Completion Report

Project Number: 33175

Loan Number: 1748
September 2007

People’s Republic of China: Hefei-Xi’an Railway

Project
 CURRENCY EQUIVALENTS

Currency Unit – yuan (CNY)

At Appraisal At Project Completion

21 June 2000 31 October 2005
CNY1.00 = $0.1215 $0.1236
$1.00 = CNY8.2272 CNY8.0885

ABBREVIATIONS

ADB – Asian Development Bank

CDB – China Development Bank
DMIS – dispatch management information system
EA – executing agency
EIA – environmental impact assessment
EIRR – economic internal rate of return
FIRR – financial internal rate of return
HXR – Hefei-Xi’an Railway
HXRCH – Hefei-Xi’an Railway Construction Headquarters
ICB – international competitive bidding
LAR – land acquisition and resettlement
LCB – local competitive bidding
M&E – monitoring and evaluation
MOR – Ministry of Railways
PCR – project completion report
PPTA – project preparatory technical assistance
PRC – People’s Republic of China
RP – resettlement plan
RRP – report and recommendation of the President
RCMC – Railway Construction Management Center
RCSO – Railway Construction Support Office
SEIA – summary environmental impact assessment
SEPA – State Environmental Protection Administration
TA – technical assistance
WACC – weighted average cost of capital

WEIGHTS AND MEASURES

km – kilometer
m – meter
mu – traditional land area measure
t – ton

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 December.
(ii) In this report, "$" refers to US dollars.
Vice President C. Lawrence Greenwood, Jr., Operations Group 2
Director General H. S. Rao, East Asia Department (EARD)
Director N. C. Rayner, Transport Division, EARD

Team leader S. H. Yoon, Transport Economist, EARD

Team member T. S. Capati, Associate Project Analyst, EARD
 CONTENTS

Page

BASIC DATA ii
MAPS vi
I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 1
A. Relevance of Design and Formulation 1
B. Project Outputs 2
C. Project Costs 3
D. Disbursements 4
E. Project Schedule 4
F. Implementation Arrangements 5
G. Conditions and Covenants 6
H. Consultant Recruitment and Procurement 6
I. Performance of Consultants, Contractors, and Suppliers 7
J. Performance of the Borrower and the Executing Agency 7
K. Performance of the Asian Development Bank 7
III. EVALUATION OF PERFORMANCE 7
A. Relevance 7
B. Effectiveness in Achieving Outcome 8
C. Efficiency in Achieving Outcome and Outputs 9
D. Preliminary Assessment of Sustainability 9
E. Impact 10
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12
A. Overall Assessment 12
B. Lessons 12
C. Recommendations 13
APPENDIXES
1. Project Framework 14
2. Chronology of Major Events in the Project’s History 17
3. Project Cost and Financing Source 20
4. Projected and Actual Disbursements 22
5. Planned and Actual Implementation Schedule 23
6. Organization Chart 24
7. Evaluation of Land Acquisition and Resettlement Activities 25
8. Environmental Impact Analysis 33
9. Compliance with Loan Covenants 36
10. Contract Packages Financed by the Asian Development Bank 42
11. Traffic Forecast 50
12. Financial Reevaluation 52
13. Economic Reevaluation 56
14. Social Impact and Poverty Reduction in the Project Area 59
 BASIC DATA

A. Loan Identification

1. Country People’s Republic of China

2. Loan Number 1748
3. Project Title Hefei-Xi’an Railway Project
4. Borrower People’s Republic of China
5. Executing Agency Ministry of Railways
6. Amount of Loan $300,000,000
7. Project Completion Report Number PCR: PRC 991

B. Loan Data
1. Appraisal
– Date Started 28 March 2000
– Date Completed 11 April 2000

2. Loan Negotiations
– Date Started 19 June 2000
– Date Completed 21 June 2000

3. Date of Board Approval 17 August 2000

4. Date of Loan Agreement 4 December 2000

5. Date of Loan Effectiveness

– In Loan Agreement 4 March 2001
– Actual 2 March 2001
– Number of Extensions none

6. Closing Date
– In Loan Agreement 30 December 2005
– Actual 28 June 2007
– Number of Extensions 2

7. Terms of Loan
– Interest Rate Pool-based variable lending rate system for
US dollar loans
– Maturity (number of years) 20
– Grace Period (number of years) 5

8. Terms of Relending Not Applicable

– Interest Rate
– Maturity (number of years)
– Grace Period (number of years)
– Second-Step Borrower
 iii

9. Disbursements
a. Dates
Initial Disbursement Final Disbursement Time Interval
2 March 2001 28 June 2007 76 months

Effective Date Original Closing Date Time Interval

2 March 2001 30 December 2005 58 months

b. Amount ($)
Category Last
or Original Revised Amount Net Amount Amount Undisbursed
Subloan Allocation Allocation Canceled Available Disbursed Balance a
1 Civil Works 76,700,000 72,000,000 0 72,000,000 71,813,390 186,610
2 Equipment
and Materials 200,620,000 224,800,000 0 224,800,000 215,124,957 9,675,043
3 Consulting
Services 200,000 200,000 0 200,000 171,860 28,140
4 Front-End Fee 3,000,000 3,000,000 0 3,000,000 3,000,000 0
5 Unallocated 19,480,000 0 0 0 0 0
Total 300,000,000 300,000,000 0 300,000,000 290,110,207 9,889,793
IDC = interest during construction.
a
It was cancelled at loan closing on 28 June 2007.

10. Local Costs (ADB-Financed): None

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 913.0 844.9

Local Currency Cost 1,922.0 1,771.8
Total 2,835.0 2,616.7

2. Financing Source ($ million)

Cost Appraisal Estimate Actual
A. Implementation Costs
Borrower Financed 2,354.9 2,061.8
ADB Financed 297.0 287.1
Other External Financing 0.0 0.0
Subtotal (A) 2,651.9 2,348.9
B. IDC Costs and Front-End Fee
Borrower Financed 180.1 264.8
ADB Financed (Front-End Fee only) 3.0 3.0
Other External Financing 0.0 0.0
Subtotal (B) 183.1 267.8
Total 2,835.0 2,616.7
ADB = Asian Development Bank, IDC = interest during construction.
iv

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual
Civil Works 1,375.2 1,386.1
Equipment and Materials 611.8 613.9
Environmental Protection, Mitigation, and Monitoring 38.5 55.5
Land Acquisition, Compensation, and Resettlement 211.2 146.7
Administration, Consulting Services,
and Miscellaneous Costs 122.1 146.7
Contingencies 293.1 0.0
Interest and Other Charges During 183.1 267.8
Construction and Front-End Fee
Total 2,835.0 2,616.7

4. Project Schedule
Item Appraisal Actual
Estimate
Date of Contract with Consultants:
International (marketing and project management) November 2004
Domestic (construction supervision) October 2000 December 1999
Completion of Engineering Designs June 2001 September 2001
Civil Works Contract:
Date of Award October 2000 April 2001
Completion of Work June 2005 December 2004
Equipment and Supplies:
First Procurement November 2000 May 2001
Last Procurement June 2004 November 2006
Completion of Equipment Installation June 2004 March 2007
Start of Operations:
Completion of Tests and Commissioning June 2005 January 2004
Beginning of Start-Up (Trial Operation) June 2005 January 2004

5. Project Performance Report Ratings

Development
Implementation Period
From August to December 2000
From January to December 2001
From January to December 2002
From January to December 2003
From January to August 2004
From September to December 2004
From January to December 2005
From January to August 2006
From September to December 2006
From January to March 2007
HS = highly satisfactory, S = satisfactory.
Ratings
Implementation Progress
Objectives
S S
S S
S S
S S
S S
S HS
S HS
S HS
S S
S S
 v

D. Data on Asian Development Bank Missions

No. of No. of Specialization of
Name of Mission Date Persons Person- Members a
Days
Fact-Finding 1–18 December 1999 6 90 a, b, d, f, g, h
Appraisal 28 March–11 April 2000 5 48 a, b, c, d, f
Inception 7–16 December 2000 3 30 a, b, j
Review 1 19–24 November 2002 3 18 a, e, j
Review 2 21–27 November 2003 2 14 e, j
Review 3 7–13 December 2004 2 7 e, j
(concurrently with Loan 1850-PRC:
Ganzhou-Longyan Railway)
Review 4 8–12 December 2005 2 10 e, j
Review 5 12–15 December 2006 2 8 d, j
Project Completion Review 21–30 May 2007 4 40 a, d, i, j
a
a - engineer, b - financial specialist, c - counsel, d - economist, e - transport specialist, f - programs officer,
g - environmental specialist, h - social development specialist, i - resettlement specialist, j - project analyst.
b
The project completion report was prepared by Seok-Hyun Yoon, Transport Economist/Mission Leader; and
Teresita S. Capati, Associate Project Analyst, assisted by an international consultant (civil engineer) and a
domestic consultant (resettlement specialist).
Map 1
 I. PROJECT DESCRIPTION

1. The national economy of the People’s Republic of China (PRC) has been expanding
rapidly since the adoption of economic reform measures in 1978. However, the lack of cost-
effective transportation in the western and central provinces of the PRC has impeded economic
development and the people are poor. The Government’s ambitious Railway Development Plan
for 1998–2004 gave priority to unserved areas, particularly railway lines that would improve links
between the poor inland provinces in the western and central PRC and the more prosperous
coastal areas. This plan was focused on (i) expanding the rail network and removing constraints;
(ii) encouraging construction of joint venture railways to develop local economies; (iii) improving
the efficiency of the existing system by using new technology and modern management tools;
(iv) reducing subsidies for infrastructure through appropriate pricing and commercialization of
services; (v) implementing institutional and structural reforms to provide autonomy to railway
entities by linking responsibility and accountability; and (vi) encouraging nongovernment
investment in infrastructure and related services. 1 The Hefei-Xi’an Railway Project (the Project)
is a direct outgrowth of these initiatives in an effort to promote economic growth and reduce
poverty in the four inland provinces traversed by the Project.

2. The $2.8 billion railway Project links with four north-south railways and traverses 27
counties in four poor interior provinces (Anhui, Henan, Hubei and Shaanxi), including 15 poverty
counties (Map 2, page vii). It provides the critical east-west transport corridor linking the central
and western areas with the more developed eastern regions. The 27 counties had a population
of 22.4 million in 2000, of which 18.4 million (82%), were rural. Over 5.7 million people (31% of
the rural population) were living below the international poverty line, 2 a poverty incidence nearly
double the national average of 16.5% at the time of appraisal. The principal goal of the Project
was to promote economic growth in the poor interior provinces in order to raise living standards
and reduce poverty. The Project was classified as an economic growth project. The Project
Framework 3 is presented in Appendix 1 and the chronology of major events is in Appendix 2.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

3. At the time of appraisal the Asian Development Bank (ADB) recognized the continuing
importance of railways in providing cost-effective transportation of large volumes of goods and
people over long distances. ADB’s railway sector strategy was focused on (i) expanding the
railway system by constructing new lines, particularly in the poorer areas of inland provinces; (ii)
modernizing and increasing capacity on key routes of the national railway system; and (iii)
commercializing railway operation. With poverty reduction as ADB's overarching goal,
preference was given to projects located in poorer parts of the country and those that connect
poor isolated areas to areas in the economic mainstream. The goal is to reduce the costs of
transport to and from rural areas and between growth centers, and increase access of the poor

1
ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the
People’s Republic of China for the Hefei-Xi’an Railway Project. Manila (para. 15, page 6).
2
The commonly used standard for the international poverty line is $1 per capita per day, measured in 1985
international prices and adjusted to local currency using purchasing power parities (PPP).
3
The Project Framework was formulated by the project completion review mission.
2

to employment, markets, education, and health care. The Project was and is fully consistent
with that strategy. 4

4. The Project was formulated under a project preparatory technical assistance (PPTA) 5
project that reviewed the Government’s feasibility study, environmental impact assessment and
proposed resettlement plan, thereby strengthening the project preparatory work.

B. Project Outputs

1. Construction of the Hefei to Xi’an Railway

5. The project railway has been effectively integrated into the existing network. In addition
to increasing transport capacity in the east-west corridor, the connections between the project
railway (Hefei-Xi’an Railway, or HXR) and four major north-south railway lines 6 are helping to
improve overall rail efficiency in the central PRC, and are having a significant impact on the poor
areas west of Xi'an, particularly in Gansu and Qinghai provinces, and the autonomous regions
of Ningxia and Xinjiang. The Project thus supports the Government's strategic objective of
accelerating development of the central and western regions of the PRC by improving
transportation links to the coastal regions.

6. At appraisal the project scope comprised constructing a 954 kilometer (km) single-track,
standard-gauge railway between Hefei and Xi’an. 7 The Project includes 407 major bridges with
a total length of about 88 km; 4,732 minor bridges and culverts; and 83 tunnels with a total
length of about 81 km. The longest tunnel is 12.3 km through the Qinling Mountains in Shaanxi
Province and the longest bridge is the 2.76 km bridge over the Yellow River in Henan Province.
Forty-four civil works packages, 8 including earthworks, tunnels, bridges and culverts, were
completed by December 2004. Track laying, telecommunications, signaling and electrification
were completed by June 2003. Ninety-five stations have been provided along the main railway
line; 39 are passing stations only, 52 are passenger stations, and 4 are marshalling yards (24 of
the other stations also have freight handling facilities).

7. The technical standard for the project railway followed the Railway Line Design Protocol
for class 1 railway 9 of the Ministry of Railways (MOR), with a maximum gradient of 0.6% for
single locomotives and 1.3% in mountainous areas for double locomotives, with minimum curve
radius of 1,200 meters (m) for normal sections, 600 m for hard sections and 400 m for
connecting lines. For train control, a semiautomatic block relay signaling system with electric
interlocking and color light signals were used. Bridges and culverts were designed for 100-year

4
ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the
People’s Republic of China for the Hefei-Xi’an Railway Project. Manila (para. 29, page 9).
5
ADB. 1999. Technical Assistance to the People’s Republic of China for the Hefei-Xi’an railway Project. Manila (TA
3251-PRC, for $665,000, approved on 3 September). Transport and Economic Research Associates, Inc. (TERA),
USA in association with Fourth Survey and Design Institute, PRC.
6
The four major north-south railway lines are Taiyuan-Huaihai railway at Nanyang, Beijing-Guangzhou railway at
Xinyang, Jing-Jui Railway at Huangchuan, and Shanghai-Guangzhou Railway at Hefei (see Map 1, page vi).
7
The actual completed length was 1,030.2 km, which includes the 70.4 km Lishan-Xiaolin connecting section
exclusively financed by the MOR under loan covenants.
8
Eleven contract packages were tendered using international competitive bidding procedures in accordance with
ADB guidelines and funded from the loan; 33 packages were tendered under local competitive bidding procedures,
funded entirely by the Borrower.
9
Class 1 railways are defined as those that will haul 15 million tons per annum and have a maximum operating
speed of 120 km per hour.
 3

floods with 300-year floods used for large bridges, based on available data; tunnels were
constructed to the standard clearance for national railways. The 407 km Xi’an to Nanyang
section was electrified to ensure high operational efficiency given the expected traffic densities
and gradients. On this section, electric locomotives are used, while diesel locomotives will work
the remaining 547 km Nanyang-Hefei section.

8. The quality of the completed works is high and consistent with international standards.
Slopes have been adequately protected with a combination grass planting, retaining walls and
arch block slope protection. The spoil from tunnel excavation was used for constructing
embankments, leveling areas for relocated housing, flood control dikes and the like.

2. Service, Access, and Link Roads 10

9. During implementation of the Project about 1,500 km of temporary service roads were
constructed to facilitate the construction of the civil works, 298 km of which have been turned
over to local authorities to be used for access to the railroad and local villages. Access and link
roads were also constructed or upgraded under the Project by provincial authorities to provide
wider market access for people living in rural areas, township and village enterprises, and
mining activities. 11

3. Institutional Strengthening

10. Provision was included in the Loan for institutional strengthening in the form of improved
marketing and business development to attract industrial development. This initiative was
included in the Project because of the changing environment with regard to competition. In the
past PRC Railways operated from a virtual monopoly position, while today rail services are
provided in an increasingly competitive market. It therefore became necessary to collect
statistical data along the railway and provide training to key staff in modern marketing and
business development techniques. International consultants were engaged who collected
marketing information and other relevant information along the line. Training of key staff was
then undertaken, first overseas and finally in the PRC. Eight high-level MOR managers were
selected for overseas training in the United Kingdom. For the training in the PRC, 16 delegates
who were involved in marketing along the railway line attended a three-day program covering
marketing theory, strategy and application of marketing strategy to railway operations. The
efforts of the consultants were well received by MOR.

C. Project Costs

11. The actual final cost of the Project was $2,616.7 million, compared with $2,835.0 million
estimated at appraisal. Actual final cost comprised $870.6 million in foreign exchange costs
($913.0 million at appraisal) and $1,746.1 million equivalent in local currency cost ($1,922.0
million at appraisal). The actual civil works cost was $1,386.1 million versus $1,375.2 million
estimated at appraisal, a difference of less than 1%.

10
Access roads are generally short roads to provide access from villages and/or adjacent highways to the railway
stations. Link roads provide access to the railway from other, more distant, population and industrial centers.
11
At appraisal it was envisaged that 51 access roads (totalling 407 km) and 13 link roads (totalling 1,122 km) would
be built and/or upgraded to connect the railway with the hinterland. MOR was not directly responsible to ensure
that the planned roads were completed and could not provide verification that all the roads were completed as set
out at appraisal; however, quarterly progress reports submitted by MOR contained listings of the access and link
roads being constructed.
4

12. Actual equipment and materials costs were marginally (less than 1%) higher than
estimated ($613.9 million compared with $611.8 million estimated at appraisal). The cost of
environmental protection, mitigation and monitoring increased more significantly (from $38.5
million at appraisal to an actual cost of $55.5 million). The increase of about 44% was primarily
due to difficult tunnel and bridge construction in the Qinling Mountains in Shaanxi Province that
required additional environmental protection. Land acquisition and resettlement costs were
significantly less than estimated at appraisal ($211.2 million at appraisal compared to the cost of
$146.6 million). The actual costs of land acquisition and resettlement including $60.7 million
paid under civil works cost were $207.3 million, which was 5.9% less than estimated at
appraisal. Actual expenditures for administration, consulting services and miscellaneous costs
were $146.7 million, compared with the appraisal estimate of $122.1 million, an increase of
about 20%.

13. The financing plan prepared at appraisal called for ADB to finance 32.9% ($300 million)
of the estimated foreign exchange expenditures and 10.6% of the total project cost. The
remaining 67.1% of the estimated foreign exchange expenditures ($613 million) was to be
financed by MOR ($313 million) and a loan from the China Development Bank (CDB) for $300
million. Local currency expenditures were to be covered by MOR ($1,003 million) and the CDB
loan for $921.7 million. ADB actually financed 11.1% ($290.1 million) of the total cost (33.3% of
foreign exchange costs). The remaining foreign exchange expenditures ($580.5 million) and the
actual local currency expenditures ($1,746.1 million) were financed by MOR ($824.4 million)
and the loan from CDB ($921.7 million). Appendix 3 presents a detailed comparison of appraisal
estimates with actual costs and the appraisal and actual financing plans.

D. Disbursements

14. Disbursement was generally accomplished through reimbursement, commitment letter

and direct payment. An imprest account facility was also used to help reduce the cash flow
difficulties in financing project expenditures during implementation. 12 MOR had sufficient
accounting capabilities and established adequate internal control, accounting, and auditing
procedures to ensure the efficient use of the imprest fund. Disbursement began in March 2001
and was completed in June 2007. Of the $300 million of loan proceeds, $9,889,793 was not
utilized and cancelled at loan closing on 28 June 2007. Appendix 4 shows actual annual
disbursement during project implementation.

