinvolved in its implementation.

9. The procurement of equipment for the operation and maintenance of the BTTE,and the staff training program were accomplished satisfactorily, although someadjustments had to be made to the type and quantity of equipment procured and the areas

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of training, compared to the original stipulations in the SAR and the Minutes ofNegotiations. The changes made were well considered and regarded as appropriate.

10. It was intended that assistance would be provided under the project to support thedevelopment of a road data bank in Beijing Municipality. However, sufficient progresshad already been made by the Beijing Municipality Road Administration on this prograrnby the end of the 1980s, and it was not considered expedient to get involved in theprogram. Therefore, the Bank agreed instead to provide assistance for the establishmentof a pavement management system specifically designed for the BTTE, which now formsan integral part of the overall BTTE Management System.

11. Three broader road transport subsectoral issues were addressed through threestudies: (a) identifying alternative sources for financing highway development;(b) analyzing the potential for the utilization of local bitumen for high-class roadpavements; and (c) formulating a management system for the operation of the BTTE, as apossible pattern for the management of other major toll highways in China. Theoutcomes of these studies have been mixed. The highway finance study would havebenefited from a better-focused policy framework prior to its launching or, at least, froma more persistent follow-up of the study's recommendations. The study of local bitumenwas useful, but there has been a lack of coordinated effort by the Borrower to obtaingreater benefits from following up the study's finding and recommendations. TheManagement System for the BTTE is in place and it functions satisfactorily.

Summary of Findings, Future Operations, and Key Lessons Learned

12. Notwithstanding the difficulties, substantial delays and quality deficienciesencountered during the implementation of the BTTE, the key component of the project,as well as the minor components of the project, were implemented satisfactorily. TheICR estimate of the ERR confirm that the project's development objectives have beenachieved, and that the condition of the project civil works facilities and the benefitsemanating from the investments made, as detailed in Annex 1, are sustainable and are notexpected to be exposed to substantial future risks.

13. The Financial Analysis presented in Annex 1 shows a rate of return of 5.2 percent,and also confirms that the toll revenues are expected to be more than adequate to coverthe repayment of financial obligations and the expenses required for the satisfactorymaintenance of the BTTE.

14. All prerequisites are in place to ensure that the physical condition of the BTTE issustainable through regular routine and periodic maintenance. Furthermore, the BTTEUnited Corporation (BTTEUC) is a well-established entity and regarded to be capable ofensuring that the BTTE will be satisfactorily operated and maintained. An OperationManual for the BTTE under preparation is designed to define the appropriateperformance parameters, which should help ensure that the operation of the BTTE ismonitored effectively at regular intervals.

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15. The implementation of the equipment and staff training components of the projectwas also satisfactory. While the efforts put into the highway finance and local bitumenstudies were adequate, lack of follow-up on the findings and recommendations of thestudies by the Chinese entities and the Bank Group render the outcome less than fullysatisfactory. BTTEUC, through a study, achieved a satisfactory set up for theadministration of the BTTE.

16. The following lessons learned are relevant to the still ongoing and future BankGroup-financed highway projects in China:

(a) The noted deficiencies of the civil works design and technicalspecifications highlighted the urgent need for the revision, improvementand consolidation of engineering design and technical specifications intonational standards for the construction of high-class highways in China.

(b) The late start and the slow progress made on the preparation of the E&Mworks for the BTTE, covering tolling, traffic monitoring,telecommunication and lighting systems, added about two years to theimplementation period of the project. In the future, E&M designdocumentation should be an integral part of the overall designdocumentation for major highways, and the designated executing agenciesand the Bank Group should ensure that the design and technicalspecifications for the E&M works are ready at the same time as the designand technical specifications for the highway civil works contracts.

(c) The contractors and almost all of the supervision staff had been affiliatedwith the same transport divisions of the two municipalities and theprovince involved in the construction of the BTTE. Such an arrangementcreated difficulties in adhering to the principles of the general conditionsof the contract according to which the Employer, Supervision andContractor should be separate and independent entities. While over theyears the administrative and financial independence of the contractingentities evolved quite extensively, the staffing of the supervision units isstill predominantly provided from local highway administration units.Assuring the impartiality of the construction supervision units isimperative, and, therefore, the creation of an independent constructionsupervision industry in China should be pursued as a matter of highpriority.

(d) Preparation and follow-up to the recommendations of studies arefrequently deficient, and the Bank Group's participation in and guidanceto ongoing studies have often been inadequate. Since, in most cases,studies are included in the projects at the Bank Group's initiative, BankGroup staff should put much more effort into identifying the rationale andappropriate timing of the studies, and the extent of the borrower's interest

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in the subject through more substantive consultation with the borrower andthe beneficiaries in the project preparatory phase. Moreover, it is seldomthat sufficient provision is built into the studies regarding a follow-upmechanism to the likely implementation phase of the studies'recommendations. The above observations are pertinent to the HighwayFinance and Local Bitumen studies carried out under the project.

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CHINA



PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. PROJECT OBJECTIVES AND DESCRIPTION

1. China joined the World Bank Group in 1980 and lending operations began soonafter. However, Bank involvement with highway infrastructure only began in April 1983,with the identification of the first Highway Project (Loan 2539/Credit 1954-CHA). Theproject provided funding for the improvement of provincial roads and the construction ofcritical missing links in nine provinces, particularly those that constrained interprovincialroad transport. Although the involvement was limited, this initial step helped familiarizethe Bank Group with the highway subsector issues in China and identify subsectoralpriorities in subsequent projects. It became apparent that the shortage of capacity inheavily congested corridors of the national and provincial road networks constitutes oneof the major impediments to accelerated development of the country's economy. Inrecognition of the need for urgent initiatives to address this issue, the ChineseGovernment accorded high priority to providing adequate capacity in key road transportcorridors under the Seventh Five-Year Plan (1986-90, 7FYP) and subsequent Five-YearPlans. The Bank Group supported such government objective, as reflected in the BankGroup's lending strategy for the development of the highway subsector from the mid-1980s onward.

2. The Beijing-Tianjin-Tanggu Expressway (BTTE) project was the first of themajor Bank-financed highway projects that aimed at addressing the capacity constraintson the particularly heavily trafficked sections of the interprovincial arterial roads linkingBeijing, Tianjin and Tanggu. Thereafter, between 1985 and 1996 the Bank Groupapproved the financing of another 16 highway projects as listed in Part II, Table 2 of thisreport. To date, six of the highway projects have been completed, and a ProjectCompletion Report (PCR) and three ICRs were issued for the first Highway Project(August 1992), Shaanxi Provincial Highway Project (June 1996), Jiangxi ProvincialHighway Project (January 1997) and Jiangsu Provincial Transport Project (January1997). Although, with the exception of the first Highway Project, the projects listedcommenced later than the BTTE, they were smaller in scope and were finished within theoriginally envisaged implementation period. The construction of the BTTE was a majorundertaking and its implementation was delayed by three years.

3. The project's primary objective was to provide urgently needed road trafficcapacity expansion in the important transport corridor between the national capital of

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Beijing, Tianjin and the port city of Tanggu in Tianjin Municipality. At the time ofproject preparation, traffic between Beijing and Tanggu had to pass through 10 cities andtownships of varying sizes and 7 railway crossings, and had to intercept at grade morethan 20 other roads and some 100 pedestrian and animal-drawn cart traffic paths on 166km of arterial road links. By contrast, the BTTE was designed as a 143 km fully access-controlled expressway with 8 interchanges and 2 connecting roads (11.2 km) to provideeasy access to the Expressway.

4. In addition to financing a highway capacity improvement component aimed ateasing capacity constraints, provisions were made also under the project to help expeditethe transfer of advanced technologies through the provision of modem equipment for theoperation of the BTTE and a diversified staff training program. Three studies wereundertaken to promote policy, technology and management initiatives: (a) exploringalternative modes for financing the expansion and improvement of the highway network;(b) upgrading the quality of local bitumen to be used for high-class road pavements, and(c) identifying an appropriate way to operate and maintain the expressway. Moreover,the project was intended to support the Beijing Municipal Highway Bureau's program forestablishing a road data base and introduce methodologies for evaluating road conditionsand applying comprehensive road maintenance management systems to facilitate theimprovement and upgrading of the national and provincial road networks in theMunicipality.

5. The Bank loan and IDA credit for the Beijing-Tianjin-Tanggu Expressway Projectwere approved by the Bank Group in May 1987. The above-outlined scope of the projectwas in line with investment priorities for road network development of the localgovernments involved, and it was also consistent with the Central Government's policyand the Bank Group's assistance strategy for the development of the road transportsubsector in China.

6. The Ministry of Communications (MOC) was designated to take fullresponsibility for the execution of the project through its Highway AdministrationDepartment. However, since the alignment of the BTTE traverses the Beijing and Tianjinmunicipalities and Hebei Province, it was agreed at negotiations that MOC would enterinto a Project Implementation Agreement with the three local governments to form aUnited Corporation to exercise the day-to-day executive functions for the implementationof the BTTE.

B. ACHIEVEMENT OF PROJECT OBJECTIVES

7. Project objectives were substantially achieved as indicated by the followingreview of the various components.

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Beijing-Tianjin-Tanggu Expressway

Civil Works

8. The Beijing-Tianjin-Tanggu Expressway project component comprised theconstruction of a 142.7 km four-lane dual carriageway, access-controlled tolledexpressway. The expressway traverses 35.00 km, 6.84 km and 100.85 km of BeijingMunicipality, Hebei Province and Tianjin Municipality, respectively. The alignmentstarts at the southeastern part of the fourth ring road in Beijing and ends at the HebeiRoad in the Tanggu District of Tianjin Municipality (Map). In addition, as agreed atnegotiations, two four-lane divided connecting roads were constructed, under localfinancing, to facilitate access to the Expressway: a 3.1 km link between the third and thefourth ring roads at the Beijing end, and an 8.1 km link extending from the southeasternend of the Expressway to the port of Tianjin (Xingang) through the Tianjin Technical andEconomic Development Area and Tax-Free Zone.

9. The Expressway complex includes 8 interchanges, 4,913 m of twin viaducts, 48bridges, 27 overpasses, 9 toll stations, 1 traffic control center, 3 road service areas and 3maintenance/operations management stations. The pavement of the Expressway consistsof stabilized subbase and road-base layers, and three asphalt concrete layers (only twolayers were placed in soft-soil settlement areas between km 86 to km 142; the wearingcourse will be placed, under local financing, after the consolidation of the embankmentreaches the required limits). Road furniture comprises guard rails, road markings, trafficsigns and boundary fencing.

10. Feasibility Study and Engineering Design. The preliminary engineering andfeasibility study were prepared by the Highway Planning and Research Institute (HPDI)and reviewed by Bank Group staff. The engineering design was prepared by the First andSecond Survey and Design Institutes of MOC and HPDI, with the involvement of theHighway Scientific Research Institute (HSRI) and the Chongqing Highway ResearchInstitute. The design documentation was reviewed by a foreign consultant firm, a servicefinanced under bilateral aid.

11. Despite the seemingly thorough design efforts, the documentation did not meetnormally accepted international standards. Numerous design deficiencies were identifiedin the course of implementation. Some design details were omitted, and there werecontradictions, errors and impractical stipulations in the design documents and thetechnical specifications. Although the skill of highway design institutions have improvedconsiderably over the years, it is understandable that at the time the design for the BTTEwas prepared there was a lack of experience in designing high-class highways in China.Also, there has been excessive time gap between the completion of the design and thecommencement of works, and field conditions changed during such an interval. Itbecame, largely, the task of the supervision staff to identify and remedy the designdeficiencies, although at times, local design institutes were also called upon to complete

or modify some elements of the design. The detection and correction of such defectscontributed to implementation delays.

12. The majority of the variation orders issued were for relatively minor changesinvolving an increased number and changed location of drainage structures andunderpasses. However, major design changes also occurred, which included: (a) thesubstantial redesign of a railway underpass on the Beijing section of the BTTE; and(b) the redesign of the service building structures since the contract drawings providedonly outline designs that were inadequate for construction purposes, and conceptualchanges had also been introduced, which contributed to cost increases.

13. In addition to the design changes due strictly to technical reasons, severalmodifications had to be introduced due to the initial lack of information on future landuse and transport generating investment plans. Also, it seems, that consultations withauthorities at district, township and village levels may not have been adequate during theplanning and design phases of the BTTE. The more notable adverse effects of suchshortcomings were:

(a) In the vicinity of Tianjin City the original design included two twinviaducts (1,777 m and 1,000 m) that were connected by a 980 membankment section. This scheme was changed to a 3,710 m longcontinuous twin viaduct, incurring a cost increase of about Y 17.42million, of which Y 10.0 million was financed by the TianjinMunicipality, against which Bank Group funds were not disbursed. Thechange became necessary to avoid conflicts with major road crossings,existing buildings/factories and zoning regulations of TianjinMunicipality.

(b) The layout of the toll station and the interchange at Jinzhuang Road werealso radically changed because urban development proceeded beyond thelimits envisaged at the time the alignment of the expressway was defined.

(c) In order to comply with the Beijing municipal building code, it wasnecessary to relocate the Traffic Control Center from the original siteadjacent to the expressway to Fangzhuang, a suburb of Beijing near to thestarting point of the BTTE. Also, the original size of the building wasincreased, and, therefore it was agreed that about one third, i.e., aboutY 9.0 million, of the Center's cost would be financed by BeijingMunicipality, against which Bank Group funds were not disbursed.

14. Implementation. The procurement of civil works was carried out followingInternational Competitive Bidding (ICB) procedures. Each of the four civil workscontracts was awarded to a local/foreign joint venture. The principal local contractorswere contracting units of the respective municipalities and Hebei Province, although thecontractor for the Tianjin Viaduct was an engineering corporation of MOC. The role ofthe foreign joint-venture partners, three from Japan and one from France, was confined to

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on-site technical advisory services, with only limited influence on the contractors' overallperformance. The compensation of the foreign personnel on three of the civil workscontracts was based on person-month fees that, together with mobilization andaccommodation expenses, represented insignificant portions of the total contractamounts. Thus, the involvement of foreign firms in the contract was more of a technicalcooperation-type arrangement than a joint venture in the conventional meaning of theterm. The participating foreign firms did not provide plant, equipment or any otherphysical and financial resources, the provision of which remained the responsibility of thelocal contractors.

15. Originally, the construction of the BTTE was scheduled to start in October 1987 andto be completed in about 38 months, by December 31, 1990. Although the constructioncommenced at the end of December 1987 with a slightly less than two months delay, theExpressway's civil works were completed only in September 1993, in 69 months, whichallowed the opening of the expressway to traffic over its full length. However, theExpressway was completed progressively, and it was opened to traffic in the followingsequence: From 0 km (Beijing end) to 72 km in January 1991, (36 months), to 98 km inDecember 1991 (48 months), and to 109 km in October 1992 (58 months). The first 72 kmsection was opened temporarily between during September 12 and October 24, 1990, toaccommodate traffic in connection with the Asian Games. The BTTE was closed for trafficwhen the Asian Games ended for full completion, and it was reopened again in January1991.

16. All civil works were completed within the extended time for completion grantedunder the contract. Justification for awarding time extensions included the recognition ofthe problems related to land acquisition delays, obstructions within the rights-of-way,problems encountered with design documentation, frequent issuance of variation orders dueto design changes, exceptionally heavy rainfalls in 1988, and increased quantities of works.Also, in mid-1990, resources from other parts of the Expressway were transferred to theBeijing-Tianjin segment in order to assure that this section could be opened to meet thetransport needs of the Asian Games in September/October 1990. Such a step disrupted andadversely effected the progress of works on the other sections of the Expressway, andcontributed to the overall delay in completing the civil works. The longest completiondelay occurred on the last section of the expressway toward Tanggu, which required soft-soil treatment. Delays also occurred because of the employer's commitment that fillmaterials from borrow pits be delivered to the site by farmers, which, as it happened,limited the contractors' access to fill material in a timely manner. However, regardingdelays, it should be noted that stipulating 30-36 months construction periods under the civilworks lacked sound engineering judgment. Such timing was too tight for the complexity ofthe task. Also, an extensive length of the Expressway's alignment had poor sub-soilconditions over which the embankments constructed required a minimum of 12 months tosettle.

17. Performance of Supervision Organization and Contractors. The overallresponsibility for contract administration and construction supervision of the civil works

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rested with MOC. The Director of the Department of Highway Administration wasappointed as the "Engineer," with the powers and responsibilities laid down in the FIDICconditions. The construction was supervised by a joint local/foreign team. Theorganization in the field was based on a three-tier hierarchy of responsibilities: (a) Officeof the Engineer's Representative, located in Tianjin, was set up by MOC to undertakesupervision tasks on behalf of the Engineer, with staff members provided by the FirstSurvey and Design Institute of MOC in Xi'an; (b) Offices of Senior Resident Engineerswere established in Beijing, Hebei and Tianjin; and (c) Offices of Resident Engineerswere established for each construction contract. The Chinese supervision staff for theBTTE civil works totaled about 220 professionals, i.e., about 1.5 persons per km. Fiveforeign engineers were attached to the supervision organization during most of theconstruction period; one Senior Resident Engineer on each of the four constructioncontracts and one Chief Resident Engineer at the Office of the Engineer's Representative.The foreign supervision input amounted to 207 person-months of long-term engineers. Inaddition, there were six short-term visits by experts covering such technical disciplines assoft-soil engineering, traffic management, electronic data processing and asphalt concretetechnology. This level of staffing made it possible for the foreign engineers to involvethemselves in all significant project matters and play a meaningful role in the contractadministration and construction supervision. The foreign supervisors were jointly incharge of contract administration and involved in technical decisions. Their signatureswere required on payment certificates and other contractual documents. On-the-job aswell as formal training of Chinese staff were important elements of the duties of foreignsupervision personnel.

18. While such an organizational structure seemed appropriate, it took considerabletime and effort to make it sufficiently effective. Since the internationally acceptedconditions of contracting were largely unknown within the highway sector in China at theoutset of the BTTE project, it is not surprising that the requirement for independentsupervision of construction was not well understood by the executing agencies and thecontractors. During the Bank's first and second site supervision missions in October1988 and January 1989, it was noted that municipal/provincial supervision units were notindependent from the local governments. It became also apparent that the Chinese civilworks contractors: (a) had little appreciation for the requirements according to whichworks were required to be inspected and tested by the construction supervision units;(b) had no internal quality control system; (c) were not well prepared and equipped formeeting the requirements of the technical specifications under the contracts, and (d) hadno experience in the preparation of work programs and routine monitoring ofperformance. It was not uncommon that unqualified subcontractors were mobilized andinsufficiently guided by the principal contractors and thus were unable to execute theworks satisfactorily.

19. As the combined effect of the poor performance of the contractors, and theinexperience of the supervision units in the initial phase of implementation, the executionand the quality of the works were not controlled effectively, and, consequently, asubstantial portion of the works done in 1988 failed to meet the technical specifications.

As an outcome of the late 1988 and early 1989 Bank Group missions' findings, it wasagreed that MOC would take remedial measures in the interest of enhancing theeffectiveness of the supervision organization through (a) signing a formal contractagreement for supervision services with each of the three Resident Supervision Units;(b) ensuring that the units would be operating independently from themunicipal/provincial authorities and report directly to the Engineer's Representative,(c) insisting that contractors prepare realistic work programs and submit those to theEngineer for his consent, and (d) keeping the Bank Group informed about the progress ofworks and compliance with quality requirements and other conditionalities under thecontracts. Furthermore, it was agreed that no disbursement requests would be submittedto the Bank Group until the Office of the Engineer's Representative certified that, after acomplete reassessment of the quality of the works executed during 1988 and in early1989, all substandard works had been rectified. The defective works carried out during1988 were subsequently remedied and disbursements resumed in the second half of 1989.Also, MOC, BTTEUC and the supervision units took steps to strengthen the supervisionorganization through employing additional staff, extensive staff training, acquisition oftransport vehicles and the provision of test laboratories.

20. Although the performance of contractors indicated gradual improvement, theunderlying causes for poor workmanship were not entirely overcome, and there was arecurrence of quality defects to various degrees during the entire period of implementation,as documented in the monthly reports issued by the Office of the Engineer's Representativeand also noted and reported by Bank Group supervision missions. However, as the localsupervision staff gained more experience and became more independent, firmer anddecisive in their handling of the contractors, the effectiveness of supervision improved.This, combined with the substantive contribution of foreign supervisors, increasedsufficiently the performance and effectiveness of the supervision organization to handle theemerging problems and assured that the defective works were rejected and redone and that agenerally acceptable work quality was achieved overall. The satisfactory overallperformance of the BTTE after several years in service is a good measure of the successfuloutcome of the efforts of those involved in the implementation of the Expressway.

