Heilonjiang Expressway Project (Loan 1324-PRC)

7/31/2019 Heilonjiang Expressway Project (Loan 1324-PRC)

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ASIAN DEVELOPMENT BANK PPA: PRC 26377

PROJECT PERFORMANCE AUDIT REPORT

ON THE

HEILONGJIANG EXPRESSWAY PROJECT(Loan 1324-PRC)

IN THE

PEOPLES REPUBLIC OF CHINA

August 2001


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CURRENCY EQUIVALENTS

Currency Unit Yuan (Y)

At Appraisal At Project Completion At Operations Evaluation(May 1994) (August 1999) (June 2001)

Y1.00 = $0.115 $0.120 $0.124

$1.00 = Y8.70 Y8.32 Y8.07

ABBREVIATIONS

ADB Asian Development BankEA Executing AgencyEIRR economic internal rate of returnFIRR financial internal rate of returnHHEC Heilongjiang Hatong Expressway CorporationHPCD Heilongjiang Provincial Communications DepartmentHPSB Heilongjiang Public Security BureauHSDI

Heilongjiang Survey and Design Institute

HTSMO Heilongjiang Traffic Safety Management OrganizationIRI international roughness indexNTHS National Trunk Highway SystemO&M operation and maintenanceOEM Operations Evaluation MissionPCR project completion reportPPAR project performance audit reportPRC Peoples Republic of ChinaTA technical assistanceTOR terms of reference

VOC

vehicle operating cost

WEIGHTS AND MEASURES

km kilometerm metervpd vehicles per day

NOTES

(i) The fiscal year (FY) of the Government and HHEC ends on 31 December.(ii) In this report, $ refers to US dollars.

Operations Evaluation Department, PE-570


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CONTENTSPage

BASIC DATA ii

EXECUTIVE SUMMARY iii

I. BACKGROUND 1

A. Rationale 1B. Formulation 1C. Purpose and Outputs 1D. Cost, Financing, and Executing Arrangements 2E. Completion and Self-Evaluation 2F. Operations Evaluation 3

II. PLANNING AND IMPLEMENTATION PERFORMANCE 3

A. Formulation and Design 3

B. Achievement of Outputs 3C. Cost and Scheduling 4D. Procurement and Construction 4E. Organization and Management 5

III. ACHIEVEMENT OF PROJECT PURPOSE 5

A. Operational Performance 5B. Performance of the Operating Entity 7C. Financial and Economic Reevaluation 8D. Sustainability 9

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 9

A. Socioeconomic Impact 9B. Environmental Impact 11C. Impact on Institutions and Policy 11

V. OVERALL ASSESSMENT 13

A. Relevance 13B. Efficacy 13C. Efficiency 13D. Sustainability 14

E. Institutional Development and Other Impacts 14F. Overall Project Rating 14G. Assessment of ADB and Borrower Performance 14

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 15

A. Key Issues for the Future 15B. Lessons Identified 15C. Follow-Up Actions 15

APPENDIXES 17


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BASIC DATA

Heilongjiang Expressway Project (Loan 1324-PRC)

Project Preparation/Institution BuildingTA No. TA Name Type Person-

MonthsAmount

($)Approval

Date1981 Heilongjiang and Yunnan Expressways PPTA 13 320,000 16 Nov 19932177 Preparation of a Road Safety Program ADTA 22 600,000 29 Sep 19942178 Provincial Highway Network Planning ADTA 38 600,000 29 Sep 1994

Key Project Data ($ million)As per ADB

Loan DocumentsActual

Total Project Cost 330.0 309.2Foreign Exchange Cost 142.0 142.1Local Currency Cost 188.0 167.1

ADB Loan Amount/Utilization 142.0 141.5ADB Loan Amount/Cancellation 0.5

Key Dates Expected ActualAppraisal 3-23 May 1994

Loan Negotiations 15-19 Aug 1994Board Approval 29 Sep 1994Loan Agreement 14 Feb 1995Loan Effectiveness 15 May 1995 7 Apr 1995First Disbursement 23 May 1995Project Completion 30 Sep 1998 30 Aug 1997Loan Closing 31 Mar 1999 23 Jun 1998Months (effectiveness to completion) 40 29

Key Performance Indicators (%) Appraisal PCR PPARFinancial Internal Rate of Return 3.7 3.3 1.1Economic Internal Rate of Return 18.9 15.1 14.6

Borrower Government of the Peoples Republic of China

Executing Agency Heilongjiang Hatong Expressway Corporation1

Mission Data

Type of MissionNo. of Missions No. of Person-Days

Fact-Finding 1 84Appraisal 1 64Project Administration

Inception 1 7Review 3 28

Project Completion 1 36Operations Evaluation2 1 30

TA = technical assistance, ADTA = advisory technical assistance, ADB = Asian Development Bank, PCR = projectcompletion report, PPAR = project performance audit report, PPTA = project preparatory technical assistance.1

Referenced at appraisal as the Heilongjiang Hatong Highway Corporation, this is a new organization incorporatedunder the Heilongjiang Provincial Communications Department.