E. Project Schedule

15. The loan was approved on 17 August 2000, signed on 4 December 2000 and became
effective on 2 March 2001. Advance procurement action was approved by ADB for the
procurement of civil works. The advance action involved (i) issuing a general procurement
notice, (ii) prequalification of bidders, (iii) issuing invitations to bid, (iv) opening and evaluating
bids, and (v) completion of related activities up to the stage of contract award. Land acquisition
and resettlement activities began during the period from 2000 to 2001 and were completed in
August 2003, about 8 months later than envisaged at appraisal. This delay did not adversely
affect project construction.

16. Civil works and buildings were scheduled to start in November 2000, but actually started
early, in August 2000 and were completed in December 2004, one year earlier than envisaged

12
An initial advance of $3.0 million was deposited to the imprest account to pay suppliers and contractors for ADB’s
share of eligible project expenditures incurred in foreign currency.
 5

at commencement. Track laying, which was expected to start in August 2001, actually started
about one month late, but was completed on schedule in June 2003. Telecommunications,
signaling and electrification started 5 months late in January 2002, but were completed six
months early in December 2003. Procurement and installation of the dispatch management
information system (DMIS) and axle count systems were scheduled to start in January 2004 but
were delayed nearly one year, starting January 2005; they were completed on time in October
2005.

17. Trial operations (freight) were expected to commence in July 2004, but started 5 months
early in February 2004; the trials were completed 12 months late, in December 2006.
Passenger operation started in April 2006. The purchase of additional traffic safety equipment in
order to enhance project benefits was approved in January 2005, through utilization of loan
savings; this took place after award of all the material contracts, necessitating extension of the
loan closing date to allow for disbursements related to the safety equipment procurement. The
Project’s main components were completed well within the schedule prepared at the time of
appraisal. The final, full commercial license was granted on 18 May 2007. A graphical
comparison of appraisal and actual implementation schedules is presented in Appendix 5.

F. Implementation Arrangements

18. As envisaged and agreed at appraisal, MOR’s Railway Construction Management

Center (RCMC) had overall responsibility for Project implementation. To provide continuity, it
was agreed at appraisal that MOR would be the Executing Agency for the Project, because the
Project traversed four provinces and the operation of the completed railway would be the
responsibility of three separate Railway Administrations. 13 MOR, through the Foreign Capital
and Technical Import Center, was responsible for procurement and liaison with ADB. For on-site
project management, RCMC established the HXR Construction Headquarters in Xi’an in May
2000. The organizational charts for the Project are presented at Appendix 6.

19. Construction supervision and quality control supervision was provided by 17 domestic
consulting firms. Altogether, 30 supervision contracts were executed with 850 supervision
engineers engaged for the work. Land acquisition and resettlement monitoring was undertaken
by the Research Institute of Foreign Capital Utilization in Southwest Jiaotong University.

20. While MOR was responsible, through RCMC, for implementation of land acquisition and
resettlement in accordance with the agreed Resettlement Plan (RP), the institutional
responsibility actually rested with the provinces, prefectures and counties traversed by the
project railway, as is the case for all public sector development projects. Therefore, the detailed
land acquisition and resettlement planning and implementation were carried out in accordance
with local regulations and standards, which are generally consistent with the agreed RP under
the loan agreement. However, the RP did not clearly stipulate compensation rates that were to
be adopted, as these were left to each local administration. The resettlement cost included in
the RP was simply a feasibility level budget, with estimated unit costs that were much higher
than the prevailing compensation rates used by local governments.

21. The amount of land acquired permanently was less than the amount estimated in the RP
(59,062 mu 14 vs. 63,071 mu), while the amount of temporarily acquired land was exceeded that

13
The three railway administrations are based in: Zhengzhou, responsible for 700 km of the HXR route; Nanchang,
responsible for 100 km; and Shanghai, responsible for 154 km.
14
One mu is equivalent to 0.0667 hectare.
6

estimated in the RP (19,542 mu vs. 16,305 mu). The area of houses demolished (1,108,060 m2)
exceeded that set out in the RP (935,889 m2). The total cost of land acquisition and resettlement
was CNY 1,823 million, 5.5% lower than the estimated budget in the RP (see Table A7.3). The
total compensation actually paid to affected persons was 25.6% lower than budgeted in the RP
due to the overestimation of compensation standards in the RP. The number of persons
affected by house demolition, however, fell to 19,302 compared with the estimates of 48,720 at
appraisal due to estimation errors. 15 A detailed discussion of land acquisition and resettlement
activities is given in Appendix 7.

22. Environmental impact and mitigation measures were monitored by the Environment
Evaluation and Engineering Center of Scientific Institute of Railway. The project facilities were
accepted by the State Environmental Protection Administration (SEPA) in November 2005.
Details of environmental impact and mitigation measures are presented in Appendix 8. The
Project encountered no significant issues relating to indigenous peoples during implementation.
Only 0.68% of all affected people were ethnic minorities, mainly of Hui and Mongolian
nationality, who live in the same communities as people of Han ethnicity. Resettlement of ethnic
minorities was undertaken in the same way as that of the Han majority, and minorities
expressed satisfaction with their resettlement compensation.

G. Conditions and Covenants

23. The status of compliance with major covenants is presented in Appendix 9. Out of the
forty one covenants listed, forty that are due have been complied or are being complied with,
and one is not yet due. No covenants were modified, suspended or waived during
implementation.

H Consultant Recruitment and Procurement

24. The loan included provision for recruitment of international consultants in association
with domestic consultants for institutional strengthening to improve marketing and business
development so as to attract industrial development along the railway. The consultants were
engaged in accordance with ADB’s Guidelines on the Use of Consultants. The consultancy was
carried out satisfactorily, including overseas training for key high-level MOR managers and in-
country training of key MOR staff involved in business development and marketing along the
railway.

25. Domestic consultants were engaged, in accordance with procedures followed in the
PRC and acceptable to ADB, for (i) monitoring land acquisition and resettlement, (ii) monitoring
environmental and socioeconomic impacts, (iii) technical design, (iv) survey, (v) prequalification
of international competitive bidding (ICB) contractors, (vi) tendering, and (vii) construction
management and construction supervision. The domestic consultants performing those services
were experienced and performed satisfactorily, without any significant problems.

26. For the 11 contracts funded from loan funds, procurement was undertaken in
accordance with ADB’s Procurement Guidelines. For the 33 contracts funded form the
Borrower’s own resources, procurement was carried out in accordance with local competitive
biding (LCB) procedures acceptable to the ADB. As mentioned above, domestic organizations
were responsible for carrying out tendering on the Project. No significant problems were

15
The average demolition area per household was 223 m2 compared with estimates of 137 m2 per household in the
RP.
 7

encountered in the packaging of contracts, preparation of bidding documents or evaluation and

award of contracts. The details of contract packages are presented at Appendix 10.

I. Performance of Consultants, Contractors, and Suppliers

27. Civil works contractors performed satisfactorily with all works being completed well
before the schedule prepared at the time of appraisal. Also, track laying was completed quite
satisfactorily, and on time. Telecommunications, signaling and electrification were also
completed satisfactorily, about 6 months ahead of the original schedule. Suppliers of Portland
cement, steel, track and other materials presented no problems and such materials were
delivered on time.

J. Performance of the Borrower and the Executing Agency

28. MOR, through its RCMC, was designated as the Executing Agency for the Project. The
Borrower, represented by the Ministry of Finance (MOF) and MOR/RCMC, performed
satisfactorily. During implementation, both the Borrower and MOR/RCMC generally made timely
decisions and initiated appropriate actions. MOF also ensured that local counterpart funds were
made available on a timely basis. With respect to the physical implementation of the railway
facilities, RCMC staff members were well experienced in project implementation and railway
operations and management, and were considered reasonably diligent and dedicated to the
successful and timely completion of the Project. MOR/RCMC also rationalized the location of
stations to facilitate the increased traffic.

K. Performance of the Asian Development Bank

29. An inception mission was undertaken in December 2000 and five review missions were
fielded during implementation. The appraisal was well prepared, with traffic projections and the
economic assessment carefully prepared and more realistic than has been the case with
previous railway projects. All other processing activities were considered satisfactory. The
Project was completed on time with no delay in procurement or disbursements.

30. Review missions visited the resettlement sites and relocated housing, and met with
affected people to ensure satisfactory implementation, as per ADB’s Involuntary Resettlement
Policy. However, the fact that resettlement compensation was considerably less than set forth in
the RP was not discovered until late in the project implementation cycle and confirmed by the
project completion review mission (the Mission). ADB’s monitoring of resettlement activities
should have included a resettlement specialist on review missions. ADB review missions did
resolve many problems and difficulties that occurred during project implementation, and the
working spirit embodied by ADB’s officials was deeply respected by the executing agency (EA).
The ADB encouraged the EA and local governments to implement associated components of
the Project to maximize project benefits. Overall, ADB’s performance was considered
satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

31. The rationale for the Project is sound given the high priority accorded to development of
a more direct and efficient transportation corridor from the four poor interior provinces to the
coastal regions. In particular it serves as an efficient outlet for large quantities of high-grade,
8

low-sulfur coal from Shaanxi, helping to reduce environmental emissions from the use of high-
sulfur coal. The increased transport capacity will encourage development of other natural
resources and establishment of new industries, including agroprocessing, in the project-
influenced area.

32. Without the Project, roads and the overcrowded Xi’an-Lianyungang Railway would have
been the only alternative means of transport in the project area. Road upgrading to
accommodate the projected freight and passenger loads would have been a massive
undertaking. Economic development in the project area would have been much slower or even
stifled, and road accidents and deaths would have increased. The Project provides the national
railway network with travel time and distance savings by offering shorter travel distances for
east-west traffic as well as improved connections for existing north-south lines. Cost-effective
transport provided by the Project has induced new industrial and natural resources development
that will continue to generate significant economic development in the project area and reduce
poverty (para. 40).

33. The Project as formulated anticipated benefits from both freight operations
(predominantly coal) and passengers. Early operations show that the volume of freight and
passengers is considerably higher that estimated at the time of appraisal (para. 38). Actual
freight volumes for 2005 exceed the appraisal estimates by 9.7%. At present, these volumes
could be even higher, if not for a shortage of wagons. The daily freight traffic has reached the
capacity envisaged for the Project, and Xi’an Railway Administration Bureau is preparing an
upgrade plan to be funded from government’s own resources. The Project is rated “highly
relevant”.

B. Effectiveness in Achievement Outcome

34. The Project is considered “highly effective” because it (i) provides for added capacity of
cost-effective transport for both industrial outputs and people in the project area; (ii) enables the
economy to grow and endemic poverty to be reduced through increased employment and
higher income levels; (iii) provides for safer transportation of both freight and passengers,
particularly in winter; and (iv) facilitates the delivery of health, education, communication, and
other public services to the rural poor.

35. The traffic analysis for the project railway is presented in Appendix 11. The traffic growth
pattern from 2007 to 2024 is based on (i) actual traffic (2004–2006), (ii) actual and expected
industrial and population growth in the project area, (iii) network development, and (iv) expected
train scheduling and wagon allocation. The revised forecasts exceed the appraisal estimated for
both freight and passengers. Even though initial passenger operation was delayed by nearly
one year, the growth has been rapid and passenger volumes are projected to exceed appraisal
estimates in 2009. The rapid growth from 2004 for freight and from 2005 for passengers is
attributable to the accelerated industrial development in the project area and the increased need
for coal transport from the west. Industrial development along the railway includes, (i) iron
mining development in Zhashui County of Shaanxi province and Huoqui County of Anhui
province; (ii) high-quality coal mine development in Yishang County of Anhui province; (iii) alkali
mine development in Tongbai County of Nanyang; (iv) Wanxi power plant development; (v)
ethanol production in Nanyang; (vi) mutton and beef processing in Nanyang; and (vii) “industrial
town” development at Pingqiao and Minggang, to mention a few.

36. Industrial siding development has been promoted to improve transport efficiency by
linking the railway and the premises of larger volume rail customers. MOR has taken steps to
 9

encourage shippers to remove the need for additional handling and road transport for local
collection and delivery. As of May 2007, eight applications were being processed, including four
industrial sidings that were put into operation. Two applications are under consideration.

37. To increase operational efficiency and safety, a DMIS was introduced. DMIS enables
marshalling yards to be more efficiently operated, as this modern technology can accommodate
the rapid increase in traffic demand that is being experienced.

C. Efficiency in Achieving Outcome and Outputs

38. MOR and the Borrower implemented the Project efficiently and made the necessary
counterpart funds available on a timely basis. The planned outputs were completed ahead of
schedule or on-time (Appendix 6). The physical facilities were completed and in operation
before the original loan closing, although commercial operation was delayed due to prolonged
commissioning and trial operation to ensure safe operation. The traffic analysis presented in
Appendix 11 shows that freight traffic volumes have already exceeded appraisal estimates;
freight volumes reached 86% of capacity in 2006.

39. The financial internal rate of return (FIRR) was recalculated using the major assumptions
given in Appendix 12. The recalculated FIRR, in constant prices, is higher than at appraisal
(8.1% vs. 7.0%), due to higher tariff rates than anticipated and rapid growth in traffic. The
recalculated weighted average cost of capital (WACC), in constant prices, is 4.9%. Importantly,
taking into account the fact that traffic trends are improving and economic growth is very solid in
the affected region, the Project will undoubtedly facilitate the transport of an increased number
of passengers and freight. Against this backdrop, the operating capacity has been strengthened,
resulting in improved overall efficiencies. The Mission confirmed that MOR and the associated
railway administrations could provide adequate future rail maintenance services, rolling stock
and funds. The reevaluation shows that the Project is financially viable, which is confirmed by
progressively increasing operational revenues.

40. The economic revaluation contained in Appendix 13 uses the same “with-” and “without-
project” approach used at appraisal. The economic internal rate of return (EIRR) based on
current data is 19.6%, compared with 15.8% at appraisal, due primarily to higher traffic than
originally estimated. The economic reevaluation is considered conservative, because benefits
arising from project-related access and link roads and the cost savings due to accident
avoidance have not been included in the calculations. Time savings from the diversion of freight
traffic from other rail lines were not included in the analysis. Cost-effective railway transport has
benefited passengers and shippers, as well as producers and consumers of transported goods.
EIRR would increase significantly if these additional benefits were included as project-related
benefits. The rapid industrial development along the railway will increase the production of
minerals, coal, chemicals, iron and steel, and other industrial outputs. On the basis of these
analyses, the Project is rated “highly efficient”.

D. Preliminary Assessment of Sustainability

41. The Project is technically and financially sound. Production trends indicate that coal and
petroleum production increased significantly. The demand for coal and petroleum will continue,
and as the establishment of other industrial operations continues and expands, the demand for
rail services in the project area will continue to increase. The railway administrations responsible
for the operation of the railway have appropriate, well trained staff capable of efficient operation
and maintenance of the facilities. Modern management information systems are in use, up-to-
10

date financial accounting systems are in place, and staff members have been adequately
trained in their use. The project railway not only links east and west, but provides critical
network connections for north-south traffic, shortening the transport distance from the northwest
to central-south and eastern PRC, and from the southwest to the east.

42. Access and link roads constructed under the Project provide transport network continuity
in the project area. Of the 1,500 km of temporary service roads constructed to facilitate the
construction of the civil works, 298 km have been retained as permanent access roads. All
access and link roads have been turned over to provincial and other local authorities for
maintenance and public use (para. 9).

43. The financial reevaluation (Appendix 12) highlights the financial sustainability of the
Project, particularly with the establishment of freight and passenger tariffs that will allow full cost
recovery, and the projected high demand for freight and passenger transport facilities. The
projected financial statements (Appendix 12) indicate that tariff revenues will be sufficient to
cover operation and maintenance costs, income taxes and debt service to ADB, and to provide
a reasonable rate of return over the long term.

44. The demand for and production of coal in Shaanxi Province are expected to continue to
rise. Furthermore, the demand for rail services in the project area will continue to increase as
other industrial operations continue to expand. Taking into account the fact that the Project is
projected to continue to be highly profitable with sufficient volume of passengers and freight, the
sustainability of Project is rated “most likely”.

E. Impact

45. The goal of the Project was to promote economic growth in the four poor interior
provinces, in order to raise living standards and reduce poverty. During implementation of the
Project (2000–2006), per capita incomes in the project area increased by 41% to 78%; the
percentage of the rural population living below the poverty level was reduced significantly
between 1999 and 2006 (see Table 1, below). The Project has provided better access to: (i)
health care; (ii) larger markets; (iii) better employment opportunities; and (iv) safer, low-cost
transportation. Appendix 14 presents a detailed review of the social and poverty reduction
impact of the Project in the project area. For the main cities 16 along the railway, per capita gross
domestic product (GDP) increased an average of 18.2 % from 2004 to 2005, with the highest
increase in Hefei (40.9%).

Table 1: Percentage of People Below the Poverty Level

City 1999 2000 2001 2005 2006

Shangluo 38.17 22.46
Nanyang 10.73 7.10
Xinyang 11.19 9.06
Lui’an 12.15 8.71
Sources: Meetings/interviews with local governments during the project completion review
mission, Lui’an Statistical Yearbook 2006, and websites of local governments.

46. A total of 306,130 person-months of unskilled laborer services were used; 211,399
person-months were worked by local laborers, of which 151,136 person-months (71.5%)

16
Xi’an, Weinan, Shangluo, Nanyang, Xinyang, Lui’an, and Hefei.
 11

involved people living below the poverty line. The average annual net income for urban people
increased between from 56% to 81% from 1999 to 2005, and the annual net income for farmers
rose between 41% and 53% during the same period. (Appendix 14) Women supplied about
10% of the labor used during construction.

47. To ascertain the economic impact of the project on the affected area, the Mission visited
selected sections in the project area (Shangluo, Nanyang, Xinyang and Liu’an) and carried out
interviews with various affected people, including local residents and government officials. The
Mission noted that local people increased their income through the selling of construction
materials, opening restaurants and shops, and renting out spare houses to the contractors
(Appendix 14). The Project also caused very rapid growth of tertiary industries, which involve
commercial services that distribute goods to final consumers; this demonstrates that affected
people have benefited from the Project railway, which is the most important transportation
facility in most of the affected areas. The development of manufacturing industries is an
effective poverty reduction tool, as it increases the share of the tertiary sector in the whole
industry, being accompanied by industrial service sector development. This implies that the
railway project has been effective in reducing poverty in the project area.

48. Resettlement was generally implemented satisfactorily according to the local procedures
and compensation standards. However, the standards proposed in the RP were not adopted.
Instead, the compensation mechanism used by MOR gave comprehensive rates to the four
provincial local governments, with local governments determining the final compensation rates
in accordance with the related state laws and implementation regulations of the provincial and
municipal governments. Therefore, actual compensation rates were different from the planned
rates. While compensation was much lower than set out in the RP, there does not seem to be
widespread discontent among the affected persons. The actual rates were widely utilized at the
time, and were a significant improvement over the rates paid in previous years. For these
reasons, most of the affected persons were relatively satisfied. The decision by many local
communities to readjust farmland also helped to offset serious impacts on most villages and
households. When interviewed by the Mission, the affected people showed their satisfaction
with the compensation paid based on the prevailing market rates. In summary, the Mission
found that resettlement had been successfully carried out, in conformance with the RP.

49. In April 1999 the First Survey and Design Institute and the Fourth Survey and Design
Institute prepared two Environmental Impact Assessments (EIAs); one for the Xi’an to Nanyang
section of the railway and one for the Nanyang to Hefei section of the railway. The final
alignment of the railway was selected in part to avoid adverse environmental impacts. During
implementation the Environment Evaluation and Engineering Center of Scientific Institute of
Railway was engaged to carry out environmental sampling and analysis and regularly monitor
the mitigation of environmental impacts. Also, the Environmental Assessment and Engineering
Center of China Academy of Railway Science made quarterly visits to the Project to assess and
monitor the environmental elements of project implementation.

50. The main features of the environmental impact mitigation measures included: (i) use of
excavated materials for embankments and station formations; (ii) deposition of excess
excavated materials in nearby valleys, with retaining walls to prevent erosion; (iii) unstable
slopes were given proper and timely slope treatment to avert landslides and erosion; (iv)
construction of appropriately designed drainage ditches and drainage structures; (v) use of low-
noise and low-pollution equipment during construction; and (vi) installation of proper ventilation
equipment to prevent the buildup of harmful gas in tunnels and use of explosion-proof
12

equipment for tunnel excavation. All environmental mitigation measures were adequately
carried out.