Electronic, Electrical and Mechanical (E&M) Works

21. Implementation and Supervision. The design of the E&M works and thepreparation of bid documents for the BTTE was carried out by HSRI. The drawings andtechnical specifications were confined to the presentation of an outline of the system'sconfigurations, leaving the detailed design to be proposed by the contractors. The overallsystem comprised the supply and installation of electronic, electrical and mechanicalequipment for (a) traffic surveillance (closed-circuit television, ultrasonic detectors);(b) traffic control devices (variable message and speed limit signs); (c) communicationsnetwork (roadside emergency telephones, cable and radio communication network)(d) toll collection module (toll facilities, vehicle registration, control center withcomputer graphics and map display and operations console); and (e) provision ofoverhead lighting at interchanges and toll plazas.

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22. Bids were called in October 1990 and opened in April 1991 according to ICBprocedures. The package had been divided into four separate subsystems (TrafficDetection and Management, Integrated Communications Network, Closed TollCollection Facilities; and Roadway Lighting) and four contracts covering the subsystemswere awarded in August 1992, 18 months after the bids were opened, at an aggregatedcontract amount of Y 106.59 million. Works commenced in late November 1992, withan implementation schedule for 24 months except for the lighting component, which wasto be completed in 18 months. There was a two- to five-month delay in completion, andthe most delayed contract was completed in April 1995. The final payment of Y 111.45million in aggregate was only marginally higher (4.5 percent) than the original aggregateamount of the contracts on account of variation of work items. The contracts did notprovide for price escalation. All works were completed within the extended time forcompletion granted under the contract. The reasons for the award of time extension weremainly related to problems encountered during system integration. Overall, theperformance of the contractors involved was satisfactory.

23. Since this was the first time that an E&M system for expressway operation was tobe installed in China, the preparation of design, bidding documents, evaluation and awardof bids took considerably longer time than originally assumed. The bids were called onlyin October 1990, which was close to the originally scheduled target for the completion ofthe BTTE, including E&M works. The evaluation of bids took about 18 months, becauseof the unexpected complexities of technical details and procurement issues. Although thedelay in the completion of civil works on the last 34 km section of the BTTE warranted aone-year extension of the loan/credit closing date, the subsequent two one-yearextensions were granted almost exclusively on account of the substantial delay in thepreparation and installation of the E&M component of the project.

24. The supervision team included one foreign Senior Resident Engineer and twolocal Deputy Senior Resident Engineers. More than 20 Chinese staff participated in thetechnical supervision and contract administration, which were carried out from twooffices, one in Tianjin and the other one in Beijing. The supervision arrangements wereappropriate.

25. Being the first integrated traffic operation and management system forexpressways in China, there were, understandably, deficiencies in all three major areas ofimplementation, such as contracting, supervision and the employer's administrativefunctions. The separation of the E&M works into four subsystem contracts was done inthe interest of reducing the overall cost. Although this objective was achieved,difficulties emerged between the independent contractors in the coordination ofinterrelated technical systems, especially during the systems-integration phase. Suchexperience combined with the findings of a Bank-initiated study, financed fromConsultant Trust Funds, under which more recent E&M contracting practices forexpressway traffic operations and management were reviewed, have helped formulate abetter-focused approach to the execution of traffic operations-related E&M works on tollhighways in China. Consequently, E&M works for tolling, traffic operation and

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communication systems under more recent Bank-financed highway projects have beencontracted under one contract to a single firm or a joint venture, with the prime contractortaking responsibility for coordinating the inputs of the joint-venture partners. Also, theprocurement process has been modified to follow a two-phased approach under a new setof the Bank's standard documents.

26. Environmental Protection. An environmental impact assessment for the BTTEwas carried out between September 1989 and August 1990 by personnel of a group oflocal institutions experienced in environmental assessment. The evaluation focused onthe potential adverse impact of the Expressway on the atmosphere, noise levels, soils andvegetation. The assessment identified no major environmental risks in any of these areas.However, after completion of works, deficiencies were noted at some underpasses, wherethe elevation of the underpass as constructed did not allow permanent solutions foradequate drainage. BTTEUC has been gradually dealing with such situations, partly byassuring that the accumulated water is pumped out expeditiously after heavy rains.

27. In July 1995, a group, comprising the State Environmental Protection Bureau, theEnvironmental Protection Office of MOC, the Environmental Protection Bureau ofTianjin and the Environmental Protection Bureau of Beijing carried out a comprehensiveinspection of the BTTE with regard to environmental protection. The conclusion wasthat (a) the noise levels on both sides of the expressway are within the requiredenvironmental standards, (b) the tidying up of earth borrow pits used to obtain fillmaterial had been satisfactorily accomplished, and (c) the landscaping along the highwayis complete and pleasing. The group consented to the environmental acceptance of theBTTE in a document titled "Environmental Protection of BTT Expressway." However, itwas pointed out in the document that with increased traffic the noise levels are expectedto rise and there will be a need for the regular monitoring of noise levels, and takingappropriate measures to protect noise-sensitive zones. Also, more stringent measures willbe required for controlling vehicles carrying hazardous materials. The responsibility foractions on these matters rests with BTTEUC.

28. Land Acquisition and Resettlement. The land and resettlement-relatedinformation gathered during the preliminary design of the BTTE was subsequentlydiscussed with local governments at county, township and village levels, and providedthe baseline data for the land acquisition and resettlement. The local governments of thetwo municipalities and Hebei Province had the responsibility for administering the landacquisition and resettlement process according to national laws and national andmunicipal/provincial regulations. Such regulations conformed to the Bank's guidelinesand requirements with respect to involuntary resettlement. The information on the area ofland and houses and attached structures was verified and corrected based on final designdata. Village representatives participated in the quantification and the overall assessmentprocess, which provided the basis for the compensation payments.

29. Due to design variations, appreciation of property values and inflation, theoriginally estimated cost of land acquisition and resettlement increased from the original

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estimate of Y 81.82 million to Y 235.39 million. The Bank's Resettlement ReviewMission held discussions with representatives of the two municipalities and the HebeiProvince in November/December 1994. The mission confirmed that the resettlementactions, in general, were carried out satisfactorily and in line with Bank Group policiesand procedures. However, the mission noted that some of the affected people may haveexperienced temporary difficulties in restoring their standard of living. Notwithstandingthis, the BTTE project has brought considerable benefits to the people through the majorinvestments made in the corridor of the Expressway. Such investments, mainlycommercial enterprises, created many job opportunities and contributed to increasedincome levels, which helped offset the adverse impact of the resettlement on those whoinitially had been handicapped.

30. Construction Costs. The SAR cost estimates for the expressway's civil worksand E&M supply and installation works was Y 890.60 million (Y 771.85 million andY 118.75 million, respectively), including physical and price contingencies. The finalcost based on certified payments to the contractors amounted to Y 1,479.0 million(Y 1,367.55 million and Y 111.45 million, respectively), representing a cost increase ofabout 66 percent in current prices, which resulted from cost overruns on civil workscontracts as there was a slight saving on the E&M mechanical works that was absorbedby the higher cost of civil works. Of this amount, 58 percent was due to greater-than-expected physical quantities and extra works carried out through variation orders issuedto the contractors and 42 percent was due to price escalation. In addition, as indicated inpara. 8, two connecting roads were constructed at both ends of the BTTE under localfinancing at a cost of Y 196.13 million, and the two municipalities and Hebei Provincealso financed civil works, which were related to the impact of the Expressway on theadjacent secondary and tertiary road networks and other public facilities. The extent ofthe associated expenses, which had not been taken into consideration at project appraisal,were quite substantial and amounted to Y 243.00 million. This amount, together withcommonly considered cost items, such as land acquisition and resettlement, engineeringdesign and construction supervision, and some other minor items as listed in Table 2B ofAnnex 1, increased the overall financial cost of construction of the BTTE to Y 2,221.95,corresponding to a cost increase of about 139 percent over the SAR estimate of Y 928.04million, in terms of current cost.

31. Economic Evaluation. The ICR's economic evaluation is presented in Annex 1.It shows an estimated ERR of 15.7 percent, compared to the SAR estimate of 14.5percent. The reestimation was based on final cost of investment, revised shadow prices,corridor traffic data and traffic projection based on actual split of traffic between theexisting arterial road and the new highway from 1990 to mid-1995, and revised trafficforecasts from mid-1995 onward, and updated vehicle operation costs (VOCs). Thereestimated economic cost of the BTTE, in 1995 constant prices, is presented in Table 2Aof Annex 1. The evaluation took into consideration the phased opening of the varioussections of the BTTE to traffic. Although the SAR and ICR estimates of the ERR differonly marginally, the cost and benefit interrelations have changed significantly. Theincrease in investment cost has been offset by the substantially higher-than-expected

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increase in corridor traffic, a large portion of which diverted to the BTTE. Morespecifically: (a) the economic cost in the ICR, at December 1995 constant prices, isabout 116 percent higher than the SAR estimate, and (b)the 1995 Beijing-Tianjin-Tanggu corridor traffic, compared to SAR traffic forecast, on one section quadrupled, ontwo sections more than doubled and on the remaining two sections increased by about 60percent above SAR forecast, and (c) the proportion of the corridor traffic that diverted tothe Expressway has been higher than assumed at project appraisal, except on the firstsection of the BTTE southeast of Beijing and between Tianjin and Tanggu.

32. The proportions of traffic that are diverting to and generated by the Expresswayare different to that anticipated in the SAR (para. 4 of Annex 1). The reasons for thedifferences are difficult to identify, since the SAR projections were made withinsufficient data base for forecasting traffic growth and distribution between alternativeroutes in a rapidly expanding urbanized environment with sustained high economicgrowth. In addition, the development of the arterial road network was different to thatexpected. Following the appraisal, a high-standard, all purpose ring road was builtaround Tianjin City, and the section of the arterial road between Tianjin and the TangguDistrict was also upgraded. Actual traffic growth in the corridor has been much higherthan expected, and the rate of diversion to the BTTE has been similar to that expected,except on the first (Beijing) and last (Tanggu) sections. Diversion at the Beijing end hasbeen lower than expected partly because entry and exit for trucks between the BTTE andat the third and fourth Beijing ring roads are restricted by regulations. It has been lowover the Tianjin-Tanggu section because the existing arterial road provides a shorter routebetween Tanggu and the eastern and central part of Tianjin city than the BTTE.

33. Financial Evaluation. Based on the data (as of November 1996) provided byBTTEUC, the financial analysis carried out indicates that the financial rate of return(FRR) on the BTTE investment is estimated at 5.2 percent, as detailed in Table 6 ofAnnex 1. This level of FRR indicates that the BTTE is expected to generate sufficientrevenues from tolls to cover not only maintenance and administrative expenses but alsoall financial obligations, including the repayment of the Bank loan and the IDA credit.

34. Tolling. The Development Credit Agreement stipulated that the level of tollscharged on the BTTE should not exceed 30 percent of the financial VOC savings.Following a preliminary analysis carried out by BTTEUC, toll rates were established inJanuary 1991 when the first 72 km section of the BTTE was opened for traffic. The tollrates were revised in 1994 and are still in force. As detailed in paragraphs 16-18 of Annex1, an approximating analysis was carried out to deternine the relationship between theprevailing toll rates and the VOC savings for the BTTE. The conclusions of ICR's analysisare as follows:

(a) on the average for the Expressway, 1996 toll rates for vehicles in allcategories, except that for tractor-trailers, exceed 30 percent of the financialVOC savings;

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(b) on those sections of the Expressway where the travel distance issubstantially shorter than on the alternative road network, the 30 percentVOC savings are close to or even higher than the toll rates for the variouscategories of vehicles;

(c) wherever there is no travel distance saving for the traffic using theExpressway or it is not significant, the 30 percent VOC saving falls belowthe toll rate, indicating that the user of the Expressway is likely to beovercharged in relation to the benefits gained by using the Expressway;

(d) a uniform, per-km-based toll rate is inequitable because of the highsensitivity of the VOC savings to travel distance/time savings; and

(e) a comprehensive origin and destination survey-based study would berequired for reaching more reliable conclusions regarding the determinationof a reasonable balance between toll charges and vehicle operating costsavings.

35. As recorded in para. 6 of the Agreed Minutes of Negations dated March 20, 1987,the Chinese Delegation and the Bank Group team agreed that the expressway operatingorganization's monitoring unit would update origin and destination matrix data for theBTTE, and that a refinement of the vehicle operating cost would to be done jointly byMOC and the Bank Group prior to the opening of the Expressway. Furthermore, Section4.03 of the Development Credit Agreement stipulated that the VOC savings were to becalculated in a manner agreed between the Borrower and the Association. Since theseconditionalities were not fully complied with during the implementation of the project, itis recommended that MOC, BTTEUC and the Bank Group rectify this omission in thenear future in the interest of establishing a methodology for the determination of tollrates, which could set a pattern for nationwide application.

Equipment Procurement

36. Provisions were made under the project for the purchase of basic highwaymaintenance equipment, such as trucks, loaders, motorgraders, asphalt and concretemixers, asphalt and milling machines, pavers and rollers. In addition, the list alsoincluded patrol vehicles, heavy-duty tow trucks and ambulances needed for the operationof the expressway and for clearing broken down vehicles and dealing with emergencies incase of accidents. The budget for equipment acquisition under the project was $6.0million, including physical and price contingencies.

37. The original list of equipment, which was attached to the Minutes of Negotiations,had to be revised substantially, partly because of the underestimate of the cost ofequipment acquisition. Also, because of a restriction on importing vehicles, theacquisition of some type of vehicles would have not been possible under the Bank'sprocurement guidelines. Eventually, 14 types of highway maintenance and operationsequipment, comprising 48 units, were procured at a cost of $6.96 million.

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38. As stipulated in the loan agreement, about 75 percent of the equipment, in costterms, was to be procured through ICB procedures. However, some of the items to bepurchased were available from only a limited number of suppliers, and only a few unitswere required at relatively low cost; the Bank waived the ICB requirement for some ofthe items and agreed that about 65 percent of the total cost of purchase be done throughICB and the rest through international and local shopping. The equipment procured isregarded as appropriate in type, quality and number to meet the anticipated maintenanceand operations needs of the BTTE.

Road Management

39. As indicated in the SAR, it was intended to set up a computerized road data bankfor the Beijing Municipality, although there was no elaboration on how it should bepursued, and no funds were earmarked for this purpose under the project. Furthermore,by the time the implementation of the project got under way, good progress had alreadybeen made on the establishment of a Pavement Management System (PMS)-oriented roaddata base, which was the forerunner of the PMS system designed by the Beijing HighwayBureau. This system, which was well advanced by the end of 1988, was one of the pilotsystems that contributed to the development of the Chinese PMS in HSRI. For the abovereasons, it was not considered expedient to get involved with the Beijing Municipality'sroad data bank development under the project.

40. However, it was considered appropriate to formulate a PMS that would meet thespecific requirements of the BTTE in the framework of the BTTE's Management System.An agreement to formulate a PMS for the BTTE was signed between BTTEUC and HSRIin November 1991. During the system's preparation, a group of personnel involvedvisited some of the eastern states of the United States, and the information gatheredregarding expressway operations was particularly useful for PMS's computer hardwareselection and software development. HSRI submitted the data system to BTTEUC fortesting at the end of 1992, and the system's development was completed in May 1993.The cost of the assignment was $200,000, including expenses for hardware and softwareneeds, which was financed from the proceeds of the loan/credit.

41. The PMS software has been installed in each of the three ExpresswayManagement Offices (Beijing, Hebei and Tianjin), and BTTEUC intends to establish acomputer linkup between the three offices and the Traffic Control Center. Independentlyfrom this system, the PMS has been operational in the Beijing Municipality since theearly 1990s, covering 2,260 km of the national and municipal highways. A HSRI-developed PMS is also operational in Tianjin Municipality and covers 1,665 km of thenetwork. The PMS being applied in Hebei Province covers 9,765 km of the network.

Studies

42. Financing Highway Development. In recognition of the increasing financialresource needs for the expansion, improvement, rehabilitation and maintenance of thehighway network, it was considered appropriate to carry out a study to help identify

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alternative sources of financing for highway sector development in China during the lastdecade of the century. In particular, the terms of reference stipulated that the studyshould determine: (a) the financial needs of the road sector (in terms of recurrent andcapital cost), broken down by administrative classification of the network (i.e., national,provincial and local) during the 1990s; (b) the required levels of user revenues;(c) alternative tax instruments that could be applied, and their proportion of the total levelof revenues; and (d) a tax structure, for the various category of vehicle groups (cars,buses, trucks of different sizes etc.).

43. The study was carried out by HSRI during 1990 and 1991 under the guidance ofMOC and with the support of one foreign expert. Key members of the study team visitedMexico and the United States during this period to examine highway financing practicesin these countries. The study report, released in June 1991, provided a comprehensive setof information on the present systems of road financing and future financial needs. Thekey conclusion and recommendation of the study was that the bulk of revenues for theroad sector should be raised through taxing fuel. However, traditionally, transport fueltaxation has not been a revenue source in China, and when a few years earlier a proposalwas made for its introduction as an alternative revenue source, it was not endorsed by theGovernment. Fuel taxation is regarded as a major policy issue in China, which wouldrequire that the proposal for its acceptance be considered at the highest level of theGovernment. In light of its rejection before, the concerned ministries of the CentralGovermment were reluctant to pursue this matter any further.

44. The Bank Group, in light of the standoff at Central Government level regardingthe fuel taxation issue, and considering that highway financing is primarily a municipal/provincial responsibility, decided to pursue the highway funding issue at the provinciallevel under the Bank-financed Guangdong Provincial Highway Project. The final reportof the provincial highway finance study, completed in March 1995, identified 19potential sources for financing highway-related expenditures, which subsequently werenarrowed to four new sources of financing options that are presently being pursued by theProvince: (a) issuing of stocks and bonds; (b) exploring possible overseas financingwindows for raising capital; (c) selling operational rights of existing toll facilities toprivate investors; and (d) investigating build-operate-transfer arrangements forexpressway projects. The Province and the Bank is maintaining a dialogue on thedevelopment of these alternative modes of financing.

45. Local Bitumen. The locally produced bitumen in China was regarded to be ofinferior quality, particularly for the pavement of high-class highways. The study's mainobjective was to carry out comprehensive testing of local bitumen produced in selectedrefineries using crude oils of different characteristics to deterrnine whether, throughchanges in refinery processes, the quality of local bitumen could be improved to the samelevel as that of imported bitumen and, thereby, could lead to reduction of the quantity ofimported bitumen needed for the construction of high-class road pavements.

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46. The study was carried out jointly by HSRI of MOC and BTTEUC during1987-91. The study provides comparison of the properties of domestic bitumen, obtainedprimarily from heavy-crude oils in the refineries of Shanjiasi (Shandong Province),Huanxingling (Liaoning Province) and Karamay (Xinjiang Autonomous Region), withthe properties of bitumen produced by refineries in Albania, Japan, Singapore and theUnited Kingdom from various crude oil sources. Some field studies were also conductedto compare the performance of asphalt pavements made with local versus importedbitumen. The investigation of the feasibility of utilizing local bitumen for the BTT (inpart), Shenyang-Dalian (whole), and Shanghai-Jiadine (whole) expressways was alsocompleted.

47. The report provides good coverage of the physical and mechanical properties ofthe domestic and imported bitumen, and it affirms that such properties of the domesticbitumen derived from heavy-crude oils compare well with that of imported bitumen. Anexception relates to durability; the asphalt layers made with domestic heavy-crude oilbitumen appear to be somewhat less durable than asphalt layers made with importedbitumen but possibly within acceptable limits. On the other hand, test results of domesticbitumen derived from light crude oils have confirmed that such bitumen is, in manyrespects, inferior to bitumen derived from heavy-crude oils, and its use in road pavementswould, normally, lead to accelerated pavement deterioration.

48. The final report of the study, completed in June 1991, concluded that somedomestic bitumen could meet the requirements of high-class highway pavements anddependence on imported bitumen could be reduced. However, the choice of suitablecrude oil and adjustment of processing techniques will be essential to the production ofsatisfactory quantity and quality of the bitumen. Presently, only the three refineriesreferred to above have such potential. Unfortunately, since 1991, the heaving crude oilsupplied from the Shengli Oil Field to the Shanjiasi refinery has been mixed with lightcrude oil of high wax content, and, at present, the bitumen from this refinery does notmeet the specifications as a high-grade bitumen.