2The mission comprised T.M. Hutton (Evaluation Specialist and Mission Leader), Dr. Yuli Pan (Local Consultant),and D.B. Willmott (International Consultant).


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EXECUTIVE SUMMARY

The Project, to build a 350-kilometer (km) two-lane expressway connecting the cities ofHarbin and Jiamusi in Heilongjiang Province, was formulated as a priority development underthe Governments Eighth and Ninth Five-Year Plans (1991-1995 and 1996-2000) for theconstruction of 12 key transport corridors. The Project was expected to improve access to

Beijing and to Dalian, Dandong, and Tongjiang ports; reduce vehicle operating costs; relievetraffic congestion over the existing narrow unpaved Highway 101; spur development of theregion and hinterland and provide poverty relief for Tonghe and seven other poverty areas,which the expressway would traverse; reduce vehicle accidents; and strengthen HeilongjiangProvinces institutional capacity for highway planning, construction, operation, andmanagement. Two technical assistance (TA) grants attached to the Project were intended toprovide advisory support to address mounting road safety concerns (associated with nationalhighway designs) and further develop human resources in highway planning.

The Appraisal Mission of the Asian Development Bank (ADB) was completed in May1994, and ADBs loan of $142 million and two TA grants of $600,000 each were approved on29 September 1994.3 The Project was completed in August 1997, 13 months ahead of

schedule. Expeditious implementation was facilitated through early loan effectiveness, advanceaction on the award of civil works, procurement of materials and equipment, and engagement ofconsultants, and retroactive financing. The final project cost of $309.2 million was less than theappraisal estimate of $330 million by 6 percent. ADBs loan disbursements were $0.49 millionbelow the approved loan amount.

The project rationale to support the Governments investment program for developing anational highway system was consistent with ADBs country assistance strategy to supportinfrastructure development aimed at raising national productivity. Without the Project, trafficcongestion along the existing corridor would have impeded access to the cities of Harbin andJiamusi and slowed output through the northeast port of Tongjiang to Japan, the Republic ofKorea, and the Russian Federation, and through the southern ports of Dalian and Dandong.

Strengthening Heilongjiang Provinces capacity for highway planning, construction, operation,and management would have been denied as would the need to gain experience andunderstanding of road and pavement design to meet traffic loads and extreme weatherconditions and reduce accidents. The regions farming communities would not have benefitedfrom reduced transport costs and easier access to markets.

The quality of the civil works is sound and they should long outlast the projected end ofeconomic life in 2018. Problems observed in ADBs project completion report (PCR) withpavement cracking and deformation have been adequately addressed through maintenancesealing and pavement reconstruction. Safety deficiencies in design have been prioritized forremedy under Heilongjiang Provinces five-year program, and actions to date have resulted in areduction of accidents. The expressway is well maintained, and ongoing improvements aimed at

reducing overloading and improving safety are a priority concern attended to with a strongcommitment.

The primary purpose of improving transport efficiencies, reducing vehicle operating costs(VOCs), relieving congestion along the existing road, and facilitating access for intercity trafficwas achieved. Average journey times for cars and small buses between Harbin and Jiamusiwere reduced from 15 hours to 4.5 hours. Average VOC savings were around 40 percent. The

3Loan 1324-PRC: Heilongjiang Expressway Project; TA 2177-PRC: Preparation of a Road Safety Program;and TA2178-PRC: Provincial Highway Network Planning.


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two TAs attached to the Project proved appropriate, enhanced safety awareness, and planningand design knowledge, and resulted in recommendations that have largely been taken up.

Savings in VOCs, which were expected to benefit farmers, spur economic developmentof the region, and reduce poverty, were only partly passed on because of government controlson the price of key farm inputs. Other socioeconomic benefits deriving from reduced journeytimes were not measured. Their impact on production and on access to education and health

services remains largely unknown.

The Project is rated successful. The recalculated project economic internal rate of return(EIRR) of 14.6 percent attests to the overall efficiency and economic viability of the Project. Thecompletion of the connecting expressway link at Jiamusi improved access to the port atTongjiang, and economic zone development will help ensure that traffic growth is sustained.Revenues from tolls are adequate to cover management operations and capital outlays forroutine and spot maintenance. Toll charges are set to take into account full project recoverycosts, including provision for periodic maintenance, and adjusted to meet user affordability. Tollcharges will next be reviewed in 2004 and thereafter every four years. The toll level has notinhibited the diversion of traffic from the existing road.