51. Overall, the socioeconomic, environmental and other impacts as a result of the Project
are rated positively.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

52. The Project has been implemented as planned with no significant changes and on
schedule. The Project’s formulation and design were technically sound and highly relevant to
the achievement of its development goals at appraisal and at completion. The main outputs
have been implemented well and either ahead of schedule or on time. The goal of the Project as
stated in the RRP—to promote economic growth in the poor interior provinces, in order to raise
living standards and reduce poverty—have been achieved; the proportion of the rural population
living below the poverty level has been reduced from 38% before the Project to between 9%
and 22% in 2006 (Appendix 14). The project railway has acted as a primary catalyst for
improved economic growth in the project area. The Project achieved its main impacts:
increasing per capita incomes and reducing the proportion of the population in the project area
living below the poverty level. The stated outcome—to develop the rail transport corridor for
freight and passengers to help integrate the western and central provinces with the coastal
region—was attained.

53. The reevaluation by the Mission showed that the Project remains economically viable,
with an EIRR of 19.6%, and financially cost-effective, with an FIRR of 8.1%. Financial
sustainability is ensured by setting tariff levels designed to achieve full cost recovery over the
long term. The Mission confirmed that tariff revenues will be sufficient to cover operation and
maintenance costs, income taxes and debt service to ADB and commercial banks, and to
provide a reasonable rate of return over the long term. Although cash flow was vulnerable for
the first two years of operation, it is expected to stabilize reflecting the current traffic flows. It is
forecast that operating ratio will be 70%, and meet the covenant. MOR is meeting the covenant
for the debt service ratio. Overall, the Project was well implemented and is rated “highly
successful”.

B. Lessons

54. A general lesson from the Project is that the actual freight traffic in the initial years of
operation was much higher than the appraisal estimates, reflecting the strong economic
performance in the PRC in general and in the project area in particular. Projections of output
levels resulting from development activities that will be catalyzed by the transport investment
should be carefully estimated. Development of other transport modes in the project area needs
to be carefully reviewed and updated. Traffic forecasting for ADB ongoing projects is improving
and needs to be continually strengthened to ensure more realistic assessments.

55. In March 2006, the consultants providing industrial development and marketing
assistance pointed out that the railway was unable to meet demand, primarily due to a shortage
of wagons. This has been the case for some years, with an estimated shortage of 35%
nationwide.
 13

56. Though not funded under the Project, access and link roads are critically important to the
successful operation of the facility. While the proposed roads were reasonably well defined at
appraisal, the monitoring of their construction was not robust (para. 9). The construction and
finalization of all access and link roads should have been more closely monitored and evaluated
by the EA during implementation and at project completion to ensure better access.

C. Recommendations

1. General

57. Link and access roads are a critical element to the success of the railway project. It
would be useful for MOR to have an effective monitoring system to ensure their completion so
that the project benefits can flow as planned, and to closely coordinate with the local
governments for adequate funding and maintenance (para. 9).

58. Although the actual compensation rates paid to the affected people were higher than the
prevailing rates at that time, the compensation rate paid was lower than the estimated rate in
the RP. To avoid such situations, it is recommended that EA, the local government, and ADB
carefully assess and reach agreement on the compensation rates in the RP, and more closely
monitor the resettlement process to ensure compliance. To improve the implementation of land
acquisition and resettlement activities, it is recommended that (i) resettlement plans be updated
after the detailed measurement surveys, and (ii) ADB review missions for projects with
significant involuntary resettlement impacts monitor resettlement activities more closely to
ensure compliance.

2. Project Related

59. Although the solid economic growth experienced in the project area (due to accelerated
industrial development along the project railway) continues to expand the project railway freight
volume, the related freight and passenger demands cannot be met due to the shortage of
wagons. The MOR and responsible railway administrations should assess passenger demand
and increase the number of passenger trains as demand warrants. The MOR should prepare
the necessary investment plan and accelerate the manufacture and allocation of wagons and
passenger cars to cope with the expected demand, based on relevant demand for wagons.

60. There is strong justification to upgrade the railway from single-track to double-track,
because the project railway has already reached 86% capacity, and freight traffic continues to
increase, thanks to strong economic growth in the affected region. Double-tracking upgrade
plans have been submitted to the MOR. A delay in investing in double-tracking could serve as a
hurdle to the region’s sustainable economic growth, and MOR should consider these
applications on an urgent and positive basis. 17

61. The railway will have been fully operational for three years by the end of 2009, at which
time the project performance evaluation could be undertaken.

17
A recent ADB Operations Evaluation Department study carried out in April 2007 (2007. Sector Assistance Program
Evaluation of Asian Development Bank Assistance for Roads and Railways in the People’s Republic of China.
Manila) found utilization and productivity of existing railway assets in the PRC to already be among the highest in
the world. To mitigate the gap between supply and demand, continuous investment in new infrastructure and
equipment was recommended. This includes replication of existing assets, replacement of existing assets with
improved technologies and expansion of the existing asset base by adding new assets incorporating new
technologies.
 14 Appendix 1

PROJECT FRAMEWORK

Performance Indicators/Targets Monitoring

Design Summary Assumptions / Risks
Appraisal Actual Mechanisms
Goal
Promote economic • Increase per • Percentage of • Provincial • Planned development
growth in poor interior capita income rural poor in the statistics of new coal mines in
provinces to raise • Reduce the project has been • National central Shaanxi will
living standards and proportion of the reduced from statistics eventuate
reduce poverty. population living 38% in 1999 to • Industrial development
in poverty. 9–22% in 2006. along the HXR route will
occur
• Infrastructure will be
completed on time and
within budget
• Supportive social
programs are in place
Purpose
1. Develop the rail • Achieve forecast • Actual volumes
transport corridor for freight and have exceeded
freight and passenger forecasts in first
passengers to help volumes years of
integrate the western operation
and central provinces
with the coastal
region

2. Reduce • Truck freight • Train freight tariff

transportation costs transportation CNY 0.11 per
cost CNY 0.18 ton-km in 2007
per ton-km in
2000
Outputs
1. Land acquisition • Land acquisition • Carried out and • Progress • Strong implementation
and resettlement and resettlement completed by reports and capacity of local
to be completed August 2003. monitoring by governments
as per agreed • Impacts are domestic • Adequate
resettlement plan within RP consultants compensation as per
estimates. agreed resettlement
• Compensation plan
rates paid on the • Adequate funds for
basis of resettlement
prevailing market
rates

2. Construction of the • Start construction • Construction • Progress • Advance action for

954 km HXR rail line mid-2000; commenced reports procurement
construction August 2000 and • Strong implementation
complete by June completed by capacity of the Railway
2005 December 2004 Construction
with 954 km of Management Center
railway • Adequate counterpart
completed. funds
 Appendix 1 15

Performance Indicators/Targets Monitoring

Design Summary Assumptions / Risks
Appraisal Actual Mechanisms
3. Construction of • To be completed • 298 km of • Progress • Commitment of local
access roads by June 2005 service roads, reports governments
between HXR stations 407 km of access • Availability of local
and townships, link roads and 1,122 funds
roads and industrial km of link roads
sidings turned over to
local authorities
for operation and
maintenance

4. Procurement of • Equipment to be • Procurement • Progress • Strong implementation

equipment for procured by completed in reports capacity of the Railway
operation and December 2006 March 2007 and Construction
maintenance included Management Center
communications, • Adequate counterpart
signalling, funds
operation and
maintenance
equipment.

5. Minimization of • Compliance with • Mitigation • Progress • Technical capability of

adverse EIA and SEIA measures reports EAC-CARS
environmental • Completion adequately • Annual • Supervision capability
impacts concurrent with carried out and monitoring of local environmental
project works, in monitored by reports during project bureaus
June 2005 domestic implementation
consultants

6. Institutional • Development of • Training provided • Consultants • Suitable consultant

strengthening an effective by international reports, surveys input.
marketing consultants, with along the
program to attract 16 delegates railway and
new industry attending a 3-day progress
along the HXR program reports.

7. Additional • Creation of • 306,130 person- • Socioeconomic • Implementation as per

employment 350,000 person- months of surveys schedule and
months of construction- commitment of local
construction- related governments.
related employment, with
employment 211,399 person-
months of local
employment, and
151,136 person-
months provided
by poor families
 16 Appendix 1

Activities – Milestones Inputs

1.0 Preparatory Activities, 1998–2000 • Approval of project proposal
• Arrangement of counterpart funds
• Environmental impact assessment
report
• Approval of feasibility study
• Survey and design
• Advance action for procurement

2.0 Land acquisition and resettlement, October 2000–December 2002 • Preliminary survey and design
• Detailed acquisition plan
• Acquisition of land and resettlement
of affected persons
• Monitoring by FCUO-SJU

3.0 Civil works construction and equipment procurement • Engagement of domestic consultants
• Prequalification of bidders
3.1 Procurement of civil works by June 2003 • Invitation to bid
• Evaluation of bids
• Award of contracts
3.2 Construction of civil works • Implementation according to contract
schedules
3.3 Environmental protection and mitigation measures • Implementation of mitigation
measures recommended by EIA and
SEIA
• Monitoring by EEECSIR
3.4 Procurement of equipment • ADB approval of bidding documents
• Bidding and evaluation of bids
• Award of contracts and approval by
ADB

4.0 Construction of service, access and link roads • Service road construction by
contractors; transfer to local
governments
• Commitment of local governments
• Design and construction of access
and link roads by local governments
• Operation and maintenance by local
governments

5.0 Institutional Strengthening • Engagement of international

consultants by February 2005
• Staff training
• Implementation of strategic plan
ADB = Asian Development Bank, EIA = environmental impact assessment, EAC-CARS = Environmental Assessment and
Engineering Center of China Academy of Railway Sciences, EEECSIR = Environment Evaluation and Engineering Center of
Scientific Institute of Railway, FCUO-SJU = Research Institute of Foreign Capital Utilization in Southwest Jiaotong University,
HXR = Hefei–Xi’an Railway, km = kilometer, RP = resettlement plan, SEIA = summary environmental impact assessment.
 Appendix 2 17

CHRONOLOGY OF MAJOR EVENTS IN THE PROJECT’S HISTORY

Date Project Events

3 September 1999 - TA 3251-PRC: Hefei-Xi’an Railway Project approved by ADB for
$665,000
1–18 December 1999 - Fact-finding Mission.
11 March 2000 - Feasibility study for the Project approved by PRC’s State Council.
28 March to 11 April 2000 - Appraisal Mission.
May 2000 - Contract signing of 33 LCB civil works contracts financed by the
Borrower.
29 May 2000 - Contract signing of domestic consultants for construction supervision of
the 33 LCB civil works contracts financed by the Borrower.
19–21 June 2000 - Loan negotiations
17 August 2000 - Loan approval.
4 December 2000 - Loan Agreement signed.
7–16 December 2000 - Inception Mission.
2 March 2001 - Loan became effective. First disbursement of loan proceeds was made
for payment of the front-end fee.
9 March 2001 - ADB approved the award of 11 ICB civil works contracts.
6 April 2001 - Contract signing of 11 ICB civil works contracts.
11 April 2001 - ADB approved award of contracts for rail, turnouts, and scissors
crossings.
18 April 2001 - Contract signing of rail, turnouts, and scissors crossings.
26 April 2001 - Contract signing of domestic consultants for construction supervision of
the 11 ICB civil works and track laying and bridge erection works
contracts financed by the Borrower.
27 April 2001 - ADB approved the award of five ICB contracts for steel casting bearings,
and sleepers.
9 May 2001 - Contract signing of five ICB contracts for steel casting bearings, and
sleepers.
23 and 28 August 2001 - ADB approved the award of three contracts for operating security and
maintenance.
14 September 2001 - ADB approved the award of three more contracts for operating security
and maintenance.
18 September 2001 - ADB approved the award of six contracts for signaling equipment.
24 September 2001 - Contract signing of signaling equipment.
16 and 21 October 2001 - Signing of all contracts for operating security and maintenance.
8 November 2001 - ADB approved the award of seven contracts for communications
equipment.
13, 18, and 21 December - ADB approved the procurement of two batches of rail materials.
2001
14, 19, 21, and 26 - Contract signing of rail materials.
December 2001
May 2002 - Completion of delivery of rail, turnouts, and scissors crossings.
June 2002 - Signing of five LCB contracts for track laying and bridge erection works
financed by the Borrower.
18 Appendix 2

Date Project Events

20, 24 June, and 3 July - ADB approved the award of various contracts for electrification traction
2002 substation.
25 June 2002 - ADB approved the award of 11 contracts for power supply equipment.
5, 7 July 2002 - Contract signing of electrification traction substation.
7 July 2002 - Contract signing of power supply equipment.
11 September 2002 - ADB approved the award of five contracts for communications equipment.
November 2002 - Completion of delivery of second batch of rail materials.
15, 21 November 2002 - ADB approved the award of seven contracts for water treatment
equipment.
19–24 November 2002 - Review Mission 1.
16 December 2002 - Contract signing of water treatment equipment.
January 2003 - Completion of delivery of five ICB contracts for steel casting, bearings,
and sleepers.
26 February 2003 - ADB approved the contract award for hot wheel bearing detectors.
10 March 2003 - Contract signing of hot wheel bearing detectors.
May 2003 - Completion of the 52 new railway stations financed by the Borrower.
June 2003 - Completion of the five LCB contracts for track laying and bridge erection
works financed by the Borrower.
August 2003 - Completion of land acquisition and resettlement.
September 2003 - Completion of delivery of the first batch of rail materials.
21–27 November 2003 - Review Mission 2.
December 2003 - Completion of: (i) all equipment contracts for communications, signaling,
operating security and maintenance, electrification traction substation,
power supply, water treatment, and hot box detecting system financed by
ADB; and (ii) the electrification of the 407 km Xi’an-Nanyang section
financed by the Borrower.
6 January 2004 - Trial (freight) operation started.
March 2004 - Receipt of the completion report on resettlement.
18 August 2004 - ADB approved the contract award for DMIS equipment.
17 September 2004 - Contract signing of DMIS equipment.
27 October 2004 - ADB approved the recruitment of the international consultant for industrial
development and marketing and project management.
11 November 2004 - ADB approved the contract award for section axle-counting and
inspecting equipment.
December 2004 - Completion of all civil works contracts.
6 December 2004 - ADB approved the award of six contracts for large track maintenance
machinery.
7–13 December 2004 - Review Mission 3.
15–16 December 2004 - Contract signing of four (out of six) contracts for large track maintenance
machinery.
22 December 2004 - Contract signing for section axle-counting and inspecting equipment.
6 January 2005 - ADB approved the award of four more contracts for large track
maintenance machinery.
 Appendix 2 19

Date Project Events

7 January 2005 - Contract signing of the other six contracts for large track maintenance
machinery.
20 January 2005 - Contract signing for the international consultant for industrial development
and marketing and project management.
25 January 2005 - ADB approved the utilization and reallocation of surplus loan proceeds for
the procurement of safety transport equipment.
17 February 2005 - Commencement of services of the international consultant for industrial
development and marketing and project management.
May 2005 - Overseas training for MOR’s transport system was conducted by the
international consultant for industrial development and marketing and
project management.
8 June 2005 - Completion of services of the international consultant for industrial
development and marketing and project management.
October 2005 - Completion of DMIS and axle-counting and inspecting equipment.
8–12 December 2005 - Review Mission 4.
12 January 2006 - First extension of the loan closing date by 12 months, or up to 30
December 2006.
24 March 2006 - Receipt of Final Report and completion of services of the international
consultant for industrial development and marketing and project
management.
18 April 2006 - Passenger operation started.
June 2006 - Completion of the large track maintenance machinery.
5 October 2006 - ADB approved the contract award for the safety transport equipment.
24 October 2006 - Contract signing of the safety transport equipment.
6 December 2006 - Second extension of the loan closing date by three months, or up to 31
March 2007.
12–15 December 2006 - Review Mission 5.
28 March 2007 - Contract completion and final disbursement of loan proceeds for the
safety transport equipment.
31 March 2007 - Loan closing date.
18 May 2007 - Final acceptance of the project.
21–30 May 2007 - Project Completion Review Mission.
28 June 2007 - Effective date of loan closing.
ADB = Asian Development Bank, DMIS = dispatch management information system, EIA = environmental impact
assessment, ICB = international competitive bidding, km = kilometer, LCB = local competitive bidding, MOR =
Ministry of Railways, PRC = People’s Republic of China, TA = technical assistance
Source: Asian Development Bank
 20 Appendix 3
PROJECT COST AND FINANCING SOURCE

Table A3.1: Detailed Project Cost and Financing Source

($ million)

Appraisal Actual
Project Cost Financing Plan Project Cost Financing Plan
Component
ADB MOR / CDB ADB MOR / CDB
Foreign Local Total Total Foreign Local Total Total
Foreign Foreign Local Total Foreign Foreign Local Total
A B C = A+B A B C = A+B
A. Base Cost
1. Civil Works
a. MOR-financed 311.1 726.0 1,037.1 0.0 311.1 726.0 1,037.1 1,037.1 327.1 763.3 1,090.4 0.0 327.1 763.3 1,090.4 1,090.4
b. ADB-financed 76.7 179.0 255.7 76.7 0.0 179.0 179.0 255.7 71.8 167.2 239.0 71.8 0.0 167.2 167.2 239.0
2. Buildings and Facilities 17.3 65.1 82.4 0.0 17.3 65.1 82.4 82.4 11.9 44.9 56.8 0.0 11.9 44.9 56.8 56.8
3. Railway Trackwork (including 150.6 120.3 270.9 119.6 31.0 120.3 151.3 270.9 145.3 126.4 271.7 112.7 32.6 126.4 158.9 271.7
rails, sleepers, and ballast)
4. Signaling, Telecommunications 72.7 36.6 109.3 31.0 41.7 36.6 78.3 109.3 63.7 40.8 104.5 17.3 46.4 40.8 87.2 104.5
5. Electrification, Electric Power 85.3 45.9 131.2 25.3 60.0 45.9 105.9 131.2 76.5 45.2 121.7 17.4 59.1 45.2 104.2 121.7
6. Operational Equipment 70.2 30.2 100.4 21.3 48.9 30.2 79.1 100.4 89.6 18.8 108.4 59.1 30.5 18.8 49.3 108.4
7. Safety Transport Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.7 0.0 7.7 7.7 0.0 0.0 0.0 7.7
8. Environmental Protection, 6.5 32.0 38.5 3.4 3.1 32.0 35.1 38.5 5.7 49.8 55.5 0.8 4.8 49.8 54.7 55.5
Mitigation,and Monitoring
9. Land Acquisition, Compensation, 0.0 211.2 211.2 0.0 0.0 211.2 211.2 211.2 0.0 146.6 146.6 0.0 0.0 146.6 146.6 146.6
and Resettlement
10. Administration, Consulting 0.2 121.9 122.1 0.2 0.0 121.9 121.9 122.1 0.2 146.6 146.7 0.2 0.0 146.6 146.6 146.7
Services,and Miscellaneous
Subtotal A 790.6 1,568.2 2,358.8 277.5 513.1 1,568.2 2,081.3 2,358.8 799.4 1,549.4 2,348.9 287.1 512.3 1,549.4 2,061.8 2,348.9
B. Contingencies
1. Physical 45.5 101.5 147.0 11.2 34.3 101.5 135.8 147.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2. Price 45.0 101.1 146.1 8.3 36.7 101.1 137.8 146.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Subtotal B 90.5 202.6 293.1 19.5 71.0 202.6 273.6 293.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total - Implementation Cost 881.1 1,770.8 2,651.9 297.0 584.1 1,770.8 2,354.9 2,651.9 799.4 1,549.4 2,348.9 287.1 512.3 1,549.4 2,061.8 2,348.9
C. Interest and Other Charges During 31.9 151.2 183.1 3.0 28.9 151.2 180.1 183.1 71.1 196.7 267.8 3.0 68.1 196.7 264.8 267.8
Construction and Front-End Fee
Total - Project Cost 913.0 1,922.0 2,835.0 300.0 613.0 1,922.0 2,535.0 2,835.0 870.6 1,746.1 2,616.7 290.1 580.5 1,746.1 2,326.6 2,616.7
ADB = Asian Development Bank, MOR = Ministry of Railways, CDB = China Development Bank
Source: Asian Development Bank.
 Appendix 3 21

Table A3.2: Summary Financing Source

($ million)

Appraisal Actual
Foreign Local Total % Foreign Local Total %
MOR 313.0 1,000.3 1,313.3 46.3 280.5 824.4 1,104.9 42.2
CDB 300.0 921.7 1,221.7 43.1 300.0 921.7 1,221.7 46.7
ADB 300.0 0.0 300.0 10.6 290.1 0.0 290.1 11.1
Total 913.0 1,922.0 2,835.0 100.0 870.6 1,746.1 2,616.7 100.0
ADB = Asian Development Bank, MOR = Ministry of Railways, CDB = China Development Bank
Source: Asian Development Bank.
22 Appendix 4

PROJECTED AND ACTUAL DISBURSEMENTS

Table A4: Disbursement Schedule

($ million)
Cumulative
Year
Projected a Actual
2001 56.6 54.7
2002 174.7 159.0
2003 275.9 223.7
2004 300.0 245.8
2005 273.1
2006 283.3
2007 290.1
Total 300.0 290.1
a
Annual projected plus cumulative disbursements of previous year.
Source: Asian Development Bank.