49. There have been some beneficial impact of the study on a limited scale: (a) theHuanxingling bitumen has been widely adopted for expressway pavements in north andnortheast China, including Liaoning Province and Beijing Municipality; and (b) theKaramay bitumen is being used in Shanxi and Yunnan provinces and XinjiangAutonomous Region, although the use is not yet widespread due to transportationconstraints. Furthermore, MOC has assured the Bank Group that efforts are continuing tointroduce new technologies to expand the use of local bitumen for high-class highwaypavements.

50. As a whole, the local bitumen production is still far from meeting the needs ofhigh-class highway construction in China, either in quantity or in quality. Therefore, itwill be necessary to continue to import a considerably large quantity of bitumen. Anymajor impact through the production of local, high-quality bitumen in greater quantity ata competitive price would require substantial efforts and investment, and the major

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obstacles to achieving such objectives are: (a) the refineries using heavy crude oils, aprerequisite for higher-grade bitumen production, are located in relatively remote areas ofthe country (Liaoning Province and Xinjiang Autonomous Region), and hightransportation cost to most locations in China increases price levels to that of importedbitumen; (b) the transportation systems and methods for transporting liquid bitumen inbulk are not in use, and supply time is unreliable; (c) producing bitumen as a well-controlled derivate, and not as a by-product of the refinery process, is costly and itrequires the reduction of production quantities of some more profitable derivates, such asgasoline and diesel fuel.

51. The Bank Group in its comments on the study highlighted the significance ofutilizing domestic natural resources, achieving foreign exchange savings and extendingthe life of road pavements. Such benefits could be achieved through the production ofimproved-quality local bitumen. The Bank Group suggested setting up aninterministerial committee to formulate a plan of action for addressing the multiplicity ofissues involved in improving local bitumen production, transportation and marketing.However, there has been no indication that such initiative was pursued by MOC at such alevel, neither has been follow-up action taken by the Bank Group.

52. Organization of Expressway Operation and Maintenance. At the time offormulating the project, there was no experience in operating and maintaining tolledexpressways in China. The primary objective of the study was to identify and thenestablish a suitable organizational structure for administering the BTTE. This objectivewas pursued through studying the organization patterns of corporations in countries withextensive networks of tolled highways, and blend such practices with local requirementsand regulations. The study was completed satisfactorily and a report titled "A ResearchReport on the Organization and Management of BTT Expressway" was issued in October1991. By that time, the implementation-related organization structure of BTTEUC wasalready in place. Therefore, the report covered mainly the management of the operationalaspects of the BTTE, including: (a) the organizational structure and delineation ofmanagement responsibilities; (b) tolling strategy and determination of toll levels;(c) financial management; and (d) administrative procedures and regulations. Afterreviewing the report, both MOC and the Bank Group considered that the report'srecommendation on staffing was excessive, which view was accepted by BTTEUC. Asupplementary report was released in May 1992 with a revised organizational structureand staffing for the Corporation.

53. The study was an important undertaking for formulating the structure andfunctions of BTTEUC. The Corporation established for the implementation andoperation of the BTTE is representative of a corporate body under the recently promotedeconomic management system in China. Such an arrangement is a breakaway from thetraditional administration pattern and the strict region/province separating practices underthe planned economic system of the country. BTTEUC, after initial difficulties, managedthe implementation of the BTTE reasonably well, and is well prepared for administeringthe operation and maintenance of the Expressway.

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Staff Training Program

54. As outlined in the SAR, the objectives of the staff training program were to:(a) provide training equipment and material, such as audiovisual training aids andlaboratory, computer and photogrammetry equipment and technical literature, ($85,000);(b) arrange visits of foreign academic experts to lectures on selected topics to municipal/provincial institutes in Beijing, Tianjin and Hebei on selected technical topics (six visits,$30,000); and (c) organize short- and medium-term training courses and study tours forstaff of entities associated with the project to cover the following topics: transportplanning, transport economics, soils and materials engineering, highway maintenance andequipment management, construction management and supervision, new constructionmaterials and technology, financial management and accounting and technicalinterpreting (360 person-months, $445,000). The program was scheduled to commencein November 1987 and be completed by June 1992.

55. The training program implemented comprised training courses and study toursabroad in Australia, Denmark, France, Germany, Italy, Spain, Japan and the United States.A total of 42 persons participated in the program, involving about 140 person-months at anoverall cost of $800,000, i.e., $5,700/person-month. The program covered the followingtopics: administration system for the operation and maintenance of expressways, scope ofE&M works for traffic operations (tolling, telecommunication and traffic surveillancesystems), maintenance management for roads and bridges, soft-soil treatment for highwayembankments, data base for expressway performance monitoring, preappraisal andpostevaluation of highway projects and financial management and accounting. The firsttraining course was conducted in July 1990 and the last one in November 1994. In additionto the above listed program, the training of about 450 local supervision personnel inconstruction supervision and contract management was undertaken during December 1988and March 1989. Such training was carried out by the foreign consulting firm contracted toprovide supervision services, and the cost associated with this program was covered underthe consultant services contract. There were also extensive on-the-job training programs forlocal supervisors during the various phases of the construction of the BTTE.

56. The training program as executed differed from that originally planned, for variousreasons: (a) loan/credit proceeds were not used for acquiring training tools because suchmaterials and equipment became available on the local market and were well within themeans of the institutions involved to purchase them with local funds (b) the trainingprogram was delayed and some groups, unfortunately, missed the opportune time fortraining, such as English interpreters, despite the recognition of its benefits; (c) the originaltraining plan lacked components for expressway operation, management and service,which were added as important areas of training; (d) some training topics, such astransport planning and transport, were dropped on consideration of having lower prioritythan some others; (e) contrary to the expectation that some courses would be conducted inChina, almost all were organized abroad, which added travel costs, and used consultants forproviding training services and organizing and facilitating study tours. In some instances,courses were arranged through state road authorities at relatively low cost.

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57. It is considered that the areas of training were well chosen, and provided the staff aswell as the institutions involved with both immediate and long-term benefits. The traininggroup members were professional staff with technical or financial managementbackground. On the whole, the program exposed the participants to advanced technologiesabroad, which were pertinent to the priority needs of the executing agencies. The studytours abroad widened the vision of the participants and enhanced their knowledge.Despite the relatively high person-month costs, which point to the need to explore moreefficient ways to conduct training courses, the training program under the project can beregarded as highly successful. Notwithstanding this, less costly training programs with amix of training abroad balanced with courses/seminars organized through local institutionswith selective involvement of foreign experts in areas where local expertise could be a goodalternative approach in the future, as this would provide opportunity for training more staffresulting in even greater benefits to the institutions.

C. MAJOR FACTORS AFFECTING THE PROJECT

58. The major factors that adversely affected the implementation of the BTTE were:(a) the poor quality of the engineering design and technical specifications; (b) theexecuting agencies, the contractors and supervision staff had no previous experience inimplementing highway projects of similar magnitude, complexity and technicalrequirements, and also lacked contracting practices under international contractingconditionalities; (c) poor performance of the contractors. The negative effects of suchshortcomings were particularly apparent and detrimental to the quality of works in theinitial phase of implementation and also contributed to the implementation delays.According to the SAR schedule, the project was expected to be completed by mid-1992with a closing date of the loan and credit on December 31, 1992. However, the projectwas completed only in mid-1995, and the loan/credit was closed only on December 31,1995, three years later than originally expected.

59. The implementation of the project was delayed for a number of reasons.Although a 72 km section, i.e. 50 percent of the BTTE, was completed, more or less, ontime, the rest of the civil works proceeded more slowly mainly because of frequent designchanges, requiring the issuance of variation orders, and some major deviations from theoriginal concept of the design, such as the construction of a major viaduct near Tianjininstead of an earth embankment. There was also a transfer of resources from othersections of the BTTE to the Beijing-Tianjin segment in mid-1990 to ensure the openingof that section for the Asian Games. Such regrouping of the labor force slowed thecompletion of civil works, particular of the Tianjin-Tanggu section of the BTTE. Thus,the civil works of the BTTE were completed fully only in September 1993, althoughsome sections of the expressway beyond the first 72 km section had been opened totraffic earlier (para. 15). However, the delay in the completion of the BTTE and theproject, as a whole, was mainly caused by the protracted preparation of design for, andthe slow procurement of, the E&M supply and installation works, covering tolling,telecommunications, traffic monitoring and lighting systems for the BTTE. The

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execution of this component commenced only in November 1992 and was completed inApril 1995.

60. The Bank Group's recognition at the end of 1988 of the high risk of proceedingwith the project without insisting on full compliance with contract conditionalities paidoff, and there was a gradual but substantive improvement in contract management andquality control by the construction supervision units. Although quality problemsemerged through out, the effectiveness of supervision has improved within the constraintsof the ability and preparedness of the employers, contractors and construction supervisionunits, and from 1989 onward an acceptable modus operandi emerged in the course of theexecution of the BTTE. Overall, considering that the principles of international contractadministration were hardly known before, and that the BTTE was the first high-classhighway project in China, the implementation of the civil works, despite itsshortcomings, has been a commendable achievement, and it provided an excellentopportunity for acquiring technological and managerial experience, even if some pricehad to be paid for the learning process. Also, in retrospect, the contracting periods of 30-36 months for civil works have been too tight on account of the poor sub-soil conditionsalong several section of the Expressway alignment, over which the embankmentsconstructed required a minimum of 12 months to settle. Regarding the E&M componentof the BTTE, it could be argued that a much earlier start on the preparation of could havepreempted the excessive implementation delay of the BTTE and the project as a whole.In this context, it is important to note that this was the first time that such kind of E&Mworks had been undertaken in China. Such a novelty, combined with the overallmanagement requirements for the implementation of the BTTE civil works, to which ahigher priority had been given, understandably led to the delay encountered in thecompletion of the E&M component.

61. Two of the minor components of the projects, such as procurement ofmaintenance equipment and staff training, were executed with some modifications,without deviating from the original objectives of these components. The road data basecomponent for the Beijing Municipality road network was substituted with a PMScomponent for the BTTE because the road data base and PMS development were alreadysatisfactorily addressed by the Municipality itself. The execution of the three studies onhighway financing, local bitumen usage and the development of a management systemfor the BTTE proceeded according to their respective terms of reference. However, thefirst two studies have had only limited impact on the policy issues covered by the studies.The management system for the BTTE is in place and functions satisfactorily.

D. PROJECT SUSTAINABILITY

62. The physical condition of the BTTE has shown no signs of adverse deteriorationsince it has been in service, and BTTEUC is well organized and equipped to meet theanticipated routine maintenance requirements of the BTTE. The increase in corridortraffic is expected to continue in line with the trend of the economic development in theinfluence area of the Expressway. There is no discernible risk to steady growth in toll

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revenues, and the necessary funding for maintenance, loan repayment, and, thus,achieving the overall development objectives of the project seems to be well assured.

63. The maintenance and operation equipment fleet acquired under the project shouldprovide adequate long-term service, since operators have been trained, sufficient stock ofessential spares have been purchased and maintenance facilities have been provided alongthe BTTE.

64. The PMS, as an integral part of the Management System for BTTE, isfunctioning, and represents an important tool for maintenance decisions. It is expectedthat the system with regularly collected input data will be operating satisfactorily, and theoutput information of the system will be used for maintenance decisions in terms of thetiming and the nature of the technical solutions.

65. The information from the staff training program, despite the involvement of arelatively small proportion of staff, has filtered through the organizations involved andhelped in the formulation of administrative and technical decisions that are reflected inthe operation of the BTTE. The effect of the training has also benefited the Beijing andTianjin municipalities and Hebei Province, as well as MOC, beyond the strictly BTTE-oriented impact of the program.

E. BANK PERFORMANCE

66. The project was consistent with the sectoral investment priority of the Beijing andTianjin Municipalities and Hebei Province, the development objectives of the CentralGovernnent and the country assistance strategy of the Bank Group. The identification ofthe components, preparation, appraisal and supervision of the project were satisfactory.Although, partly through hindsight, the following weaknesses have been noted:

(a) It could be argued that the Bank Group could have been more alert to thequality of design and technical specifications. However, since a review ofthe design documentation prepared by design institutions was checked byforeign consultants engaged under bilateral aid, it is understandable thatBank Group staff felt assured that the risk of design deficiencies had beensubstantially reduced. Less-than-satisfactory engineering design was notan isolated case, and the Bank Group had similar experience with someother Bank-Group-financed highway projects in China. Since the Bankhas no resources to undertake in-depth review of designs and technicalspecifications, from 1991 onward the Bank Group mobilized ConsultantTrust Funds and involved consultants in the preparation phase of theengineering design and technical specifications, working jointly with localdesign institutions. Such an approach was aimed at improving the qualityof design documentation through participation in the design process, ratherthan reviewing already completed packages, in which case there had beena reluctance to introduce changes once the documentation had beencompleted. Recently, the Bank Group achieved the same objective

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through including in project preparation mission teams a highway designspecialist to scrutinize the engineering design and technical specifications.

(b) The Bank Group's supervision efforts were adequate and commensuratewith the project's size and complexity. In critical stages, such as in late1988 and early 1989, when it was identified that contractors were notcomplying with the conditions of the contracts, decisive and firm actionswere taken by the Bank Group. An agreement was negotiated with MOCand BTTEUC, which amounted to an informal suspension ofdisbursements until such time as all previously constructed defectiveworks had been corrected and the Office of the Engineer's Representativehad certified that the quality of civil works had been restored to meet thetechnical specifications. This measure helped ensure that a firm disciplinewas established for the acceptance of future works. The ongoing workswere regularly supervised by the Bank Group, particularly in the earlyphases of the implementation. Also, because of the BTTE's proximity toBeijing, short but frequent visits to the site and consultations betweenBank Group missions and MOC/ BTTEUC took place, which do not showup in Bank Group records as formal missions.

(c) The Bank Group's performance in the preparation, implementation andfollow-up of the studies has been mixed:

The Highway Finance Study might have benefited from extensiveprediscussions with the Ministry of Finance and MOC in the CentralGovernment to ensure that the study was regarded by the ChineseGovernment as a much-needed and timely undertaking within thecountry's overall transport sector strategy. While the terms of referencewere reasonably clear regarding the study's objectives, it received onlycursory attention from the Borrower during the progress of the study andno formal comments were given on the study's finding by any of theministries of the Central Government. The Bank Group's discussions withHSRI regarding the study's follow-up remained inconclusive, and theBank Group was unable to enter into a meaningful dialogue with theministries of the Central Government on a strategy for the further handlingof the key issues and recommendations presented in the study's finalreport. In light of the impasse, the Bank Group decided to pursue many ofthe same objectives of the study but narrowed the scope of the new studyto one province under the Guangdong Provincial Highway Project (para.44).

The Local Bitumen Study arrived to a more definite conclusion, and thestudy's findings had some impact on the increased though still verylimited use of good-quality local bitumen for high-class road pavements.Nevertheless, the study established the potential for wider use of bitumen

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from local refineries capable of producing bitumen with propertiescomparable to imported bitumen. Although MOC has been promoting thewider use of local bitumen for high-class highway pavements, the study'srecommendations for more radical measures have not been pursued in aresolute manner and in accord with the oil refinery and transport industriesfor establishing consistent production quality and efficient mode oftransportation for high-grade bitumen. Similarly, the Bank Group has notcontinued dialogue with the Central Government in the interest ofencouraging further action on this matter.

The evolution of the Organization of Expressway Operation andMaintenance for the BTTE had limited Bank Group participation andinput. It has evolved from the experience gained by BTTEUC's studytours abroad and the Corporation's own initiatives to adjust suchexperience to local conditions. However, the organization andmanagement study report was reviewed by the Bank Group, and itscomments were taken into account in the supplementary report (para. 52).

F. BORROWER PERFORMANCE

67. Formally, MOC was the designated Executing Agency for the project. However,MOC, structurally and functionally, as a line ministry, was not suited for such role, andthe executive agency functions were delegated to BTTEUC, which was specificallyestablished for this purpose. The Corporation represented the three beneficiaries, Beijingand Tianjin Municipalities and Hebei Province, and assumed the repayment obligationsof the loan and credit. However, MOC retained the functions of the Engineer and theEngineer's Representative, thus ensuring, to some degree, the independence of theconstruction supervision organization.

68. BTTEUC was a first-time de-facto executing agency for a Bank Group-financedproject and this was a notable element in the way the project was administered,particularly in the early phases of implementation. BTTEUC was not well prepared forthe administrative requirements associated with Bank Group borrowing or for themanagement of major contracts based on ICB conditionalities. The Corporation's rolewas further complicated by the fact that most contracting units under the contracts, andthe bulk of the supervision staff, belonged to Beijing and Tianjin Municipalities andHebei Province. In the beginning, it was common for the employers and contractors tohave the tendency to communicate directly without the involvement of the joint local/foreign supervision team and this practice, which conflicted with FIDIC conditions ofcontract, took quite some time to overcome. The performance of BTTEUC showedimpressive improvement as the implementation of the project proceeded. It became awell-organized institution, capable of exercising prudent judgment in critical situations.It recognized the importance of ensuring the quality of work, and became a supporter ofthe independence of the supervision units. It also recognized the limitations of thecontractors, and rather than demanding unrealistic deadlines for completion, gave priority

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to ensuring that the quality requirements were complied with. In the case of qualitydefects, BTTEUC supported the supervision to get defective works redone as a conditionfor processing of progress payments. MOC's role was also supportive in this regard.While it would be unrealistic to assume that all elements of the works on the BTTE wereexecuted without quality shortfalls, the BTTE may be regarded as one of the best majornew highways constructed in China to date. BTTEUC also demonstrated initiative andsound judgment in handling the implementation of the other components of the project.The training programs were well selected and organized, and considerable care was takento choose the right equipment for the maintenance and operation of the BTTE. BTTEUCalso made commendable efforts in setting up an organization, which is expected to ensurethe efficient operation of the BTTE.

G. ASSESSMENT OF OUTCOME

69. Despite the initial difficulties and some setbacks encountered during theimplementation of civil works, the implementation of the project is regarded assatisfactory. The developmental objectives of the project were achieved and areconsidered sustainable without perceptible elements of risk. The stream of benefits isexpected to be maintained, or even increase, because of the favorable prospect forcontinued strong economic activity in the influence area of the BTTE, which wouldtranslate into continued traffic growth in the corridor, with a high percentage of additionaltraffic making use of the expressway.

70. Overall, the contractors' performance was uneven. After very disappointinglypoor performance the contractors' performance improved but constant vigilance of thesupervision staff was required to mitigate quality defects, which, even so, showed uprather frequently throughout implementation of the project. The contractors' shortfallswere attributable to unfamiliarity with contracting requirements to which they had notbeen previously exposed, lack of suitable equipment fleet for the type of works andtechnical requirements, serious and recurrent cash flow problems, and inexperience inmanaging and organizing the construction of high-class highways. The contractors'relatively poor performance placed an added burden on the construction supervisionteams, which, particularly in the beginning, were handicapped by a lack of experiencewith supervision procedures under international contract conditionalities. Credit is due tothe foreign supervising engineers attached to the joint local/foreign supervision team, notonly for their direct involvement in the field in quality control, but also for their extensiveformal and on-the-job training efforts through which they increased the technical skills ofthe local supervisors in a relatively short time.

71. The outcome on sectoral development initiatives under the project through thethree studies has been marginal. The Highway Finance Study had some inconsistenciesthat required several sessions of discussions with Bank Group staff. But moreimportantly, there was neither provision nor willingness for its follow-up to bring thestudy's finding to a definite conclusion. The Local Bitumen study came up with correcttechnical conclusions but it was less articulate in outlining a definite line of actions for

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pursuing the issues. It was, primarily, up to Borrower to take the initiative and pursue thesetting up of an interministerial coordinating committee for formulating a plan of actionfor expanding the utilization of high-quality bitumen, the production of which on abroader scale was found to be viable by the study. The Expressway Operation andMaintenance Study achieved its objective by providing BTTEUC with sufficientinformation for setting up the management organizations for the BTTE.

72. The level of technology transfer through training is not easy to measure due to alack of well-defined baseline parameters. The training courses and study tours were wellselected and provided a satisfactory level of exposure to new concepts and incentives foradopting them selectively in the Chinese environment. However, the program involvedfewer trainees than it could have had with a better mix of training abroad and locallyorganized courses/seminars, involving local institutions and a well-balanced participationof local and foreign experts, although the cost per trainee was lower than under recentBank-financed highway projects. The technology transfer through modem equipment forthe operation and maintenance of the BTTE should achieve its objectives and ensure thatthe new facilities will be efficiently operated and adequately maintained.

