Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 22334

IMPLEMENTATION COMPLETION REPORT(IDA-22960)

ON A

CREDIT

IN THE AMOUNT OF SDR 44.4 MILLION (US$60.0 MILLION EQUIVALENT)

TO TBE PEOPLE'S REPUBLIC OF

CHINA

FOR A

SHANGHAI METROPOLITAN TRANSPORT PROJECT

JUNE 29, 2001

This document has a restricted distribution and may be used by recipients only in the performance of their 7official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2000)

Currency Unit = Yuan (Y)Y 1.00 = US$ 0.120817US$ 1 = Y 8.2770

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

ATC - Area Traffic ControlBAA - Barton Aschiman AssociatesCBD - Central Business DistrictCCTV - Close Circuit TelevisionETC - Electronic Toll CollectionIRR - Inner Ring RoadMV - Motor VehicleNBF - Non Bank FundedNMV - Non-Motor VehicleNSC - North-South CorridorNUTI - Northwestern University Traffic InstitutePDR - Preliminary Design ReportPGS - Parking Guidance SystemPT - Public TransportTA - Technical AssistanceTMP - Traffic Management ProgramTMS - Traffic Management and SafetySMCC - Shanghai Municipal Construction CommissionSMEAD - Shanghai Municipal Engineering Administration DepartmentSMEC - Snowy Mountain Engineering CorporationSMECC - Shanghai Municipal Engineering Construction CompanySMG - Shanghai Municipal GovernmentSMTAB - Shanghai Municipal Transport Administration BureauSPSB - Shanghai Public Security Bureau Traffic Police Patrol and General BrigadeSTC - Shanghai Transit CompanySTERI - Shanghai Traffic Engineering Research Institute (STERI) of SPSBSUPDRI - Shanghai Urban Planning Design and Research InstituteVMS - Variable Message Signs

Vice President: Jemal-ud-din Kassum, EAPVP |Country Manager/Director: Yukon Huang, EACCF

Sector Manager/Director: Jitendra N. Bajpai, EASTRTask Team Leader/Task Manager: Edward B. Dotson

FOR OFFICIAL USE ONLY

CHINASHANGHAI METRO TRANSPORT PROJECT

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 65. Major Factors Affecting Implementation and Outcome 106. Sustainability 127. Bank and Borrower Performance 128. Lessons Learned 149. Partner Comments 2010. Additional Information 31Annex 1. Key Performance Indicators/Log Frame Matrix 32Annex 2. Project Costs and Financing 35Annex 3. Economic Costs and Benefits 37Annex 4. Bank Inputs 39Annex 5. Ratings for Achievement of Objectives/Outputs of Components 41Annex 6. Ratings of Bank and Borrower Performance 42Annex 7. List of Supporting Documents 43Annex 8. Beneficiary Survey Results 44Annex 9. Stakeholder Workshop Results 45

Map: IBRD 31441

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.

Project ID: P003565 Project Name: SHANGHAI METRO TRANSTeam Leader: Edward B. Dotson TL Unit: EASTRICR Type: Intensive Learning Model (ILM) of ICR Report Date: June 29, 2001

1. Project Data

Name: SHANGHAI METRO TRANS LIC/TFNumber: IDA-22960Country/Department: CHINA Region: East Asia and Pacific

RegionSector/subsector: TU - Urban Transport

KEY DATESOriginal Revised/Actual

PCD: 06/22/1988 Effective: 01/15/1992 01/15/1992Appraisal: 05/29/1989 MTR.Approval: 09/10/1991 Closing: 06/30/1998 06/30/1999

Borrower/lImplementing Agency: People's Republic of China/Shanghai Municipal People's GovernmentOther Partners: Inner Ring Road Construction Company, Traffic Management Division of the

Shanghai Public Security Bureau, Shainghai Municpality EngineeringAdminstration Department, Shanghai City Planning and Design Institute andShanghai Urban Construction Design Institute.

STAFF Current At AppraisalVice President: Jemal -ud-din Kassum Russel J. CheethamCountry Manager: Yukon Huang Shahid Javed BurkiSector Manager: Jitendra N. Bajpai Daud AhmadTeam Leader at ICR: Edward Dotson Ms. Carrolle CarrICR Primary Author: Edward Dotson; Ephrem Asebe

Asebe

This project was the first of two metropolitan transport projects providing assistance to ShanghaiMunicipal Government (SMG), with similar objectives and design, overlapping implementation periods andthe same implementing agency. The second project is the Second Shanghai Metropolitan Transport Project(SMTP II: ID-P003622). Given their similarities, a single assessment has been made covering the twoprojects, but separate reports have been printed. These contain the same text and annexes, except forsections 1 and 2, and Annexes 2, 4, 5 and 6.2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability. HL

Institutional Development Impact: H

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: HS S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The two metropolitan transport projects (SMTP I & II) providing assistance to Shanghai MunicipalGovernment (SMG) had similar objectives. For SMTP I, the original objective was to provide the basis fordeveloping an efficient transport system in the Shanghai Metropolitan Region by:

(a) increasing capacity, reducing congestion, and improving efficiency in the Shanghai urban transportnetwork, and(b) improve the planning, programming, financing, and management of the urban transport system inShanghai.

The project represented the first stage of a long-term program intended to upgrade and develop the urbantransport infrastructure of Shanghai to meet the needs of a developing economy.

For SMTP II, the original objectives of the project, in support of the economic and social development ofShanghai, were:

(a) to enhance economic productivity by improving the operational and economic efficiency of theurban transport system; and

(b) to strengthen public sector management capacity by improving the planning and management of theurban transport system.

SMTP I was the first urban transport project undertaken by the Bank in China. In 1991 at the time of theappraisal update of SMTP I, roads occupied 5% of the land surface of Shanghai (compared to 15% insimilar cities in other countries); average traffic speeds were 15 km/br with bus speeds at 8 km/hr; thevehicles fleet was 200,000 (53% trucks), the bicycle fleet 6.5 million and the bus fleet 5500. Five differententities were responsible for transport, and the ad hoc transport planning task force had just been turnedinto a pernanent transport planning institute. The SAR stated that the road network did not have sufficientcapacity to accommodate existing, let alone future vehicle flows. Viewed against this background, theproject objectives were clear and well related to the analysis of the issues in the sector. They represented abalanced emphasis on physical works and institutional capacity building in the sector.

The SMTP II objectives represented a logical extension of the SMTP I objectives into economicdevelopment and city management, reflecting the broadening of the dialogue between the Bank and theShanghai Municipal Government (SMG). In 1990, with Bank assistance, a process was begun to articulateShanghai's comprehensive reform policies, establish detailed action plans for implementation of reforms,and link the future expenditure program and institutional development of Shanghai to the reform program.In 1991, SMG launched the Shanghai Economic Reform Action Program (SERAP), and it was agreed thatfuture Bank lending to Shanghai should be linked to the implementation of the SERAP. Municipalinfrastructure reform was one of the six activities in SERAP. Within this activity, the key areas of reformwere:

(a) price reform aimed ultimately at full cost recovery for urban services(b) strengthening autonomy of public utility agencies (including Shanghai Transit)(c) enabling the use of enterprises as contractors to provide services such as public transport(d) regulation and guidance by updating and strengthening spatial planning, integration ofinfrastructure investrnent with spatial planning, and strengthening of planning, programming andbudgeting procedures.

-2 -

SMG placed great emphasis in SERAP on the expansion of the city into the Pudong area, located on theeast side of the Huangpu River. A key factor in developing Pudong was the improvement of the transportacross the Huangpu River. The Inner Ring Road (IRR) proposed for the Puxi area west of the HuangpuRiver, was to be extended via the Nanpu and Yangpu bridges in Pudong. Besides providing arterial roadaccess to Pudong, the function of the IRR was to divert through-traffic away from the established citycenter in Puxi, and provide a link with regional routes from the surrounding provinces of Jiangsu andZhejiang to Shanghai Port. The Bank financed the IRR, while the Asian Development Bank provided somefinance for the bridges.

Apart from resettlement, environment, and the Project Implementation Unit, conditions in theimplementation program of the project agreements related to transport investment plans, trafficmanagement, reform of the transit company, motor vehicle emission control strategy, and technicalassistance. The topics covered under project conditionality were appropriate and did not appear unrealisticat the time.

3.2 Revised Objective:The original project objectives were maintained throughout implementation.

3.3 Original Components:SMTP I Project Components:

A. Major Road Investments (Inner Ring Road Stage 1, US$131.9 million or nearly 90% of totalproject cost of SMTP I). These investments were the core of the project and were designated for majorroad construction along the existing ZhongShan Inner-Ring Road, a high-volume bypass route encirclingthe old central city. The credit supported the construction of a 5.5 km viaduct over Zhongshan Road, withassociated surface improvements. The viaduct was designed as a high speed arterial while the surface roadwas to be upgraded to four motor vehicle lanes with segregated NMV lanes.