Figure A4: Cumulative Disbursement

350

300

250
$ million

200

150

100

50

0
2001 2002 2003 2004 2005 2006 2007
Year
Projected Actual

Source: Asian Development Bank.

 Appendix 5 23
PLANNED AND ACTUAL IMPLEMENTATION SCHEDULE
2000 2001 2002 2003 2004 2005 2006 2007
Item
J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAM J
Detailed Planning,
Engineening, and Document
Preparation

Prequalification and Bidding

Land Acquisition and

Resettlement

Civil Works and Buildings

Rail Laying

Telecommunication,
Signaling, and Electrification

DMIS and Axle Counting and

Inspecting

TA: Industrial Development

and Marketing and Project
Management

Operation, Safety Inspection

and Maintenance Equipments

Trial Operation

State Acceptance

Planned Actual

DMIS = dispatch management information system, TA = technical assistance

Sources: Asian Development Bank and Ministry of Railways
24 Appendix 6

ORGARNIZATION CHART
(Hefei-Xi’an Railway Project)

Figure A6.1: Ministry of Railways

Hefei-Xi'an Railway Project Construction

Management Committee
Chair: Vice Minister of MOR

Hefei-Xi'an Railway Project Communication Office

Planning and Design Institute/ Railway Construction Financial Foreign Capital

Development Bureau Economy and Program Management Center of Bureau of Technical & Import
of MOR Institute of MOR MOR MOR Center

Railway Construction Support Office and

Railway Construction Support Office and Environmental
Environmental Protection Bureau of Henan
Protection Bureau of Shaanxi Province/Hubei Province and
Province/Anhui Province and Local
Local Government
Government

Land Acquisition and

Environmental Monitoring: Beijing
Hefei-Xi'an Railway Construction Resettlement Supervision:
OASIS Environmental Protection
Headquarter Southwest Communication
Technology Co. Ltd.
University

Construction Contractor

MOR = Ministry of Railways

Source: MOR.

Figure A6.2: Project Management Organization Chart

Railway Engineering Management

Center of MOR

Xi'an-Nanjing Railway Construction

Headquarters

Contract and Engineering Engineering Construction Material and

Office Financial Design Supervision Coordination Equipment
Department Department Department Department Department

MOR = Ministry of Railways

Source: MOR.
 Appendix 7 25

EVALUATION OF LAND ACQUISITION AND RESETTLEMENT ACTIVITIES

A. Background

1. In March 2000, a Resettlement Plan (RP) for the Project was prepared in accordance
with related Chinese laws and regulations and ADB’s Involuntary Resettlement Policy (1995).
The affected areas traversed by the 954 kilometer (km) railway (in which the 52 new railway
stations are located) include Xi’an City (Lintong District, Lantian County), Weinan City (Linwei
District, Hua County), and Shangluo City (Shangzhou District, Danfeng County, Shangnan
County) in Shaanxi Province; Nanyang City (Xixia County, Neixiang County, Zhenping County,
Wolong District, Wancheng District, Tanghe County, Tongbai County), and Xinyang City
(Pingqiao District, Shihe District, Luoshan District, Guangshan County, Xi County, Huangchuan
County, Shangcheng County, Gushi County) in Henan Province; and Liu’an City (Huoqiu
County, Yeji County, Jinzhai County, Yu’an District, Jin’an District), and Hefei City (Feixi County,
Feidong County) in Anhui Province. In total 7 prefectural-level cities, 27 counties/districts, 133
townships, and 409 villages are affected. This was the longest railway financed by ADB since
ADB’s Involuntary Resettlement Policy was approved in 1995, and the magnitude of
resettlement impacts was very large.

2. Between 23 and 25 May 2007, the project completion review mission (the Mission)
visited four villages affected by railway stations in Shaanxi, Henan and Anhui provinces, and
four village leaders and four farmers were interviewed. Although the Mission included a national
resettlement consultant, due to the length of the railway and the limited budget, this evaluation
had to rely heavily upon three external monitoring and evaluation (M&E) reports prepared by the
Research Institute of Foreign Capital Utilization of Southwest Jiaotang University, the external
monitor. Therefore, the Mission focused on verification of the external monitor’s findings and
conclusion rather than carrying out a detailed investigation.

B. Scope of Land Acquisition and Resettlement

3. At appraisal, it was estimated that about 63,071 mu 1 of land would be acquired for the
construction of the railway and 16,305 mu for temporary land occupation. By project completion,
59,062 mu of land was permanently acquired, a decrease of 6.3% due to alignment changes in
some railway sections. However, the amount of farmland affected increased by 6.7%. It is
unknown whether this was due to alignment changes or simply a revised classification of land
types; if the latter, it could mean that affected persons negotiated better compensation for their
lands. The area of houses demolished increased by 18.4% to 1,108,060 square meters (m2),
compared with 935,889 m2 of houses in RP. The main reason for the increase in the house area
demolished was the lack of accuracy of the RP, which was based on feasibility level estimates.
Also, during construction projects of this type it is common to relocate some houses that are
close to the alignment and would be affected by railway noise and/or vibrations. However, the
number of persons affected by house demolition fell to 19,302 compared with the estimates of
48,720 at appraisal. The reason is due to estimation errors (e.g., the average demolition area
per household was 223 m2 compared with estimates of 137 m2 per household in the RP). Such
variations in estimates of affected persons are common at the feasibility stage for linear
projects. 2 Table A7.1 compares the planned and actual resettlement activities.
1
One mu is equivalent to 0.0667 hectare.
2
The railway alignment causes a linear impact on land ranging from 5% to 30% loss of cultivated land at the village
level. The railway stations and marshalling yards cause more concentrated impacts ranging from 30% to 70% or
more loss of cultivated land. Of the 409 affected villages, 60% had less than 10% land loss, 20% had 10% to 30%
land loss, 10% had 10% to 30% land loss, 7% had 10% to 30% land loss, and 3% had 100% land loss.
26 Appendix 7

Table A7.1: Resettlement Plan and Implementation Compared

Difference
Impact of Resettlement RP (A) Actual (B) C / A (%)
(C = B–A)
1. Land acquisition (mu)
(i) Total permanent land acquisition 63,071 59,062 (4,009) (6.3)
- farmland 55,026 58,699 3,673 6.7
(ii) Temporary land use 16,305 19,542 3,237 19.9
2. House demolition (m2) 935,889 1,108,060 172,171 18.4
3. People affected 76,500 —
(i) By house demolition/relocation 48,720 19,302 (29,418) (60.4)
(ii) By permanent land acquisition a 53,278 45,746 (7,532) (14.1)
( ) = negative, — = not applicable.
a
This is a theoretical calculation based on 100% land loss; in reality, the average loss of loss is about 20%,
which means the number of partially affected persons is 5 times greater.
Sources: Resettlement Plan, Ministry of Railway’s Completion Report, 2003 and Post-evaluation of
Resettlement Report, Southwest Jiaotong University, 2006.

C. Applied Laws and Regulations

4. The Project’s land acquisition and resettlement (LAR) was implemented according to the
following laws and regulations, which were referenced in the RP.

(i) The Land Administration Law of the People’s Republic of China (revised by the
4th session of the 9th National Congress in August 1998, it came into effect from
1 January 1999).

(ii) Implementation Regulations for Land Administration Law of the Peoples Republic
of China (promulgated by Order No.256 of the State Council of the Peoples
Republic of China on 27 December 1998, and effective as of 1 January 1999).

5. In the RP, it was mentioned that resettlement should strictly follow the provincial-level
implementation regulations of the State Land Law. Since all of the above-mentioned provincial
regulations were issued in 1999, there were no differences between the regulations referenced
in the RP and those in effect during implementation in three of the affected provinces. However,
different compensation rates for land acquisition were found in the neighboring cities within
Henan Province. 3

D. Resettlement Organizations and Funding

6. Following the practice common in previous railway projects, the Ministry of Railways
(MOR) entrusted the four provincial governments with implementation of resettlement, and
signed contracts with each that specified (i) that each provincial government was responsible for
all LAR work for the Project under its jurisdiction, and (ii) the budgeted funding from MOR was
fixed, with any additional LAR costs to be borne by the local governments.

7. MOR signed the land acquisition and house relocation contracts with each province in
2000. According to the agreements, MOR paid compensation to the provinces for land
acquisition at a fixed rate of CNY 11,780 per mu in Henan and Anhui Provinces, and CNY

3
The Mission field visit found that in Henan Province compensation rates were not based on provincial regulations
but on the decisions of the county level governments. This has been observed in other ADB projects in Henan.
 Appendix 7 27

10,780 per mu in Shaanxi province (this compensation rate was lower because the affected
area is in the very remote and hilly Qinling mountains). The fixed rate for houses paid by MOR
to the provinces was CNY 250 per m2, except for Shaanxi Province, where it was CNY 230 per
m2. These comprehensive agreements represented MOR’s contribution to the LAR costs, with
the exception of infrastructure restoration costs which are included in the Project civil works.

8. As project owner, the Hefei-Xi’an Railway Construction Headquarters established a

coordination department to take charge of the resettlement work. The local resettlement leading
groups and offices were set up at four levels (provincial, prefectural, county and township levels).
The main responsibilities of city resettlement officers were coordination and administration of
LAR. The county (district) resettlement offices were to carry out the resettlement. Each county
(district) resettlement office administrated affected townships and each township administrated
villages. The government staff included: (i) 6 to 10 staff in each of the four leading groups, (ii) 5
to 8 staff in each of the eight prefecture level Railway Construction Support Offices (RCSOs), (iii)
5 to 10 staff in each of the 27 county RCSOs, and (iv) 2 to 5 staff in each of the 133 town level
RCSOs. Also, all the leaders in the affected villages and village groups participated in the
related resettlement activities.

E. Compensation Standards, Payments, and Resettlement Cost

9. The compensation rates in the RP (see Table A7.2) were based on a consultant’s
economic assessment of the average annual output value of various types of land use and were
also used as the basis for the resettlement cost estimate in the RP. However, these rates were
not consistent with local regulations, and were not endorsed by local governments. According to
the related provincial and local regulations, each county/district decided the compensation rates
for different types of land and different house structures in Shaanxi, Henan, and Hubei
Provinces. In Anhui Province, the compensation rates were decided at the provincial level.
Table A7.2 shows the estimated and actual compensation rates in the counties/districts visited
by the Mission; the actual compensation rates were significantly lower than those estimated for
the RP budget.

Table A7.2: Compensation Rates Comparison between RP and Actual

Actual Actual Actual Actual
RP Danfeng Xixia Pingqiao Yu’an
Item Unit
(average) County, County, District, District,
Shaanxi Henan Henan Anhui
Irrigated Land CNY/mu 15,000 7,700 10,000 8,000 6,800
Dry Land CNY/mu 9,000 5,800 8,000 4,000 6,800
Slope Land CNY/mu 5,000 4,500 — — 6,800
Brick-Concrete House CNY/m2 277 240 250 240 260
Brick-Timber House CNY/m2 250 160 200 190 180
Earth-Timber House CNY/m2 250 100 155 150 140
— = not available, RP = resettlement plan.
Note: The rates in the table exclude all the taxes and administrative fees. Actual costs are based on the M&E
reports.
Sources: RP and Post-evaluation of Resettlement Report, Southwest Jiaotong University, 2006.

10. The compensation and disbursement procedures were different from county/district to
village group (for land) and individual (for private assets). In some counties/districts
compensation was paid directly to the affected persons, while in others compensation was paid
via townships and administrative villages. In the latter case, some villages decided to reallocate
farmland among the affected village groups, whereby some compensation was retained for
28 Appendix 7

collective investments (e.g., land improvements and irrigation), with the remaining amount paid
to villagers equally. Compensation for land and housing was normally paid in two installments,
with the final payment made when the land or house is transferred to the project. For housing,
the external monitor recommended one lump sum payment, so affected households had
sufficient cash to rebuild their new homes in a timely manner.

11. The external monitor made annual assessments of the actual compensation standards
during implementation (2001 to 2003) which indicated that farmers were generally satisfied with
the compensation standards. The reasons stemmed from the recently mandated higher land
compensation, as per the Land Law which became effective in 1999. Also, the house
compensation was basically equivalent to replacement value, and farmers were pleased with
the ability to get cash to build better houses. The affected urban residents were less satisfied
with the compensation standards because market prices for land and housing were higher than
replacement value. In the case of Nanyang City, the local government agreed to increase the
housing standard to 400 CNY/m2, which satisfied the affected households. From these findings,
it is clear that the estimated standards in the RP were unrealistically high and were simply the
desired rates that local government hoped to negotiate with MOR. Since the funding negotiated
with MOR was fixed, the local governments had to implement based on their local standards.
However, in special cases, the local governments invested additional funds to satisfy the
demands of the affected persons.

12. The actual cost of land compensation, house relocation and resettlement was estimated
to be CNY 1,823 million, 5.5% lower than the estimated budget in the RP (see Table A7.3). The
total compensation actually paid to affected persons was 25.6% lower than budgeted in the RP
due to the overestimation of compensation standards in the RP. The amount of funding paid by
MOR to the provincial governments, as per their agreements, was CNY 1,257 million, of which
CNY 881.6 million was for land acquisition (including green crops, temporary land occupation
and land taxes/fees), CNY 257.6 million was for house demolition/relocation, and CNY 117.9
million was for enterprise and institutional relocation. MOR also paid the cost of infrastructure
restoration but this was part of the cost of civil works (i.e., these funds were not disbursed to
provincial governments). In addition, the local governments used some of their own budgets to
enhance resettlement, including the provision of infrastructure at resettlement sites, increasing
housing standards for urban residents, and expansion of reconstructed schools.

Table A7.3: RP Budget and Actual Costs

(CNY million)
Difference
Item RP (A) Actual (B) C / A (%)
(C = B–A)
1. Land acquisition 798 490 (308) (38.6)
2. House demolition and relocation a 365 257 10 2.7
Subtotal (1+2) 1,163 865 (298) (25.6)
3. Temporary land use 88 170 82 92.8
4. Infrastructure restoration b 503 503 0 0.0
5. Land and forestry taxes/fees 0 285 285 —
6. Contingency 175 0 (175) —
Total 1,929 1,823 (106) (5.5)
( ) = negative, — = not applicable, RP = resettlement plan.
a
Costs of factory and institution relocation are included.
b
These costs were included in the cost of civil works, and are assumed to be the same as the RP estimate.
Sources: RP, Post-Evaluation of Resettlement Report, Southwest Jiaotong University, 2006 and Asian
Development Bank estimates.
 Appendix 7 29

F. Resettlement Implementation

13. Land acquisition and house relocation were mainly carried out during 2000–2001. The
resettlement activities for land acquisition were implemented at village and village group level.
According to the monitoring reports, about 80% of the affected village groups redistributed
farmland after land acquisition, while other village groups provided affected persons reserve
(non-contracted) farmland, or gave them cash compensation. The reallocation of farmland
helped minimize the losses of affected persons, by sharing the burden with the entire village
group. This approach is very common even today in these provinces.

14. Commencement of house demolition and reconstruction was almost simultaneous with
land acquisition. House compensation was usually paid to the affected households as a lump
sum or as two installments. Field investigations revealed that in Xixia County, Henan Province,
the new houses were finished before the old ones were demolished. However, in other areas,
the affected people experienced about a 6 month transitional period to build their new houses.
The villagers usually built larger and better houses by using additional funds, either from the
compensation they received for land acquisition or by borrowing money from relatives.

G. Assessment of the Quality of Resettlement and Rehabilitation

15. The main strategy to mitigate land loss was to redistribute the remaining farmland and
the compensation funds were used to improve irrigation, expand animal husbandry, construct
greenhouses, plant orchards, start small businesses, expand markets, rebuild public works, or
were paid as cash compensation to all villagers. For villages that did not redistribute farmland,
the cash compensation was paid directly to the affected households. Due to the land acquisition
for the Project and other development projects, the local per capita cultivated land holdings
have been decreasing. Work done outside the villages has become the most important source
of income for villagers. Since the serious impacts wear near urban areas, affected persons
could use the cash to invest in small businesses and relied on local employment opportunities
created by the new railway stations and related urban development. In several towns,
concentrated relocation sites were constructed near the railway station in a unified manner,
including the development of a market street for shops on the first floor and residential units on
the second floor.

16. The redistribution of farmland helped prevent serious loss of income. In addition, many
people benefited from wage income during the railway construction, either as direct laborers or
by providing materials, food services, transport and renting houses to the contractors. In the
urban areas, the availability of construction jobs continued after project completion due to
ongoing urban development. In the rural areas, villagers also benefited from the ability to market
their cash crops due to the railway and related businesses.

17. In 2000, the external monitor, Research Institute of Foreign Capital Utilization of
Southwest Jiaotang University, conducted a baseline survey of 1,000 households, but no
systematic tracer surveys were undertaken of those households. The external monitor did
conduct a limited number of household surveys and provided findings in each monitoring report,
but this information was anecdotal (i.e., it only provides some “typical” examples). Investigations
of “typical” villages were also conducted which indicated that income levels of farmers had
steadily improved, especially for poverty villages because the railway construction created new
economic development. This trend was confirmed from the official statistical data, whereby the
average annual net income per farmer in the four seriously affected cities increased more than
40% from 2000 (1999) to 2005. However, without a systematic assessment of the Project’s
30 Appendix 7

impacts on the income levels of affected persons, it is not possible to determine whether all
households have been fully restored; this would require much larger surveys and would be
costly to conduct for a project of this magnitude.

18. Regarding vulnerable groups, the following special measures were taken: free labor for
house construction, preferential house sites, guaranteed replacement land, cash subsidies,
control of material costs and humanitarian care. The most vulnerable households are taken care
of directly by the local government agencies for their house relocation and welfare.

19. Generally, the affected households were relocated within their original village groups or
the same villages to keep social and economic relationships intact. The new houses were
generally better in style and quality than the old houses, resulting in an improvement in the living
conditions of those relocated. Closer to urban centers, the amount of house relocation was
greater; in these cases, new concentrated resettlement sites were established in a unified
manner with the station area and surrounding urban development. This approach has helped
the affected households to avoid impoverishment risks and to enhance their economic
opportunities and incomes.

20. During the Project civil work, construction contractors provided affected farmers
employment opportunities for low-skilled labor such as earth works. According to MOR’s
completion report, local non-skilled laborers were employed for 211,399 person-months
(71.49% of which was supplied by people below the poverty line). On average, their daily wage
was about CNY 20. This construction employment helped to increase the income of the affected
persons, although the data collected were not segregated in this manner. During resettlement
implementation, local governments organized many training programs, especially in agricultural
technology and manual jobs such as bricklaying. However, these programs were aimed at the
entire area, and no special training programs for seriously affected villages were held according
to the Mission’s findings.