73. Overall, the project was implemented within the terms of the development creditand loan agreements, and in substantial compliance with the Bank's proceduralrequirements. Credit/loan proceeds were not extended to any component of the projectwithout obtaining prior clearance from the Bank Group.

H. FUTURE OPERATION

74. BTTEUC is responsible for the operation and maintenance of the BTTE. Interimmanuals for the management and maintenance of tolling, traffic surveillance andintegrated communication systems of the BTTE were issued in October 1995. The PMSfor the BTTE, developed under the project (para. 40), is also operational and provides thebasis for the scheduling of the periodic and routine maintenance activities for the BTTE.BTTEUC is in the process of consolidating administrative and technical regulations,which are expected to be issued during 1997 as an Operations Manual for the BTTE.Also, BTTEUC has undertaken to submit to the Bank an operation report annually and apostevaluation of economic benefits every three years.

I. KEY LESSONS LEARNED

75. Some of the more critical shortfalls noted in connection with the implementationof the project, which have also been encountered on recently completed and still ongoingBank-financed projects, comprise the following:

(a) The design and technical specification deficiencies in the technicaldocumentation for the BTTE highlighted the need for the consolidation ofdesign and technical specification standards for the construction of high-class highways in China. This is a topic that had been frequently raisedwith MOC but without reaching an understanding on proceeding with the

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task. The Bank Group should take up this matter with the CentralGovernment in the interest of formulating a viable solution for thedevelopment of national design standards and technical specifications,possibly involving local highway design institutions to be assisted byforeign experts as required.

(b) The late start and the slow progress made on the preparation of the E&Mworks for the BTTE, covering tolling, traffic monitoring,telecommunication and lighting systems related E&M works added abouttwo years to the implementation period of the project. Substantialimplementation delays for the same reason have been experienced underother Bank-financed highway projects. In the future, E&M designdocumentation should be an integral part of the overall designdocumentation for major highways, and the Central Government and theBank Group should ensure that the design and technical specifications forthe E&M works are ready at the same time as the design and technicalspecifications for the civil works contracts of the highway.

(c) The fact that the contractors and almost all of the supervision staff wereaffiliated with the same transport divisions within the Beijing and Tianjinmunicipalities and Hebei Province created difficulties in adhering to theprinciples of the general conditions of contract, according to which theemployer, supervision and contractor should each be an entirely separateand independent entity. In the initial phase of the implementation theseparate roles and responsibilities of the three parties were not wellunderstood, which, apparently, led to confusion and conflicts. Thisproblem was gradually overcome to an acceptable degree as theimplementation of the project proceeded, but it was not fully eliminated.Similar conflicts have also emerged under other Bank-financed projects.While over the years the financial independence of the contracting entitieshas evolved extensively, the staffing of the supervision units are stillpredominantly provided from local highway administration units with onlya limited level of independence from the employer and local governments.It is therefore imperative that the creation of an independent constructionsupervision industry be pursued as a matter of high priority, which couldinitially provide supervision services in joint ventures with foreignconsulting firms, and eventually on its own. An initiative along these lineshas already been taken under the Second Henan Provincial HighwayProject, the outcome of which should be monitored, and if foundsatisfactory, be followed up expeditiously by the Central Government andthe Bank Group.

(d) It appears that the preparation of the Highway Finance Study was deficientand lacked sufficient consultation with the Borrower. Furthermore, onlylimited efforts were made by the Borrower and the Bank Group to follow

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up on the recommendations of the Highway Finance and the LocalBitumen studies. It has been noted that preparation and follow-up ofstudies are frequently deficient, and Bank Group's guidance to ongoingstudies have been often inadequate. Since in most cases studies areincluded in the projects at the Bank Group's initiative, the Bank Groupshould put much more effort into identifying the expediency and focus ofthe studies, and the extent of the borrower's interest in the subject throughmore substantive consultation with the borrowers and beneficiaries of theloan/credit in the project preparatory phase. Furthermore, it is seldom thatsufficient provision is built into the studies regarding a follow-upmechanism to the likely implementation phase of the studies'recommendations. The above observations are pertinent to the highwayfinance and local bitumen studies carried out under the project.

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PART II: STATISTICAL TABLES

TABLE 1: SUMMARY OF ASSESSMENTS

A. Achievement of Objectives Substantial Partial Negligible Not Applicable

Macroeconomic policies XSector policies XFinancial objectives XInstitutional development XPhysical objectives XPoverty reduction XGender issues xOther social objectives XEnvironmental objectives XPublic sector management XPrivate sector development X

B. Project Sustainability Likely Unlikely Uncertain

x

C. Bank Performance Highly Satisfactory Satisfactory Deficient

Identification XPreparation assistance XAppraisal XSupervision X

D. Borrower Performance Highly Satisfactory Satisfactory Deficient

Preparation XImplementation XCovenant compliance XOperation (if applicable) X

E. Assessment of Outcome Highly Satisfactory Unsatisfactory HighlySatisfactory Unsatisfactory

x

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TABLE 2: RELATED BANK LOANS/CREDITS

Year ofLoan/credit title Purpose approval Status

Preceding operation

1. Highway Project provincial road network FY85 completedLn. 2539-CHA/Cr. 1954-CHA expansion/improvement

Following operations

1. Shaanxi Provincial Highway Project see footnote La FY88 completedLn. 2952-CHA

2. Sichuan Provincial Highway Project see footnote LA FY88 completedLn. 295 1-CHA/Cr. 1917-CHA

3. Jiangxi Provincial Highway Project see footnote LA FY89 completedCr. 1984-CHA

4. Shandong Provincial Highway Project see footnote La FY89 ongoingLn. 3073-CHA/Cr. 2025-CHA

5. Jiangsu Provincial Transport Project see footnote La FY91 completedLn. 3316-CHA/Cr. 2226-CHA

6. Zhejiang Provincial Highway Project see footnote LA FY92 ongoingLn. 3471-CHA

7. Henan Provincial Highway Project see footnote la FY93 ongoingLn. 3531-CHA

8. Guangdong Provincial Highway Project see footnote LA FY93 ongoingLn. 3530-CHA

9. Fujian Provincial Highway Project see footnote da FY94 ongoingLn. 3681-CHA

10. Hebei/Henan National Highway Project see footnote La FY94 ongoingLn. 3748-CHA

11. Xinjiang Highway Project see footnote La FY95 ongoingLn. 3787-CHA

12. Shanghai-Zhejiang Highway Project see footnote La FY96 ongoingLn. 3929-CHA

13. Second Shaanxi Provincial Highway Project see footnote La FY96 ongoingLn. 3986-CHA

14. Second Henan Provincial Highway Project see footnote La FY96 ongoingLn. 4027-CHA

15. Second Xinjiang Highway Project see footnote La FY97 ongoingLn. 3643-CHA

16. Second National Highway Project see footnote La FY97 ongoingLn. 3654-CHA

Za These highway projects, typically, have had the following components: (a) construction of a majorhighway; (b) improvement of provincial roads; (c) procurement of road maintenance equipment; and(d) institutional development components, such as RDB and PMS programs, staff training and selectedsubsector-oriented studies.

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TABLE 3: PROJECT TIMETABLE

Steps in project cycle Date planned Date actual

Identification (Executive Project Summary) N/A 06/84Preparation N/A 03/85Appraisal 10/86 10/86Negotiations 03/87 03/87Board presentation 04/87 05/12/87Signing 07/87 09/14/87Effectiveness 09/87 12/08/87Project completion 06/92 04/95Loan closing 12/92 12/31/95

TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMULATIVE ESTIMATE AND ACTUAL

($ million)

FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96

Appraisal estimate 18.00 50.00 95.00 130.00 150.00Actual 13.90 26.15 72.79 90.14 114.69 137.33 148.09 151.40 158.53

Actual as %of estimate 77.21 52.30 76.62 69.34 76.46 91.55 98.73 100.93 105.69Yearly distribution in % 8.77 16.49 45.91 56.86 72.35 86.62 93.41 95.50 100.00

Date of final disbursement January 26, 1996

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TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION

Estimated ActualStart Complete Start Complete

1. Expressway Construction Sep-86 Oct-90 Dec-87 Sept-93

2. E & M Supply and Installation - - Nov-92 Apr-95

3. Expressway Maintenance, Operation and Feb-88 Nov-89 May-92 May-95Monitoring Equipment

4. Consulting Services Sep-87 Jan-90 Jan-88 Jun-95

5. Studies Oct-87 Jun-91 Jul-90 Jun-92

6. Staff Training Oct-87 Jun-92 Jul-90 Nov-94

7. PMS for BTTE Oct-87 Aug-90 Nov-91 Nov-93

TABLE 6: KEY INDICATORS FOR PROJECT OPERATIONS

Length (km) Traffic (1995 ADT)Estimated Actual Estimated Actual

Expressway ConstructionSection 1: Beijing-Majuqiao 14.0 14.0 5,850 13,100Section 2: Majuqiao-Nanying 28.0 28.0 4,150 12,900Section 3: Nanying-Yangcun 30.2 30.2 4,150 11,250Section 4: Yangcun-Tianjin 36.7 36.7 6,100 9,700Section 5: Tianjin-Tanggu 33.8 33.8 7,250 5,850

Total 142.7 142.7

TABLE 7: STUDIES INCLUDED IN PROJECT

Studies on Financing Highway Development, Local Bitumen and Organizationfor Expressway Operation and Maintenance were included in the Project. The first twowere carried out by the Highway Scientific Research Institute of MOC and the latter byBTTEUC. The overall cost of the studies was Y 1.42 million, about evenly sharedbetween the three studies.

The objectives of the studies, in general, have been achieved. However, there wasa lack of effort both on the part of the Borrower and the Bank Group to follow up on thefindings and recommendations of the highway finance and local bitumen studies. Theassessment of the implementation of the studies is presented in paras. 42-51 of Part I ofthe ICR.

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TABLE 8A: PROJECT COSTS($ million)

Appraisal Estimate Actual/Latest EstimateItem Local Foreign Total Local Foreign Total

Civil Worksa. BTTE 81.79 93.88 175.68 151.00 172.78 323.78b. Two Conn. Roads to BTTE - - - 26.56 14.30 40.86E&M Works 5.41 21.62 27.03 4.06 16.20 20.26Construction Supervision 0.00 4.49 4.49 4.35 4.50 8.85Equipment 0.00 5.00 5.00 0.00 6.96 6.96Staff Training 0.00 0.81 0.81 0.00 0.80 0.80Studies 0.27 0.27 0.54 0.28 0.10 0.38Road Panning 0.00 0.20 0.20 0.00 0.20 0.20

Base Cost 87.47 126.27 213.74 186.25 215.84 402.09

Physical Contingencies 8.75 12.63 21.37 - - -Price Contingencies 7.48 11.08 18.56

Total Contingencies 16.23 23.71 39.93 - - -

Land Acquisition 22.11 0.00 22.11 63.08 0.00 63.08

Total Project Cost 125.81 149.98 275.79 249.33 215.84 465.17

TABLE 8B: PROJECT COSTS

(Y million)

Appraisal Estimate Actual/Latest EstimateItem Local Foreign Total Local Foreign Total

Civil Worksa. BTTE 302.64 347.36 650.00 724.80 642.75 1,367.55b. Two Conn. Roads to BTTE - - - 127.49 68.64 196.13E & M Works 20.00 80.00 100.00 22.28 89.17 111.45Construction Supervision 0.00 16.60 16.60 20.87 16.65 37.81Equipment 0.00 18.50 18.50 0.00 25.97 25.97Staff Training 0.00 3.00 3.00 0.00 2.99 2.99Studies 1.00 1.00 2.00 1.04 0.38 1.42Road Panning 0.00 0.74 0.74 0.00 0.75 0.75

Base Cost 323.64 467.20 790.84 896.48 847.20 1,743.68

Physical Contingencies 32.36 46.72 79.08 - - -

Price Contingencies 27.68 41.00 68.67

Total Contingencies 60.04 87.72 147.76 - - -

Land Acquisition 81.82 0.00 81.82 235.39 0.00 235.39

Total Project Cost 465.50 554.92 1,020.42 1,131.87 847.20 1,979.07

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TABLE 8c: PROJECT FINANCING

($ million)

Source Appraisal Estimate Actual/Latest Estimate

IDA 125.0 133.5IBRD 25.0 25.0Government 125.8 306.7

Total 275.8 465.2

TABLE 9: ECONOMIC COSTS AND BENEFITS

(Y million)

Costs La Benefits Lb NPV k ERR (%)

The ICRBeijing-Tianjin-Tanggu Expressway 3,274.71 209.56 1,109.70 15.7

The SARBeijing-Tianjin-Tanggu Expressway 1,387.59 50.45 n.a. 14.5

la December 1995 prices.Lb First-year benefits.k Discount rate = 12 percent.

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TABLE 10: STATUS OF LEGAL COVENANTS

Agree- Covenant Original Revisedment Section class(es) Status Date Date Description of Covenant Comments

Loan 2.02(b) 5 C Open and maintain a Special Account indollars in a bank on terms and conditionssatisfactory to the Bank

3.01(a) 5 C Commitment to project objectives, meetingobligations under the Development CreditAgreement

3.01(b) 10 C Adhering to Implementation Program setforth in Schedule 4

3.02 10 C Commitment to comply with Schedule 3 ofthe Development Credit Agreement

3.03(a) 5 C The Borrower to enter into a Project(b) Implementation Credit Agreement with

Beijing Municipalit), Tianjin Municipalityand Hebei Province, acceptable to the Bank

4.01 (a) I C Maintaining adequate financial recording and(b) (c) meeting auditing reporting requirements

Project 4.02 (a) 5 C Establish and maintain an ExpresswayOperating Organization (EOO)

4.02 (b) 9 C Within EOO establish and maintain a unit formonitoring toll rates, traffic flow, trafficdiversion and vehicle axle loads

4.03 9 CP Toll rates charged not to exceed 30% of the Partially fulfilledvehicle operating cost saving for theExpressway

4.04 13 C Borrower to ensure that connecting roads tothe Expressway shall be open to traffic uponthe completion of Expressway

2.05 7 C Carry out resettlement actions as agreed

Status: C - Complied withCD - Compliance after delayNC - Not complied withSOON - Compliance expected in reasonably short timeCP - Complied with partiallyNYD - Not yet due

Covenant Class:I - Accounts/audit2 - Financial performance/generate revenue from beneficiaries3 - Flow and utilization of Project funds4 - Counterpart funding5 - Management aspects of the Project or of its executing agency6 - Environmental covenants7 - Involuntary resettlement8 - Indigenous people9 - Monitoring,, review and reporting

10 - Implementation11 - Sectoral or cross-sectoral budgetary or other resource allocation12 - Sectoral or cross-sectoral regulatory/institutional action13 - Other

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TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS

There was no significant lack of compliance with an applicable Bank Operational ManualStatement (OD or OP/BP)

TABLE 12: BANK RESOURCES: STAFF INPUTS

FY 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Total

Preappraisal 24.3 24.3

Appraisal 5.2 19.6 24.8

Negotiations 17.9 17.9

Supervision 4.4 5.1 14.5 9.9 9.4 5.7 5.2 3.6 9.9 8.2 75.9

Completion 11.9 6.8 18.7

Total la 24.3 5.2 41.9 5.1 14.5 9.9 9.4 5.7 5.2 3.6 9.9 20.1 6.8 161.6

TABLE 13: BANK RESOURCES: MISSIONS

Performance ratingNumber Days Specialized Implemen- Develop-

Stage of Project Month/ of in staff skills La tation ment Types ofCycle year persons field represented status Ll objectives problems LZ

Identification 02/85 - - EN,ECPreparation 06/85 3 10 PO,EC,FAPreappraisal 08/85 6 12 EN,ECAppraisal 10/86 4 5 EN,ECNegotiation 03/87 6 - EN,EC,PO

LC,DO,RABoard approval 05/87 -Signing 09/87Effective 12/87 - - -

Supervision 1 10/88 2 5 EN,TS 2 1Supervision 2 08/89 1 5 EN 2 1Supervision 3 12/89 1 5 EN 2 1Supervision 4 07/90 1 5 EN 2 1Supervision 5 11/90 1 5 EN 2Supervision 6 11/92 2 5 EN,RA 2 1Supervision 7 05/94 1 5 EN 2 1Supervision 8 08/95 1 5 EN 2 1& Completion ICompletion 2 11/95 1 2 RA - -

La PO: Project Officer; EN: Engineer; FA: Financial Analyst; EC: Economist; OS: Operations Specialist;EN: Environmentalist; LC: Legal Counsel; CO: Country Officer; DO: Disbursement Officer;RA: Research Analyst; TS: Training Specialist.

Lb 1: Highly satisfactory; 2: Satisfactory.la Typical problems included: design changes, quality deficiency and delays.

- 35 - ANNEX 1

ANNEX 1: ECONOMIC AND FINANCIAL EVALUATION

Preface

1. In the Staff Appraisal Report (SAR) for the Beijing-Tianjin-Tanggu ExpresswayProject (Report No. 6344-CHA), the economic evaluation was presented for theconstruction of a 143 kin, 4-lane divided, controlled-access, tolled expressway connectingBeijing and Tianjin (the second and the third most populated municipalities in China)with the new port of Xingang at Tanggu and the necessary connecting roads betweenBeijing and Tanggu.

2. The economic analysis presented in this ICR is based on updated data on traffic,vehicle operating cost (VOC), economic cost and road user benefits, taking into accountrevised assumptions regarding future traffic growth projection. The methodology used inthe economic analysis for this ICR is similar to that used in the SAR and is summarized inthe following:

(a) capital investment and maintenance costs have been revised to reflectDecember 1995 prices and included in the cost stream;

(b) the benefit stream, also reflecting December 1995 prices, has also beenincluded, and consists of savings in VOC, reduced traffic congestion on theexisting road, and reduction in cost of accidents;

(c) a project life of 20 years (1996-2015) has been assumed and the capitalinvestment period for the expressway is during 1987-1995; and

(d) full benefits started to accrue on the BTTE in October 1993, althoughbetween September 1990 and October 1993 partial benefits accrued because,in addition to the opening of the first 72 km section of the BTTE to traffic inSeptember 1990, two additional sections, 26 km and 11 km in length, wereopened to traffic in December 1991 and October 1992, respectively.

3. As in the SAR, the highway was divided into five sections.

Section 1: from Beijing to Majuqiao (14.0 km);Section 2: from Majuqiao to Nanying (28.0 km);Section 3: from Nanying to Yangcun (30.2 km);Section 4: from Yangcun to Tianjin (36.7 km); andSection 5: from Tianjin to Tanggu (33.8 km).

- 36 - ANNEX I

Cost and benefit analysis were carried out separately for each section as well as thehighway as a whole.

Corridor Traffic

4. The 1995 corridor traffic and its distribution between the old and the newhighway is presented in the following table, indicating SAR forecast and actual trafficcensus data:

NUMBER OF MOTORIZED VEHICLES PER DAY (ADT) FOR 1995:

The New DiversionThe Old Road Expressway Total Corridor Factor (DF)

(1) (2) (3)=(1)+(2) (4)=(2)/(3)

SAR:Section 1 2,146 5,843 7,989 73.1%Section 2 3,367 4,143 7,510 55.2%Section 3 8,843 4,146 12,989 31.9%Section 4 7,838 6,075 13,909 43.7%Section 5 3,625 7,247 10,872 66.7%

Actual:Section 1 19,891 13,093 32,984 39.7%Section 2 4,712 12,902 17,614 72.3%Section 3 10,061 11,252 21,313 52.2%Section 4 12,992 9,671 22,663 42.7%Section 5 17,425 5,861 23,286 25.2%

(Actual/SAR) ratios:Section 1 926.9% 224.1% 412.9%Section 2 139.9% 311.4% 234.5%Section 3 113.8% 271.4% 164.1%Section 4 165.8% 159.2% 162.9%Section 5 480.7% 80.9% 214.2%

Sources: BTTEUC and the Bank staff.

5. As shown above, the 1995 corridor traffic on all five sections (i.e., the sum oftraffic on the parallel sections of the existing arterial road and the BTTE ) was muchhigher than the SAR estimates. Also, the actual diversion of traffic to the BTTE had beenat a higher rate than forecast (Sections 2 and 3) or at about the same rate (Section 4),except for Sections 1 and 5, on which the DF was substantially lower than expected.However, because of the overall increase in corridor traffic, over and above SARexpectation, the traffic volume of the BTTE in 1995 well exceeded SAR forecast on eachsection of the Expressway.