B. Traffic Safety and Management (US$ 11.7 million or nearly 8% of the total project costs). Thecredit would finance traffic management and safety measures including the introduction of a 1.1 kmbusway and 19 km of non-motorized vehicle roads.

C. Technical Assistance (US$4.6 million or about 2% of the total project costs).TA was designed to strengthen the municipality's capabilities for planning and implementing urbantransportation measures, effecting improvements in traffic and safety, and improving bus operations.

SMTP II Project Components:

A. Construction of the Inner Ring (IRR) Stage 2 (US$574.6 million or 87% of SAR project costestimates). The loan would finance the construction of a further 22 km of Inner Ring Road on the westbank of the Huangpu River.

B. Traffic Management and Safety (US$44.9 million or 6.5% of the total SMTP II SAR estimates).This component was to extend the traffic management plan started under SMTP I.

C. Public Transport Investments (US$36.5 million or 5.5% of SMTP II SAR estimates).This is to construct and equip two bus depots and one bus interchange for Shanghai Transit.

-3 -

D. Technical Assistance (US$1.1 million or 1% of the costs of SMTP estimates)The TA was to support project implementation and to give further support to transport planninginstitutions.

3.4 Revised Components:SMTP I.A Major Road Investments.(i) Inner Ring Road viaduct works in SMTP II of contract 2.7 and the corresponding ground levelworks of contract 1.13 and 1.14 were transferred to SMTP I. Ramps were added to the viaduct. Thisextended the length of Zhongshan Road works under SMTP I from 5.5 km to 7.4 km. Works included therefurbishing of #3 Bridge.(ii) Ramps at Zhoujiang Road and Jinshajiang Road were added after completion of the IRR viaduct toimprove traffic flow.

B. Traffic Management. The NS Corridor (NSC) Program was deleted from the TM component.

C. Technical Assistance. Some minor modifications were made. The availability of funding from theFrench Government to support strategic planning and feasibility studies permitted a reallocation of SMTP1 project finds for expansion of Institutional Development of transport planning capabilities.

SMTP II.

A. Construction of the Inner Ring (IRR) Stage 2. The share of IBRD contribution in Category I,Civil Work Schedule I, in the original Loan Agreement was amended as of January 1994, from 38% to53% to accommodate change in exchange rate of 5.7 to 8.2 RMB to USD.

B. Traffic Management Various detailed changes were made to the schemes included in thiscomponent.

C. Public Transport. Construction of the new depot at Yinhang was replaced by construction of amulti-story garage and routine maintenance facility within the confines of the Siping road depot.

3.5 Quality at Entry:Neither project was ever selected for review by the Quality Assurance Group (QAG).

Strategies. Both projects were presented to the Board before the first CAS was prepared for China. TheWorld Bank urban transport policy prevailing at the time of preparation was published in 1986. Thisemphasized the importance of managing demand for road use, improving efficiency by traffic managementand self supporting bus services to secure economically efficient urban movement, while acknowledgingthat expansion of road capacity may be unavoidable when the demand for urban transport grows rapidly.The Bank's urban sector lending strategy in China was to

(a) assist the government in planning and prioritizing needs for urban services and to prepare cost effectiveprojects(b) help strengthen institutions (responsible for planning, preparing, constructing and operating urbanservices) through support for organizational improvement and staff training(c) promote sound financial and cost recovery policies for urban services(d) help develop sector policies and strategies supportive of China's overall reform program.

- 4 -

In the areas of urban planning, finance, and management, China was looking to the Bank for transfer ofknowledge gained in other countries. The two projects were consistent with these strategies and theShanghai Economic Reform Action Plan.Country and Sector Knowledge. The Bank started building a body of country and urban sector knowledgein China from 1981, coupled with a series of studies to provide information on the urban transport sector inShanghai. These studies provided an adequate underpinning of the project.Lessons of Experience. SMTP 1 was the first Bank urban transport project in China, and so there was noChina specific experience to draw on. Experience from a review of 15 PCR/PAR in other countries wasused. The main relevant lessons related to* weak institutional capacity - which was addressed through TA* weak enforcement of traffic regulations -which was addressed by making traffic management schemes

"self enforcing" and by involving the SPSB (traffic police) in their design* inefficient public transport operations -which were addressed through TA, and* lack of consideration of environmental impacts - which was acknowledged as a potential cause for

concem as motorization increased, despite increased political awarenessAppropriateness of Project Approach. When SMTP I was identified on May 1988, SMG presented threelarge infrastructure projects for possible Bank group funding. Given that the client was new to the Bank,the Bank team selected part of one of the projects (the IRR) for SMTP 1. Traffic management (in line withsector policy) and TA for capacity building and improving PT (in line with lessons learned) were added.When it became clear that the client had the institutional and engineering capacity to undertake major civilworks, the remainder of the IRR was included in SMTP II. This approach was entirely appropriate in thecircumstances.Borrower Ownership. The Borrower was highly committed to the IRR component of both projects whichthey saw as an essential elements in their strategy for the development of Pudong. There was Borrowerownership, but with a lesser priority attached, to the ATC system and the PT investments.Partnership Arrangements. The projects were prepared with assistance from funding provided by theFrench and US Govenmuents. SERAP was prepared by SMG with assistance from the Bank, UNDP andthe Ford Foundation. The Nangpu and Yangpu Bridges at either end of the Bank financed sections of theIRR, were part financed by the ADB.Technical Aspects. In depth planning, feasibility, and technical studies and economic analyses, funded bySMG or bilateral donors were undertaken at the request of the Bank during the preparation of bothprojects. These covered urban development, finance, public transport, traffic management, road safety,road maintenance and the design of the ring road. The extent of the studies reflected in part theuncertainties of doing business with China as a new Bank client. While the key issue of the fuctionaldesign parameters (including the number of lanes) of the IRR was discussed between the Bank and SMGduring preparation missions, analysis is inadequately presented in the two SARs. It was generally assumedthat land cost and availability limited the IRR to 2 x 2 lanes and that traffic demand in excess of thiscapacity would be met by other new roads, specifically the Second/Outer Ring Road. However inadequatecapacity was seen as a risk. Greater discussion of IRR functional design options in the SAR was aweakness in the technical analysis. The PAD structure facilitates the discussion of such issues in a way thatthe SAR structure did not.Economic Evaluation. This followed standard methodology of estimating benefits from the IRR as vehicleoperating cost (VOC) and time savings with and without the project. At the time the evaluation wasconsidered an example of good practice.FinancialAnalysis. This analysis verified the financial capacity of SMG to provide counterpart funds andrepay the credit and loan. There was discussion of operating cost recovery from user fees (not just publictransport fares). No attempt to calculate the coverage of project costs or of the SMG transport programfrom user fees.

-5 -

Poverty and Social Aspects. The project was not intended to address directly poverty reduction or genderissues. Preparation for resettlement was carried out in accordance with Bank guidelines on involuntaryresettlement by dedicated staff within a legal framework, well organized institutional network, and welldefined compensation policies. The quality of the RAP was quite good since the scope of impacts and theamount of entitlement changed little during implementation. The only resettlement drawback foreseen wasthe increased commuting distance for most resettled residents.Environmental Aspects. In general, the EA addressed adequately the environmental impacts, but didrequire strengthening in some areas. Measures to mitigate impacts adjacent to the IRR including noisebarriers were adequate, as were proposals to reduce the pollution at source through a Motor VehicleEmission Control Strategy (including cleaner engines and fuels), which was included as a project condition.The third mitigation measure proposed - land use changes along the IRR through redevelopment - appearedrealistic. Environmental policies and institutional capacity were adequately assessed, which resulted in TAbeing proposed to support the preparation of a MVECS. There was little if any consultation or disclosure,as was current Bank practice at the time. The projects also predated the assignment of environmentalcategory. Due to the environmental impacts and resettlement, the projects would have been classified asCategory 'A'.Financial Management. No assessment was made of Financial Management Systems.Procurement. The procurement arrangements for the projects took into account experience from previousBank financed projects and used model bidding documents developed for China. Intemational procurementwas to be undertaken by Intemational Tendering Companies (ITC) experienced in Bank ICB.Policy and Institutional Aspects. As discussed earlier, as these were the first two urban transport projectsundertaken in China, extensive analysis was undertaken of these aspects. The only weaknesses foreseenwere in technical areas that were relatively new to SMG, and for which TA was included in the projects.Implementation Arrangements. No project implementation plan was prepared, but the Borrower didprovide realistic implementation schedules for both projects. The first year program was ready forimplementation. Project management arrangements were clear, with a Project Implementation Unit havingoverall responsibility for project management, and sub-PIU dealing with each component. TA wasprovided to assist the PIU in the initial years.RiskAssessment and Management. The risks identified were purely technical. They included delays indemolition, resettlement and construction, inadequate IRR capacity, inadequate traffic engineering atviaduct interchanges, inadequate or delayed traffic management measures.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:While the two projects shared two sirnilar key objectives, each had specific objectives, which are discussedseparately.Increasing capacity in the urban transport network The construction of the elevated ring road and theassociated improvements to the ground level roads increased the physical capacity of the road system by upto 90,000 vehicles/day on the most heavily used sections. Other roads built during the time period of theprojects, notably the N-S Chengdu Road viaduct and the E-W Henan Road viaduct also added roadcapacity. The traffic management schemes increased the practical capacity of the existing road network,but to a lesser extent than envisaged, due to a reduction in the numbers of schemes implemented. The busdepots facilitated increase in public transport capacity (bus numbers and route length increased by over250%) and operating efficiency, and elimnination of the operating subsidy.