21. The monitoring reports concluded that affected persons were generally satisfied with the
compensation standards, because they were higher than the previous compensation rates
applied in 1998, prior to the new Land Law. The relocated households were satisfied with the
resettlement implementation. During the Mission’s field visit, all the interviewed village leaders
and villagers also expressed their satisfaction with the land acquisition and house relocation. In
terms of housing, the relocated families have benefited from modern housing in areas with
better environmental and economic conditions. In terms of incomes, the land losses were mainly
shared amongst the villages, which reduced the degree of impacts on households and enabled
them to gain from new economic opportunities during and after project construction. In some
areas, the resettlement was difficult but local government provided good support to ensure that
resettlement was accomplished in a timely and successful manner.

H. Consultation, Monitoring, and Evaluation

22. In 2000, mobilization campaigns were held in all affected villages and village groups.
Prior to land acquisition, the land compensation amounts, allocation and utilization were
determined through consultation with the affected village leaders and villagers. Resettlement
sites and methods of resettling relocated residents were identified after consultation with
affected households, village leaders and local officials.

23. In accordance with ADB requirements, MOR entrusted an independent monitoring

agency—the Research Institute of Foreign Capital Introduction & Utilization of Southwest
 Appendix 7 31

Jiaotong University (the external monitor)—to undertake the external resettlement and social
M&E work. As agreed with ADB, two external M&E reports on resettlement, two evaluation
reports on social development and gender, one completion report on resettlement, and one
post-evaluation report for both resettlement and social impact were finished and submitted.
Those reports described the resettlement organizations, compensation standards, resettlement
implementation, as well as social and gender issues, especially the detailed records of the field
investigation. Unfortunately, much of the reporting was quite anecdotal and did not include a
systematic analysis of resettlement impacts, implementation issues and results, as required by
ADB. Part of this problem stems from the long length of the alignment and the very small budget
for M&E paid by MOR. Despite the shortcomings with the external analysis, the documentation
provided by the external monitor was a significant improvement from earlier transport projects in
the PRC.

I. Conclusions and Lessons Learned

24. Resettlement was generally implemented satisfactorily according to the local procedures
and compensation standards. However, the standards proposed in the RP were not adopted.
Instead, agreements entered into by MOR and the provinces had fixed the resettlement budget,
which meant local governments implemented LAR largely based on local regulations. The
actual rates were widely utilized at the time, and were a significant improvement over the rate
paid in previous years. For these reasons, most of the affected persons were relatively satisfied.
The decision by many local communities to readjust farmland also helped to offset serious
impacts on most households. Villages that were more seriously affected benefited from station
area development and economic opportunities in nearby urban centers.

25. The level of compensation was stipulated by local governments, and paid to the affected
parties (both collectively and individually) in a timely manner. All households affected by the
house relocation who wished to build new houses did so in a timely manner (either before
demolition or with 6 months). However, transition allowances were not always paid, which would
have assisted affected persons in moving. The affected facilities and infrastructure have been
rehabilitated or reconstructed. There were numerous small problems relating to construction
impacts (i.e., disruption of irrigation channels and congestion on roads) but these were
eventually solved with the support of the RCSOs.

26. The resettlement activities were carried out by a well-established resettlement

organization system at all levels (i.e., the RCSOs). The system closely linked resettlement to
Project construction, and the agencies involved in resettlement operated well. According to both
the monitoring reports and the Mission field visit, affected persons were satisfied with the
resettlement implementation.

27. For the project owner, the main lessons from the Project are as follows:

(i) The project owner should remain fully responsible for not only resettlement
planning but also resettlement implementation and monitoring. Contracting with
local government entities, which devolved MOR of direct responsibility, was a
factor that resulted in lack of attention to implementation problems. Fortunately,
these were managed by the RCSOs.

(ii) For a project involving more than one province, better effort should be made and
coordination undertaken to establish similar resettlement policies and resolve
important resettlement issues across the whole project. However, this remains
32 Appendix 7

problematic, because local governments are ultimately responsible for

implementation.

28. For ADB, the main lessons from the Project are as follows:

(i) Taking into account the fact that The RP was not adequately detailed, the RP
should be updated after the detailed measurement survey to ensure a good
baseline and confirm the actual compensation rates to be used.

(ii) Detailed resettlement data should be collected immediately after land acquisition
and house relocation is finished, as it is difficult to collect those data at the
project completion review stage.

(iii) ADB review missions should include a resettlement specialist at critical stages of
the project to assess resettlement implementation and to ensure timely,
corrective actions to problems.

(iv) An adequate budget for M&E must provided to allow for tracer surveys of a
representative sample of affected households, including an assessment of
household incomes, expenditures, assets and savings before and after the
project. In this way, the project completion review mission can properly assess
whether the Involuntary Resettlement Policy objectives have been achieved.
 Appendix 8 33

ENVIRONMENTAL IMPACT ANALYSIS

A. Introduction

1. The Hefei-Xi’an Railway Project (the Project) traverses 27 counties/districts in four

interior provinces (Shaanxi, Henan, Hubei, and Anhui). The Project is classified as Asian
Development Bank (ADB) environmental category A. The overall conclusion of the
environmental impact assessment (EIA) was that the adverse environmental impacts arising
from the construction and operation of the Project could be mitigated to acceptable levels by
implementing a set of clearly identified mitigation measures.

2. In April 2000, a summary EIA (SEIA) was prepared by the project preparatory technical
assistance (PPTA) consultants, circulated to ADB’s Board of Directors, and made public. The
EIA was approved by the State Environmental Protection Administration (SEPA) in June 2000.
The final alignment was selected to minimize construction costs, resettlement costs, and
adverse environmental impact.

B. Environmental Protection and Management

3. While finalizing the railway alignment, further efforts was made by adopting appropriate
engineering designs to minimize environmental impacts. The Hefei-Xi’an Railway Construction
Headquarters (HXRCH) was responsible for environmental management and supervision for the
Project. During construction, the designated personnel, with the help of the environmental
consultants, were in charge of the mitigation measures set out in the EIA. The personnel
reviewed the environmental monitoring reports, responded to any adverse environmental
impacts, supervised the contractors and construction supervision companies, and reported to
the relevant agencies and ADB. All important environmental matters and decisions were
referred directly to the top management of HXRCH and the Ministry of Railways (MOR). At the
request of HXRCH, each contractor and construction supervision company designated staff
from the site management team to deal with environmental issues.

4. At appraisal, it was estimated that the total cost of environmental protection and
mitigation measures would be about $38.5 million. According to MOR’s completion report, the
actual total investment for environmental protection and afforestation was $55.49 million.

C. Environmental Monitoring

5. Environmental monitoring took place at two levels: daily environmental monitoring by the
contractors and construction supervision companies on the site, and periodic environmental
monitoring by specialist staff, who took samples for analysis in accordance with the monitoring
procedures and guidelines.

6. The Environment Evaluation and Engineering Center of Scientific Institute of Railway

was assigned to carry out the environmental sampling and analysis, and perform environmental
monitoring. The Environment Evaluation and Engineering Center monitored noise pollution,
ambient air quality, surface water quality, and the ecological environment, verified the EIA
evaluation, and implemented the mitigation plan. Environment Evaluation and Engineering
Center staff visited the site for periodic environmental monitoring and inspection, gave guidance
and advice on environmental monitoring, trained project staff, planned the implementation of
mitigation measures, and reported their findings. Between 2001 and 2005, they prepared 26
monitoring reports for MOR and ADB.
34 Appendix 8

D. Implementation of Mitigation Measures

7. During implementation, the environmental monitoring and mitigation measures were

carried out according to the EIA and SEIA. The following primary measures have been taken to
minimize adverse environmental effects: (i) using spoils from tunnels and other excavations in
building embankments or railway stations, and moving the unused spoils into nearby valleys
with retaining walls to prevent them from being dumped into rivers; (ii) dealing promptly with
unstable slopes to avert landslides and erosion; (iii) planting protection forest along the two
sides of the railway; (iv) growing plants on the embankment slopes and in the railway station
areas; (v) building ditches or conduits to drain waste water; (vi) using low-noise and low-
pollution machines; (vii) limiting working time at construction sites near villages or other
inhabited areas; and (viii) further revising and perfecting the design of culverts and other
drainage structures to avoid damaging the local drainage systems.

E. Environmental Impact

1. Noise

8. The contractors adopted noise mitigation measures to reduce noise at sensitive

locations mentioned in the EIA. Those locations where noise reduction measures had already
been implemented met the class III standard (GB 3096-1993: Standard of environmental noise
of urban area). The present equivalent sound level of the railway was monitored at residential
locations within the 30 meters of the centerline of the outer track of the railway and was found to
meet the standard GB 12525-90.

2. Environmental Air

9. During operation, the primary air pollution sources were the waste gas discharged by
locomotives and various boilers. According to the monitoring results in 2005, the values for
sulfur dioxide, nitrogen oxides, and smoke could meet the Class II emission standard for air
pollutants for coal-burning, oil-burning and gas-fired boilers (GB13271-91).

3. Surface Water

10. During operation, the primary water pollutants comprised live sewage from the large
railway stations. The water quality monitoring results showed the discharged sewage during
both construction and operation stages met the Class I standard for integrated wastewater
discharge (GB8978-88 and GB8978-1996).

4. Ecological Environment

11. During construction, the contractors carried out the environmental protection provisions
in their contracts; soil erosion in waste disposal areas was controlled by building appropriate
retaining walls before accumulating waste, which prevented construction activities from
adversely affecting the surrounding environment.

12. Possible ecological problems in the project areas during railway operation—such as
water and soil erosion, landslip, and mud-rock flow—have been controlled through appropriate
design and management. There have been no significant changes in the five main indices of
environmental quality (i.e., the area of forest cover, the extent of water and soil erosion, paddy
 Appendix 8 35

fields as a percentage of cultivated land, the percentage of steep slopes, and the percentage of
bare land).

F. Conclusions

13. During construction, all the contractors fulfilled their obligation to protect the environment
and to implement mitigation measures in their construction schemes. The adverse effects of the
project construction on the surrounding environment were thus minimized.

14. According to the monitoring results, the railway operation has not affected the habitat of
any protected species. The noise level and environmental air quality meet the Government’s
regulatory standards, and there is no significant impact on the water quality of receiving rivers.
The Project has met its objective of environmental protection.
36 Appendix 9

COMPLIANCE WITH LOAN COVENANTS

Reference to Loan Status of

Covenant
Agreement Compliance

1 MOR shall be the Executing Agency Schedule 6, para. 1 Complied.

responsible for overall implementation of the
Project.

2 RCMC to implement the Project and to set up Schedule 6, para. 2 Complied.

offices along the Project route to carry out on-
site supervision. FCTIC to undertake
procurement of ADB-financed components and
to monitor the utilization of loan proceeds and
maintain liaison with ADB.

3 The Borrower shall set up a steering committee Schedule 6, para. 3 Complied.

comprising members from MOR, RCMC,
FCTIC, Anhui, Henan, Hubei, and Shaanxi
Provinces, concerned railway administrations
and other agencies as necessary, for central
coordination and resolution of any conflicts
between the various agencies involved in
Project implementation.

4 Construction Quality. The Borrower shall Schedule 6, para. 4 Complied.

ensure that the Project is constructed in
accordance with the national technical
standards, and that construction supervision,
quality control, and contract management are
performed satisfactorily.

5 Connecting Railway Lines. The Borrower Schedule 6, para. 5 Complied.

shall ensure that the connecting railway lines,
including the Xi’an-Ankang Railway and the
Lishan-Xiaolin Railway, as well as marshalling
yards, shall be built, and the capacity
constraints in Xi’an area will be alleviated in a
timely manner.

6 Industrial Sidings. The Borrower shall ensure Schedule 6, para. 6 Complied.

that potential major shippers along the Project
will be encouraged and assistance be provided
as necessary to construct and operate
industrial sidings.

7 Access and Link Roads. The Borrower shall Schedule 6, para. 7 Complied.
cause Anhui, Henan, Hubei, and Shaanxi
Provinces to take all measures to construct the
access and link roads in a timely manner to
maximize the benefits of economic transport to
the poor people.
 Appendix 9 37

Reference to Loan Status of

Covenant
Agreement Compliance

Financial Performance and Tariff Schedule 6, para. 8 Not yet due.

8 The Borrower shall cause MOR to monitor the

operational and financial performance of the
Project and to ensure that proforma financial
statements of the Project for the first five full
years of its operation shall be provided to ADB
within nine months after the end of the fiscal
year.

9 The Borrower shall cause MOR to maintain for Schedule 6, para. 9(a) Being complied.
the Project, for each of its fiscal years after its
fiscal year ending on 31 December 2005, a
ratio of total operating expenses to total
operating revenues not higher than 70 percent.

10 Before 31 December in each of its fiscal years, Schedule 6, para. 9(b) Being complied.
MOR shall, on the basis of forecasts prepared
by MOR and satisfactory to ADB, ascertain
whether the Project would meet the
requirements in para. 9 above and furnish to
ADB the results of such review upon
completion.

11 If any review shows that the Project would not Schedule 6, para. 9(c) Being complied.
meet the requirements set forth in para. 9
above, MOR shall promptly take all necessary
measures (including, but not limited to,
adjustments of the structure or levels of its
tariffs) in order to meet such requirements.

12 Tariff. The Borrower shall, and shall cause Schedule 6, para. 10. Complied.
MOR to, ensure that tariffs are set at levels
sufficient to ensure full cost recovery, including
operation and maintenance costs,
depreciation, debt service in excess of
depreciation, taxes, and a reasonable profit.
Six months prior to opening of the Project for
commercial traffic, the Borrower shall cause
MOR to carry out a tariff study to determine the
tariff structure and levels to be applied and
provide the study to ADB for comments.

13 Railway Operation. The Borrower shall cause Schedule 6, para. 11. Complied.
MOR through relevant regional railway
administrations to ensure (a) an efficient and
economic management, day-to-day operation,
and repair and maintenance of the Project, (b)
the provision of adequate trained staff to meet
the Project’s operational needs, (c) the
provision of sufficient quantity of rolling stock
(locomotives, freight wagons and passenger
cars) to meet the demand for transportation on
the Project.

14 The Borrower shall ensure the safety of Schedule 6, para. 11. Complied
passengers and freight.
38 Appendix 9

Reference to Loan Status of

Covenant
Agreement Compliance

15 To familiarize people living along the Project’s Schedule 6, para. 11. Complied.
route with safety issues related to operation of
the electric railway, the Borrower shall cause
MOR to devise and implement appropriate
public safety campaigns through media, public
announcements, household contacts, and
schools; and erect prominent advance warning
signs at all intersections.

Environment.

16 The Borrower shall ensure, through MOR, that Schedule 6, para. 12. Complied.
the Project is constructed and operated in
accordance with the national laws and
regulations.

17 The Borrower shall ensure, through MOR, that Schedule 6, para. 12. Complied.
any adverse environmental impacts arising
from construction and operation of the Project
shall be minimized by implementing the
mitigation measures, environmental monitoring
program, and other recommendations
presented in the Environmental Impact
Assessment dated April/May 1999 (EIA).

18 The Borrower shall cause MOR, together with Schedule 6, para. 13. Complied.
the concerned provincial and county
Environment Protection Bureaus ensure that
the connecting railway lines and access and
link roads are constructed in accordance with
the appropriate national and local government
environmental procedures and guidelines.

19 The Borrower shall ensure, through MOR, that Schedule 6, para. 14. Complied.
the Environmental Assessment Center of the
China Academy of Railway Sciences shall
carry out environmental monitoring in
accordance with the EIA and ensure that the
results of environmental monitoring shall be
reported by MOR to ADB through the quarterly
progress reports on project implementation,
annual reports on environmental monitoring,
and an evaluation report one year after
completion of construction.

20 The Borrower shall ensure, through Anhui, Schedule 6, para. 14. Complied.
Henan, Hubei and Shaanxi Provinces, that any
Project-induced economic activities,
particularly mining and industrial
developments, shall undergo appropriate
environmental assessment and review under
the national and provincial regulations to
ensure minimal adverse environmental impact.
 Appendix 9 39

Reference to Loan Status of

Covenant
Agreement Compliance

21 Gender and Development. The Borrower Schedule 6, para. 15 Complied.

shall ensure that MOR through RCMC, Anhui,
Henan, Hubei, and Shaanxi Provinces shall
follow the ADB’s Policy on Gender and
Development during the implementation of the
Project, and shall take all necessary actions to
encourage women living in the Project area to
participate in planning and implementing of the
Project.

22 The Borrower shall cause MOR, with the Schedule 6, para. 15 Complied.
assistance of the Research Institute of FCUO-
SJU, to monitor effects on women during
Project implementation, through gender-
disaggregated data in the resettlement plan
and the Project performance monitoring
system, in consultation with the All China
Women’s Federation at various concerned
provincial and local levels.

Land Acquisition and Resettlement Schedule 6, para. 16. Complied.

23 The Borrower shall ensure that MOR shall

assume the lead responsibility for
implementing the Resettlement Plan (RP)
through RCMC.

24 The Borrower shall ensure that the institutional Schedule 6, para. 16. Complied.
responsibility for implementation of land
acquisition and resettlement rest with the
provinces, prefectures and counties traversed
by the Project, on the basis of prior
arrangements with MOR, which include,
among others, setting up of railway
construction support offices in the concerned
provinces, prefectures and counties.

25 The Borrower shall ensure that all land and Schedule 6, para. 17. Complied.
rights of way for the Project are made available
in a timely manner.

26 The Borrower shall ensure, through Anhui, Schedule 6, para. 17. Complied.
Henan, Hubei, and Shaanxi Provinces, that the
RP agreed with ADB is carried out promptly
and efficiently in line with the Borrower’s Land
Administration Law, the provincial guidelines,
other relevant regulations, and ADB’s Policy on
Involuntary Resettlement.

27 The Borrower shall ensure, through MOR, that Schedule 6, para. 18. Complied.
all persons affected by the Project are
compensated and assisted prior to
displacement from their houses, land and
assets in accordance with the RP such that
they are at least as well off as they would have
been in the absence of the Project.
40 Appendix 9

Reference to Loan Status of

Covenant
Agreement Compliance

28 The Borrower shall ensure, through Anhui, Schedule 6, para. 19. Complied.
Henan, Hubei and Shaanxi Provinces, that, for
the connecting railway lines and access and
link roads, these Provinces shall provide the
same compensation and assistance as set out
in the RP.

29 The Borrower shall ensure that funds for land Schedule 6, para. 20. Complied.
acquisition and resettlement are provided as
scheduled in the RP and meet any obligations
in excess of the cost estimate to meet the RP
objectives.

30 The Borrower shall ensure, through MOR, that Schedule 6, para. 21 Complied.
the Research Institute of FCUO-SJU carries
out independent monitoring and regular
reporting during resettlement implementation
and evaluates resettlement achievement two
years after completion of resettlement, and that
such independent monitoring shall include a
baseline socioeconomic survey of households
before the land is acquired, and annual survey
updates during resettlement implementation as
required in the RP.

31 The Borrower shall cause MOR to report to Schedule 6, para. 21 Complied.

ADB on the progress of land acquisition and
resettlement through the quarterly progress
reports, and a report to be submitted on
completion of the resettlement and an
evaluation report to be submitted two years
thereafter.

Monitoring and Evaluation.

32 The Borrower shall monitor and evaluate Schedule 6, para. 22. Being complied.
Project impacts through a Project performance
management system to ensure that the Project
facilities are managed effectively and the
benefits are maximized.

33 The Borrower shall collect data agreed with Schedule 6, para. 22. Being complied
ADB prior to implementation, at completion of
the Project, and one year and five years after
the completion.

34 Poverty Reduction. The Borrower shall Schedule 6, para. 23 Complied.

ensure, through RCMC, that local poor persons
fill half of the unskilled labor jobs required for
Project construction.