- 37 - ANNEX I

Traffic Projection

6. The opening of the BTTE caused a relatively quick traffic buildup to respond tothe long pent-up road transport demand along this corridor, particularly during the firstthree years. Notwithstanding this, the ICR's traffic forecast for the Expressway is moreconservative than the SAR estimates because: (a) the traffic on Section 5 remained wellbelow exceptions; (b) the DF ratios for Sections 1 and 5 are still below SAR projections;(c) the distance savings between some of the parallel sections of the BTTE and theexisting arterial roads are not significant enough to encourage diversion from the arterialroad to the BTTE; and (d) further growth in urban development along the parallel arterialroads is expected generate local traffic growth, which could limit the rate of corridortraffic diversion to the BTTE.

7. The long-term traffic growth rate (1993-2010) for the expressway has beenestimated in the range of 5.4 to 6.8 percent, compared with the SAR estimate of auniform growth rate of 8.2 percent for all four sections. The traffic projections bysections are summarized as follows:

TRAFFIC FORECAST COMPARISON FOR THE NEW HIGHWAY (ADT) BY SECTIONS:

Section 1 Section 2 Section 3 Section 4 Section 5Beijing- Majuqiao- Nanying- Yangcun- Tianjin-Majugiao Nanying Yangcun Tianjin Tanggu

SAR:1993 4,828 3,425 3,426 5,020 5,9891994 5,311 3,767 3,769 5,522 6,5881995 5,843 4,143 4,146 6,075 7,2472000 9,409 6,675 6,675 9,785 11,6752005 13,197 9,362 9,362 13,724 16,3692010 18,509 13,132 13,132 19,248 22,959Average growth p.a.

1993-2010 8.2% 8.2% 8.2% 8.2% 8.2%

ICR:1993 9,818 9,878 9,045 8,032 5,5031994 12,239 12,058 10,516 9,039 5,4781995 13,093 12,902 11,252 9,671 5,8612000 18,364 18,096 15,782 13,564 8,2202005 23,438 23,096 20,142 17,311 10,4912010 29,913 29,476 25,707 22,094 13,389Average growth p.a.

1993-2010 6.8% 6.6% 6.3% 6.1% 5.4%

Note: All figures are rounded.

8. The projected traffic for the five sections of the expressway for year 1993-2015,by type of vehicles, is detailed in Table 1 of this Annex. From 1993-95, actual traffic

- 38 - ANNEX I

data have been used, while for subsequent years the following growth rates haveassumed:

(a) basic expressway traffic to increase by 7.0 percent per year between 1995and 2000, and 5.0 percent per year thereafter;

(b) generated traffic would be 10 percent of basic traffic.

9. In the SAR, by comparison, the basic traffic growth rate for the new expresswaywas 10.0 percent per year between 1995 and 2000; and 7 percent per year thereafter. Thegenerated traffic growth rate was assumed to be 55 to 60 percent of the normal traffic. Itwas further assumed that some railway traffic, both passenger and freight, would divert tothe expressway. Diversion of railway traffic has been discounted in the revisedprojection because (a) the highway tariffs are much higher than those for rail (about30 fen per ton-km or passenger-km for highway and 4 to 6 fen per km passenger-km orton-km for railway); and (b) the average railway transport distance in Beijing and Tianjinare generally much longer than the total length of the expressway, so the effect of theBTTE would be marginal at most.

Economic Costs

10. Financial costs have been converted to economic costs (Table 2) by applyingshadow prices shown in Table 3. The overall effect of the revised financial costs andshadow prices that the total economic cost of the project is 116.1 percent higher than theSAR estimate, both at constant December 1995 prices.

HIGHWAY ECONOMIC COST COMPARISON

(Y million)

SAR ICR ICR/SARMar 1986 Dec 1995 Dec 1995 (in%)

Total Costs 916.41 1,515.26 3,274.71 +116.1

Economic Benefits

11. The economic analysis includes the benefits derived from (a) VOC savings forboth basic and generated traffic, (b) relieved congestion on the existing road, and(c) accident cost saving (Table 5).

12. Based on the actual traffic performance, it is estimated that about 25 to 72 percentof corridor traffic has diverted to the new highway. The lower traffic level on the existingarterial roads reduces congestion and VOCs, and the sum of the two produces an average15 percent reduction in VOCs up to 1995. Thereafter, because of the gradual buildup of

- 39 - ANNEX 1

traffic on the existing arterial roads, the savings would be reduced by 1 percent for eachof remaining five-year periods, reaching an 11 percent saving by 2015.

13. The annual average number of accidents per km per year on the existing roadbetween 1987 and 1990 (without the BTTE), was 3.20. With the BTTE, between 1991and 1994, the number of accidents on the old road reduced to 1.77 per km per yearbetween 1991 and 1994. For the BTTE, the accident rate was 0.71 per km per year. Forestimating future road accident cost savings, it was assumed that the reduction in thenumber of accidents, resulting from the construction of the highway, would be oneaccident per km per year at a cost of Y 15,000 for each accident.

Overall Economic Evaluation

14. The overall ERR on the highway investment is estimated to be 15.7 percentversus the SAR estimate of 14.5 percent (Table 5). Total costs and benefits streams,Economic Rate of Return (ERR) and Net Present Value (NPV), for each section of theexpressway are presented in Tables 5A-5E.

SAR ICR

Best estimate of rate of return 14.5% 15.7%NPV (12%, Y million) n.a. 1,109.7

Financial Evaluation

15. The estimated financial rate of return (FRR) against the full costs of theexpressway is 5.2 percent as indicated below, and detailed in Table 6 of this Annex. Theestimate is based on the final estimate of the financial cost of the project as indicated inTable 2B, and the information provided by BTTEUC regarding: (a) maintenance cost,(b) projected toll revenues, (c) operating cost for the BTTE, and (d) loan repaymentschedule. The result indicates that the BTTE is expected to recover its full operating costand to generate sufficient revenues to repay the Bank loan and IDA credit.

-40 - ANNEX I

FINANCIAL ANALYSIS RESULTS

Input Data:Total cost Y 2,464.99 millionDebt Y 599.75 millionEquity Y 1,905.28 millionPeriod of loan 20.0 yearsLoan interest rate (onlending rate) 4.2%Grace period 5.0 years

ResultsRate of return on equity 6.8%Financial rates of return:

Best estimate 5.2%Toll revenue (-10%) 3.9%Operating costs (+10%) 5.1%Toll revenue (-10%) and operating costs (+10%) 3.7%

Level of Toll Charges

16. The expressway is operated as a closed toll system with 9 toll stations along theexpressway. The tolls are determined for four groups of vehicles: (a) passenger cars andsmall trucks; (b) medium trucks and buses; (c) large trucks and buses; and (d) truck-trailers. Toll levels are calculated at a uniform per km rate for the four classes. andpresently are as follows: Y 0.25, Y 0.35, Y 0.45 and Y 0.60 per km for the fourcategories of vehicles, respectively.

17. In the absence of a comprehensive traffic origin and destination pattern and VOCcost saving calculation for the various trips involved, the ICR used an approximatinganalysis to highlight the present relationships between the prevailing toll rates and thefinancial VOC savings on the five sections of the BTTE for which economic evaluationshave been carried out and economic and financial VOC costs have been available, as of1996, as indicated in Table 7.

18. From the ICR's analysis the following tentative conclusions may be drawn:

(a) On the average, the toll rates for all types of vehicles, except for tractor-trailers, exceed 30 percent of the VOC savings. However, on thosesections where the travel distance on the Expressway is significantlyshorter than on the parallel arterial road, the 30 percent of the VOC savingis close or even higher than the toll rate, such as on Sections 3 and 5. Thiscould indicate that toll rates higher than 30 percent of the VOC savings arenot necessarily a deterrent to road users, if it results from substantivedistance and time savings. However, wherever the difference between thetravel distance on the parallel section of the arterial road and the section of

-41- ANNEX 1

the BTTE is not significant, the VOC saving falls below the toll rateindicating that the road user is likely to be overcharged in relation to thebenefits gained by using the expressway. Also, small vehicles (cars, smalltrucks) seem to pay proportionally higher toll rates than truck-trailers oreven heavy trucks.

(b) The ICR assessment, even in its rudimentary form, seems to indicate, thata uniform, strictly per km based toll rate is inequitable because of the highsensitivity of VOC savings to travel distance/time saving. This would beadvantages in situations when long-distance traffic has built up to suchdegree that shorter, more direct trips on the expressway should bediscouraged in the interest of reducing congestion or ensure a high-level ofservice condition on the expressway. However, on the BTTE there is stillsufficient capacity, and a better differentiated tolling rates , closer to the defacto VOC savings, would be appropriate.

(c) A comprehensive, origin and destination survey-based study could lead tomore reliable conclusions and the determination of toll rates in a morerational manner. Such a study could also attempt to examine in greaterdepth the effect of arterial network congestion on VOCs, which at presentmay be underestimated and result in an underestimate of the VOC savingsbetween trips taken on the BTTE and the sections of the arterial network.

TWe I - Beijing-Tianjin-Tauggu Expressway Trafrw Summary(ADT)

km Of"- (Vlix i.%) Le Rd am ROW codtm AVOW p"d (bWb=)

I n III IV v I-V I n ID IV v I 11 in IV v I 11 In IV v I n RI IV IV

Om roe&15.0 15.0 9.0 1S.0 15.0 4 F F F F F I I 11 I I FWr Fair P- Foiff Foir 4S 45 45 45 45

b 19.5 19.5 14.0 2D.0 20.0 1_b 1.0% 1.0% 1.09A ilo% LOSA (P-.d) (P..d) (Pr-d) (Pr-d) (P-,W)

15.0 13.0 15.0 15.0 15.0 4 F F F p F EV. EM. Eitp Gwd Good Good G..d God OD 90 30 80 sob 20.0 20.0 20.0 2D.0 20.0 1.2% 1.2-A 1.2% 3.0% 1.7% a,-td) oto OIW-4) 04WW) (M d)

Sn.11 cW_ -Nkdin BV� �� Ba�- ��Svwll Ttuck- -MO&= Tnwk- �� Tnwk - -TDO. 7�9&,- - TOW---RMI lh� WALIWW WthoM Willat

W"- Wkb ftw;od p-j- witb Prqd Poiga "k ftojm Wjd wm"ea Wjd Wkh Projet Projd With Projet Projet Wikh Projea projod vrith ftoja

OM ER� OW E)W- Old Old lixprm Old Old Exp� Old Old Eq� Old Old Eveu Old Oid ERMN Old Old Evtm Old 014 EVEM Oldroad -- MY real -way 'od '.W ."Y mA .d -,my -d 100 -- od -,d -y v..d road -wsy WWI rod -way roM mW -way W

5.M 3,142 2.750 �.477 1,964 1,513 1,992 1,374 618 4,459 884 3.575 3,201 1.276 1.925 2,495 9192 1,513 Z052 196 1,836 23,MS 9,618 13,750""t 7.634 3,916 1,719 4.492 Z447 2,045 2.549 1,713 836 5,934 1.101 4,333 4,194 1,391 Z60 3,269 1,224 Z045 Z75S 245 2,510 30,Vn IZ237 IS.3W1995 ,168 4,190 3,979 4.W7 2,619 2,188 2.728 1,833 895 6,330 1,178 5,172 4,497 S.702 Z785 3,497 1,309 z ISO Z947 262 2.685 3Z"4 13.093 19,891200 4:436 5,676 5.580 61742 3, 73 3�069 3.SV 2.572 1,2SS 8,906 1,653 7,253 6,293 Z317 3,W 4,905 I.Sm 3,069 4,133 367 3.766 46,262 18,364 27,119S2005 14,S04 7,SQO 7,004 8.540 4.2 3.852 4�856 3,281 1,575 11.214 Z 109 9,105 7,950 3,047 4,903 61196 2.344 3,852 5,197 469 4,728 53.4S7 23,438 35.01921110 1S."O 9,572 9,088 10,992 5.983 4,999 6,232 4,188 2,044 14.507 Z692 131815 20M) 3.889 6,362 7.990 Z"l 4,"9 6173P3 593 6,135 75,355 29. 913 45,44220 I , 23,917 12,217 11,60) 1,1,015 7.635 6,390 7,953 5,344 Z09 18,515 3,436 1S.079 13,083 4.963 8.120 10.1" 3,319 6,380 4.594 764 7,830 %.175 38, I77 57.9198Arew Read 3.00

Ntgt� 4.0127 3.161 866 2.452 1,976 476 1,579 1,382 196 2,015 889 1,126 1,890 1,2S4 606 1,464 998 476 733 198 585 14,2D9 9.8713 4.3311994 4 740 1.959 881 2.8% Z412 484 I'SBS 1,697 198 2.2m 1,035 1.145 Z 185 1,569 617 1,690 I'M 454 836 241 593 16,462 12,058 4,404l"5 5:071 4,129 942 310" zsft 518 Z020 1,807 213 Z386 1.161 1,225 2.337 1.677 660 IMS 1.290 SIB a" 2u 636 17,614 12.902 4,7122DW 7,113 5,791 1.322 4,346 1,619 727 2.831 Z533 298 3,347 1,629 1.718 31277 2,352 925 Z537 1.810 727 1.254 362 892 24,705 18,096 6,6092ODS 9,2711 7.391 1.887 1637 4,619 t.038 3.657 3,233 424 4,532 Z079 Z453 4,323 3,002 1,321 1.3,48 Z310 1,039 1,736 462 1,274 32,531 23.096 9,0521' 11 585 9,432 Z 153 7,079 5,895 1.184 4,611 4,126 495 5,452 2.653 Z799 5,339 3,832 1,507 4,132 7.949 1. IS4 2,043 5" 1,433 40.241 29,476 10,76520 I'5' 14:786 tZ 038 7 743 9.035 7.324 1,511 5.886 5,267 619 6,95% 3,336 1,572 6,815 4,891 1,924 5,273 3,762 1,511 2,607 752 1,255 51.36( 37,620 13,740A"m Romd 0.00

"W� 20 4,652 ZS% 1.753 Z 776 1.30 967 1.661 1,266 395 3,099 814 Z285 1406 1.176 1,230 J,872 905 %7 L.367 lei 1,136 17,833 9.045 8.788Im 5,246 3.365 1.831 3,137 2,103 t.034 1,597 1.473 424 3,39) 946 Z445 2.681 1.367 1,316 21096 1.052 1,034 1,479 210 1,269 19,919 10.516 9,4031995 5,613 3.60) Z012 3.357 Z250 1.107 Z027 1,575 452 1,629 1,013 Z616 Z872 1,463 1.409 Z232 L. 125 1,107 1.533 225 1.359 21.313 11,252 10,0612m 7,972 5�050 2.422 4,708 3.156 1,552 Z345 Z210 635 5,069 L,420 3,669 4,028 Z052 1,976 3,130 1,578 1.552 2.221 316 1,905 29,893 15.782 4.1112m 10,047 6,445 3,602 6.009 4.029 1.981 3,632 Z821 911 6.495 1,813 4.682 5,139 Z613 Z523 3,995 Z014 1.981 Z834 403 7,431 38.151 20,142 18,00920 JZSZ 9,226 4,597 7,669 5,141 Z528 4,634 3.3" 1,035 9.290 Z314 5.976 6.560 3,342 1.21S 5.0" Z571 Z528 3.617 514 3,103 48.692 25,707 22,9952DI 16.3" 10.499 5,967 9,789 6,562 3.227 5,914 A.5" 1,321 10,530 2,953 7.627 8,372 4,265 4,107 6,508 3,281 1.227 4.616 656 3,960 6Z 145 32,W9 2P.336

Acm Rood 0.00S.b- IV, Yqpew-Ti.Min

lik� 26.00 36.70 4,940 Z.570 Z270 ZrA 1,606 1.248 1,636 1,125 sit 3,673 723 21950 2.633 1,044 I'Sag Z051 303 1,248 1.693 161 1,532 19.380 8.02 11,348i9% 5,320 Z892 Z428 3,144 I's" 1,336 1.911 1,265 546 3,9171 814 3,157 2.873 1,17S 1,700 Z240 904 1,336 1.8" 181 1,639 21,151 91 0�9515 5.6" 3.05 Z598 -3,363 1,934 1,429 1,940 I.-A55 595 4.20 970 3.373 3,076 1,257 1,819 Z396 %? 1.429 1.947 193 1.7.54 2Z663 2.992

20010 7,984 4 3" 3,644 4.717 Z 713 2,004 Z 721 Um 921 5,959 1.221 4,738 4,314 1,763 Z551 3,360 L336 Z004 Z731 271 7,460 31.786 13.364 IS,=2005 10. 91 5:50 4,651 6.WA 3.462 2.559 3,470 Z424 1.046 7,605 1�558 6,047 55.506 2.2M 3,256 4,289 1,731 ZS59 3,486 346 1140 40.567 1?.311 23.Z562110 13.0[06 7,070 5,936 ?,664 4,419 31265 4,431 31094 1,337 9,705 1,988 7.717 7.OV 2.M 4,155 5,474 Z209 3,265 4,449 442 4,007 51,776 U094 29,6822D..' 16.574 S'"s 7.576 9,791 5,624 4,167 5.643 3.937 1.706 IZ380 Z531 9,949 8,958 3.655 5,303 6,979 2.112 4.167 5,676 362 5.124 66,001 26.IS9 37.232Acco Rod 0.00

Seebm V.- rAqp�TWW993 43.00 33.80 4. W5 76i 3.044 ZTTS 1.101 1.674 1,456 771 685 4.452 495 3,957 Z846 715 2.131 2.224 350 i.674 Z 165 tio '4055 20,723 5,503 15,220M 5.010 1:753 3,257 2,897 1.096 1.791 1.500 766 734 4,727 493 4.234 Z992 712 2.280 Z339 S48 1,791 Z308 110 2.198 21,763 5,471 16.285

1515 5.361 1,876 3,485 3.089 1,172 1.917 1,604 821 733 5.058 527 4,531 3.202 762 2,440 2.503 SS6 1,917 2,469 117 2.352 23,236 5.861 17.4252OW 7,518 2.630 4,998 4,332 1,644 Z688 Z252 1.151 1.101 7,094 740 6,354 4,490 1,069 3,421 3,510 = Z6811 3.463 164 3.2" 3Z659 8.220 24.4392003 91395 3.357 6,238 5,529 ZM 3,01 zrn 1.469 1,403 91054 944 8.110 5,731 1,364 4,367 4,480 1,049 3,431 4,421 2to 4,211 41.632 10�491 31,1912110 IZ246 4,294 7.962 7,057 Z678 4,379 3."5 1,874 1,791 11.355 1,205 19,350 7,314 1,741 "73 5.718 1,339 4.379 5.642 268 5.37A 53.197 13,389 39.11M20 15,629 5.468 10,161 9.007 3,418 5.509 4,VS Z392 Z2116 14.748 1,339 13,210 9,335 Z222 7,113 7,2" 1,709 5'5" 7.201 342 61859 67.8% MM so. SD7

Acea Road

Tow I d &OWTW"�TW*PEV..-W

A: 168.00 142.70

B: 166.00 152.70

Lw c RoodprAmet, U. WiLh wd bd. I_b: O*thtbvdo.,UmfdwaMrood(Nwiyu%-Y-&-)n2lxm. Le: Fi Fl.L W VADy. M:Mont*-w �_'t: 'k WW.W tbt - Mok Bi wAh tbt Wcm r-*&, Le: All the fApm we roudd.

- 43 - ANNEX 1

TABLE 2A: FINANCIAL AND ECONOMIC COST SUMMARY

(Y million)

1987 1988 1989 1990 1991 1992 1993 1994 1995 Total

A. Financhil (Current):

Beijlng-Majuqlao 14.08 24.94 27.71 68.25 31.81 46.44 11.51 10.23 7.00 241.97Majuqlao-Nanying 27.15 90.44 66.96 52.08 40.56 31.49 11.85 24.16 14.11 358.80Nanylng-Yangcun 29.89 55.80 45.28 52.39 43.72 28.07 46.65 58.50 17.45 377.75Yangcun-Tlanjln 36.32 87.33 89.36 68.05 49.54 56.13 146.76 109.14 21.27 663.90Tlanjin-Tanggu 33.39 76.77 55.69 12.56 26.72 36.95 201.84 116.09 19.52 579.53

Total 140.83 335.28 285.00 253.33 192.35 199.08 418.61 318.12 79.35 2221.95

B. Economic (Dec. 1995 prices):

Beijlng-Majuqiao 27.09 46.53 44.96 102.78 44.01 64.27 14.99 11.13 6.69 362.45Majuqlao-Nanying 52.07 168.18 108.27 78.15 55.90 43.43 15.39 26.19 13.44 561.02Nanying-Yangcun 57.17 103.41 72.98 78.36 60.10 38.61 60.37 63.22 16.56 550.78Yangcun-Tanjln 111.13 161.91 144.03 101.81 68.05 77.16 189.89 117.94 20.17 992.09Tianjin-Tanggu 63.94 142.48 89.90 18.84 36.75 50.85 261.46 125.60 18.55 808.37

Total 311.40 622.51 460.14 379.94 264.81 274.32 542.10 344.08 75.41 3274.71

I_1 All the figu are rounded.