Reducing congestion. Overall congestion along the ring road corridor and within the Central BusinessDistrict in Puxi has been reduced. Despite an almost ninefold increase in vehicle trips to/from/within theCBD, the network volume/capacity ratio has fallen (from 0.8 to 0.75). Cross town travel speeds have

- 6 -

increased from 12 kmlhr to 24 km/hr on some trips, and from 18 kin/hr to 29 km/hr on others, resulting intime savings of up to 50 minutes on 20 km trips. However, the 2 x 2 lane (without emergency lanes)configuration adopted for the elevated road has proved insufficient for the travel demand. Year 2000 flowsare double those predicted in 1991 and the design capacity is being exceeded in some sections. Thuscongestion is starting to re-emerge at peak times on some sections and some ramps of the ring road. This isbeing addressed operationally through monitoring, ramp control and more effective traffic managementwhere the ramps meet the ground level roads.

Enhance Economic Productivity. Economic productivity, measured by Gross Regional Product increaseddramatically during the project from 8.94 Billion in 1991 to 40 Billion RMB in 1999. The extent to whichthe IRR and other investments contributed to this increase, or that the overall investment in transportcontributed, is difficult to quantify. Improvements were realized in the operational efficiency of the variouselements of the urban transport system - the overall road network (as measured by the sort of increases inoperating speeds and throughput indicated above). For the bus network, staff per bus were reduced to 5: 1,operating subsidies were elimninated, while service was expanded. Improvements were also realized ineconomic efficiency as trips/head increased by 25% while average trip time increased by only 10%.

Improve planning, programming, financing and management of the urban transport system. There aretwo ways to judge the achievement of this objective - by looking at the individual components of thesystem, and then the system as a whole. In terns of transport planning, the results are highly satisfactory.The Shanghai City Comprehensive Transport Planning Institute (SCCTPI) received TA support in bothprojects. SCCTPI has grown in capacity and stature to the point where it is now providing consultingservices (with limited Bank guidance) on recently prepared Bank urban transport projects in China (Urumriand Shijiazhuang). It recently completed the 2020 Transport Strategy for Shanghai. The methodologyincluded separate studies on the highway and rail networks (modeled on the Hong Kong approach), as wellas consideration of multiple options. SMG is in the process of developing detailed transport policy for2020, based on the Strategy, with the assistance of European consultants.

Programming andfinancing - Programming of works is still undertaken based on the National five yearplans. Financing is still from a variety of sources with no requirement for sectoral cost recovery. Theresults therefore in terms of these items are less than satisfactory.

Transport System Management. The results are satisfactory. The traffic management components and TAachieved the principal objective of providing the basis for developing an efficient urban transport system.Evidence of a change of attitudes towards traffic management is clear together with its enhanced status.An understanding of the broader range of activities which come under the umbrella of traffic managementwas gained. The flexibility of traffic management was recognized and fully exploited. The trafficmanagement strategy developed under the component and endorsed by SMG was incorporated into thelatest Shanghai Master Plan.

There has been a significant change in status and image of traffic management. There is more awarenessof the scope of traffic management planning and design - and not just the police remits of operations andenforcement. The TA was particularly successful with regard to the traffic police (SPSB). Not only didstaff become exposed to traffic management planning and design issues, but their particular operationalremits were enhanced by overseas training. Many of the ideas put forward in the project were subsequentlyapplied elsewhere in Shanghai. There is now better temporary traffic management during construction.The use of Area Traffic Control to improve the efficiency of the road system was very successful.

- 7 -

However to date there appears to be limited awareness of the need for travel demand management, startingwith parking policy. However, it is understood that this is one of the topics to be addressed in the transportpolicy studies recently commissioned by SMG from international consultants.

For Public Transport, the results are highly satisfactory. In early 1996, the Shanghai Public TransportCompany (SPTC) was reorganized into Shanghai Public Transport General Company, an umbrellacompany, and 13 operating companies, all of which were to be financially and operationally independent.A Shanghai Public Transport Limited Joint-Stock Company was established to hold the state-owned assetsfor all 13 companies. The city's municipal finance bureau then contracted with each of the 13 companieson an area basis, including provisions for subsidies. These allowed subsidies to be given on a decliningbasis for losses incurred over the three year period (1996 to 1998). The savings from operating subsidieswere redirected to increased capital investment. A passenger transport management division wasestablished under Shanghai Public Utility Bureau in order to regulate the passenger transport sector andmanage the tendering of all new bus routes to the 13 companies and 100 or so other eligible publictransport companies. In other words, the 13 operating companies compete amongst themselves and withother operators for the operating rights to new routes. More recently this division has been separated outfrom the Public Utilities Bureau and a Public Transport Management Office has been created.

VehicularAir Quality Management. The results are highly satisfactory. A leading group for emissionscontrol was established. The Chair is the Deputy Director of SEPB. A action plan was developed andShanghai is five years ahead of other cities in China in this field. Specific actions that have been takeninclude introduction of unleaded fuel in October 1, 1997, and the introduction (in 1998 two years ahead ofnational standards) emission standards for new light duty vehicles. Competitive bidding is underway for ademonstration project for the implementation of a centralized Inspection and Maintenance (I/M) system forlight duty vehicles. Emission standards for diesel vehicles are at an advanced stage of preparation.

Strengthen public sector management capacity. Overall the results look satisfactory. However,management of the street and elevated highway networks is under separate agencies. It is acknowledged bySMG that better management and traffic control system integration is needed, particularly for incidentmanagement.

Improving efficiency. The works and equipment in the traffic management components directly improvedthe operating efficiency of the street network, as the falls in cross-town travel times show. However theefficiency gains were less than would have been expected as the extent of traffic management was less thanplanned. In particular, measures for non-motor vehicles (bicycles) that were implemented generallyresulted in efficiency gains for MV traffic only. Works and equipment in the public transport componentsimproved the efficiency of operation of the bus system. However as few on street bus priority measureswere implemented, the improvements were less than anticipated at appraisal. The creation of a primaryroad network (comprising the ring road and the N-S and E-W viaducts) catering for longer distanceintra-urban movements further raised the overall operating efficiency of the road network by segregatinglonger distance traffic from shorter distance access and local traffic and bus traffic, permitting each type ofnetwork to performn the functions for which it was intended. TA for STC reform and the development ofpavement management systems improved the efficiency of bus operations and road maintenance.

Resettlement. Based on a recent survey, most resettled households were generally satisfied. Most agreedthat the resettlement had helped them to increase their living space and housing quality, and improve theirliving environment. The time for commuting (which was the main concern at appraisal) had reduced withthe improvement of services by Shanghai Transit. For most resettled people the objective of restoring theirliving conditions and livelihood had been achieved.

- 8 -

4.2 Outputs by components:

Shanghai Inner Ring Road Civil Works were satisfactorily completed in two stages and open to trafficahead of schedule and within overall budget, although some contracts of sub-components experienced costoverruns exceeding 15%. The quality of the civil works was generally of a high standard. The completedIRR civil works has met the physical targets set under SMTP I and II. A total of 29 km of elevated roadand associated ground road, 41 ramps, and 4 interchanges were completed. The elevated road is a four-lanedual carriageway with a design speed of 80 km per hour and a traffic capacity of 3,005 vehicles per hour inIeach direction. The ground level road, ranging in width from 40 to 50 meters, is a four lane dualcarriageway with a design speed of 40 km per hour and a design capacity of 1,650 vehicles per hour ineach direction. The ground road has non-motorized vehicle lanes and foot paths in both directions. Theramps are two lanes. Gonghexin road interchange and Luban road interchange connect the elevated IRRand north-south elevated road. The westem Yanan interchange connects the Inner Ring Raod viaduct andtheYanan Road viaduct. The IRR is equipped with monitoring and traffic accident rescue systems.