35 For the remaining jobs, the Borrower shall Schedule 6, para. 23 Complied.
ensure that MOR, through RCMC, follow a pro-
poor policy for the engagement of workers
subject to poor workers meeting the job and
efficiency requirements and ensure that such
workers will be provided on-the-job training.
 Appendix 9 41

Reference to Loan Status of

Covenant
Agreement Compliance

36 The Borrower shall cause Anhui, Henan, Schedule 6, para. 23 Complied.

Hubei, and Shaanxi Provinces to extend the
quality and coverage of public utilities, basic
health, basic education, and agricultural
extension in the Project area to maximize the
poverty reduction impacts.

37 The Borrower shall, through MOR, monitor the Schedule 6, para. 23 Complied.
impacts on poverty with the assistance of the
Research Institute of FCUO-SJU.

38 The Borrower shall provide annual monitoring Schedule 6, para. 23 Being complied.
reports to ADB and submit to ADB an
evaluation report one year after the start of
operation of the Project facilities.

39 Worker Safety and Health. The Borrower Schedule 6, para. 24. Complied.
shall cause the MOR, through RCMC, to
ensure that measures are taken to ensure the
safety of workers during construction, and
contractors disseminating information on the
risks of socially transmitted diseases to those
employed during construction.

40 Audit Report. The Borrower shall (i) maintain Section 4.06(b) Being complied.
separate accounts for the Project; financial
statements (income statements, balance
sheets, cash flow statements) for MOR’s
overall operations; and pro forma financial
statements for the operation of the Hefei-Xi’an
Railway; (ii) have such accounts and related
financial statements (except the pro forma
financial statements) audited annually; (iii)
furnish to ADB not later than nine months after
the end of each related fiscal year, certified
copies of such audited accounts and financial
statements and the report of the auditors
relating thereto (including the auditors’ opinion
on the use of the loan proceeds and
compliance with the covenants of the Loan
Agreement, all in the English language; and
(iv) furnish to ADB such other information
concerning such accounts and financial
statements and the audit thereof as ADB shall
from time to time reasonably request.

41 Borrower’s Project Completion Report. Section 4.07(c) Complied.

Promptly after physical completion of the
Project, but not later than three months
thereafter, the Borrower shall prepare and
furnish to ADB a report on the execution and
initial operation of the Project, including its
cost, the performance by the Borrower of its
obligations under the Loan Agreement, and the
accomplishment of the purposes of the loan.
42 Appendix 10

CONTRACT PACKAGES FINANCED BY THE ASIAN DEVELOPMENT BANK

Contract Contract Final Contract ADB Financing
No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
ADB-Financed Contracts
1. Civil Works
W1 DK573+800 - DK613+030 Mar-01 Apr-01 Dec-03 The 11th Engineering Bureau of China Railway CNY 240,221,935 8,711,683

W2 DK613+030 - DK633+300 Mar-01 Apr-01 Dec-03 China Railway the 13th Engineering Bureau CNY 181,358,522 6,580,545
W3 DK633+300 - DK659+113 Mar-01 Apr-01 Dec-03 The 12th Engineering Bureau Bloc of Co. Ltd. CNY 193,658,264 7,028,879
of MOR
W4 DK659+113 - DK677+033.4 Mar-01 Apr-01 Dec-03 The 17th Engineering Bureau of CRCC CNY 159,201,636 5,776,958
W5 DK677+033.4 - DK706+200 Mar-01 Apr-01 Dec-03 The 17th Engineering Bureau of CRCC CNY 238,593,948 8,658,855
W6 DK854+900 - DK883+350 Mar-01 Apr-01 Dec-03 Major Bridge Engineering Bureau of MOR CNY 142,802,123 5,183,829
W7 DK883+350 - DK919+200 Mar-01 Apr-01 Dec-03 Major Bridge Engineering Bureau of MOR CNY 162,591,639 5,901,625
W8 DK919+200 - DK952+200 Mar-01 Apr-01 Dec-03 Tunnel Engineering Bureau of MOR CNY 192,116,802 6,974,593
W9 DK952+200 - DK987+100 Mar-01 Apr-01 Dec-03 The Third Engineering Goup Co., Ltd. of China CNY 212,769,450 7,722,390
Railway
W10 DK987+100 - DK1021+600 Mar-01 Apr-01 Dec-03 Fuzhou Engineering Corp. of Shanghai CNY 138,507,355 5,034,523
Railway Bureau
W11 DK1021+600 - DK1055+056.70 Mar-01 Apr-01 Dec-03 Fuzhou Engineering Corp. of Shanghai CNY 116,689,375 4,239,505
Railway Bureau
Total - Civil Works CNY 1,978,511,049 71,813,390
2. Materials
Steel Casting, Bearings, and Sleepers
Lot 101 Steel Castings Bearings Apr-01 May-01 Jan-03 Shanhaiguan Bridge Works $ 338,058 338,058
Lot 201 Concrete Sleeper Apr-01 May-01 Jan-03 CITIC Development Co. Ltd. $ 2,331,065 2,331,065
Lot 202 Concrete Sleeper Apr-01 May-01 Jan-03 CITIC Development Co. Ltd. $ 1,294,359 1,294,359
Lot 301 Wooden Sleeper Apr-01 May-01 Jan-03 China National General Machinery Engineering $ 827,545 827,545
Corp.
Lot 302 Wooden Sleeper Apr-01 May-01 Jan-03 China National General Machinery Engineering $ 448,527 448,527
Corp.
Subtotal $ 5,239,555 5,239,555
First Procurement of Rail Materials
Lot 101 Whole-Length Quenched Rail and Fish Apr-02 Apr-02 Sep-03 Pangang Group International Economic and $ 11,624,355 11,624,355
Plate Trading Corp.
Lot 102 Whole-Length Quenched Rail and Fish Apr-02 Apr-02 Sep-03 Pangang Group International Economic and $ 6,418,574 6,418,574
Plate Trading Corp.
 Appendix 10 43

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Lot 103 Whole-Length Quenched Rail and Fish Dec-01 Dec-01 Sep-03 Shenzhen Sunray Group Corp./PRC $ 6,976,711 6,976,711
Plate
Lot 104 Whole-Length Quenched Rail and Fish Apr-02 Apr-02 Sep-03 Paryorient International Co. Ltd./PRC $ 7,269,466 7,269,466
Plate
Lot 105 Rail (60 kg/m), 16,854.12T Apr-02 Apr-02 Sep-03 China Machine-Building International $ 6,617,201 6,617,201
Corp./PRC
Lot 106 Rail (60 kg/m), 16,259.48T Apr-02 Apr-02 Sep-03 CITIC International Cooperation Co. Ltd./PRC $ 6,556,697 6,556,697

Lot 107 Rail (50 kg/m) and Fish Plate (50 kg/m) Dec-01 Dec-01 Sep-03 CITIC International Cooperation Co. Ltd./PRC $ 6,673,484 6,673,484

Lot 108 Rail (50 kg/m) and Fish Plate (50 kg/m) Dec-01 Dec-01 Sep-03 CITIC International Cooperation Co. Ltd./PRC $ 3,992,076 3,992,076

Lot 109 Rail (43 kg/m) and Fish Plate (43 kg/m) Dec-01 Dec-01 Sep-03 Transgoods America Inc./USA $ 1,557,886 1,557,886

Lot 201 Turnout, 402 sets; Transition Rail, 590 Dec-01 Dec-01 Sep-03 China Railway Shanhaiguan Bridge Group Co. $ 5,161,600 5,161,600
pcs. Ltd./PRC
Lot 202 Turnout, Transition Rail, and Transition Dec-01 Dec-01 Sep-03 China Railway Turnout Bridge Inc./PRC $ 4,459,334 4,459,334
Rail with Fish Plate
Subtotal $ 67,307,385 67,307,385
Second Procurement of Rail Materials
Lot 101 Casting Steel Bearing of Railway Dec-01 Dec-01 Jun-02 Shenzhen Sunray Group Co. Ltd./PRC $ 401,535 401,535
Bridge, 429 span
Lot 102 Casting Steel Bearing of Railway Dec-01 Dec-01 Jun-02 CITIC International Cooperation Co. Ltd./PRC $ 730,819 730,819
Bridge, 488 span
Lot 103 Casting Steel Bearing of Railway Dec-01 Dec-01 Jun-02 Shenzhen Sunray Group Co. Ltd./PRC $ 749,043 749,043
Bridge, 736.5 span
Lot 104 Casting Steel Bearing of Railway Dec-01 Dec-01 Jun-02 China National General Machinery Eng. $ 1,030,575 1,030,575
Bridge, 800 span Corp./PRC
Lot 105 Casting Steel Bearing of Railway Dec-01 Dec-01 Jun-02 Shenzhen Sunray Group Co. Ltd./PRC $ 532,760 532,760
Bridge, 478 span
Lot 201 Concrete Sleeper, 485,262 pcs. Dec-01 Dec-01 Nov-02 CITIC International Cooperation Co. Ltd./PRC $ 4,505,654 4,505,654

Lot 202 Concrete Sleeper, 533,099 pcs. Dec-01 Dec-01 Nov-02 Hainan Flywheel Industries Trading Co./PRC $ 4,975,404 4,975,404

Lot 203 Concrete Sleeper, 807,084 pcs. Dec-01 Dec-01 Nov-02 Hainan Flywheel Industries Trading Co./PRC $ 7,164,653 7,164,653

Lot 204 Concrete Sleeper, 264,830 pcs. Dec-01 Dec-01 Nov-02 Hainan Flywheel Industries Trading Co./PRC $ 2,685,509 2,685,509

Lot 301 4 Dec-01 Dec-01 Nov-02 Shenzhen Sunray Group Co. Ltd./PRC $ 1,353,277 1,353,277
Wooden Sleeper, 6,434.88 m
44 Appendix 10

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Lot 302 5 Dec-01 Dec-01 Nov-02 Shenzhen Sunray Group Co. Ltd./PRC $ 496,257 496,257
Wooden Sleeper, 5,339.843 m
Subtotal $ 24,625,487 24,625,487
Rail, Turnouts, and Scissors Crossings
Lot 101 Rail and Fish Plate, 60 kg/m (Nanyang May-01 May-01 May-02 Minmetals Traading Company Ltd./PRC $ 4,394,387 4,394,387
East)
Lot 102 Rail and Fish Plate, 60 kg/m (Nanyang Apr-01 Apr-01 May-02 China Electric Power Technology I/E $ 2,889,026 2,889,026
West) Corp./PRC
Lot 103 Rail and Fish Plate, 50kg/m Apr-01 Apr-01 May-02 China Electric Power Technology I/E $ 3,433,936 3,433,936
Corp./PRC
Lot 104 Rail and Fish Plate, 43kg/m Apr-01 Apr-01 May-02 Pangang Group Intl. Economic and Trading $ 1,699,088 1,699,088
Corp./PRC
Lot 105 Turnout, Nanyang East Apr-01 Apr-01 May-02 Minmetals Traading Company Ltd./PRC $ 1,558,108 1,558,108
Lot 106 Turnout, Nanyang West May-01 May-01 May-02 Shanhaiguan Bridge Works/PRC $ 1,587,244 1,587,244
Subtotal $ 15,561,789 15,561,789
Total - Materials 112,734,216
3. Equipment
Communications Equipment
Lot 101 Program Control Exchange, 6 sets Nov-01 Dec-01 Dec-03 China United Electric I/E Corp./PRC $ 845,347 845,347
Lot 102 Digital Transmission System, 2 units Nov-01 Dec-01 Dec-03 Shanghai Marconi Communications Equipment $ 1,335,902 1,335,902
Co. Ltd./PRC
Lot 103-1 Communication Power Supply, 112 sets Nov-01 Dec-01 Dec-03 Shandong Machinery and Equipment I/E $ 348,872 348,872
Group Corp./PRC
Lot 103-2 Communication Power Supply, 123 sets Nov-01 Dec-01 Dec-03 CITIC International Cooperation Co., Ltd./PRC $ 72,563 72,563

Lot 104 Radio Communication Dispatch System Dec-01 Dec-01 Dec-03 CITIC International Cooperation Co., Ltd./PRC $ 3,191,323 3,191,323

Lot 106 Long Distance Communication Nov-01 Dec-01 Dec-03 CITIC Development Co., Ltd./PRC $ 1,055,817 1,055,817
Symmetrical Cable
Lot 107-1 Optic Fibre Cable, 482 km Nov-01 Dec-01 Dec-03 Yangtze Optical Fiber and Cable Co. Ltd./PRC $ 482,964 482,964

Lot 107-2 Optic Fibre Cable, 717.1 km Nov-01 Dec-01 Dec-03 Yangtze Optical Fiber and Cable Co. Ltd./PRC $ 716,004 716,004

Lot 108-1 OTDR, Portable OTDR, Handheld Sep-02 Sep-02 Dec-03 China United Electric I/E Corp./PRC $ 264,679 264,679
Optical Multimeter
Lot 108-2 SDH Digital Transmission Analyzer, Sep-02 Sep-02 Dec-03 CCECC International Trading Co. $ 431,425 431,425
SDH, Handheld Digital Transmission
Analyzer
Lot 108-3 Optical Fibre Fuse Splicer Sep-02 Sep-02 Dec-03 CCECC International Trading Co. $ 88,501 88,501
 Appendix 10 45

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Lot 108-4 PCM Channel Performance Tester, Sep-02 Sep-02 Dec-03 New Cosmos (HK) Ltd. $ 249,998 249,998
Voice Channel Performance Tester,
2Mb/s Bid Error Tester
Lot 108-5 Cable Fault Tester Sep-02 Sep-02 Dec-03 New Cosmos (HK) Ltd. $ 98,442 98,442
Subtotal $ 9,181,837 9,181,837
Signalling Equipment
Lot 101 Composite Sheath Signaling Cable, Sep-01 Sep-01 Dec-03 Shenzhen Sunray Group Co., Ltd./PRC $ 1,136,798 1,136,798
1,083.43 km
Lot 102 Aluminum Sheath Signaling Cable, Sep-01 Sep-01 Dec-03 CITIC International Corp. Co., Ltd./PRC $ 910,307 910,307
423.06 km
Lot 103 Computer Interlocking System, 11 unit Sep-01 Sep-01 Dec-03 Xi'an Electric Machinery I/E Corp./PRC $ 2,831,833 2,831,833
Lot 104 Switcher, 1,883 sets Sep-01 Sep-01 Dec-03 China United Electric I/E Corp./PRC $ 2,216,820 2,216,820
Lot 105 Automatic Hump Control System, 1 unit Sep-01 Sep-01 Dec-03 Xi'an Electric Machinery I/E Corp./PRC $ 492,323 492,323
Lot 106 Hump Yard Computer Process Control Sep-01 Sep-01 Dec-03 China United Electric I/E Corp./PRC $ 492,298 492,298
System, 2 units
Subtotal 8,080,379
Operational Equipment: Operating Security and Maintenance
Lot 101 On-Track Full Section Undercutting Sep-01 Oct-01 Dec-03 Kunming Machinery Factory/PRC $ 10,721,987 10,721,987
Ballast Cleaning Machine, 4 sets
Lot 102 Track-Lifting Lining Sep-01 Oct-01 Dec-03 Kunming Machinery Factory/PRC $ 3,210,579 3,210,579
LevellingandTamping Machine, 3 sets

Lot 103 Dynamic Track Stabilizer, 4 sets Sep-01 Oct-01 Dec-03 Kunming Machinery Factory/PRC $ 3,840,558 3,840,558
Lot 104 Ballast Regulating Machine, 2 sets Aug-01 Oct-01 Dec-03 Kunming Machinery Factory/PRC $ 660,125 660,125
Lot 105 Rail Flaw Detection Vehicle, 1 set Aug-01 Oct-01 Dec-03 Yardway Ltd./Hongkong $ 1,660,888 1,660,888
Lot 106 Rail Welding Machine, 1 set Aug-01 Oct-01 Dec-03 H.A. Schlatter AG/Switzerland SWF 1,985,336 1,309,686
Subtotal 21,403,824
Electrification Traction Substation
Lot 101 Three-Phase Traction Transformer, 2 Jun-02 Jul-02 Dec-03 China National Heavy Machinery Corp. $ 208,830 208,830
Lot 102 t
Three-Two Phase Balancing Traction Jun-02 Jul-02 Dec-03 China National Heavy Machinery Corp. $ 1,956,280 1,956,280
Transformer
Lot 103 Power Transformer and Substation Jun-02 Jul-02 Dec-03 CCECC International Trading Co. CNY 2,166,935 261,854
Transformer
Lot 104 Current Transformer and Voltage Jun-02 Jul-02 Dec-03 CCECC International Trading Co. CNY 2,375,641 287,070
Transformer
Lot 105 110 kv Electric Disconnector, 36 sets Jul-02 Jul-02 Dec-03 L. Geismar, France Euro 481,169 552,678
46 Appendix 10

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Lot 106 27.5 kv and 35 kv Electric Jul-02 Jul-02 Dec-03 L. Geismar, France Euro 528,651 608,631
Disconnector, 99 sets
Lot 107 110 kv and 27.5 kv Manual Jun-02 Jul-02 Dec-03 Minmetals Trading Co. Ltd. $ 101,013 101,013
Disconnector, 195 sets
Lot 108 110 kv Circuit Breaker, 24 sets Jul-02 Jul-02 Dec-03 ABB High Voltage Switchgear Co. Ltd. $ 714,296 714,296
Lot 109 27.5kv Vacuum Circuit Breaker, 145 Jun-02 Jul-02 Dec-03 China United Electric Import and Export Corp. $ 504,743 504,743
Lot 110 t
Lighting Arrestor and Antistatic Jun-02 Jul-02 Dec-03 Jiangxi Machinery and Equipment $ 129,662 129,662
Arrestor, 276 sets Import/Export Corp.
Lot 111 Switch Board, 286 panel Jun-02 Jul-02 Dec-03 XJ Group Corporation $ 988,831 988,831
Lot 112 AC and DC System, 26 panels + 12 Jun-02 Jul-02 Dec-03 Shenzhen Sunray Group Co. Ltd. $ 234,759 234,759
Lot 113 t kv Vacuum Load Switch, 10 sets
27.5 Jun-02 Jul-02 Dec-03 China Electro-Ceramic Import/Export Allied $ 151,880 151,880
Corp.
Lot 114 Fault Point Locating Panel of Overhead Jun-02 Jul-02 Dec-03 China Electric Power Technology Import and $ 185,468 185,468
Contact System, 12 panels Export Corp.