TABLE 2B: COMPONENTS OF FINANCIAL COST

(Y million, in current prices)

For Economic Evaluation For Financial Evaluation

Civil Worb: Financial Costa. BTTE 1,367.55 Cost as for economic evaluation 2,221.95b. Acces roads to BTTE 196.13 Additional cost itemsc. Supplementary civil works 243.00 Equipment acquisition 25.97

E A M 111.45 Two studies (Hwy finance, local bitumen) 4.53Staff training 2.99

Subtotal 1,918.13 Loan/Credit ervicing 209.55

Offer Invesunmu Itenu; Subtotal 243.04

Land acquiition and resettlement 235.39Engimeeru deign 20.10 Total 2,464.99Contnmctio supev ion 37.81Environmental Survey 0.90Management Study for BTTTUEC 0.47PMS for BTTE 0.75Administrtie Overhead of BTTUEC 8.40

Subtotal 303.82

Total 2,221.95

Table 3: Shadow Price Calculation(Y _mon. December 1995 pie.)

Coeivler-MatoqLa Mojuqlia-Nylni Nonylg-Yaecun Yangeun-Timiin Tbajin-TanuguConver --

Totai-men - Financial-- Econo finanacal- Ecces- Financal--- cone- - Financial- Econo- -- Fn ina bal Econo. projectfactor Loca Foreign Total ak Lecal Ferign To _ ic Local Foren Total ak lAocal Foecign Total kic Local Foreign Total n ic PLand 2.00 25.96 0.00 25.96 25.96 40.41 0.00 40.41 40.41 39.63 0.00 39.63 39.63 53.69 0,00 53.69 53.69 55.09 0.00 55.09 55.09 3 CUnrilled 100 1199 0.00 11.99 11.99 1E.67 0.00 1.67 1I.67 21.92 0.00 21.92 21.92 34.10 000 34.10 34.10 3373 0.00 33.73 33.73 -Semiskhlied/Tecbnkian 067 1271 0.00 22.71 8.52 lR978 0.00 19.78 13.25 23.47 0.00 23.47 15.72 38.90 0.00 38.90 26.06 35.70 0.00 35.70 23.92 >SupervIsr 2.00 4.20 4.14 *.34 12.54 6.54 5.42 11.96 I8.50 5.64 4.68 10.32 15.96 11.20 7.57 18.77 29.97 10.20 5.75 15.95 26.15MAbterias:

/Sto 1.00 6.61 6.54 13.15 13.15 10.29 *.56 18.85 18.85 12.25 10.01 22.26 22.26 36.14 24.23 60.37 60.37 24.24 13.61 37.85 37.85 8 0Timber 1.00 2.98 2.94 5.92 5.92 4.63 3.84 8.47 8.47 3.11 6.61 14.72 14.72 15.06 10.05 25211 25.11 15.85 8.89 24.74 24.74 (9Cement 1.00 5.92 5.87 11.79 11.79 9.21 7.69 16.90 16.90 10.52 8.64 19.16 19.16 24.06 1624 4030 4030 19.44 20.88 30.32 30.32Sand O.8O 3.94 0.00 194 3.15 614 0.00 6.14 4.91 7.6 0.00 7.86 6.29 19.09 0.00 19.09 25.27 12.83 0.00 12.t3 10.26 LOStow 0.80 16.87 0.00 16.87 13.50 26.26 0.00 26.26 21.01 29.33 0.00 29.33 23.46 63.20 0.00 6820 54.56 51.35 0.00 51.35 41.08Btuawn 2.00 931 0.00 9.31 9.31 14.49 0.00 14.49 14.49 15,85 0.00 15.85 15.85 31.06 0.00 31.06 31,06 22.77 0.00 22.77 22.77 -Othe 0.10 17.12 17.5S 35.37 31.81 27.73 22.92 50.71 45.16 29.66 24.25 53.91 47,9S 52.20 35.10 87.30 76.86 51.20 22.77 79.97 69.73 '0 (Fuel:Dkse 1.00 5.82 0.00 5.82 5.82 9.07 0.00 9.07 9.07 10.21 0.00 10.21 10.21 14.07 0.00 14.07 14.07 17.72 0.00 17.72 17.72GaCoie 100 502 0.00 5.02 5.02 7.81 0.00 7.81 7.81 9.63 0.00 9.63 9.63 12.69 0.00 22.69 22.69 16.97 0.00 16.97 1697Heavy iO 200 226 0.00 2.26 2.26 3.52 0.00 3.52 3.52 5.09 0.00 5.09 5.09 8.17 0.00 8.17 8.27 12.17 0.00 12.17 12.17 Otiel 1.00 2.67 0.00 2.67 2.67 4.15 0.00 415 4.15 5.37 0.00 5.37 5.37 6.90 0.00 6.90 6.90 2282 0.00 22.82 11.82Water 0.80 2.26 000 2.26 1.81 3.52 0.00 3.52 2.82 5.09 0.00 5.09 4.07 9.66 0.00 9.66 7.73 9.49 0.00 9.49 7.59 .4EzkIck 1.50 520 000 5.20 7.80 8.10 000 U80 125 7.83 0.00 7.83 11.75 1446 .0.00 14.46 21.69 15.40 0.00 1540 23.20ConutrucUlo 1200 509 5.01 10.10 10.10 7.93 6.55 14.48 14.48 9.97 8.17 12.14 18.14 21.79 14.59 36.38 36.38 14.64 8.16 22.80 2230 Z

mccimacaleq_slpse It 2-00 4.69 3543 40.12 40.12 7.30 46.40 53.70 53.70 7.44 6.06 13.50 13.50 15.61 10.47 26.01 26.08 12.42 7.00 19.42 19.42Othen 0.10 31.25 0.00 31.25 2S.00 41.62 0.00 41.62 31.90 39.97 32.72 72.69 64.70 64.70 43.52 108.21 95.27 61.90 34.85 96.75 84.37TOtnl 132.57 77.43 2611.ff 240.24 24.17 8.44 3MA.1 367.22 048 101.14 405.98 385.41 551.75 161.76 713.51 676.33 564.93 117.91 622.84 591.661

Oval to 6.96 0.9 0.9 5 .95

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

I): M^ auioum

I# bawm_-'

-45 - ANNEX 1

TABLE 4: ECONOMIC VEHICLE OPERATING COSTS

(Y per km, December 1995 prices)

-- Goo-------- --------- Fafr----------- ----- Poor------Flat Roll HRif Mount. Flat Roil Hill Mount. Flat Roll Hm Mount

Small car 0.440 0.460 0.475 0.518 0.538 0.553 0.671 0.691 0.706Small bus 0.813 0.965 1.089 1.052 1.222 1.361 1.346 1.500 1.639Medium bus 1.281 1.488 1.667 1.702 1.949 2.150 2.244 2.461 2.662Largebus 1.436 1.751 2.031 1.975 2.378 2.710 2.393 2.782 3.114Snalbtruck 0.625 0.781 0.899 0.702 0.858 0.975 0.858 0.995 1.132Medlumntruck 0.664 0.818 0.972 0.730 0.897 1.049 0.882 1.049 1.216Large truck 0.880 1.078 1.276 1.006 1.223 1.414 1.197 1.414 1.618Tractor/trailer 1.646 2.171 2.625 1.898 2.471 2.953 2.260 2.802 3.300

Note: Without the project, both road condition and flow will deteriorate quickly with high traffic growth and shift towardsheavier vehicles. Considered 2% p.a. cost increase.

- 46 - ANNEX 1

TABLE 5: ECONOMIc EVALUATION (TOTAL EXPRESSWAY)(Y million, December 1995 prices)

Base Case

Costs Benfits-VOC Reduced

Net Gener- Cong.On Reduced NetConstru Road Sav- ated Exist Accid Cash

Year -ction Maint. Total ings Traffic Road -ents Total Flow

Total: Beijig-Tainjin-Tanggu Expressway

1987 311.40 311.40 (311.40)1988 622.51 622.51 (622.51)1989 460.14 460.14 (460.14)1990 379.94 0.31 380.25 2.04 0.10 0.26 0.01 2.41 (377.84)1991 264.81 13.51 278.32 62.13 3.11 12.26 0.59 78.09 (200.2)1992 274.32 27.43 301.75 110.29 5.54 25.67 1.19 142.69 (159.1)1993 542.10 53.45 595.55 187.46 9.38 58.12 2.31 257.27 (338.28)1994 344.08 53.45 397.53 241.78 12.08 63.43 2.31 319.60 (77.93)1995 75.41 53.45 128.86 291.28 14.55 67.89 2.31 376.03 247.171996 53.45 53.45 344.83 17.23 69.47 2.31 433.84 380.391997 53.45 53.45 406.12 20.29 71.08 2.31 499.80 446.351998 53.45 53.45 476.52 23.82 72.75 2.31 575.40 521.951999 53.45 53.45 557.63 27.88 74.45 2.31 662.27 608.822000 53.45 53.45 651.37 32.59 76.17 2.31 762.44 708.99

2001 53.45 53.45 731.72 36.60 75.60 2.31 846.23 792.782002 53.45 53.45 822.62 41.14 75.04 2.31 941.11 887.662003 /_a 80.18 80.18 925.60 46.28 74.48 2.31 1,048.67 968.502004 /_a 80.18 80.18 1,042.41 52.10 73.92 2.31 1,170.74 1,090.572005 53.45 53.45 1,175.11 58.73 73.34 2.31 1,309.49 1,256.042006 53.45 53.45 1,303.57 65.15 70.93 2.31 1,441.96 1,388.512007 53.45 53.45 1,446.43 72.30 68.60 2.31 1,589.64 1,536.192008 53.45 53.45 1,605.37 80.25 66.33 2.31 1,754.26 1,700.812009 53.45 53.45 1,782.25 89.09 64.15 2.31 1,937.80 1,884.352010 53.45 53.45 1,979.12 98.96 62.06 2.31 2,142.45 2,089.002011 53.45 53.45 2,178.99 108.95 56.73 2.31 2,346.98 2,293.532012 53.45 53.45 2,399.27 119.96 51.85 2.31 2,573.39 2,519.942013 53.45 53.45 2,642.10 132.10 47.39 2.31 2,823.90 2,770.452014 53.45 53.45 2,909.81 145.47 43.32 2.31 3,100.91 3,047.462015 53.45 53.45 3,204.99 160.22 39.60 2.31 3,407.12 3,353.67

Total 3274.71 EERR = 15.7%===== NPV (12%) = 1109.7

First Year Return =.3%

Ia: Major resurfacing./ b: All figures are rounded.

-47 - ANNEX 1

TABLE 5A: ECONOMIC EVALUATION (SECTION 1)

(Y million, December 1995 prices)

Base Case

Costs___________- - VOC Reduced

Net Gcner- Cong.0n Reduced NetConstru Road Sav- ated Exist Accid Cash

Year -clion Maint. Total fgs Traffic Road -ents Total Flow

Section 1: Beijing-Majuqiao

1987 27.09 27.09 (27.09)1988 46.53 46.53 (46.53)19S9 44.96 44.96 (44.96)1990 102.78 0.07 102.85 0.20 0.01 0.06 0.00 0.27 (102.58)1991 44.01 2.33 46.34 6.71 0.34 2.06 0.10 9.21 (37.13)1992 64.27 4.33 68.60 12.46 0.63 3.83 0.19 17.11 (51.49)1993 14.99 5.95 20.94 17.14 0.86 5.27 0.26 23.53 2.591994 11.13 5.95 17.08 25.62 1.28 7.12 0.26 34.28 17.201995 6.69 5.95 12.64 32.04 1.59 7.62 0.26 41.51 28.871996 5.95 5.95 38.43 1.91 7.80 0.26 48.40 42.451997 5.95 5.95 46.09 2.29 7.98 0.26 56.62 50.671998 5.95 5.95 55.28 2.75 8.17 0.26 66.46 60.511999 5.95 5.95 66.30 3.30 8.36 0.26 78.22 72.272000 5.95 5.95 79.53 3.98 8.56 0.26 92.33 86.382001 5.95 5.95 90.19 4.51 8.46 0.26 103.42 97.472002 5.95 5.95 102.27 5.11 8.36 0.26 116.00 110.052003 /-a 8.93 8.93 115.97 5.79 8.26 0.26 130.28 121.362004 /_a 8.93 8.93 131.51 6.56 8.16 0.26 146.49 137.572005 5.95 5.95 149.13 7.44 8.06 0.26 164.89 158.942006 5.95 5.95 166.71 8.32 7.83 0.26 183.12 177.172007 5.95 5.95 186.36 9.31 7.61 0.26 203.54 197.592008 5.95 5.95 208.33 10.41 7.39 0.26 226.39 220.442009 5.95 5.95 232.89 11.64 7.18 0.26 251.97 246.022010 5.95 5.95 260.33 13.02 6.98 0.26 280.59 274.642011 5.95 5.95 287.68 14.39 6.38 0.26 308.71 302.76

2012 5.95 5.95 317.90 15.90 5.83 0.26 339.89 333.942013 5.95 5.95 351.30 17.57 5.33 0.26 374.46 368.512014 5.95 5.95 388.21 19.41 4.87 0.26 412.75 406.802015 5.95 5.95 428.99 21.44 4.46 0.26 455.15 449.20

Total 362.45 EIRR = 16.3%

NPV (12%) = 158.3First Year Return 5.8%

/_a: Major resurfacing./b: All figures are rounded.

- 48 - ANNEX 1

TABLE 5B: ECONOMIC EVALUATION (SECTION 2)(Y million, December 1995 prices)

Base Case

Cosa Benefiht -

________ _- VOC ReducedNet Gener- CongOn Reduced Net

Constru Road Sav- ated Exist Accid CashYear -ction Maint. ToW ings Traffic Road -ents Total Flow

Section 2: Majuqi-Nanying

1987 52.07 52.07 (52.07)1988 16S.1 168.18 (16S.18)19S9 108.27 108.27 (10.27)

1990 78.15 0.11 78.26 0.35 0.02 0.05 0.00 0.42 (77.84)1991 55.90 3.S6 59.76 11.74 0.59 1.56 0.17 14.06 (45.70)1992 43.43 7.12 50.55 21.63 1.09 2.88 0.31 25.91 (24.64)1993 15.39 9.80 25.19 29.78 1.50 3.97 0.42 35.67 10.481994 26.19 9.80 35.99 40.17 2.00 4.01 0.42 46.60 10.611995 13.44 9.80 23.24 47.18 2.36 4.31 0.42 54.27 31.031996 9.80 9.80 54.54 2.73 4.41 0.42 62.10 52.301997 9.80 9.80 63.05 3.16 4.51 0.42 71.14 61.341998 9.80 9.80 72.89 3.66 4.62 0.42 81.59 71.791999 9.80 9.80 84.27 4.23 4.73 0.42 93.65 83.852000 9.80 9.80 97.43 4.89 4.84 0.42 107.58 97.782001 9.80 9.80 109.08 5.47 4.91 0.42 119.88 110.02002 9.80 9.80 122.12 6.12 4.98 0.42 133.64 123.84

2003 /_a 14.70 14.70 136.72 6.85 5.05 0.42 149.04 134.342004 /_a 14.70 14.70 153.06 7.66 5.12 0.42 166.26 151.562005 9.80 9.80 171.36 8.56 5.18 0.42 185.52 175.722006 9.80 9.80 188.62 9.42 4.91 0.42 203.37 193.572007 9.80 9.80 207.62 10.37 4.65 0.42 223.06 213.26

2008 9.80 9.80 228.53 11.42 4.40 0.42 244.77 234.972009 9.80 9.80 251.55 12.57 4.17 0.42 268.71 258.912010 9.80 9.80 276.88 13.85 3.95 0.42 295.10 285.302011 9.80 9.S0 303.87 15.20 3.61 0.42 323.10 313.302012 9.80 9.80 333.49 16.68 3.30 0.42 353.89 344.092013 9.80 9.80 366.00 18.31 3.01 0.42 387.74 377.942014 9.80 9.80 401.68 20.09 2.75 0.42 424.94 415.142015 9.80 9.80 440.84 22.05 2.51 0.42 465.82 456.02

Total 561.02 EIRR= 13.0%

NPV (12%) = 52.6First Year Return = 4.6%

/a: Majr rsurfacinr./_b: All fgures are rounded.

-49 - ANNEX 1

TABLE 5C: ECONOMIC EVALUATION (SECTION 3)(Y million, December 1995 prices)

Base Case

Costs - Benefits-- VOC Reduced

Net Gener- Cong.On Reduced NetCosntm Road Sav- ated Exist Accid Cub

Year -ction Maint. Total ings Traffic Road -Onts Total Flow

Section 3: Narrig-YaY cun

1987 57.17 57.17 (57.17)1938 103.41 103.41 (103.41)1939 72.98 72.98 (72.98)1990 78.36 0.13 78.49 1.49 0.07 0.15 0.01 1.73 (76.76)1991 60.10 4.16 64.26 46.25 2.31 4.78 0.18 53.52 (10.74)1992 38.61 7.48 46.09 83.11 4.16 8.59 0.32 96.18 50.091993 60.37 10.57 70.94 117.51 5.88 12.15 0.45 135.99 65.051994 63.22 10.57 73.79 143.46 7.18 13.00 0.45 164.09 90.301995 16.56 10.57 27.13 163.21 8.16 13.91 0.45 185.73 158.601996 10.57 10.57 184.53 9.23 14.23 0.45 208.44 197.871997 10.57 10.57 208.63 10.43 14.56 0.45 234.07 223.50199S 10.57 10.57 235.88 11.79 14.90 0.45 263.02 252.451999 10.57 10.57 266.69 13.33 15.25 0.45 295.72 285.152000 10.57 10.57 301.54 15.07 15.60 0.45 332.66 322.092001 10.57 10.57 331.88 16.59 15.47 0.45 364.39 353.822002 10.57 10.57 365.27 18.26 15.34 0.45 399.32 388.752003 / I 15.86 15.86 402.02 20.10 15.21 0.45 437.78 421.932004 / a 15.86 15.86 442.47 22.12 15.08 0.45 480.12 464.272005 10.57 10.57 486.98 24.35 14.94 0.45 526.72 516.152006 10.57 10.57 533.09 26.66 14.46 0.45 574.66 564.092007 10.57 10.57 583.56 29.18 14.00 0.45 627.19 616.622003 10.57 10.57 638.81 31.94 13.55 0.45 684.75 674.182009 10.57 10.57 699.29 34.96 13.12 0.45 747.82 737.252010 10.57 10.57 765.49 38.28 12.71 0.45 816.93 806.362011 10.57 10.57 834.69 41.74 11.62 0.45 888.50 877.932012 10.57 10.57 910.14 45.51 10.62 0.45 966.72 956.152013 10.57 10.57 992.41 49.62 9.71 0.45 1,052.19 1,041.622014 10.57 10.57 1,082.12 54.10 S.88 0.45 1,145.55 1,134.982015 10.57 10.57 1,179.95 58.99 8.11 0.45 1,247.50 1,236.93

TOtWl 550.78 EIRR = 2S.0%NPV (12%) = 1,065.2First Year Retum - 17.2%

I_b: ME firesurfacivg .I_b: Al figre ate rounded.