SMTP I & II. Traffic Management and Safety Components. In terms of resource allocation (with US$56.7or 7% of the total cost) it is second only after IRR cost. In terms of implementation this was the mostcomplex part of the project. Implementation require the creation of traffic management coordination teamwhich sought to bring together members from different agencies. The component which was in both SMTFPI & II was satisfactorily completed but after a protracted delays and substantial modifications. The delaysin implementation of this component was a key factor in the extension of SMTP I and II closing dates. Asthe same problem has arisen in other projects in China, it would be prudent to include loan conditions onthe implementation schedule for traffic management works in future projects.

Non-Motor Vehicle Programs. The delays and accidents caused by motor vehicles conflicting withnon-motor vehicles (NMV) were major problem throughout Shanghai's urban area. In accordance withNMV action program two way NMV only routes have been established but their performnance remainedless than satisfactory due to lack of lane discipline, lack of respect for traffic signals at junctions,uncontrolled parking of vehicles conflicts with pedestrian and diverted traffic from major constructionworks, pedestrian jay walking at traffic light junctions, etc. Lack of channelization was a major problem.On the whole the NMV program has helped mitigate these conflicts by creating an exclusive non-motorizedvehicle route passing in and around CBD, approximately 19.4 km in length.

Technical Assistance of SMTP Iand II The technical assistance components of SMTP I & II werecomplementary. They were completed successfully and generally as specified in the SAR. The availabilityof funding from the French Govemment to support strategic planning and feasibility studies, permitted areallocation of SMTP 1 project funds for expansion of Institutional Development of transport planningcapabilities. These TAs have served an important means of transfer of technology.

4.3 Net Present Value/Economic rate of return:The post construction economic appraisal of the Inner Ring Road was undertaken following the samemethodology used at appraisal. The main differences were an overall cost increase of 21%, a shorterconstruction period (three years instead of four), and the possibility to include network benefits. Theprincipal benefits in the "with project" case compared to the "without project" case included (a) savings invehicle operating cost of traffic on the ring road and (b) savings in passenger time of traffic using the ringroad, and (c) vehicle operating cost savings and time savings on the central city network (within the ringroad) and on the rest of the network. At appraisal benefits in stream (c) were omitted from the calculationas a traffic model robust enough to give reliable estimates was not available at the time. The recalculated

-9-

Economic Intemal Rate of Return (EIRR) estimated to be 27.6% taking both stages of the IRR in SMTP I& II together. The NPV @ 12% discount rate is 61 Million RMB, and the Benefit Cost Ratio is 2.6. Atappraisal, the EIRR estimates for the Inner Ring Road for Stage I and Stage II respectively were 18% and15%, which would drop to 16.5% and 14% with a 15% cost increase. Removing the network benefitsbrings the recalculted EIRR down to 14%, close to the appraisal estimates with a 15% cost increase.

4.4 Financial rate of return:Not applicable

4.5 Institutional development impact:One objective of each project was concerned with institutional development. As noted above, theachievement of these objectives was satisfactory. In the nine years spanned by the implementation of thetwo projects, institutional development has been substantial. Competitive bidding for both NCB and ICBprocurement by SMG agencies is now standard practice. Foreign consultant services are used to provideadvice on policy. The regulator and operator functions of the public transport system have been separated.The vertically integrated monopoly bus operator has been split into a total of 13 separate commnercializedoperators, capable of competitive tendering for service provision without operating subsidy. Institutionscapable of undertaking transport modeling and traffic management exist.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:The Chinese economy grew in the 90's faster than envisaged. The Government exerted substantialmanagement influence on the economy, but was not able to completely control it. As a result the vehiclefleet and travel demand increased more than envisaged.

5.2 Factors generally subject to government control:The key factor subject to central government control was the change in exchange rate. The economicgrowth in Shanghai produced a pressure for redevelopment which in theory was within SMG ability tocontrol. In practice, the institutional framework to manage such redevelopment was not developed. Thismade it very difficult to design and implement TM schemes.

Land acquisition for Yinhang Depot. The sub-component was not implemented because of difficulties inland acquisition and resettlement. The site was changed from the one identified in SAR to the currentSpring Depot of Shanghai No. 1 Bus Company.

Construction schedules for the IRR were accelerated from those originally established at appraisal, withsome cost increases as a result.

Bankfunding ratio at 15% for TM was lower than the 24% used for the IRR and PT components.Combined with the importance attached to the construction of the IRR, this provided less encouragement tothe TM team than to the IRR team to solve the problems that arose.

Role of the Leading Group. This group provided high level policy support for the project, and had aresponsibility for implementation policy and issues. Even so, it does not appear to have been used duringproject implementation to resolve specific project design or project management issues that could not beresolved by the PIU. This applied particularly to the differences of view in the traffic managementcomponent on the priorities to be accorded to different categories of traffic (MV, bus, NMV, andpedestrians), which were one of the factors slowing implementation.

- 10 -

5.3 Factors generally subject to implementing agency control:Focus on the IRR construction. The objectives of the Shanghai Municipal Engineering ConstructionCompany (SMECC) was to complete the IRR. There was a lack of consideration about how the IRRwould operate. This was evident in the early lack of concern about the interface of the IRR with the groundlevel road network, particularly the at-grade junctions where on- and off-ramps connected. Several Bankmissions raised this issue throughout the project and expressed concern about junction designs. Ultimately,innovative traffic management measures focusing on multi-phase lane-control signalling solved theseproblems.Ownership of the TM component. TA was provided before and during the projects to assist the Shanghaiagencies prepare and implement the schemes. The consultants had to try to form a partnership withShanghai team but this was hard to achieve since local expertise was lacking initially. While thecounterpart working relationships were very close, there was probably not a true partnership established.This may have resulted in undue consultant influence on the content of the proposals. In retrospect,Shanghai agencies may never have fully owned the proposals.Output of TA for STC. The output from this TA was considered by STC not to have been of great value indetailing their reform proposals. In theory agencies should be able to ensure that outputs are of value. Inpractice this is difficult in policy areas, and where agencies have limited experience of dealing withconsultants, particularly foreign consultants.

5.4 Costs andfinancing:

Total Appraised and Actual Costs of SMTP I and II Projects by Component(in miDlion US Dollar)

SMTP I & II Component Appraisal Actual/latest Estimates % ofAppraisal total

SMTP I SMTP II Total SMTP I SMTP Total to Actual totalII of SMTP I &1I

A. Inner-Ring Roads of Stage I & 2 131.93 574.67 706.6 146.38 524.65 671.03 95%B. Traffic management and Safety 11.74 44.89 56.63 14.13 25.29 39.42 70%C. Public Transport Investments 0.00 36.46 36.46 0.00 30.44 30.44 83%cD. Technical Assistance 4.58 1.1 5.68 4.28 1.66 5.94 105%

Total 148.25 657.12 805.37 164.79 582.04 746.83 93%

Total Appraised and Actual Costs of SMTP I and II Projects by Component(in million of Chinese Yuan)

SMTP I & II Component Appraisal Actual/latest Estimates % ofAppraisal total

SMTP I SMTP 11 Total SMTP I SMTP II Total to Actual totalof SMTP I

A. Inner-Ring Roads of Stage I & 2 688.68 3,275.6 3,964.28 1.138.97 3,641.89 4,780.86 121%B. Traffic management and Safety 61.30 255.9 317.2 87.41 207.52 294.93 93%C. Public Transport Investmnents 0.00 207.8 207.8 0.00 250.90 250.9 121%D. Technical Assistance 23.94 6.5 30.44 34.27 13.90 48.17 158%-

Total 773.92 3,745.7 4,519.62 j 1,260.65 4,114.21 5 119%Ratio between costs in Y to US$ 5.22 5.70 5.65 J 7.65 7.68 7.196

The tables provide a comparison of the appraisal estimates of SMTP I and SMTP II costs with Bank Staffactual/latest estimates.

-11 -

Project Financing.

IDA credit financed 40% of SMTP I total project cost of US$148.3 million equivalent. The total amountof SDR credit was US$44.4 million or US$60.00 million equivalent at appraisal. Due to the appreciationof the SDR relative to US Dollar, the total credit became US$ 62.99 million. A total of US$61.27 millionwas disbursed and the balance US$1.72 (SDRI.25 million) was cancelled. IBRD loan financed 20.3% ofthe total SMTP II cost of loan was US$150 million. The total disbursed is about US$148.0 million.

6. Sustainability

6.1 Rationale for sustainability rating:All components are likely to be physically sustainable. The capacity and efficiency gains through roadconstruction, traffic management and public transport reform are also sustainable. So too are the publicsector management capacities. The major question mark is whether the overall road conditions aresustainable. Given that congestion is already apparent at certain locations and certain times on the ringroad the answer is clearly that without other measures, the gains in travel times over the past ten years willbe eroded over the next ten. More sophisticated management of the road system and redistribution oftraffic by further construction (as was envisaged in both SAR) will certainly help. Continued increases inthe capacity and quality of public transport will also decelerate the rate of increase of demand. But demandmanagement will become necessary, starting with parking management and in the not too distant future,some form of area pricing scheme within the ring road.