Lot 115 Remote Control System, 2 sets Jun-02 Jul-02 Dec-03 China Electric Power Technology Import and $ 908,460 908,460
Export Corp.
Lot 116 High-voltage Line Fault Identification Jun-02 Jul-02 Dec-03 CCECC International Trading Co. CNY 4,783,590 578,043
Device, 23sets
Lot 117 Auto-throw and Cut Device of Parallel Jun-02 Jul-02 Dec-03 China National Electric Equipment Corp. CNY 1,518,900 183,791
Capacitance Compensation Device, 1
set
Lot 118 Parallet Capacitor, 26 sets Jun-02 Jul-02 Dec-03 China Electric Power Technology Import and $ 159,129 159,129
Export Corp.
Lot 119 Serial Reactor, 26 sets Jul-02 Jul-02 Dec-03 CCECC International Trading Co. CNY 1,074,099 129,969
Lot 201 Section Insulator and Phase Break, 112 Jun-02 Jul-02 Dec-03 China National Heavy Machinery Corp. $ 63,520.00 63,520
sets
Lot 202 2 Jun-02 Jul-02 Dec-03 Shandong Machinery and Equip. Imp./Exp. $ 1,443,601.24 1,443,601
Trolley Wire of Copper Alloy (120mm ),
546T Group Corp.
Lot 203 2 Jun-02 Jul-02 Dec-03 Shenzhen Zhong Tie Equipment Trade Co. $ 333,782.19 333,782
Trolley Wire of Copper (85mm ), 144T
Ltd.
Lot 204 2 Jun-02 Jul-02 Dec-03 Shenzhen Zhong Tie Equipment Trade Co. $ 182,999.20 182,999
Copper Alloy Stranded Wires (95mm ),
47T Ltd.
Lot 205 Aluminum-coated Steel-cored Stranded Jun-02 Jul-02 Dec-03 Shandong Machinery and Equipment $ 852,798.00 852,798
Wires (185/30mm2), 356T Import/Export Group Corp.
Lot 206 Aluminum-coated Steel-stranded wires Jun-02 Jul-02 Dec-03 Shandong Machinery and Equipment $ 143,888.00 143,888
2 Import/Export Group Corp.
(70mm ), 68T
 Appendix 10 47

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Lot 207 Aluminum-coated Steel-cored Jun-02 Jul-02 Dec-03 Shandong Machinery and Equipment $ 501,270.00 501,270
Aluminum Stranded Wires Import/Export Group Corp.
2
(150/20mm ), 217T
Lot 208 Aluminum-coated Steel-cored Jun-02 Jul-02 Dec-03 Shandong Machinery and Equipment $ 34,500.00 34,500
2 Import/Export Group Corp.
Aluminum Stranded Wires (70/10mm ),
15T
Lot 209 Galvanized Steel Pillars, 1,319 strand Jun-02 Jul-02 Dec-03 CCECC International Trading Co. Ltd. CNY 3,260,575.00 394,006
Lot 210 Cone-casing Anchor-fixing Linear Jun-02 Jul-02 Dec-03 Jiangxi Machinery and Equipment $ 249,808.70 249,809
Clamp at Contact Wire Terminals, Import/Export Corp.
38,170 sets
Lot 211 Linear Clamps of Electrically Jun-02 Jul-02 Dec-03 China United Electric Import and Export Corp. $ 18,066.40 18,066
Connected Contact Wire, 2,861 sets

Lot 212 Steady Arm and Limit Multifunctional Jun-02 Jul-02 Dec-03 CITIC Development Co. Ltd. $ 57,249.09 57,249
Steady Arm, 8,221 sets

Lot 213 Steady Clamp, Transverse Carrying Jun-02 Jul-02 Dec-03 Jiangxi Machinery and Equipment $ 103,150.60 103,151
Cable Clamp, 26,809 sets Import/Export Corp.
Lot 214 Pulley Assembly for Anchor, 892 sets Jul-02 Jul-02 Dec-03 Shenzhen Zhong Tie Equipment Trade Co. $ 282,639.12 282,639
Ltd.
Lot 215 Single Pole Manual Disconnector, 82 Jun-02 Jul-02 Dec-03 CCECC International Trading Co. Ltd. CNY 159,100.00 19,251
Lot 216 t
Porcelain Suspension Insulator, 60,571 Jun-02 Jul-02 Dec-03 Shenzhen Zhong Tie Equipment Trade Co. $ 245,703.71 245,704
sets Ltd.
Lot 217 Stem Insulator, 9,823 sets Jun-02 Dec-02 Dec-03 China National Heavy Machinery Corp. $ 175,446.50 175,447
Lot 218 Working Car for Checking and Jun-02 Jul-02 Dec-03 LORIC Import and Export Corp. Ltd. $ 1,356,739.80 1,356,740
Repairing Overhead Contact Line
Equipment, 13 each
Lot 219 Rail Flatcar, 13 each Jun-02 Jul-02 Dec-03 China United Electric Import and Export Corp. $ 207,655.50 207,656
Lot 220 Steel Pillars of Overhead Contact Line Jun-02 Jul-02 Dec-03 Henan Desen Industrial Co. $ 88,064.76 88,065
Equipment, 244 strands
Lot 221 Aluminum-Coated Steel Stranded Jun-02 Jul-02 Dec-03 Shandong Machinery and Equipment $ 68,583.90 68,584
Wires and Aluminum-Coated Steel- Import/Export Group Corp.
cored Aluminum Stranded Wires, 29T

Lot 222 Steel-Cored Aluminum Stranded Wire, Jun-02 Jul-02 Dec-03 Deyang Cable Stock Co. Ltd. CNY 298,359.00 36,101
27.4T
Subtotal 15,704,211
48 Appendix 10

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Power Supply Equipment
Lot 301 Electric Testing Car, 2 sets Jun-02 Jul-02 Dec-03 Henan Desen Industrial Co. $ 449,442.00 449,442
Lot 302 Inspection Car for Substation Jun-02 Jul-02 Dec-03 Henan Desen Industrial Co. $ 114,169.00 114,169
Secondary Side, 1 set
Lot 303 Truck, 1 set Jun-02 Jul-02 Dec-03 China Great Wall Industry Corp. $ 24,809.62 24,810
Lot 304 Passenger-Cargo Tool Car, 3 sets Jun-02 Jul-02 Dec-03 China Great Wall Industry Corp. $ 67,515.00 67,515
Lot 401 Three Phase Power Transformer, 117 Jun-02 Jul-02 Dec-03 Dragon Rich Development Ltd., Hongkong $ 119,655.09 119,655
sets
Lot 402 Single Phase Power Transformer, 63 Jun-02 Jul-02 Dec-03 Dragon Rich Development Ltd., Hongkong $ 38,680.50 38,681
sets
Lot 403 On-load Tap-changing Transformer, 8 Jun-02 Jul-02 Dec-03 China United Electric Import and Export Corp. $ 38,973.93 38,974
sets
Lot 404 High-Voltage Switch Cabinet, 144 sets Jun-02 Jul-02 Dec-03 Hubei Provincial Jiaxin Machinery $ 307,132.11 307,132
Import/Export Corp.
Lot 405 Low-Voltage Switch Cabinet, 14 sets Jun-02 Jul-02 Dec-03 China Electric Power Technology $ 61,840.76 61,841
Import/Export Corp.
Lot 406 Computer Protection Device, 8 sets Jun-02 Jul-02 Dec-03 Dragon Rich Development Ltd., Hongkong $ 225,790.84 225,791
Lot 407 High Voltage Power Cable, 34.5 km Jun-02 Jul-02 Dec-03 Deyang Cable Stock Co. Ltd. CNY 2,303,116.00 278,659
Subtotal 1,726,668
Water Treatment Equipment
101-1 Aerator with Rotation Brushes, 6 sets Nov-02 Dec-02 Dec-03 Beijing Huafeng Trading Co. Ltd. $ 127,802.39 127,802

101-2 Sediment Trap and Submersible Nov-02 Dec-02 Dec-03 Beijing Huafeng Trading Co. Ltd. $ 134,581.65 134,582
Propeller, 3 sets each
101-3 Various Nov-02 Dec-02 Dec-03 China United Electric Import and Export Corp. $ 100,579.92 100,580

101-4 Various Nov-02 Dec-02 Dec-03 Xi'an Machinery Import and Export Corp. $ 244,096.50 244,097
101-5 Submersible Sewage Pump, 21 sets Nov-02 Dec-02 Dec-03 Jiang Shu Jinling Pump Making Co., Ltd. CNY 268,015.00 32,431
101-6 Water Supply Centralized Control Nov-02 Dec-02 Dec-03 Hubei Provincial Jiaxin Machinery I/E Co. Ltd. $ 151,562.40 151,562
System, 1 set; and Sewage Chemical-
Biological Processing Control System,
102 3 t Protection Barrier, 1,030m2
Sound Nov-02 Dec-02 Dec-03 CandJ Construction Material (Beijing) Ltd. $ 45,220.50 45,221
Subtotal 836,274
 Appendix 10 49

Contract Contract Final Contract ADB Financing

No. Contract Description Approved Contractor/Supplier/Consultant
Signing Completion Cost ($ Equivalent)
Hot Box Detecting System
Hot Wheel Bearing Detectors Feb-03 Mar-03 Dec-03 Shan He Machinery Equipment Co. Ltd. $ 2,915,648 2,915,648
DMIS and Section Axle-Counting Equipment
Lot 101 Section Axle-Counting and Inspecting Nov-04 Dec-04 Oct-05 China United Electric Import and Export $ 1,587,062 1,587,062
Equipment Corp./PRC
Lot 102 DMIS Equipment Aug-04 Sep-04 Oct-05 Beijing Hua-Tie Information Technology $ 1,715,971 1,715,971
Development Co./PRC
Subtotal 3,303,033
Large Track Maintenance Machinery
Lot 1 Track Lifting Lining Leveling and Jan-05 Jan-05 Jun-06 China Railway Large Maintenance Machinery $ 4,320,000 4,320,000
Tamping Machine Co./PRC
Lot 2 Continuous Action Track Lifing Lining Jan-05 Jan-05 Jun-06 China Railway Large Maintenance Machinery $ 8,100,000 8,100,000
Leveling and Tamping Level, 5 sets Co., Kunming/PRC

Lot 3 Heavy Duty Switch Lifing Lining Jan-05 Jan-05 Jun-06 China Railway Large Maintenance Machinery $ 7,920,000 7,920,000
Leveling and Tamping Machine, 4 sets Co., Kunming/PRC

Lot 4 Dynamic Track Stabilizer, 3 sets Dec-04 Dec-04 Jun-06 China Railway Large Maintenance Machinery $ 2,940,000 2,940,000
Co./PRC
Lot 5 Ballast Regulating Machine, 3 sets Dec-04 Dec-04 Jun-06 China Railway Large Maintenance Machinery $ 1,071,231 1,071,231
Co./PRC
Lot 6 Fixed Rail Welding Machine, 1 set Dec-04 Jan-05 Jun-06 H.A. Schlatter AG/SWITZERLAND Swf 1,932,000 1,495,009
Lot 7 Test Equipment for Heavy Machine Dec-04 Dec-04 Jun-06 Beijing Dongqiao Mechanical Electrical and CNY 3,022,864 373,970
Sensors, 8 sets Chemical Equipment Co., Ltd./PRC
Lot 8 Automatic Testing System for Dec-04 Dec-04 Jun-06 China National Precision Machinery Import and $ 602,670 602,670
Electronic Plug-In Unit in Large Track Export Corp.,/PRC
Maintenance Machine, 8 sets
Lot 9 On-Track Ballast Shoulder Cleaning Jan-05 Jan-05 Jun-06 Plasser and Theurer/AUSTRIA Euro 2,489,435 3,114,332
Machine, 1 set
Lot 10 Switch Welding Machine, 29 sets Dec-04 Jan-05 Jun-06 Yardway Ltd,,/HONGKONG Euro 1,298,474 1,553,390
Subtotal 31,490,602
Safety Transport Equipment
Lot 1 Trackside Acoustic Detecting System Oct-06 Oct-06 Mar-07 Harbin Veic Technology Co. Ltd. CNY 59,900,000 7,748,268

Total - Equipment 102,390,744

4. International Consultant
Industrial Development and Marketing and Project Oct-04 Jan-05 Mar-06 Scott Wilson Ltd. $ 171,860 171,860
Management
50 Appendix 11

TRAFFIC FORECAST

1. Actual freight volumes in 2004 and 2005 on the railway constructed by the Hefei-Xi’an
Railway Project (the Project) have been higher than those forecast at appraisal. As shown in
Table A10, total freight volume reported in the project completion report of the Ministry of
Railways was 20.5 million tons in 2005, which was 9.7% higher than the appraisal estimates of
19.0 million tons. The rapid growth from 2004 for freight and from 2005 for passengers is
attributable to the accelerated industrial development in the project area and the increased need
for coal transport from the west to the major growth centers in the east. The coal freight volume
from Shaanxi Province (which accounted for more than 50% of total freight volume) rose
significantly, reflecting the strong economic growth and the growing demand for coal by newly
constructed power plants in the People’s Republic of China. Industrial development along the
railway includes (i) iron mining in Zhashui County of Shaanxi province and Huoqui County of
Anhui province; (ii) high-quality coal mine development in Yishang County of Anhui province; (iii)
alkali mine development in Tongbai County of Nanyang; (iv) Wanxi power plant development; (v)
ethanol production in Nanyang; (vi) mutton and beef processing in Nanyang; and (vii) “industrial
town” development at Pingqiao and Minggang

2. The traffic growth pattern from 2007 to 2024 is based on (i) actual traffic (2004–2006), (ii)
actual and expected industrial and population growth in the project area, (iii) network
development, and (iv) expected train scheduling and wagon allocation. The revised forecasts
exceed the appraisal estimated for both freight and passengers. Even though initial passenger
operation was delayed by nearly one year, the growth has been rapid and passenger volumes
are projected to exceed appraisal estimates in 2009.

3. The growth in freight traffic volume is forecast to continue to be more rapid than that of
passenger volume, considering that the Project is serving as an efficient outlet for large
quantities of high-grade coal from Shaanxi, and the demand for and production of coal in
Shaanxi Province are expected to continue to rise. Since the demand for freight transport is high
and will keep growing, the proportion of the total traffic volume made up by passenger traffic is
expected to decrease further in the future.
 Appendix 11 51

Table A11: Traffic Forecast

(million)

Item 2004 2005 2006 2007 2009 2014 2019 2024

A. Appraisal
Freight (tons) 0 18.733 19.389 20.106 21.736 33.057 41.061 42.405
Annual Average Growth(%) 3.5 3.7 4.0 8.7 4.4 0.6
Freight (ton-km) 0 19,546 20,232 20,978 22,679 34,492 42,843 44,246
Annual Average Growth(%) 3.5 3.7 4.0 8.7 4.4 0.6
Passengers (number) 0 14.910 16.923 18.937 22.940 39.309 43.097 47.250
Annual Average Growth(%) 13.5 11.9 10.1 11.4 1.9 1.9
Passenger-km 0 4,266 4,841 5,415 6,565 11,251 12,649 14,219
Annual Average Growth(%) 13.5 11.9 10.1 11.4 2.4 2.4

B. Actual (2004–2006) + Forecast (2007–2024)

Freight (tons) 14.404 20.545 24.786 26.318 29.827 50.781 70.939 82.753
Annual Average Growth(%) 42.6 20.6 6.2 6.5 11.2 6.9 3.1
Freight (ton-km) 14,774 18,989 23,466 27,461 30,643 50,271 67,565 75,724
Annual Average Growth(%) 28.5 23.6 5.3 5.6 10.4 6.1 2.3
Passengers (number) 0 0 3.339 8.944 23.053 44.106 54.543 67.450
Annual Average Growth(%) 100.9 60.5 13.9 4.3 4.3
Passenger-km 0 0 966 2,587 6,666 12,302 14,989 18,260
Annual Average Growth(%) 167.9 60.5 13.0 4.0 4.0

C. Net Changes ( B – A )
Freight (tons) 14.404 1.812 5.397 6.212 8.091 17.724 29.878 40.348
Change (%) — 9.7 27.8 30.9 37.2 53.6 72.8 95.2
Freight (ton-km) 14,774 -557 3,234 6,483 7,964 15,779 24,722 31,478
Change (%) — -2.8 16.0 30.9 35.1 45.7 57.7 71.1
Passengers (number) 0 -14.910 -13.584 -9.992 0.113 4.797 11.446 20.200
Change (%) — — -80.3 -52.8 0.5 12.2 26.6 42.8
Passenger-km 0 -4,266 -3,875 -2,828 101 1,051 2,340 4,041
Change (%) — — -80.1 -52.2 1.5 9.3 18.5 28.4
— = not applicable
Source: Asian Development Bank estimates.
52 Appendix 12

FINANCIAL REEVALUATION

A. Financial Internal Rate of Return

1. The financial internal rate of return (FIRR) was reevaluated using the same methodology
used at appraisal. The FIRR is based on the traffic forecasts prepared by the project completion
review mission for the Hefei-Xi’an Railway (HXR) Project (the Project), in consultation with the
Ministry of Railways (MOR). The major assumptions were as follows:

(i) FIRR calculations were in constant 2000 prices and covered the period from
2000 to 2024.
(ii) Capital costs were based on the actual project costs, but excluded interest and
other charges during construction.
(iii) At the beginning of the operation in January 2004, the tariff was set at CNY0.09
per ton-km. The National Development Review Committee (NDRC) approved a
benchmark tariff of CNY0.12 per ton-km, which allowed MOR flexibility to adjust
the new tariff within ±20 percent of the benchmark; MOR subsequently adjusted
the tariff for the project line to CNY0.11 per ton-km in April 2006. The tariff was
assumed to increase at a rate of 1% annually thereafter, with tariff adjustments
taking place every 5 years.
(iv) The operating costs included only incremental costs incurred in operation and
excluded provisions for depreciation.
(v) The residual value was estimated on the basis of assets having an average
economic life of 35 years

2. The estimated weighted average cost of capital (WACC), after-tax, in real terms was
calculated using actual capital mix and cost of funds. Costs have been considered as follows: (i)
the estimated interest rate of 6.12% per annum is used for China Development Bank (CDB),
and (ii) the opportunity cost of equity capital was assumed to be 8%. The cost of debt is also
adjusted to reflect the impact of an income tax rate of 33%. The nominal cost is converted to
real cost by applying domestic long-term inflation rates. WACC at the point of project completion
equaled 4.9.

4. The FIRR for the Project, computed on an after-tax basis, is 8.1% (Table A12.1), which
exceeds the WACC. The Project is considered both financially viable and sustainable. The
recalculated FIRR, in constant prices, is higher than that calculated at appraisal (8.1% vs. 7.0%),
due to higher than anticipated tariff rates and rapid growth in traffic. The FIRR sensitivity tests
indicate that conditions causing the Project's viability to fall below the WACC are unlikely to
occur. The sensitivity of the Project's financial indicators to cost and revenue variations is shown
in Table A12.2.
 Appendix 12 53

Table A12.1: Financial Internal Rate of Return

(CNY million)
Capital Operating Gross Working Taxes Net Cash Flow
Year
Cost Cost Revenue Capital Paid PCR RRP
2000 2,497 0 0 0 0 (2,497) (2,805)
2001 3,226 0 0 0 0 (3,226) (3,790)
2002 3,911 0 0 0 0 (3,911) (4,527)
2003 6,007 0 0 0 0 (6,007) (6,694)
2004 3,420 0 0 84 0 (3,336) (4,172)
2005 27 2,885 3,285 0 106 266 1,749
2006 259 2,873 3,685 0 119 433 2,111
2007 62 2,837 4,819 0 134 1,786 2,165
2008 0 2,777 5,159 0 197 2,185 2,215
2009 476 2,685 5,274 0 255 1,859 1,811
2010 461 2,566 5,783 0 431 2,325 1,904
2011 2,816 2,451 6,173 0 572 334 (246)
2012 5,377 2,697 6,622 0 629 (2,081) (2,562)
2013 5,274 3,088 7,136 1 663 (1,888) (2,247)
2014 3,380 3,837 7,723 11 618 (101) (153)
2015 0 4,030 8,890 4 891 3,974 3,411
2016 0 4,107 9,088 5 925 4,061 3,556
2017 0 4,155 9,310 4 973 4,185 3,683
2018 0 4,275 9,539 6 1,004 4,267 3,814
2019 0 4,365 9,796 5 1,051 4,386 3,956
2020 1,701 4,365 10,865 0 1,350 3,448 2,448
2021 (66) 4,365 10,922 0 1,366 5,258 4,258
2022 0 4,365 10,988 0 1,384 5,239 4,261
2023 0 4,365 11,063 0 1,405 5,292 4,332
2024 (17,891) 4,365 11,147 0 1,429 23,244 22,850
FIRR = 8.1% 7.0%
FIRR = financial internal rate of return, PCR = project completion report, RRP = report and
recommendation of the President.
Source: Asian Development Bank estimates.