- 50 - ANNEX 1

TABLE 5D: ECONOMIC EVALUATION (SECTION 4)(Y million, December 1995 prices)

Base Case

Costs - Benefits-VOC Reduced

Net Gener- Cong.On Reduced NetConstru Road Sav- ated Exist Accid Cash

Year -ction Maint. Total inga Traffic Road -ents Total Flow

Section 4: Yangcun-Tianjin

1987 111.13 111.13 (111.13)1988 161.91 161.91 (161.91)1989 144.03 144.03 (144.03)

1990 101.81 101.81 (101.81)1991 68.05 3.16 71.21 (2.57) (0.13) 3.86 0.14 1.30 (69.91)1992 77.16 8.50 85.66 (6.91) (0.34) 10.37 0.37 3.49 (82.17)1993 189.89 12.85 202.74 (10.44) (0.52) 15.68 0.56 5.28 (197.46)1994 117.94 12.85 130.79 (8.68) (0.44) 16.78 0.56 8.22 (122.57)1995 20.17 12.85 33.02 (4.45) (0.22) 17.96 0.56 13.85 (19.17)1996 12.85 12.85 2.38 0.12 18.38 0.56 21.44 8.591997 12.85 12.85 9.21 0.46 18.81 0.56 29.04 16.191998 12.85 12.85 16.04 0.80 19.25 0.56 36.65 23.801999 12.85 12.85 22.87 1.14 19.70 0.56 44.27 31.422000 12.85 12.85 29.71 1.49 20.15 0.56 51.91 39.062001 12.85 12.85 36.96 1.85 19.97 0.56 59.34 46.492002 12.85 12.85 45.98 2.30 19.80 0.56 68.64 55.792003 /-a 19.28 19.28 57.20 2.86 19.63 0.56 80.25 60.98

2004 /_a 19.28 19.28 71.16 3.56 19.46 0.56 94.74 75.472005 12.85 12.85 88.55 4.43 19.29 0.56 112.83 99.982006 12.85 12.85 102.55 5.13 18.68 0.56 126.92 114.072007 12.85 12.85 118.76 5.94 18.09 0.56 143.35 130.502008 12.85 12.85 137.53 6.88 17.51 0.56 162.48 149.632009 12.85 12.85 159.27 7.97 16.95 0.56 184.75 171.90

2010 12.85 12.85 184.44 9.22 16.41 0.56 210.63 197.782011 12.85 12.85 207.91 10.39 15.00 0.56 233.86 221.012012 12.85 12.85 234.37 11.71 13.71 0.56 260.35 247.502013 12.85 12.85 264.20 13.20 12.53 0.56 290.49 277.642014 12.85 12.85 297.82 14.88 11.46 0.56 324.72 311.872015 12.85 12.85 335.73 16.77 10.48 0.56 363.54 350.69

Total 992.09 EIRR = 5.2%NPV (12%) (418.8)First Year Retumn = 0.7%

/_a: Major resurfacing/_b: All figures are rounded.

-51- ANNEX I

TABLE 5E: ECONOMIC EVALUATION (SECTION 5)(Y million, December 1995 prices)

Base Case

costs --- Benefits----------- VOC Reduced

Net Gener- Cong.On Reduced NetConstiru Road Sav- ated Exist. Accid Cash

Year -ction Maint. Total ings Traffic Road -ents Total Flow

Section 5: Tianjin-Tanggu

1987 63.94 63.94 (63.94)198g 142.48 142.48 (142.48)1989 89.90 89.90 (89.90)1990 18.84 18.84 (18.84)1991 36.75 36.75 (36.75)1992 50.85 50.85 (50.85)1993 261.46 14.28 275.74 33.47 1.66 21.05 0.62 56.80 (218.94)1994 125.60 14.28 139.88 41.21 2.06 22.52 0.62 66.41 (73.47)1995 18.55 14.28 32.83 53.30 2.66 24.09 0.62 80.67 47.841996 14.28 14.28 64.95 3.24 24.65 0.62 93.46 79.18

1997 14.28 14.28 79.14 3.95 25.22 0.62 108.93 94.651998 14.28 14.28 96.43 4.82 25.81 0.62 127.68 113.401999 14.28 14.28 117.50 5.88 26.41 0.62 150.41 136.132000 14.28 14.28 143.16 7.16 27.02 0.62 177.96 163.682001 14.28 14.28 163.61 8.18 26.79 0.62 199.20 184.922002 14.28 14.28 186.98 9.35 26.56 0.62 223.51 209.232003 /-a 21.42 21.42 213.69 10.68 26.33 0.62 251.32 229.902004 /-a 21.42 21.42 244.21 12.20 26.10 0.62 283.13 261.712005 14.28 14.28 279.09 13.95 25.87 0.62 319.53 305.252006 14.28 14.28 312.60 15.62 25.05 0.62 353.89 339.612007 14.28 14.28 350.13 17.50 24.25 0.62 392.50 378.222008 14.28 14.28 392.17 19.60 23.48 0.62 435.87 421.592009 14.28 14.28 439.25 21.95 22.73 0.62 484.55 470.272010 14.28 14.28 491.98 24.59 22.01 0.62 539.20 524.922011 14.28 14.28 544.84 27.23 20.12 0.62 592.81 578.532012 14.28 14.28 603.37 30.16 18.39 0.62 652.54 638.262013 14.28 14.28 668.19 33.40 16.81 0.62 719.02 704.742014 14.28 14.28 739.98 36.99 15.36 0.62 792.95 778.672015 14.28 14.28 819.48 40.97 14.04 0.62 875.11 860.83

Total 808.37 EIRR= 15.6%NPV (12%) = 252.4First Year Return = 8.9%

/La: Major resurfacing./_b: All figues are rounided.

- 52 - ANNEX 1

TABLE 6: FINANCIAL EVALUATION

(Y million)

Net SensitivityBest Estimates (Total Highway) / I Cash Revenue

Costs Benefits Net Flow Total Operating (-10h/.)Self- Loan- Total Operating Loan Net Cash on Revenue Costs Operating

Year fmancing IBRD Subtotal Maint. Total Revenue Costs Repay. Revenue Flow Equity (-10%) (+10%) (+10/%)(1) (2) (3-1+2) (4) (5-3+4) (6) (7) (8) (9=6-7-8) (10=9-5) (11=9-2-4) (12) (13) (14)

1987 109.04 47.19 156.23 156.23 -156.23 -109.04 -156.23 -156.23 -156.231988 323.58 48.38 371.96 371.96 -371.96 -323.58 -371.96 -371.96 -371.961989 221.95 94.22 316.17 316.17 -316.17 -221.95 -316.17 -316.17 -316.171990 186.52 94.52 281.04 0.31 281.35 -281.35 -186.83 -281.35 -281.35 -281.351991 118.78 94.62 213.40 13.51 226.91 15.41 11.40 0.00 4.01 -222.90 -128.28 -224.44 -224.04 -225.581992 157.72 63.13 220.85 27.43 248.28 36.91 21.59 0.00 15.32 -232.96 -169.83 -236.65 -235.12 -238.811993 409.30 55.11 464.41 53.45 517.86 53.48 21.76 94.61 -62.89 -580.75 -525.64 -586.10 -582.93 -588.271994 304.08 48.84 352.92 53.45 406.37 112.94 32.62 95.10 -14.78 -421.15 -372.31 -432.44 424.41 435.711995 74.31 13.70 88.01 53.45 141.46 116.78 49.55 128.36 -61.13 -202.59 -188.89 -214.27 -207.55 -219.221996 53.45 53.45 192.00 51.11 140.48 0.41 -53.04 -53.04 -72.24 -58.15 -77.351997 53.45 53.45 275.54 55.08 135.00 85.46 32.01 32.01 4.46 26.50 -1.051998 53.45 53.45 315.47 57.01 153.22 105.24 51.79 51.79 20.24 46.09 14.541999 53.45 53.45 359.49 58.86 158.11 142.52 89.07 89.07 53.12 83.18 47.242000 53.45 53.45 409.66 60.77 164.63 184.26 130.81 130.81 89.84 124.73 83.772001 53.45 53.45 445.58 62.75 171.15 211.68 158.23 158.23 113.67 151.96 107.402002 53.45 53.45 486.06 64.79 177.67 243.60 190.15 190.15 141.54 183.67 135.072003 80.18 80.18 531.63 66.90 185.82 278.91 198.73 198.73 145.57 192.04 138.882004 80,18 80.18 582.90 69.07 193.97 319.86 239.68 239.68 181.39 232.77 174.482005 53.45 53.45 640.51 71.31 202.12 367.08 313.63 313.63 24958 306.50 242452006 53.45 53.45 728.90 73.63 202.12 453.15 399.70 399.70 326.81 39234 319.452007 53.45 53.45 831.32 76.02 202.12 553.18 499.73 499.73 41660 492.13 409002008 53.45 53.45 950.43 78.49 0.00 871.94 818.49 818.49 723.45 810.64 715.602009 53.45 53.45 1089.51 81.04 0.00 1008.47 955.02 955.02 846.07 946.92 837.972010 53.45 53.45 1252.58 83.67 0.00 1168.91 1115.46 1115.46 990.20 1107.09 981.842011 53.45 53.45 1400.55 86.39 0.00 1314.16 1260.71 1260.71 1120.66 1252.07 1112.02

Total 1905.28 559.71 2464.99 1110.26 3575.25 FinancialRateofReturn= 5.2% 6.8% 3.9%/ 5.1% 3.7%- - -- Net Present Value (12%) = -1007.7 -664.6 -1146.9 -1029.5 -1168.7

/_1: Actual to 1995, estimates forl 996 and 1997, projection thereafter.

- 53 - ANNEX I

TABLE 7: FINANCIAL VOC SAVINGS VS. TOLL RATES

(Y/km, 1996 current prices)

Section of BTTE Smn3a Med. Large Small Med. Large Tractor-

Distance Savingsvs Car Bus Bus Thick Thick Truck Trader

Arterial Route

Section 1:Beijing-Majuqiao Savings -1996 0.19 0.88 1.09 0.38 0.24 0.38 1.88

4.0 km 30% of Savings -1996 0.06 0.26 0.33 0.11 0.07 0.12 0.56

Section 2:Majuqiao-Nanying Savings -1996 0.16 0.76 0.99 0.22 0.18 0.29 0.83

2.0 kmn 300/o of Savings -1996 0.05 0.23 0.30 0.07 0.05 0.09 0.25

Section 3:Nanying-Yacun Savings -1996 0.61 2.46 3.05 0.93 0.78 1.17 3.52

15.8 kni 30% of Savings -1996 0.18 0.74 0.92 0.28 0.23 0.35 1.06

Section 4:Yangcun-Tianjin Savings -1996 (0.05) 0.08 0.14 0.03 (0.09) (0.08) 0.74

(10.7) kn 30% of Savings -1996 (0.01) 0.03 0.04 0.01 (0.03) (0.02) 0.22

Section 5:Tinjin-Tanggu Savings -1996 0.40 1.66 1.96 0.94 0.56 0.86 4.91

14.2 kmn 30% of Savings -1996 0.12 0.50 0.59 0.28 0.17 0.26 1.47

Average Savings -1996 0.26 1.17 1.45 0.50 0.33 0.53 2.38

Total 25.3 km 30% of Savings -1996 0.08 0.35 0.43 0.15 0.10 0.16 0.71

Snall Med. Large Tractor-Vehicles Vehicles Yehicles Trailer

BTTE Toll Charges -1996 0.25 0.35 0.45 0.60

30% of VOC Savinos (1996):Section 1 Beijing-Majuqiao 0.09 0.17 0.22 0.56

Section 2 Majuqi-Nanying 0.06 0.14 0.19 0.25

Section 3 N-nying-Yangcun 0.23 0.49 0.63 1.06

Section 4 Yangcun-Tianjin 0.00 0.00 0.01 0.22

Section 5 Tianjin-Tanggu 0.20 0.33 0.42 1.47

Average30%ofVOCSavings(FulllengthofBTTE) 0.11 0.23 0.30 0.71

Raos: 30% of VOC Savn Toll RateSection I Beijing-Majuqiao 0.34 0.48 0.49 0.94

Section 2 Majuqiao-Nanying 0.23 0.40 0.43 0.41

Section 3 Nanying-Yangcun 0.93 1.39 1.41 1.76

Section 4 Yangcun-Tianjin -0.01 0.00 0.02 0.37

Section S Tianjin-TanWgg 0.80 0.95 0.94 2.46

Average30%ofVOCSavingp(FulllengthofBTTE) | 0.46 0.64 0.66 1.19

- 54 - ANNEX2

ANNEX 2: BORROWER'S CONTRIBUTION TO THE ICR

BEIJING-TIANJIN-TANGGU EXPRESSWAY PROJECTSUMMARY EVALUATION REPORT

by BTT Expressway United CorporationJune 1996

The scope of the Beijing-Tianjin-Tanggu (BTT) Expressway Project is defined in LoanAgreement (281 1-CHA) and Credit Agreement (1972-CREDIT), and the project is fullyappraised in the World Bank's Staff Appraisal Report (Report No. 6344-CHA). TheLoan and Credit Agreements were signed by the Ministry of Finance, PRC, theInternational Bank of Reconstruction and Development and the InternationalDevelopment Association on September 14, 1987 and came into force on December 13,1987. All the objectives of the Project laid down in the Staff Appraisal Report and theLoan/Credit Agreements have been realized. The present report contains the ExecutingAgency's evaluation of the Project.

I. INTRODUCTION

1. The project defined in the Bank's Staff Appraisal Report and the Loan/CreditAgreements include the following features:

(a) construction of a 143 km long, dual 2 lanes, controlled access, tollexpressway from Beijing to the new port of Xingang at Tanggu in Tianjin;

(b) acquisition and installation of the traffic monitoring, telecommunicationand tolling systems for the Expressway;

(c) provision of consulting services for the construction supervision andquality control of the Expressway and training of the local supervisionstaff;

(d) provision of basic road maintenance and operation facilities for theExpressway;

(e) establishing a data base for Beijing Municipality;

(f) carrying out the following studies:

(i) Study on the Method of Financing the Expansion, Improvementand Rehabilitation of the Highway Network

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(ii) Study on Application of Local Bitumen for Road Pavements

(iii) Study on Organization and Management of Expressway Operationand Maintenance;

(g) staff training.

2. Accomplishments:

(a) A newly built 142.69 km long expressway out of which 2.29 km, fromNingchegu Road of Tanggu District to Hebei Road in Tianjin, is Class IHighway. In addition, a 3.07 km link road, from the starting point of theBTT Expressway Project to the Third Ring Road in Beijing and another8.07 km link road, from the end of the BTT Expressway Project to TianjinPort as well as to the Tanggu Economic Development Zone andPreferential Tax Zone, were built.

(b) The traffic monitoring, telecommunications and tolling systems for thewhole Expressway were acquired from Germany, Canada and Spain,respectively.

(c) The contract for the supervision consulting services of the BTTExpressway was awarded to Kampsax International A/S of Denmark. Inaddition, the Danish consultants arranged for 25 trainee man-months ofoverseas training according to the contract.

(d) 48 items of equipment, of 14 different types, for highway maintenance andoperation were purchased separately from suppliers in Germany, Japanand USA in 1993 and 1995.

(e) The three studies have been completed, and the study reports have beensubmitted to the Bank.

(f) The data base, for the specific use in the operation management of theBTT Expressway, has been successfully developed and put into operation.

(g) 140 man-months of staff training were accomplished in respect offinancial management, traffic engineering, soft ground, road & bridgemaintenance, highway data base, post-evaluation of projects, managementsystems, etc.

II. ACHIEVEMENT OF PROJECT OBJECTIVES

3. The State Planning Commission's document No. JJ[1984]035: "Reply re. DesignInstruction for Jing-Jin-Tang Highway for Automobiles only", granted the Jing-Jin-TangHighway for Automobiles only (the original name of BTT Expressway) the right to takeup a loan from abroad (e.g. the World Bank). The State Planning Commission's

- 56 - ANNEX2

document No. JJ[1986]1283 of July 1986: "Reply re. Design Instruction for BTTExpressway", approved that a loan of US$150,000,000 could be taken up from the WorldBank for the BTT Expressway Project. At that time, the Chinese government was in theprocess of seeking financial assistance from the World Bank in order to ease the problemof the country's relative backwardness with regard to communications and transportation,which was hindering the economic development. The Seventh Five-Year Plan aimed todevelop and improve the highway system by implementing optimum planning forhighway maintenance and construction as well as to upgrade and improve the highwaytransportation industry. The Bank had already in 1980 begun preliminary discussionsconcerning the highway industry with the Chinese government, and the first batch ofhighway projects was confirmed in June 1983. Preparations for the BTT Expressway wasat that time being undertaken by the Ministry of Communications (MOC), and theseefforts were helped by the provision of consultant services, financed by ADAB, by thehighway agency of New South Wales and Mounsell Consultants, both of Australia. OnMarch 12, 1986 the World Bank made a preappraisal for the BTT Expressway, and theformal appraisal followed in October 1986. In March 1987 the loan negotiation for theBTT Expressway was held in Washington, D.C., USA. The delegation of the Chinesegovernment was led by Mr. Luo Qing from the Ministry of Finance and Mr. Chen Senfrom MOC. The negotiation reached a consensus on the final loan document. OnSeptember 14 of the same year the loan agreement for BTT Expressway Project wassigned by the Chinese government and the Bank, and came into force on December 13,1987.

4. During the appraisal, through several discussions with MOC and representativesfrom the relevant province and municipalities, the Bank was convinced that due to thecontinuous increase of the import and export of goods as well as the development oftourism in the Beijing-Tianjin-Tanggu region, one of the most important and crowdedtransportation corridors, the traffic volume of the existing Beijing-Tanggu highway hadalready far exceeded the original design capacity. In consequence, traffic jams and trafficaccidents frequently occurred. This situation was extremely detrimental to therequirement for economic development. It was therefore deemed necessary to build anexpressway to remedy the highly unacceptable state of affairs. This project would,furthermore, produce additional benefits such as (i) improvement of technical design,construction and materials specifications and (ii) strengthening of the contracting process,construction supervision, etc. of the Chinese highway industry. To achieve these targetsstaff training, studies, establishment of a data base and a series of measures aimed at theupgrading of the future highway operation management would be implemented.

III. PROJECT PLANNING AND DESIGN

5. The Project Objectives expressed in the Bank's appraisal report are:

(a) to construct 142 km of high standard toll expressway;

- 57 - ANNEX2

(b) technical cooperation in planning, development and maintenance of thehighway network, establishing a road data base; improving the quality oflocal bitumen; and identifying the appropriate way to operate and maintainthe expressway;

(c) training of transportation planning staff;

(d) giving further support to highway study and research, to upgrade thestandard of design, construction and materials specifications as well ascivil engineering contract documents.

6. In order to achieve the above project objectives, it was agreed to proceed with thefollowing items during the final negotiations;

(a) civil engineering of the 143 km long toll expressway;

(b) acquisition and installation of electronic, electrical and mechanicalfacilities necessary for the Project;

(c) appointment of Chinese and foreign supervision engineers;

(d) purchase of facilities for expressway maintenance and operationmanagement;

(e) staff training;

(f) three studies, i.e. "raising funds for expansion and improvement of thehighway network", "the potential for using local bitumen for expresswaypavements", and "organization and management of expressway operationand maintenance";

(g) establishment of highway data base.

IV. PROJECT IMPLEMENTATION

7. The civil works of the 143 km long toll expressway were divided into 4construction contracts. The international competitive bidding, which was carried outaccording to the requirements of the Bank's "Guidelines for Procurement", took placefrom September 6, 1986 to June 24, 1987, with the International Tendering Company ofthe China Technical Import and Export General Company as the representative of theemployer. The result of the tender evaluation was approved by the State TenderEvaluation Commission and affirmed by the Bank. The successful bidders were 4 Sino-Japanese/Sino-French joint ventures. The civil works contracts were signed in Beijing onOctober 27, 1987. The Chief Supervision Engineer issued order of commence onNovember 25, 1987 and the construction formally began on December 23, 1987.

- 58 - ANNEX2

8. The whole of Contract No. 1 and the 72 km long western section of ContractNo. 2 were opened to traffic in January 1991. The eastern section of Contract No. 2 andthe whole of Contract No. 4 (Tianjin viaduct) were opened to traffic on September 30,1992. The length of expressway under traffic was then 109 km. In September 1993,upon completion of Contract No. 3, the entire 143 km of expressway came into service.

9. Contract No. 5 of the BTT Expressway Project comprised the acquisition andinstallation of electronic, electrical and mechanical facilities, includingtelecommunication, traffic monitoring and tolling systems for the whole expressway.Bids were called on October 20, 1990, and opening took place on April 23, 1991 throughfour steps: preliminary evaluation, clarification, post-examination of qualification, finalevaluation. The result of the evaluation was approved by the State Tender EvaluationCommission and affirmed by the Bank. Contract negotiations began in April 1992, andsigning took place in Beijing on August 1, 1992. The construction period lasted fromNovember 28, 1992 to April 30, 1995.

10. Selection of consultants for supervision and training was made through limitedinternational competitive bidding. Kampsax International A/S of Denmark was awardedthe contract. Altogether 248 man-months were utilized for the services. The jointsupervision team, consisting of Chinese and foreign engineers, succeeded in keepingconstruction time, quality and cost effectively under control.