Detracting from a higher assessment are (i) weaknesses in pavement and safety designthat would likely have been avoided with greater attention to technical aspects, and (ii) failure todemonstrate adequately that economic development and poverty reduction objectives wereachieved.

Key lessons from the Project are (i) the need for more rigorous review of technicalfeatures at appraisal and during implementation to avoid design deficiencies associated withengineering and safety standards; and (ii) the need to make clear the project rationale, purpose,and targets, and how these will be realized, so that there is a clear basis for monitoring andevaluating benefits.

ADB should take these lessons into account and ensure that (i) all future reviews of

feasibility studies comprise adequate technical review of engineering and safety design, (ii) futureexpressway projects are planned with greater attention to ensuring that design specifications areconsistent with meeting project objectives and expectations for the quality of project outputs, and(iii) the responsibilities and specific advisory tasks of future implementation consultants are morediligently managed and evaluated for achievement of purpose.

The Government should initiate measures to ensure that pavement and highway designsfor remaining corridor developments under the National Trunk Highway System are designed tomeet international safety standards and are constructed with a more durable pavement surface.Specific to the Project, and for future corridor developments, a more responsive mechanism fortransferring the gains from lower transport costs to the price of farm inputs such as fuel,fertilizer, and chemicals should be introduced. Finally, the Heilongjiang Hatong Expressway

Corporation should continue its efforts aimed at reducing accidents.


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I. BACKGROUND

A. Rationale

1. The Projects rationale reflected (i) the investment program of the Government of the

Peoples Republic of China (PRC) for addressing transport constraints on economic activity anddeveloping a National Trunk Highway System (NTHS) linking provincial capitals and all citieswith populations of 500,000 and more, and (ii) the country assistance strategy of the AsianDevelopment Bank (ADB) to support infrastructure development aimed at raising nationalproductivity and efficiency to promote sustainable and equitable economic growth.

B. Formulation

2. The Project was formulated as a priority development under the Governments Eighthand Ninth Five-Year Plans (1991-1995 and 1996-2000, respectively) for the construction of

12 key NTHS corridors. The Heilongjiang Provincial Communications Department (HPCD)carried out a feasibility study for the Project in 1993, which ADB reviewed in January 1994under a project preparatory technical assistance (TA).4 Fact-finding was completed in Marchand appraisal in May 1994. ADBs loan of $142 million and two TA grants were approved on29 September 1994,5 together with another expressway project in Yunnan Province.6 TheBorrower was the PRC Government.

C. Purpose and Outputs

3. The overall purpose of the Project was to improve the capacity and integration of theroad transport network in Heilongjiang Province, and help eliminate road transport bottlenecksconstraining economic growth. The Project provided for (i) construction of a 350-kilometer (km)two-lane expressway connecting Harbin and Jiamusi cities;7 (ii) construction of seveninterchanges with toll facilities and eight bridges; and (iii) the establishment of service andmaintenance areas.8 The advisory TAs were designed to help the Government prepare a roadsafety program to address mounting road safety concerns (associated with national highwaydesigns) and provide training in provincial highway network planning.

4. By making it easier for motor vehicle traffic to move between Harbin and Jiamusi, theProject was expected to serve as a link in the transport corridor between Liaoning, Jilin, andHeilongjiang provinces; improve access to Beijing and to Dalian, Dandong, and Tongjiang ports;reduce vehicle operating costs (VOCs); reduce traffic accidents; promote technology transfer;have a positive impact on regional and hinterland development; and strengthen HeilongjiangProvinces institutional capacity for highway planning, construction, operation, andmanagement. In addition, construction of the expressway was expected to provide poverty relief

4TA 1981-PRC: Heilongjiang and Yunnan Expressways, for $320,000, approved on 16 November 1993.

5Loan 1324-PRC: Heilongjiang Expressway Project, for $142 million; TA 2177-PRC: Preparation of a Road SafetyProgram, for $600,000; and TA 2178-PRC: Provincial Highway Network Planning, for $600,000.

6Loan 1325-PRC: Yunnan Expressway Project, for $150 million.

7An expressway is a corridor highway with merging access and exits and no intersections. As completed, theexpressway length totaled 331 km.

8Project inputs included (i) procurement of equipment and facilities for road maintenance, construction supervision,materials testing, and toll road operations and communications; and (ii) consulting services for construction andsupervision.


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for Tonghe and seven other poverty areas.9 People living in the Project-influenced area wereexpected to benefit through improved transport services to administrative, health, education,and commercial centers. New employment opportunities were to be created throughconstruction work on the Project and through expansion of industries, services, and commercein the area. A total of 392 households were to be relocated within 1 km of their originaldwellings, and with attention paid to maintaining their links with schools.10 The Project was notexpected to cause a loss of jobs.