Table A12.2: Sensitivity Analysis

FIRR (%)
Item
PCR RRP
1. Decrease in freight traffic by 10% 7.2 6.3
2. Decrease in passenger traffic by 10% 8.0 6.9
3. (1) + (2) 7.1 6.2
4. Operating cost increase by 10% 7.0 6.4
5. Devaluation of CNY by 10% 7.9 6.8
6. (3) + (4) + (5) 5.9 5.5
FIRR = financial internal rate of return, PCR = project completion
report, RRP = report and recommendation of the President.
Source: Asian Development Bank estimates.
54 Appendix 12

B. Financial Performance

5. The projected financial statement of HXR was prepared based on the following
assumption.

(i) Operating revenues were derived from freight and passenger transport
businesses. A total of 3.24% of business and other taxes/levies were imposed on
aggregate revenues.
(ii) The revenue rates of passenger and freight transport are assumed to be
CNY900 per 10,000 person-km and CNY1,500 per 10,000 ton-km, respectively.
(iii) The balance of receivables was 1.5 months of the gross revenues, whereas
payables and inventory were 2 months and 0.5 month of the total working
expenses, respectively.
(iv) Depreciation is calculated on a straight line method with an average life of 65
years for the main railway structures, 10 years for track, 45 years for buildings,
and 20 years for signaling, communications, safety, and other equipment and/or
facilities.
(v) The acceptance and takeover of the assets occurs every year during the
construction period.

8. Projected financial statements and indicators are presented in Table A12.3. The
projected financial statements indicate that the forecast revenue under the base assumptions is
sufficient to cover annual recurrent costs, depreciation, debt repayments on ADB and CDB, and
generate reasonable profits.
 Appendix 12 55

Table A12.3: Projected Financial Statement of HXR

(CNY million)
Item 2005 2006 2007 2008 2013 2018 2023
Proforma Balance Sheet
1. Assets 25,057 24,299 23,577 22,864 34,515 57,951 89,316
Current Assets 840 840 840 840 2,189 30,105 68,798
Rolling Stocks and Locomotives 1,982 2,101 2,224 2,380 3,797 3,732 4,277
Fixed Asset (Construction) 22,730 21,832 20,934 20,036 22,667 23,771 16,241
2. Liabilities and Capital 25,057 24,299 23,577 22,864 34,515 57,951 89,316
Current Liabilities 0 0 0 0 205 22 25
Long-term Loans 11,450 10,075 8,273 5,941 0 0 0
Paid in Capital 13,380 13,380 13,380 13,380 13,380 13,380 13,380
Retained Earnings 226 844 1,924 3,543 19,707 43,154 71,379
Proforma Income Statement
1. Transport Revenue 3,285 3,685 4,134 4,640 8,008 10,734 11,235
2. Tax and Surcharge 106 119 134 150 259 348 364
3. Operating Expense 2,885 2,873 2,837 2,777 3,088 4,275 4,365
4. Non-Operating Expense 66 74 84 94 165 223 233
5. Total Profit (1 - 2 - 3 - 4) 226 618 1,080 1,619 4,495 5,889 6,272
Proforma Cash Flow Statement
1. Cash Inflow 3,285 3,685 4,134 4,640 8,008 10,734 31,779
Transport Revenue 3,285 3,685 4,134 4,640 8,008 10,734 11,235
Scrap Value of Fixed Asset 0 0 0 0 0 0 20,424
2. Cash Outflow 1,298 1,392 1,525 1,646 7,824 3,219 2,965
Procurement of Fixed Assets 261 283 335 364 5,862 344 283
Operational Expense 865 916 973 1,037 1,535 2,298 2,368
3. Net Cash Inflow (1 - 2) 1,986 2,292 2,609 2,995 184 7,515 28,814
4. Accumulated Net Cash Inflow -20,940 -18,648 -16,039 -13,044 -4,459 26,063 85,394
Loan and Debt Service Estimates
Accumulated Loans (as of
12,440 11,450 10,075 8,273 0 0 0
Beginning)
Debt Service of Current Year 1,986 2,292 2,609 2,995 25 0 0
Capital Used in Repaying Debt
i. Profit 226 618 1,080 1,619 4,495 5,889 6,272
ii. Basic Depreciation 1,024 1,040 1,057 1,077 1,527 1,975 1,996
HXR = Hefei-Xi’an Railway
Sources: Asian Development Bank and Ministry of Railways estimates.
56 Appendix 13

ECONOMIC REEVALUATION

A. Background

1. This economic analysis was based on actual costs of the Hefei-Xi’an Railway Project
(the Project) and updated traffic data collected during the project completion review mission (the
Mission). The economic reevaluation followed the same methodology used in the economic
analysis at appraisal, by using the domestic price numeraire and comparing the project’s net
benefits under with- and without-project situations. All costs and benefits were estimated in
constant 2000 prices. In order to be consistent with the analysis in the report and
recommendation of the President (RRP), the study period (2000–2024) includes five years of
the construction period and the subsequent 20 years of operation, as did the RRP.

B. Cost-Benefit Analysis

2. The Project’s actual final cost was $2,616.66 million, compared with $2,835.0 million
estimated at appraisal. Considering that most of savings were attributed to the unused
contingency allowance, the difference is less than one percent. Financial costs were converted
to economic costs by dividing goods and services into tradables and nontradables. By following
the assumptions in the RRP, a standard conversion factor of 0.9 was used to derive the
economic costs of nontradables.

3. Consistent with the RRP, economic benefits include (i) the net economic value added,
which is based on the economic value per additional ton of coal produced in the vicinity of and
within the project area; (ii) cost savings in freight transportation, which were estimated by
comparing the freight transport cost by the project railway and by road; and (iii) cost savings in
passenger transportation. The expected economic internal rate of return (EIRR) is 19.6%. The
detailed EIRR calculation is given in Table A13.1. The EIRR of 19.6% is much higher than the
15.8% calculated at appraisal, due primarily to higher traffic than originally estimated. The
economic reevaluation is considered conservative, because benefits arising from project-related
access and link roads and the cost savings due to accident avoidance have not been included
in the calculations. Time savings from the diversion of freight traffic from other rail lines were not
included in the analysis. The availability of cost-effective railway transport has benefited
passengers and shippers, as well as producers and consumers of transport goods, and the
EIRR would increase significantly if these additional benefits were included as project-related
benefits. The rapid industrial development along the railway will increase the production of
minerals, coal, chemicals, iron and steel, and other industrial outputs.

4. A sensitivity analysis, conducted by testing key variables, shows that the result is robust
(Table A13.2). The sensitivity analysis indicates that a decrease of 34% in total benefits would
be needed to reach the cutoff EIRR of 12%. A change of this magnitude is considered unlikely
given Ministry of Railways (MOR)’s experience in railway operation and the conservative nature
of the benefit estimation.
 Appendix 13 57
Table A13.1: Economic Internal Rate of Return
(CNY million)

Costs Benefits Net Benefits

Net Freight Passenger
Avoided Freight Passenger Environ-
Year Project Operating Total Economic Transport Transport Total
Railway Time Time mental PCR RRP
Investment Costs Costs Value Cost Cost Benefits
Investment Savings Savings Benefits
Added Savings Savings
2000 2,027 63 2,090 0 0 0 0 0 0 0 0 (2,090) (2,264)
2001 3,331 95 3,426 0 0 0 0 0 0 0 0 (3,426) (3,712)
2002 4,511 91 4,602 0 0 0 0 0 0 0 0 (4,602) (4,986)
2003 5,831 92 5,924 0 0 0 0 0 0 0 0 (5,924) (6,418)
2004 5,609 93 5,702 0 0 0 0 0 0 0 0 (5,702) (6,544)
2005 26 959 985 1,141 2,783 1,157 138 0 0 123 5,342 4,357 5,612
2006 252 1,068 1,320 2,283 3,653 1,410 167 245 10 128 7,896 6,576 5,976
2007 60 1,097 1,157 1,255 3,997 1,496 175 274 11 136 7,345 6,188 4,298
2008 0 1,129 1,129 0 4,376 1,590 185 540 23 151 6,865 5,736 4,736
2009 475 1,161 1,636 0 4,794 1,692 196 589 25 175 7,470 5,834 4,757
2010 461 1,220 1,681 0 5,255 1,803 207 657 27 223 8,172 6,491 5,316
2011 2,676 1,304 3,980 0 5,386 1,896 242 1,017 42 228 8,811 4,831 3,318
2012 5,108 1,393 6,501 0 5,522 1,943 275 1,133 47 232 9,152 2,651 1,120
2013 5,010 1,487 6,497 0 5,664 1,993 315 1,257 53 236 9,518 3,021 1,407
2014 3,211 1,589 4,800 0 5,807 2,045 361 1,385 59 240 9,896 5,096 3,356
2015 0 1,659 1,659 0 5,954 2,259 448 1,413 60 244 10,379 8,720 6,661
2016 0 1,681 1,681 0 6,090 2,299 461 1,138 48 249 10,285 8,604 6,821
2017 0 1,704 1,704 0 6,234 2,342 475 1,161 50 253 10,515 8,811 6,988
2018 0 1,728 1,728 0 6,374 2,379 489 1,188 51 257 10,738 9,010 7,149
2019 0 1,754 1,754 0 6,523 2,421 504 1,213 52 261 10,974 9,220 7,318
2020 1,701 1,782 3,483 0 6,677 2,463 519 1,241 53 265 11,218 7,735 5,831
2021 (66) 1,783 1,717 0 6,677 2,715 573 1,320 57 269 11,609 9,892 7,583
2022 0 1,784 1,784 0 6,677 2,715 573 1,352 58 273 11,647 9,863 7,547
2023 0 1,785 1,785 0 6,677 2,715 573 1,379 59 277 11,679 9,894 7,573
2024 (14,504) 1,787 (12,717) 0 6,677 2,715 573 1,412 60 281 11,717 24,434 22,650
EIRR = 19.6% 15.8%
( ) = negative, EIRR = economic internal rate of return, PCR = project completion report, RRP = report and recommendation of the President.
Source: Asian Development Bank estimates.
58 Appendix 13

Table A13.2: Sensitivity Analysis

EIRR Switching
Scenario
(%) Value (%)
1. Base Case 19.6
2. Increase in Operating Cost by 10% 19.3
3. Decrease in Total Benefit by 10% 17.6 34.0
4. Decrease in Total Traffic by 10% 17.9 38.6
5. Increase in Total Traffic by 10% 20.7
6. Decrease in Net Economic Value Added by 10% 18.5 58.7
7. Increase in Net Economic Value Added by 10% 20.7
8. Combine 4 and 6 16.7 23.3
9. Combine 5 and 7 21.7
EIRR = economic internal rate of return.
Source: Asian Development Bank estimates.
 Appendix 14 59

SOCIAL IMPACT AND POVERTY REDUCTION IN THE PROJECT AREA

A. Introduction

1. The Hefei-Xi’an Railway Project (the Project) areas include 27 counties/districts of 7

prefectural-level cities in Shaanxi, Henan, Hubei, and Anhui Provinces. Among the seven
prefectural-level cities affected, Shangluo City, Nanyang City, Xinyang City, and Liu’an City
include the majority of the remote and poor counties/districts that the Project railway traverses.
Therefore, the social analysis is concentrated on those four cities. For details, please refer to
the following table:

Table A14.1: Project-Affected Area and Poverty Counties

Poverty
Province City County
Counties
Xi’an Lintong District,a Lantian Countya 1
Shaanxi
Weinan Linwei District, Hua Countya
Province
Shangluo Shangzhou District,a Danfeng County,a Shangnan Countya 3
Xixia County,a Neixiang County,a Zhenping County,a Wolong
Nanyang 1
District,a Wancheng District,a Tanghe County, Tongbai Countya
Henan
Pingqiao District,a Shihe District,a Luoshan District,a
Province
Xinyang Guangshan County,a Xi County,b Huangchuan County,b 7
Shangcheng County,a Gushi Countya
Huoqiu County,a Yeji County, Jinzhai County,a Yu’an District,a
Anhui Liu’an 3
Jin’an District a
Province
Hefei Feixi County, Feidong County
Total 15
a
Nationally designated key poverty county.
b
Provincial designated poverty county.
Notes: Xixia County is actually not a poverty county, although it is considered a national-level poverty county in the
report and recommendation of the President.
Sources: Ministry of Railway’s completion report, Research Institute of Foreign Capital Introduction & Utilization in
Southwest Jiaotong University’s post evaluation report, and website of the State Council Leading Group Office of
Poverty Alleviation and Reduction.

B. Stakeholder Analysis

2. Urban people unaffected by resettlement. The Project provides convenient access to

link towns, counties and cities, and fosters both passenger and freight movement. Railway
transport costs are lower and it provides more comfortable and safer services. Along with the
improved investment environment, the local economy has achieved higher growth. Urban
residents, therefore, have gained more employment opportunities, and earned more income.
The statistical data indicate that the average annual net income per urban person in the four
cities increased by 36% to 78% between 2000 and 2005 (Table A14.2).

Table A14.2: Increase of Average Annual Net Income Per Urban Person
City 1999 2000 2005 Increase
Shangluo 3,950 7,038 78%
Nanyang 4,430 6,919 56%
Xinyang 4,037 6,784 68%
Liu’an 4,305 7,810 81%
Sources: Shangluo Statistical Yearbook 2006, Nanyang Economic Statistical Yearbook 2002, Nanyang
Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks 2001
and 2006, and meetings with local governments during the project completion review mission.
60 Appendix 14

3. Rural people unaffected by resettlement. The Project has provided cheaper and safer
transportation, especially during the snowy winter season. Better transport has in turn provided
more opportunities to grow and sell cash crops, thus improving farmers’ incomes. It has also
improved information exchanges and the rational flow of personnel. An increasing number of
farmers work manual jobs and off-farm employment during off-farm season, and their income
increases yearly. The statistical data indicate that the average annual net income per farmer in
the four cities increased by 41% to 53% from 2000 (1999) to 2005.

Table A14.3: Increase of Average Annual Net Income Per Farmer

City 1999 2000 2005 Increase
Shangluo 1,023 1,513 48%
Nanyang 1,889 2,894 53%
Xinyang 1,916 2,708 41%
Liu’an 1,571 2,255 44%
Sources: Shangluo Statistical Yearbook 2006, Nanyang Economic Statistical Yearbook 2002, Nanyang
Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks 2001
and 2006, and meetings with local governments during the project completion review mission.

4. People affected by land acquisition, house relocation or both. Affected people have
been compensated and resettled through implementation of the resettlement plan. During
project construction, they obtained more employment opportunities because they lived close to
the railway. Their living conditions have been improved through house relocation. The Project
has increased market opportunities for agricultural products and part-time jobs. Better
transportation has provided them with more income-earning opportunities.

C. Gender Analysis

5. Before the Project, women in the project area mostly did household and farm work and
had limited opportunities to find employment elsewhere. At that time some young males sought
work opportunities outside their home village, but women remained at home to work on the farm
and look after their families and houses. Their farm work is almost the same as that of men,
involving tilling, seeding, carrying fertilizer, harvesting, and raising livestock. However, with
better transport, many women, especially younger women, are now seeking employment
outside their villages. The Project provided them with new income-generating opportunities.
According to the Research Institute of Foreign Capital Introduction & Utilization in Southwest
Jiaotong University’s post evaluation report, during civil construction of the Project, about 10%
of local laborers employed by the contractors were women; among the farmers working outside
as temporarily employed laborers, about 25% were women.

D. Poverty Reduction

6. The construction of the Project provided local people with more job opportunities, and
brought more demands for construction materials and services. According to the Ministry of
Railway’s completion report, during the railway civil work, 211,399 person-months were worked
by local laborers, with 71.49% of labor supplied by people living below the poverty line. Their
average daily wage for the civil work was CNY 20, much higher than their income from farming.
Local people also profited through selling construction materials, opening restaurants and shops
and, renting out spare houses to the contractors. The Report also stated that the project
construction used CNY 2 billion of local construction materials.
 Appendix 14 61

7. About 1,500 km of service roads were built during the civil works phase. Many bridges
were also built to provide access for the contractors. Many of these roads and bridges have
been transferred at no cost to the local villages for their use.

8. The Project has supported poverty reduction in the project areas. In the remote and
mountainous areas of Shangluo City, the proportion of the population with annual income per
capita incomes below CNY 865 decreased from 38.17% in 1999 to 22.46% in 2006. The
following table shows the poverty reduction percentages in the four cities before and after the
Project.

Table A14.4: Poor People Distribution in Main Project Area before and after the Project
City 1999 2000 2001 2005 2006
Shangluo 38.17% 22.46%
Nanyang 10.73% 7.10%
Xinyang 11.19% 9.06%
Liu’an 12.15% 8.71%
Sources: Meetings with local governments during the project completion review mission, Liu’an Statistical
Yearbook 2006, and websites of local governments.

E. Socioeconomic Development

9. Comparing the socioeconomic indicators of the four cities in 2000 with 2005, there has
been a rapid improvement in socioeconomic conditions in the project areas in those 5 years.
The rate of growth for the tertiary sector in each city was relative higher. Since the tertiary sector
involves the commercial services that distribute goods to final consumers, it is obvious that the
affected people have benefited from the Project railway, which is the most important
transportation facility in most of the affected areas. Development of manufacturing industries is
an effective poverty reduction tool, as it is accompanied by the development of the services
sector, and increases the tertiary sector’s share of the overall industrial sector. This implies that
railway project in the Project area has been effective in promoting poverty reduction. The details
are presented in Table A14.5.

10. In the project-affected mountainous and poor areas, significant poverty reduction
impacts have been achieved. The Project has contributed to socioeconomic development in the
project areas by providing cheaper, safer, and more comfortable access to markets,
employment opportunities, and social services. After the completion of the Project, railway
transportation has stimulated the local economy, especially the secondary and tertiary sector,
and provided better access to employment opportunities and social services. Therefore, the
socioeconomic conditions in the Project areas have improved and the Project’s poverty
reduction objectives have been met.
62 Appendix 14

Table A14.5: Socioeconomic Condition Changes in the Project Area

Shangluo Nanyang Xinyang
Indicator Year/Change Liu’an City
City City City
2000 2,367 10,490 6,621
Total Population ('000) 2005 2,420 10,746 7,876 6,810
Change (%) 2.24 2.44 2.85
2000 2,072 9,012 5,670
Agricultural Population ('000) 2005 2,056 9,017 5,817
Change (%) -0.77% 0.06 2.59
2000 5,627 51,966 26,105 17,862
GDP (CNY million) 2005 10,016 105,343 50,856 31,282
Change (%) 78.00 102.72 94.81 75.13
2000 1,666 15,370 9,208 6,447
Primary Sector (CNY million) 2005 2,461 27,576 15,042 8,321
Change (%) 47.72 79.41 63.36 29.07
2000 2,011 23,766 8,945 5,250
Secondary Sector (CNY million) 2005 3,528 52,799 19,348 10,493
Change (%) 75.44 122.16 116.30 99.87
2000 1,961 12,830 7,953 6,164
Tertiary Sector (CNY million) 2005 4,027 24,968 16,467 12,468
Change (%) 105.35 94.61 107.05 102.27
2000 2,348 4,963 2,698
GDP Per Capita (CNY) 2005 4,151 9,826 6,473 4,594
Change (%) 76.79 97.99 70.27
2000 2,197 13,116 6,525
Cultivated Land ('000 mu) 2005 1,939 14,087 8,519 6,300
Change (%) -11.74 7.40 -3.44
2000 1.06 1.46 1.15
Cultivated Land Per Farmer
(mu) 2005 0.94 1.56 1.08
Change (%) -11.05 7.34 -5.89
2000 500 926 5,115
Paddy and Irrigated Land
('000 mu) 2005 459 602 5,295
Change (%) -8.11 -34.93 3.52
2000 0.24 0.10 0.90
Paddy and Irrigated Land Per
Farmer (mu) 2005 0.22 0.07 0.91
Change (%) -7.39 -34.97 0.90
2000 1,128 1,889 1,916 1,571
Average Income Per Farmer
(CNY) 2005 1,513 2,894 2,708 2,255
Change (%) 34.13 53.20 41.34 43.54
GDP = gross domestic product, mu = traditional land area measure.
Sources: Shangluo statistical yearbooks 2001 and 2006, Nanyang Economic Statistical Yearbook 2002,
Nanyang Statistical Yearbook 2006, Analysis and Forecast of Xinyang’s Economy, Liu’an statistical yearbooks
2001 and 2006, meetings with local governments during project completion review mission, and websites of
local governments.