11. Purchase of the maintenance and operation management facilities for theexpressway was carried out in two batches. The first 11 items of equipment, of 2 kinds,were acquired through direct purchase before the end of 1993. The remaining 37 items ofequipment, of 12 kinds, were purchased through international competitive bidding, anddelivery took place up to July 1995.

12. Some adjustments have been made to the program for staff training. The trainingactually carried out embraced the following 7 topics: maintenance management andequipment, financial management and accounting, traffic engineering design andapplication, road and bridge maintenance, soft ground design and construction,expressway data base, post-evaluation of expressway projects. Altogether, the trainingcomprised 140 trainee man-months. The above training played an important role inupgrading the technical and management level of the staff concerned.

13. The 3 studies were successfully completed. The topics concerning "raising funds"and "local bitumen" were both covered by the Highway Scientific Research Institute ofMOC. Their achievements have benefited the macroeconomic policy decision-making ofthe Chinese government and have encouraged the use of local bitumen in high-classhighway pavements. The study on "expressway organization and management", carriedout by BTT Expressway United Corporation, has amply demonstrated the need for a wellthough out expressway management system.

14. The data base was developed specifically to serve the needs of the BTTExpressway. The software development was accomplished by the Highway Scientific

- 59 - ANNEX2

Research Institute of MOC from June 1992 to June 1993. The hardware allocation wascompleted in August 1993 and was ready for use in November 1993.

V. OPERATIONAL EXPERIENCE

15. The operational experience with the various items provided under the World Bankloan for the BTT Expressway is predominantly good.

16. Since the BTT Expressway was opened to traffic its mean annual increase oftraffic volume has been 26.4%. The average traffic volume for 1995 was 10,168 vehiclesper day, distributed as follows: Dayangfang-Majuqiao 16,129 per day, Majuqiao-Langfang 15,843 per day, Langfang-Yangcun 12,575 per day, Yangcun-Tianjin 6,751 perday, Tianjin-Tanggu 3,900 per day. The traffic volume in the section Dayangfang-Yangcun has already exceeded the forecast level, that for Yangcun-Tianjin hasapproached the forecast, whereas Tianjin-Tanggu is well below the forecast level.However, the economic development in the Beijing-Tianjin-Tanggu region and theconstruction of economic development zones along the Expressway strongly indicate thatthe operational benefit of the Project will be attained. To this end it is realized thatguiding and restrictive measures should be taken to divert more traffic to the Tianjin-Tanggu expressway section, to reach the corresponding design target.

17. The traffic monitoring, telecommunication and tolling systems have ensure thetoll income of the whole Expressway. Furthermore, the timely collection and processingof traffic data enable modem and effective operation management of the expressway.

18. The physical conditions of the BTT Expressway is good and no adverse harmfulsigns appeared since it was put into service. Therefore, the BTT Expressway have beenawarded the following honorable titles: "One of the greatest Ten Highway Projects sincereform and opening up" by MOC in 1993, the "Special Prize of the National BestEngineering Design with favorable impact at home and abroad since reform and openingup" by the Ministry of Construction in 1994, the "First Prize of High-quality HighwayProject" by MOC in 1995, and, finally, the "LUBAN Prize of Civic Engineering of China(national high-quality project in 1996). The latter is the highest quality prize in China'scivil engineering industry, and the BTT Expressway is so far the only completedexpressway project that has won this outstanding honor. In addition, an importantachievement of a scientific research study: "Complete Sets of Technologies for BTTExpressway Construction" won the Special-class Prize for Scientific and TechnologicProgress of MOC in 1996.

19. All the newly purchased maintenance equipment have already been put intooperation for maintenance and emergency rescue operations. The said equipment play animportant role in ensuring traffic safety, fast re-opening of the expressway followingaccidents and in providing good operational conditions.

- 60 - ANNEX2

20. In addition to the BTT Expressway, the achievements of the 3 studies have beenput into effect in Hainan Province as well as the Shenyang-Dalian, Shanghai-Nanjing andJinan-Qingdao expressway projects, with good results.

21. The successful implementation of the supervision and the foreign consultantservices contract have played a great role in promoting the supervision system in Chinaand in introducing the FIDIC Conditions for project administration in constructioncontracts. It has also provided the BTT Expressway United Corporation with a highquality expressway, effectively reducing future maintenance cost.

22. The development and application of the data base of the BTT Expressway haveprovided numerous data for effective monitoring of the operation and managementsystem. The data base also gives access to useful information for policy decisions by themanagement organization.

VI. PERFORMANCE OF ENTITIES INVOLVED

23. Design Institute: The main designers of the BTT Expressway are the following 5units: First Highway Survey and Design Institute of MOC, Second Highway Survey andDesign Institute of MOC, Highway Planning and Design Institute of MOC, HighwayScientific Research Institute of MOC, Chongqing Highway Scientific Research Instituteof MOC. The said units completed all the tender documents, including the designdrawings. They also participated in the review of design variations of major worksduring the construction period and the completion acceptance of the works.

24. Contractors: The contractors were selected through international competitivebidding. There were 51 Chinese and foreign contractors applying for the civil workstender documents. Through the prequalification exercise 40 individual contractors andjoint ventures were permitted to submit bids. Public bid opening was held in Beijing onJune 24, 1987. Through evaluation and selection Contract No. I was awarded to the JointVenture of China Road and Bridge Engineering Corporation, First Highway EngineeringCorporation of MOC and Nishimatsu Construction Co. Ltd. (Japan); Contract No. 2 wasawarded to the Joint Venture of Tianjin 5th and 1st Municipal Engineering Co. AndBeugnet Co. (France); Contract No. 3 was awarded to the Joint Venture of Tianjin FirstMunicipal Engineering Co. And Nippon Hodo Co. Ltd. (Japan); Contract No. 4 wasawarded to the Joint Venture of First Highway Engineering Corporation of MOC andKumagai Gumi Co. Ltd. (Japan). Calling bids for Contract No. 5 began on October 2,1990. Ten contractors and joint ventures joined the competition. Bid opening took placeon April 23, 1991. The preferred bidders were: the Joint Venture of SBH ElectricalEngineering Co. (Germany) and China International Trust and Investment Corporationwon the traffic monitoring system; CANAC Telecommunication Co. (Canada) won theintegrated telecommunication system; SAINCO Traffic Control Co. Ltd. (Spain) won thetolling system; and Tianjin Schroeder Illumination Equipments Co. Ltd. (Sino-Belgiumjoint enterprise) won the lighting system.

- 61- ANNEX2

The main works completed by the contractors during the contract period were:subgrade earthwork 16,627,300 m3 , soft ground treatment 49 km, bituminous concrete

2pavement 3,589,500 m , viaducts 4,913 m/2 units, large bridges 1,022.56 m/2 units,medium and minor bridges 1,794.5 m/44 units, culverts and underpasses 19,242.m/528units, interchanges 8 units, overpass bridges 27 units, building structures 56,000 m 2/13

locations, 6-core optical cable 150 km, emergency telephones 142 units,telecommunication center 1 location, changeable message sign 8 pcs., changeable speedlimit sign 12 pcs., meteorological stations 3 locations, video camera 5 units, controlcenter 1 location, magnetic card toll lane 65 lanes/9 locations, toll center 1 location.During construction all the contractors complied strictly with the terms of the contracts.Work quality, progress and construction cost were effectively controlled. The Projectwas considered to be of "leading national level and advanced international standard" atthe meeting of the State Acceptance Committee.

25. Supervision/Consultants: The supervision and the consultant services of theBTT Expressway, led by Chief Supervision Engineer, Mr. Yang Shengfu, and ChiefResident Engineer, Mr. Tim Waage of Kampsax A/S Denmark, was fruitful. The 3-levelsupervision organization (Office of Engineer's Representatives-Senior ResidentEngineer's Offices-On-site Supervision Teams) consisting of Chinese and foreignsupervision engineers, applied strict management control of to construction quality, timelimits and costs according to FIDIC conditions and supervision routines. The jointsupervision team adopted creative site control procedures, carried out spot checks,introduced test frequency control and test data statistics for materials and completedworks. In summary, more than 80 management processes were defined and over 260diagrams for supervision work were produced. In addition, an experience report of 1.1million Chinese characters was compiled, which has been received with acclaim by theChinese supervision community.

The consultants' staff sent to BTT Expressway by Kampsax totaled 9 persons and248 man-months. The foreign engineers' high sense of duty and serious working attitudeset a fine example for the supervision work of the BTT Expressway. The signing powerdelegated to the foreign consultants effectively upgraded the quality control capability ofthe supervision management and ensured strict compliance with contract stipulations.

26. Lessons Learned:

(a) To select qualified contractors strictly according to InternationalCompetitive Bidding procedures gives a strong assurance for satisfactoryworks quality at a reasonable construction price.

(b) To execute the supervision system strictly, to give full play to theconsultants' experts, to uphold the authority of the supervision engineersto allow them to enforce justly and independently the contract conditions,are the keys to ensure the construction quality.

- 62 - ANNEX2

(c) To prepare bid/contract documents methodically and rigorously isimportant to ensure smooth project execution.

(d) To actively coordinate the Bank's missions and heed the advice given willexpedite project execution.

(el The preparation of purchase work shall speed up and bring forward.

VII. PERFORMANCE OF EXECUTING AGENCIES

27. Preparation of Project: In 1978 the Ministry of Communications began thepreparation work for the construction of the Beijing-Tianjin Expressway on the basis oforiginal investigations for Beijing-Tianjin-Tanggu Highway. In 1982, the first"Feasibility Study Report on Construction of Beijing-Tanggu Highway" wasaccomplished. In 1984 the State Council gave approval to list this project as one of theWorld Bank's loan candidates for 1985-1987. The Bank project identification missionfor the BTT Expressway took place in May 1984. The second "Feasibility Study Reporton Construction of BTT Expressway" was issued in September 1984, taking account ofthe Chinese government's requirement that the BTT Expressway should be a toll road aswell as the Bank's comments regarding supplementary economical and financialanalyses. The preliminary design documents were completed in November 1984, and the"Design Instruction for the BTT Expressway" was submitted to the State Council. TheBank carried out the preappraisal in March 1986 and the formal appraisal in October1986. At the end of the same year, the preparation of the bidding document wascompleted. In March 1987 the loan negotiation for the BTT Expressway was held inWashington, D.C., USA. The loan agreement was signed by the Chinese government andthe Bank on September 14, 1987 and came into force on December 13, 1987.

28. Implementation of Project: According to the instruction of the State Council,Beijing Municipality, Tianjin Municipality and Hebei Province organized the BeijingCompany, Tianjin Company and Hebei Company of BTT Expressway as the employersof the Project, to be responsible for the construction and management of thecorresponding sections of the expressway. In April 1987 the 3 companies formed theBTT Expressway United Corporation to act as a general representative of the Project, tobe responsible for coordinating and treating matters not suitable for any regionalcompany alone, including receiving the World Bank's project missions. The threeregional companies would be responsible for the management of civil engineeringcontracts, land acquisition and resettlement as well as financial management. The UnitedCorporation would be responsible for the unified construction and management ofContract No. 5 as well as the coordination and implementation of the subprojects underthe loan agreement, such as equipment purchase, studies, staff training, data basedevelopment, etc.

The date of closing of the account for the project loan has been extended threetimes. The final date is December 31, 1995.

- 63 - ANNEX2


(a) The system of employer's responsibility carried out on the BTTExpressway was effective and exact. From the beginning of theconstruction to current operation management, the United Corporation hasconstantly followed up and taken charge of the project so that unnecessarywaste of time and efforts has been greatly reduced.

(b) The independent supervision system was effectively promoted andwillingly respected by the employers. An expressway of high quality wasthereby obtained.

(c) The implementation and arrangement of the project must be wellcoordinated. The acquisition of electronic, electrical and mechanicalfacilities as well as maintenance equipment should not be disjointed withthe construction of the civil works.

(d) The contents of studies and staff training should be closely coordinatedwith the needs of the project, should serve the project and be subordinateto the project.

(e) preparations for the setting-up of the operation management should bemade early in the project, and funds should be allocated in the loan tocover expenses during the initial stages of management operations.

VIII. PERFORMANCE OF THE BANK

30. Preparation of Project: As far back as 1980, during the preparation of the firstreport about the economic development in China, the Bank held preliminary discussionsabout the highway industry with the Chinese government. In June 1983, when the WorldBank affirmed the first batch of loans for China's highway sector, the BTT ExpresswayProject was included. Further discussions about this project, which commenced in 1984,led to the formal appraisal report of April 17, 1987 (December 12, 1986). This reportidentified the project objectives and features, financing plan, project benefits and outlineda project implementation plan.

31. Implementation of Project: During the implementation of the project the Bankworked in close cooperation with the executing agencies. In addition to keeping in touchwith the project through the regular progress reports, the Bank sent missions, twice a yearin average, to inspect the construction site and to assist the executing agencies inresolving problems in the implementation, so as to ensure that the project would besmoothly implemented. The aide memoires, which were prepared at the conclusion ofever mission, recorded the work of the Bank in a clear and concise way.

32. Relationship with Executing Agencies: The cooperation between the Bank andthe BTT Expressway United Corporation, as well as the 3 regional companies, have been

- 64 - ANNEX2

good and cheerful. The Bank officials were understanding and gave full support tocircumvent restraints caused by the particular situation in China. Their missions greatlyfacilitated the implementation of the project.


(a) It must be fully understood that both the Bank and the executing agenciesare working towards the same goal. The cooperation between the partiesmust be frank, open and based on mutual understanding and support.

(b) The implementation of the project nurtured and tempered a batch ofqualified Chinese professional personnel familiar with the internationalpractice of construction, management and supervision of large highwayprojects.

(c) Since the construction period of this type of project is always quite long, itwould reduce the potential for misunderstandings in the course of theimplementation if the Bank's project officials could be retainedthroughout.

IX. OPERATIONAL PLAN

34. (a) To make full use of the facilities put into the Project during theconstruction period, build a modern management system, continue toapply the principle of "unified construction, unified management, unifiedtolling, unified repayment".

(b) To work out a series of manuals, systems and regulations for futureoperation management, make full use of the data base of the BTTExpressway, accumulate and unceasingly collect data and informationconcerning highway operation, provide a scientific approach to theoperation management.

(c) To give priority to the work of diverting more traffic to the Tianjin-Tanggu section.

(d) To provide a high-speed, simple and safe mode of transportation for thedevelopment zones along the expressway to promote social benefits and atthe same time increase the toll income of the expressway, so as to makethe operation of the BTT Expressway even better.

35. It has been decided through consultation that the United Corporation will submitto the Bank an operation report annually and a post-evaluation of the economic benefitsevery 3 years.

- 65 - ANNEX3

ANNEX 3: SUPERVISION/ICR MISSION'S AIDE MEMOIRE

1. This Aide Memoire records the major points of discussions and understandingsreached among representatives of the Ministry of Communications (MOC) (Mr. RenJinxiong), the Beijing-Tianjin-Tanggu Expressway United Corporation (BTTEUC)(Messrs. Tian Ning Shou and Dong Ping Ru) and the World Bank (Messrs. 0. Raggambiand Huang Bang Ben) regarding the implementation of the Beijing-Tianjin-TangguExpressway Project on July 1 and 14, 1995.

BTT Expressway

Activities during 1995

2. Following the understanding reached during the November 1994 Banksupervision mission's visit regarding the implementation of the still outstanding worksduring 1995, the Bank agreed to a further one-year extension of the loan/credit closingdate to December 31, 1995.

3. The activities identified in November 1994 for execution in 1995 included thecommissioning of the E&M works covering telecommunication, traffic monitoring andtoll operation systems and the delivery of maintenance equipment procured during 1994.All other works under the project had been completed.

4. Regarding the E&M works, the commissioning has been completed, the workshave been accepted, and the maintenance periods have commenced. Some pavements arestill outstanding on the telecommunication and traffic monitoring contracts. Maintenanceequipment, except two items, has been delivered.

Resettlement

5. A Bank Resettlement Mission (RM) visited the project site in November/December 1994 and had discussions with representatives of BTTEUC and localgovernments regarding the execution of the resettlement actions. The RM concluded thatsome of the adversely effected people may have initially experienced difficulties inrestoring their standards of living. However, there is a consensus that the project broughtconsiderable benefits to the people because of the major investments, which have takenplace in the project area, have created job opportunities.

6. RM also noted that the proper drainage of underpasses is still a problem.BTTEUC informed the mission that it had been well aware of this, and has been taking

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measures to alleviate the inconvenience caused through providing pumps andmaintenance crews to remove the water.

Disbursements

7. The expected final amount of disbursement of the Credit (Credit 1792-CHA)according to categories is:

Category (1) Civil Works SDR 83,638,000Category (2) Equipment-Part A SDR 6,366,000Category (3) Equipment-Others SDR 4,293,800Category (4) Consultant/Training SDR 4,602,200

Total SDR 98,900,000

8. The expected final amount of disbursement of the Loan (Loan 2811 -CHA)according to categories is:

Category (1) Civil Works $ 17,139,800Category (2) Equipment-Part A $4,424,400Category (3) Equipment-Others $3,435,800Category (4) Consultant/Training 0

Total $25,000,000

Preparation of an Implementation Completion Report (ICR)

9. The Bank, in its letter dated June 6, 1995, informed BTTEUC about the scope ofand procedures for the preparation of an ICR for the Project. Regarding the economicreevaluation for the BTT Expressway, request for the submission of relevant data wasalso attached to the Bank's letter. During the course of discussions the following keypoints were covered:

10. Economic Evaluation-BTT Expressway

(a) BTTEUC, if considered necessary, will make direct contact with Mr. Han-Kang Yen, Research Analyst, Transport Division for clarification of someaspects of the data, requested by the Bank;

(b) a traffic flow diagram along the full length of the highway indicating thevolume of through and turning traffic at interchanges will be provided;

(c) in addition to routine maintenance cost, costs associated with eliminationof defects, further protection or improvement cost will be provided insufficient detail on a year-to-year basis; and

(d) all relevant information will be submitted to the Bank by August 31, 1995.

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11. BTTEUC's Report. It was agreed that BTTEUC's implementation report(s),covering all project components (expressway civil and E&M works, supervision,equipment procurement, staff training, three studies, RDB/PMS development) will besubmitted to the Bank by November 30, 1995. It was further agreed that the reports, inaddition to providing factual information and data, would also cover the qualitativeaspects of the activities. Regarding civil works, all major deviations from original plansand major variation orders will be reported and discussed with sufficient explanation forthe changes.

12. Draft CIR Report by Bank Staff. Based on the report(s) and informationprovided by BTTEUC, and records available in the Bank, Bank staff will prepare a draftCIR report, which is expected to be sent to MOC and BTTEUC for review by the end ofJanuary 1996, and BTTEUC's comments on the report are expected to be received in theBank by the end of February 1996.

13. BTTEUC's Summary Evaluation Report (ER). A summary evaluation report,not exceeding 10 pages will be prepared by BTTEUC by mid-February 1996 andsubmitted to the Bank, through MOC/MOF by mid-March 1996. The suggested scopeand the structure for the summary report are indicated in Annex 1 and Annex 2,respectively.

14. Future Operation Plans and Monitoring. It was agreed that as part of its planfor the future operation of the BTT Expressway, BTTEUC would undertake the followingactions:

(a) Prepare and thereafter maintain an Administrative Operation Manual forthe overall management and the day to day operation of the BTTExpressway. The manual will include (i) a schedule for taking measuresfor improving the operational efficiency of the expressway, such asenforcing traffic regulations, taking measures for reducing accidents, etc.;(ii) procedural instructions and formats for the regular monitoring oftraffic volume, prevailing toll rates, toll revenues, budgets and expenditurestatements, maintenance costs, cost of additional investments to improvethe efficiency of the highway system, accident records and any other itemsthat have a bearing on the operation of the system; (iii) monitoring landuse changes in the highway corridor that could be attributed to thehighway; and (iv) provision for the reevaluation of the economic benefits,from the end of 1995 in three-year intervals.

(b) The format for the storage and presentation of the information will bedetermined by BTTEUC within the framework of BTTEUC'sadministration system.

Note: The original of the Aide Memoire, signed by representatives of BTTEUC and theBank Group, is in the Project File.

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IMAGING

Report No.: 16389Type: ICR

Documents

IMPLEMENTATION COMPLETION REPORT CHINA BEIJING …documents.worldbank.org/curated/en/630041468025213591/pdf/mul… · Report No. 16389 IMPLEMENTATION COMPLETION REPORT CHINA BEIJING-TIANJIN-TANGGU