6.2 Transition arrangement to regular operations:With the exception of the Inner Ring Road, the facilities and equipment funded under the project weredesigned and implemented by the SMG agency with corresponding operations and maintenanceresponsibility. The Shanghai Viaduct and Bridge Maintenance Company was set up especially for theoperation and management of the IRR, the N-S viaduct and the Yanan Road viaduct. The Traffic andPatrol Police General Brigade of the Shanghai public Security Bureau is responsible for trafficmanagement of the IRR viaducts and the ground level roads, as well as the various traffic managementschemes. The Shanghai Public Transport Holding Company owns the new two depots which it leases tothe operating companies. The Environmental Protection Bureau is responsible for the implementation andfirther development of the MVECS.

7. Bank and Borrower Performance

Bank7.1 Lending:The Bank performance during preparation can be considered highly satisfactory. Both projects werecomprehensively prepared by highly experienced teams. SMTP I was identified in May 1988 andappraised in October 1989. Work was interrupted by events in China in mid 1990, and so the appraisalfindings were updated in February 1991. The first project was approved by the Board in November 1991.The second project was formally identified in July 1991 and appraised in February 1993. While a numberof team members were common to both projects, the task managers were different, due to circumstancesbeyond management control.

The first project was prepared at a time when the Bank was just starting urban transport work in China,and during a period when China was starting to embark on major reforms and to really open up to the restof the world. The economic, sector and technical work undertaken was thorough and comprehensive. Forthe initial stages of a dialogue with a city these analyses perhaps attempted to cover too many sector issues.

- 12 -

The preparation of the second project used the same analyses. These were supplemented by technicalstudies in transport modeling and TM supported by TA funded under SMTP I.

7.2 Supervision:Bank performance during supervision can be rated as satisfactory, although in terms of mission spacing,irregular. There were three task managers, all specialists in urban transport. The first, who was the taskmanager at appraisal of SMTP II, died in mid 1996. He was replaced quickly by the second task managerwho had participated in the appraisal of both projects. After two missions the second task manager couldno longer travel for medical reasons. The third task manager (who participated at the appraisal of SMTPII) took over in late 1997. SMECC commented that communication with the Bank suffered during thisperiod, and problems were caused by lack of timely feedback. Mission spacing from late 1997 wasadequate to review progress on the outstanding activities, largely related to the traffic management.

No supervision plan was prepared for SMTP I.. A supervision plan was prepared for the SMTP II projectwhich called for 8 missions (two per year) starting in March 94. The Bank conducted 14 missions for theSMTP-I and 15 missions for SMTP-II. This larger number of missions was called for by the duration ofthe project which was longer than planned. The project supervision took a total of 130 staff-weeks whichappears to be reasonable compared to other similar projects in Asia. (The average for the East AsiaRegion is 8 staff weeks/year and 12 staff weeks for an ICR. Adopting these averages would have resultedin a total of 144 weeks of supervision).

The quality of the dialogue between the Bank staff and the Chinese Project staff, as well as the guidancegiven by the Bank staff was well appreciated by the Chinese counterpart. However the changes of Banktask manager during the year 1996-97, made communication and problem solving more difficult. This wasmost evident for the TMS component which was not being implemented as fast nor as effectively asplanned.

7.3 OverallBank-performance:Based on the above comments, the IDA/Bank performance is rated as satisfactory. Despite changes in taskmanagers, supervision was comprehensive in coverage and focused on achievement of developmentobjectives. The Bank was responsive to Borrower requests for changes in project components, althoughsometimes the response time was perhaps not as speedy as it should have been. Early advice was given tothe Borrower on the scope of the ICR, and the definition and measurement of performance indicators linkedto the objectives. The one failing was in the irregular spacing of supervision missions after the completionof the IRR. It is felt that this irregularity had an adverse impact on the nature of the traffic managementschemes implemented.

Borrower7.4 Preparation:The Borrowers performance during preparation was highly satisfactory. SMTP I was the first projectSMG had undertaken with the Bank, at an early stage in the Bank dialogue with the Government of China.Thus the Borrower was not only having to come to grips with Bank requirements, but more generally withthe details of the western business model and westem approach to policy formulation, planning, schemedesign and project management. The learning required was broadened and deepened with the increasedscope and complexity of SMTP II.

The Borrowers primary interest was in building the IRR by a given date, but this did not preventconsideration and after discussion, acceptance of other components. The need for Bank review of designsand discussion of design parameters was not clearly understood. There was an understandable reluctance

- 13 -

to have discussions that were meaningful to the Bank team on matters that had already been endorsed bySMG. This meant that discussions on technical matters (such as for the IRR on the number of lanes or theramp locations) did not fully address concerns expressed by the Bank team on the design of projectsub-components. In the public transport components the SMG team was reluctant for the Bank team tobecome to involved in reform at the start of the design of the reform measures.

7.5 Government implementation perfornance:The Government in this instance means the Shanghai Municipal Government (SMG), since the Governmentof China had little involvement in the project, beyond on-lending the loan to SMG. The SMG LeadingGroup was responsible for the overall direction of the project, including project implementation policy andissues. However, once the IRR was completed, the leading group did not appear to have been muchinvolved. Despite its mandate, the leading group was not used to provide guidance to resolve thecontinuing differences of view of different agencies within the traffic management component. Thissuggests that the leading group did not see its role as being to take decisions on matters that involvedseveral agencies, or project management decisions that were outside the powers of the PJU.

Overall Rating is satisfactory.

7.6 Implementing Agency:The implementing agency performance was satisfactory. The same SMECC unit was responsible for thepreparation and implementation of both projects. This ensured that knowledge gained at each stage wasretained and expanded upon. It would have been rated as highly satisfactory but for a number of small dipsin performnance, viz: intermittent quarterly reporting, and in later years, not sufficiently proactivemanagement of remaining funds to ensure they were all properly used. There was one incidence ofprocurement not following Bank guidelines, due to staff being unfamiliar with them, but not sufficient formisprocurement to be declared. SMECC was also not as proactive as it could have been in projectmanaging and in sending to the leading group for a decision matters deemed beyond its responsibility. Theperformance in preparing the SMG contribution to the ICR went beyond highly satisfactory into the realmsof best practice. A detailed, insightful and well written 91 page document (plus annexes) was prepared. Itis unfortunate that Bank requirements do not pennit more than a summary of the key sections to bepresented in Section 9.

7.7 Overall Borrower performance:Overall performance is satisfactory.

8. Lessons Learned

Lessons were learned at all stages of the project, and have been incorporated into the preparation ofsubsequent Bank urban transport projects in China. These lessons have helped shape the recently preparedUrumqi and Shijiazhuang projects. Clients who prepared these projects also visited Shanghai to leam forthemselves, and participated in the stakeholder workshop. The lessons cover the main project components,as well as engineering design, construction and procurement, monitoring and evaluation, Bank/Borrowerinteraction, the role of the Leading Group, and project management. They incorporate the key conclusionsof the workshop.

8.1 Road Network

(i) Road space management and network planning. From the time of identification of SMTP Ithrough the appraisal of SMTP II, SMG focused heavily on the proposed major investments in roadinfrastructure. The Bank team discussed at length and in depth the value of complementing the Ring Road

- 14 -

investment with traffic management, facilities for cyclists and pedestrians, and public transport. The Bankteam was concerned that the N-S and E-W (Yanan) viaducts would encourage car traffic into the centralarea, within the IRR, overload the street network, and would be too destructive of the urban fabric andunaffordable, and so argued against them. With hindsight, the Bank would probably have had greaterimpact if it had accepted the basic SMG concept of a "ring and cross" viaduct network and then workedwith the city agencies to produce a more efficient network design and to integrate it with a more effectivetraffic management strategy.

(ii) Primary Road Capacity. Due to funding constraints and the amount of resettlement, the IRRviaduct was proposed as a 2 x 2 lane road with no emergency lanes. With hindsight, this is not wide enoughfor current requirements. Learning from this, SMG built later projects (N-S viaduct and E-W YananViaduct) with 2 x 3 lanes. Assumptions about traffic growth, at appraisal, were deliberately conservalive,probably too conservative. The option of building a 2 x 3 lane IRR viaduct should have been given moreconsideration. However, it can also be argued (as it was at appraisal) that the proposed Outer Ring Roadwill relieve the IRR. Also, the rapid and efficient construction of a smaller road obviously brought somebenefits to the city compared to the costs and delays which would have been associated with theconstruction of a larger facility.

(iii) Better planning and design of roads. A better functional classification of roads is required androad design standards need to be revised so that they are based on appropriate functional classifications.Greater provision for pedestrians and cyclists should be made, with particular consideration for safety.

(iv) Shanghai Central Area Network. Now that the 3 E-W and 3 N-S arterial routes are built in thecentral area within the ring road, there is a need to upgrade the rest of the network to provide a better grid,while taking account of historic buildings. There is also the need to irnprove the connections between theelevated road system and the ground level roads.

8.2 Engineering Design, Construction and Procurement

(i) Quality of basic engineering design. Because Shanghai was a new client, the Bank teams wereinitially cautious about requiring engineering design reviews for the ring road. It quickly became apparentthat the Shanghai Design Institutes had the highway and structural engineering design expertise to preparethe drawings and the technical parts of bidding documents to international standards. However, asSMECC notes, it was the first time the Shanghai Institutes had designed a large elevated road. Because oftheir lack of experience, and the tight construction schedule, there were some shortcomings in the design.For example: rubber joints were adopted for the viaduct surface which are now damnaged and createdifficulties for maintenance, emergency lanes were not provided and, drainage is not adequate during heavyrainfall. In addition the monitoring equipment on the viaduct does only that, and does not control trafficflow.

(ii) Functional Design shortcomings. Functional design skills were not as advanced. The lack ofskills lacking negatively affected the location of ramps, and the design of the junctions under the ring r oad,particularly where ramps were located. Some of these skill have been acquired during the course of theproject. SMECC notes that the additional ramps at Zhoujiazui Road and Jinshajiang Road were requiredbecause of insufficient planning before construction. Also, some ramps are too close to ground level crossstreets. This results in serious weaving between the ends of the ramps and the ground level junctions.(This problem has been resolved in part by clever use of traffic signal phases).

- 15 -

(iii) Speed and quality of construction. As with engineering designs, because Shanghai was a newclient, the Bank teams were initially cautious when establishing the construction schedules for the ringroad, and the supervision arrangements to ensure construction quality. The speed and quality ofconstruction of the cable-stayed Nanpu bridge initially mitigated these concerns. Also, the speed of theconstruction of the IRR in SMTP I demonstrated that once an agency determined a schedule, they couldadhere to it without sacrificing construction quality. The aesthetic quality of the structural finishes alsoimproved with successive sub-components.

(iv) Construction schedule and cost increase. After appraisal, SMG set a goal of finishing the IRRin 1994. In order to meet this objective, the design and construction times had to be reduced by SMECCfrom the already tight schedules agreed with the Bank. The net result was cost increases of the order of15%.

(v) Adoption of market based competitive bidding. The implementation of the SMTP illustrated tothe SMG that market based methods can make a project more effective and efficient. The bidding processwas very beneficial and stimulated the pace of reform of related design and construction companies. A fairand competitive construction market is emerging in Shanghai. Competitive bidding is now standardpractice on SMG contracts.

8.3 Traffic management

(i) There is a need to integrate the institutions dealing with traffic engineering and to develop acomprehensive approach to traffic management.

- Advantage was not taken of the opportunity to develop innovative and appropriate designmeasures for NMVs, but the concept of separating MV and NMV flows is now accepted.Complete separation will take a long time.

3 The opportunity to develop bus priority measures was deferred because of the focus on roadinfrastructure for MVs.

* Coordination between the TMS and the new road infrastructure needs to be stronger (forexample, better design of the ground level junctions under the IRR; integration of IRRmonitoring equipment and ATC).

(ii) There is a need for two discrete traffic management activities within a project. The first isessentially a independent traffic engineering component, independent of any new infrastructure proposals.This can be implemented from the start of the project and independently of new road construction so thatbenefits are realized within a short timne frame and proposals are not rendered obsolete. The secondactivity should be integrated with the design of the new infrastructure components.

(iii) Traffic Impact Analyses (TIA) should complement the design of Traffic ManagementSchemes. (TMS). TIA is required in addition to traffic management. The pace of development results inthe traffic management schemes being rapidly superseded by new infrastructure, new land uses, growingtraffic volumes and constantly changing traffic patterns.

(iv) Financing traffic lights serves a purpose. Having a large identifiable investment in traffic signalsand ATC at the heart of TMS component was justifiable to focus attention on traffic management.

(v) Loan conditions may be helpful. The judicious use of more loan conditions may be worthconsidering to ensure the timely implementation of traffic management schemes.

- 16-

(vi) Increasing the Bank's effectiveness. Bank staff need to present a very clear and consistentpicture of the type of traffic management package, and specific measures, that would be acceptable. Thiswas attempted in Shanghai, but the clarity eroded over the years.

8.4 Public Transport Reform.

(i) Pace of reform. The project facilitated a great deal of reform, of pricing, and of the structure ofthe sector. However the pace of reform is govemed by local agencies and national political conditions.Thus Bank efforts (including investments) should be directed towards assistance with the formulation andimplementation of reform.

(ii) Private sector participation. Wholesale privatization of companies, cost based competitivetendering for service supply, reducing labor surplus to benchmarked operational requirements, and majorprivate sector participation are not politically acceptable at the present time in China. Thus provision ofpublic transport is likely to remain a largely a public sector activity for the foreseeable future. The initialthrust of Bank support should therefore be directed to the separation of the intrinsic public sectorresponsibilities of service specification and planning, from the cormnercial supply functions, which arelikely to initially remain with the State Owned bus companies, but which can later be privatized.

(iii) Use of foreign experience. Some foreign experience is relevant to the current reform programs inChina. The key is to adapt this experience to local conditions, and to acknowledge that the initialconditions and stimulus for reform varies from place to place. This adaption requires knowledge sharingand teamwork between foreign experts and staff of local agencies, and locally generated solutions to reiformissues.

(iv) Reform takes time. The process to date in Shanghai has taken 10 years. This compares with 15years for complete reform of the system in London, a city of similar population and bus fleet.

(v) Modal Integration. Greater coordination of modes is still needed, particularly the integration ofrail and bus networks, with better interchanges between these modes.

8.5 Public transport priority:

(i) Plan for Bus Priority. The project focused rightly on reform of STC (a government enterprise),which is a key to sustainable development of the role of bus services. However, the priority given to theMV in the road infrastructure translated into limited physical priority being given to buses. This in turnmay have been a factor in the reduction in the modal share of buses. Future projects should consider moreprecise and realistic plans for public transport priority.

(ii) Putting public transport first. This is the current SMG policy, but people do not know how toput this policy into practice. SMG should clarify what this policy means so that bus companies can betterserve passengers and traffic management agencies will be encouraged to introduce bus lanes and signalpriorities favoring buses.

- 17 -

8.6 Transport Planning

(i) Integrated Planning is critical. SMG recognizes that comprehensive transport planning inadvance of construction is critical for city transportation. Transport plans should not be ends untothemselves, but should support economic development through integrated planning of transport and landuse. The emphasis should be on moving people and goods, not infrastructure development. Plans shouldalso be more closely related to the resources available.

(ii) Modal Split forecasting. The overall number of daily trips grew more or less as anticipated.However, the traffic on the new road infrastructure grew much faster than anticipated. The modal share ofcar and motorcycle travel quadrupled between 1991 and 1998 from 3% to 12% of all trips. Over the sameperiod, the modal share of public transport, even with the addition of the metro, decreased significantlyfrom 26% in 1991 to 15% in 1998. The forecasts made in 1991 for the year 2000 were for 6% of all tripsin cars and taxis and 30% on public transport. This evolution towards a lower share of public transport infavor of a bigger share of private means of transport, if it were to continue, could lead to a strong increasein road congestion and a loss of productivity

(iii) Bicycle usage. Contrary to the 1991 forecasts which showed NMV usage remaining stable at33%, NMV usage grew to 42% by 1998. Walking as a mode of transport remained stable at 30% of alltrips. Coupled with the decline in public transport usage, this suggests that a clear choice is being madebetween the use of public transport and the use of bicycles, with a preference for use of bicycles. Thistrend needs to be researched, carefully modeled and the implications discussed. Bicycles will still be animportant travel mode for Shanghai residents for some time.

(iv) Use of a probability approach for future economic evaluations of large investments in urbantransport infrastructure. The IRR viaduct proved to have insufficient capacity, and retrospectively itappears that it would have been better to build a larger facility. The motorization rate was faster thanforecast. Assumptions at appraisal were deliberately conservative. To prevent under-design in the future,economic analysis of large investment projects should utilize a probability approach, to determnine thesensitivity of values and assumptions to the proposed capacity and benefits.

8.7 Monitoring and Evaluation.

(i) The project did not plan nor budget for any evaluation study, or the collection of data which mighthave been used to evaluate the outcome of the project. The identification of key performance indicators,within a logical framework, was not yet mainstreamed at the time of project preparation. The studiesundertaken for the preparation of the ICR partly filled this gap.

(ii) SMECC noted that sufficient attention was not paid to data management. During the 10 year longproject implementation period, relevant data was kept separately by various units and staff. Since therewas not a central data system, it took a long time to pull together the information required for the ICR.

- 18-

8.8 Bank/Borrower Interaction

(i) Need for good communication. Communication is more than having good translators, althoughthat helps. Good communication also requires the Bank to gain an understanding and respect of the cultureand operating practices of the Boffower and implementing agencies. The key lesson in improvingcommunication of ideas, knowledge and experience is to include in the project team local technicalspecialists who speak Chinese, and technical specialists with experience of China.

(ii) Need for participation by all interested agencies. The experience in Shanghai is no different tothe Bank's experience in every other country. To develop a sustainable project requires the activeparticipation and ownership from all relevant institutions. Implementing agencies need to be fully involvedwith the design of each project component. Agencies also need guidance on how to work in partnershipwith international and local consultants for the transfer of knowledge and ownership of consultantgenerated proposals.

(iii) Need to strengthen Bank supervision. The Bank should have provided a higher level ofsupervision to complement the large resources input to project preparation. This supervision has to be atregular intervals and with a consistency of approach if it is to support the work of the local agencies.

8.9 Project Management

While project management was generally effective some improvements would have been possible. Mostobviously, project components were planned and implemented by the different agencies and there was onlylimited coordination and communications between them. Also, the domestic formalities for the approval ofall the sub-projects were managed by the relevant sector agencies over which the SMECC PIU had limitedcontrol. In addition, limited technical personnel and unclear responsibilities restricted the overall ability ofSMECC to effectively manage the planning and implementation of sub-projects.

8.10 Leading Group (Project Steering Group)

(i) The close attention of the municipal government was critical to the project's success. Continuousinput and support from SMG in terms of policy, human resources and finance provided a sound basis forsmooth preparation and implementation.

(ii) A strong Leading Group, which is knowledgeable about the local transport situation and keen tolearn from the best international practice (through cooperation with the Bank and foreign consultants) iscritical for the smooth design and implementation of the project.

(iii) As new projects are prepared, the Bank should try to ensure that the proposed institutionalarrangements given the Leading Group the authority to make decisions affecting the progress and design ofthe project which are outside the limited role and responsibilities of the Project Office (i.e. decisions whichrequire inter-agency cooperation).

(iv) For all future projects, the Leading Group should have greater responsibility for the setting andimplementation of transport planning and management policies.

-19 -

8.11 Future Challenges (identified during the workshop).

(i) Pace of Change. This makes planning particularly difficult, as the experience with the Ring Roadhas shown. It makes accurate forecasts more important but also more difficult. Also, it highlights the needfor flexibility and continuous planning so that works are not rendered obsolete by increases in traffic. Italso underlines the need for a good strategic plan when trying to assess the value of individual projects.

(ii) Project Investment Approval Procedures used in China are generally satisfactory and simplerthan Bank procedures. These Government procedures are being simplified even further, but more publicparticipation is required and is being introduced. There is also a need for better integration between theactivities of the municipal and districts governments.

(iii) Environment and Sustainable Development. Sustainable development, environment and thequality of life are now important policy issues in all cities in China. Environmental considerations (costsand benefits) should therefore be given a higher profile in the evaluation of projects. However, there is aneed to raise public awareness of environmental issues. The choice of the most appropriate mechanisms toreduce pollution from cars - emission control devices, tax policies, better control of certain types ofvehicles, better traffic management, travel demand management is a challenge in itself

9. Partner Comments

(a) Borrower/implementing agency:The implementing agency SMECC has written two sets of comments on behalf of the Shanghai MunicipalGovernment. Below is their paper entitled "Implementation and Assessment" presented at the ICRStakeholder Workshop by SMECC (with minor edits to reduce repetition of factual material presentedelsewhere in the report). A more comprehensive and detailed set of comments of some 90 pages (excludingattachments) entitled "Implementation Completion Report" is available in the project files.

1. GENERAL DESCRIPTION

The 90s on 20th century was a critical period for implementation of the national "Eighth and Ninth FiveYear Plan", for promotion of further reform and opening and for the changes of strategic position ofShanghai. With the policy of developing Pudong from the Central Government in 1990, ShanghaiMunicipal Government (SMG) made the decision to take this opportunity to develop both sides of theHuangpu River. And Shanghai will be gradually built into the lead of Yangzi River valley and one of theinternational metropolises of world economy, finance and trade. In order to realize the great target, SMGdecided to put a huge amount of investment to infrastructure construction so as to create favorablesurroundings for more investment home and abroad and good conditions for economic development ofShanghai.

To support the economic reform in Shanghai, the World Bank based on investigations by local and foreignexperts and cooperation of SMG, confirmed as early as in the late 80s a program to assist ShanghaiMetropolitan Transport Project (SMTP).

- 20 -

1.1 Objectives

The Project was implemented in two stages, and was intended to help Shanghai(a) raise the economic productivity through the improvement of operation and economic benefit of theurban transport system;(b) enhance the management capability of the public facilities through the improvement of the planningand management of urban transport system.

1.2 Elements of the Project

a. To build the inner ring road, one of the urban backbone transportation infrastructures in Shanghai,so as to improve and mitigate the traffic pressure in central area of the city;

b. Seeing from the angle of traffic engineering, traffic control measures and reducing hidden trafficaccidents, to improve traffic management and safety from central business district (CBD) tocentral area of the city;

c. To improve the operation of public transport by means of study on public transport reform andinvestment to the construction of some stops and depots;

d. To strengthen the capabilities of urban transport planning, management and road maintenanceinstitutions through providing consulting service of foreign experts and related equipment.

1.3 Duration of the Project

From 1991 to the closing date of December 31, 2000, the Project lasted ten years.

2. PROJECT IMPLEMENTATION AND ASSESSMENr

During ten year's implementation of the Project, the foreign exchange in China changed from fixed rate tofloating rate under control after 1994 so as to meet the further reform and opening. The exchange rate ofRMB and US dollars was raised from $1 = Yuan 5.2 to $1 > Yuan 8.0, which resulted in a large remainigsum of funds under SMTP from the SAR estimate. Since 1991, SM started to prepare new general urbanplan. And then comprehensive transport plans for Shanghai were in succession presented, which providednew bases for all-round implementing the objectives and components of SMTP.

Facing the above mentioned changes, both Shanghai and the Bank agreed to make adjustment andmodification to the Project so as to better use the loan surplus on principle of keeping objectives in SARunchanged, enable the implementation of components under SMTP to reflect the strategy,comprehensiveness and reality of new general planning and strengthen the objectives of SMTP.

The details are presented in the following paragraphs.

2.1 Inner Ring Road (IRR)

In the new Shanghai urban plan, IRR is one of three important ring roads in Shanghai (the other two ringroads are Outer Ring and Suburb Ring Road). Circling the center of Pudong and Puxi, IRR goes throughnine districts including Yangpu, Hongkou, Zhabei, Putuo, Xuhui, Luwan, Huangpu (former Nanshi) andPudong New District, with the total length of 48 km. IRR covers Puxi section, Pudong section, NanpuBridge and Yangpu Bridge, which is the first all-round implemented express artery in Shanghai.

- 21 -

Puxi section runs between Nanpu Bridge and Yangpu Bridge, with the total length of 29.2 km andincluding 40 m wide ground road (for standard section) and 18 m wide elevated road (for standard section).The elevated road is designed as two-way two-lane closed rapid road with the speed of 80 km/h. While theground road is of two-way two-lane MV with the design speed of 40 km/h and two-way one-lane NMVroad on both side. In addition, bus bay is provided for stops along the road. Four interchanges includingCaoxi Rd, West Yanan Rd, Gonghexin Rd and Luban Rd are provided along the road and 41 up and downramps are arranged for the main junctions.

The construction of all 29.2 km long elevated and ground road in Puxi is included in SMTP. Theimplementation agency and Project Implementation Unit (PIU) is Shanghai Municipal EngineeringConstruction Company (SMECC).

Based on a series of preparation, the first stage of IRR Puxi section under SMTP started in October 1991and completed in December 1993. Stage 1, including 5.5 km long elevated road and ground road, openedto the traffic after 26 months construction and made the social efficiency yield well in time. Stage 2,covering 23.7 km elevated and ground road, started in February 1993 and finished at the beginning ofDecember 1994, which went through 22 months construction and was put into operation on December 7,1994. The total construction duration of IRR is 38 months, with the good quality rate of 100% for Stage 1and 93.3% for Stage 2 respectively, which expressed the organization capability and working efficiency inlarge scale engineering construction in Shanghai..

The implementation of [RR has the following features:

a. Construction managementTwo-level management was adopted. IRR was listed as No. I Project by the governrment at thattime and the municipal engineering headquarter and 8 district sub-headquarters were set up. Underthe leadership of municipal engineering headquarter, district sub-headquarters were responsible forland acquisition, demolition, resettlement, traffic organization during construction and coordinationof affected residents in various districts along the route of IRR. Such a measure of joint effortswith individual responsibility was of great importance to speeding up the progress of construction,creating good environment of construction, promoting the district development and strengtheningthe idea of district's involvement in the project.

bc. ProcurementThe implementation of works and procurement of main goods including bitumen, steel andequipment was executed via Intemational Competition Bidding (ICB) procedure and NationalCompetition Bidding (NCB) procedure in accordance with the Guide of Procurement specified bythe World Bank with the principle of open, fair and just. There are 65 contracts in total underStage I and 2, of which 23 are ICB including 14 civil works and 9 goods contracts, and 42 areNCB covering 41 civil works and I goods contracts.

7 construction enterprises or joint venture between home and abroad with national first levelcertificate implemented the construction of viaduct and ground road under IRR through ICBbidding procedure. And 28 excellent medium-scale construction enterprises executed minor worksvia NCB bidding. The involvement of excellent enterprises ensured the contracts to meet therequirement of investment control, construction progress and quality specified in contracts.

- 22 -

c. Construction supervisionIn accordance with the international custom, SMECC appointed Engineer to the construction site,which formed three-level site management of Employer (SMECC) -- Engineer -- Contractor. Thecomprehensive and whole process management of the project was executed by means of progress,quality and investment control and organization coordination.

d. Quality controlUnder the unified control of Engineer authorized by SMECC, a three-level management networkcomprising contractor's self-control system, 10 public supervision companies selected throughbidding and municipal quality supervision station (Shanghai Municipal Engineering QualitySupervision Station) carried out engineering quality supervision and evaluation. This networkcould control the quality and ensure the project implemented well.

IRR has been operated for 6 years since the completion at the end of 1994, the social and economic effectscould be summarized as follows:

a. The construction of IRR introduced an urban expressway model, which fits the transportation indowntown area of Shanghai with high population density, tangled traffic and limited land for road.And it plays a lead role in the future road construction of "$` printing type like (a Chinesecharacter used to describe the road net looking like a ring combined with a cross inside) elevatedexpressway system in downtown area.

b. Enhanced the traffic capacity. The traffic capacity of IRR after operation is 9,400 pcu/h(two-way) of which elevated road is 6,100 pcu/h and ground road, 3,300 pcu/h respectively. Whilethe traffic capacity of original 4-lane inner ring road was only 2,280 pcu/h. That means the trafficcapacity increased by 3.12 times, or in the other word, the capacity of the current inner ring roadequals 4 originals approximately.

c. The operation of IRR remitted transportation inside and outside the IRR, especially the centralarea. SCCTPI sirnulated the traffic in 1995 and the result showed that the traffic on IRR elevatedroad and South-North Viaduct was 1,254,000 vehicle-km and 294,000 vehicle-km respectively.The traffic distribution is shown as follows.

Area Traffic (1000 vehicle km) Proportion (%/o)Downtown area 848.7 54.8Area outside the city center 203.8 13.2Pudong 8.1 0.5Zhongshan road at ground 368.7 23.8Other 118.7 7.7Total 1,548.0 100

As shown in the above table, the construction of elevated road enabled reducing the traffic on mostroads within IRR and part roads outside IRR. Traffic on the roads further away from viadluctscould be indirectly reduced because IRR would attract the traffic on adjacent roads, and theadjacent road would attract the traffic on the roads adjacent to them. One by one, traffic of mostground road could be diverted.

d. The operation of IRR expedited the land exploitation along and in the vicinity of IRR. Somne488,000 m2 of buildings was demolished as 6,985 affected households and 841 units removed

- 23 -

during the construction of IRR. Replaced are modem architectures. The adjustment of ShanghaiIndustry structure, the removal of lots factories causing serious pollution and the improvement ofold residential area concentrated with poor and dangerous houses in the vicinity of IRR providedopportunities for land displacement and attracted real estate development. The fair trade street atNorth Zhongshan Road of Putuo District, the outstanding Zhujiawan, Panjiawan and Tanziwantinpot residential areas, New South Bund of Nanshi District, Shanghai Stadium center of XuhuiDistrict are all the typical cases. The former old, shady and tattered face on both sides of IRR isnow replaced by new picture of modem commercial skyscrapers, office buildings, and high gradeapartment buildings.

e. The investment of the construction of IRR and the use of loan is under good control, which couldbe presented from the following data:

the final cost of IRR is about 7.8% more than the estimate, within the nornal limnit;the rations between allocated and real used amount of loan is 97.7%.

The cost of IRR makes up 88.95% of the total cost of SMTP and the loan used for IRR accountsfor 85.87% of that for SMTP, which means that good use of funds and loan for IRR could makethe whole SMTP good status.

f. The economic benefit of Puxi section of IRR is good. According to the special analysis threeeconomic indexes are as follows:

* EIRR over 27%, 18% and 20% more than that in SAR of SMTP I and II;NPV more than 0;B/C more than 1.92 under various discount rate (DR).

g. Environmental impact of IRRIn accordance with the requirements specified in Technical Assistance (TA)-D5 the environmentalaction plan under SMTP II, comparison of vehicle emission exhaust, air quality, noise andvibration before and after construction of IRR was carried out through monitoring. The resultshowed that the traffic environment worsened because the traffic volume increased by 4.8 to 8timnes. However vehicle emission exhaust didn't increased in an arithmetic progression due to theincrease of speed and the change of vehicle type. The density of N02 and TSP increased but nottoo high for CO. Noise level of 20 - 50% monitoring points in the daytime exceeded the standardand the highest noise level was 4 - lOdB(A) over the standard requirement. 80 - 90% monitoringpoints at night exceeded the standard and highest noise level was 17 - 23dB(A) over the standard.Vibration monitored at most points didn't exceed the standard requirement. Totally 14,654 m longnoise barrier was installed at the places where the residents are concentrated along IRR route,which reduced the noise interference with the residents living in 5th and 6th story even though it isnot so ideal.

Shanghai Government has made decision to take the environment treatment as the important policyand measure for construction during the further development of Shanghai so as to contribute to theimprovement of transport environment.

-24 -

2.2 Traffic Management and Safety

Under this component 8 sub-projects were arranged. Shanghai Municipal Engineering AdministrationDepartment (SMEAD) and Shanghai Traffic/Patrol Police General Brigade (T/P PGB) (the formerShanghai Public Security Bureau, SPSB) are the main executive agents.

The contents of this component include

a. Construction of Non-Motor Vehicle (NMV) road and bridges in down town covering CentralBusiness District (CBD) area inside IRR in Puxi so as to reduce congestion on some roads causedby conflicts between MV and NMV and increase the capacity of the transport network;

b. Strengthening and improving traffic management by means of such measures as signal control,channelization, signs and marking and establishment of 1.1 km two-way exclusive bus way alongthe Waitan;

c. Provision of 6 region traffic control centers and I road safety center.

The scope of this component covers a very large area. In addition, during 1990s Shanghai was in the peakperiod of city improvement. The central area of the city was just like a big construction site. Affected byland sale and lease, demolition of old buildings and construction of new buildings due to land replacement,complicated ground and underground utilities renovation along urban road network, it was very difficu'lt toexecute this component. The implementation period had to last for about 10 years from 1991 to 2000.With the effort of the executive agents, the following works were completed.

a. 30.1 km long NMV road and 4 NMV bridges (Xinzha Rd Bridge will be completed in 2001), I1km NMV road beneath the Project of Light Railway. The total length of newly established NMVlane is now 41.1 km, of which 25.7 kIn is parallel to IRR, 6.9 km parallel to Nanjing Road, 1.4 kmparallel to East Yanan Road, 2.1 km parallel to South-North Viaduct and 2.7 km parallel toLujiabang Road. The NMV route improved MV/NMV mixed traffic situation, increased thecapacity of road network and accumulated experience for further NMV road construction.According to the plan of Shanghai Municipal Engineering Administration Bureau, additional 25km NMV road will be built by year 2005.

b. Complete expansion of urban road traffic management facilities. At present, signal was providedat 2000 junctions mainly in the center area of Shanghai, 3.2 time as much as 626 in 1991; 71,000pieces of traffic signs, 3 times as that in 1991; 7300 km of markings, 4.3 times as in 1991 ancd255,000 m2 of pedestrian crossing line, 1.8 times as in 1991. There are now 52 MV exclusiveroute, 518 MV single route, 2 public transport exclusive route and 48 NMV route in central areaof Shanghai. The above mentioned traffic facilities and the construction of road during 90simpelled the death and injury rate to be reduced by 60% and 43% (in person/10,000 vehicles),which presents that the traffic management of Shanghai has stepped up to a new stage.

c. 6 new district traffic control centers were set up under this component. With the original 2 centers,now there are 8 control centers in total, which could control road traffic within IRR and providedgood bases for overall implementation of road traffic information management in Shanghai.Recently a batch of electronic police is used for traffic management, which represents that theurban transport management has gone into a modem process.

- 25 -

d. One of the sub-project under this component, 1.1 -km two-way exclusive busway along the Waitancould not be implemented because a l