D. Cost, Financing, and Executing Arrangements

5. The estimated total project cost at appraisal was $330 million equivalent, with a foreignexchange cost of $142 million for civil works, equipment, consulting services, and loan servicecharges during construction. ADBs loan was to be used to cover the entire foreign exchangecost and the Government was to meet the local currency cost of $188 million equivalent.11

Assurances that local currency funding would be available on a timely basis were a feature ofthe financing arrangements. ADBs loan was drawn from its ordinary capital resources withprovision for variable interest based on ADBs pooled cost of funding US dollars, and a

repayment period of 24 years (including a grace period of 4.5 years on repayment of principal).The PRC Government made subsidiary loan agreements with Heilongjiang Province and theHeilongjiang Hatong Expressway Corporation (HHEC) under the same terms and conditions.HHEC was created as a new organization under HPCD, and was the Executing Agency (EA).Overall responsibility for implementation was assigned to the directors of HHEC under thegeneral supervision of HPCD.

E. Completion and Self-Evaluation

6. ADBs project completion report (PCR) Mission visited the project area in May 1999 and

considered the Project partly successful.

12

Construction of the expressway was foundimplemented as envisaged, but safety design features were considered inadequate and to havecaused an abnormal incidence of serious accidents. The Mission reported less than fullcompliance with ADBs loan covenants covering reporting requirements for the attached TAs,project benefit monitoring, audited accounts for toll operations, and environmental mitigationmeasures. Vehicle use of the expressway was less than envisaged, and the financial internalrate of return (FIRR) of 3.3 percent and economic internal rate of return (EIRR) of 15.1 percentlower than the appraisal estimates of, respectively, 3.7 percent and 18.9 percent. Pavementcracking, which was later investigated under TA 2846-PRC,13 was found prevalent over theasphalt-concrete sections. Maintenance attention and budget provisions were consideredsatisfactory. Recommendations were made for (i) the Ministry of Communications to conductfurther research studies on alternative pavement designs with a view to revising relevant

9Fuyuan, Huanan, Lindian, Mingshui, Qinggang, Tailai, and Tongjiang.

10 Including, where necessary, provision for over- and underpasses.11 Government funding was to be sourced from (i) a vehicle purchase fee fund administered by the Ministry of

Communications, and (ii) a road maintenance fee fund administered by HPCD.12

At the time of PCR preparation, there was a three-category rating system: unsuccessful, partly successful, andgenerally successful. A new system was introduced in September 2000, which rates projects in one of fourcategories: unsuccessful, partly successful, successful, and highly successful. The evaluation criteria for the newsystem differ from those used under the old one.

13TA 2846-PRC: Changchun-Harbin Expressway, for $600,000, approved on 22 August 1997. No serious damage topavement strength was found, and recommendations for remedial improvements were made. Deterioration along a25 km section of the expressway was attributed to insufficient soil consolidation arising from an inadequategeotechnical survey.


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pavement standards, (ii) HHEC to monitor the incidence of cracking and ensure that routinemaintenance in the form of sealing and repair was carried out, and (iii) HPCD and relevantgovernment departments to make a more intensive effort to implement safety recommendationsmade under TA 2177-PRC.

7. Based on PCRs assessment of efficiency of project implementation, the achievement ofthe project purpose, the EIRR of 15.1 percent, and the success of the attached TAs on the

positive side, and the concerns about the noncompliance with reporting covenants, pavementdurability, and operating safety on the negative side, the rating of partly successful was realisticand appropriate. It called attention to the need to implement expeditiously PCRrecommendations, particularly in relation to road safety.

F. Operations Evaluation

8. The project performance audit report (PPAR) reviews the findings of the PCR andpresents the findings of the Operations Evaluation Mission (OEM) that visited the Project during6-16 June 2001. The purpose is to draw lessons relevant for the design of future highway

projects in the PRC and other developing member countries. Special attention is given toassessing the achievement of project purpose, sector goals, and intended developments fromthe Project, the operating performance of the expressway, the sufficiency of design anddevelopment impacts of the Project, as well as the social and environmental consequences ofthe Projects operations. The PPAR is based on the findings of the OEM, taking into accounttwo years of additional operational data; a review of the PCR, the Appraisal Report, andmaterial in ADB files; discussions with ADB staff, senior officials of HHEC, and othergovernment agencies; and spot interviews with farmer representatives. Copies of the draftPPAR were provided to the Government, HHEC, and ADB staff concerned for review, and theircomments were considered when finalizing the PPAR.


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II. PLANNING AND IMPLEMENTATION PERFORMANCE

A. Formulation and Design

9. The Project for an expressway linking the cities of Harbin (population 3.5 million) andJiamusi (population 2.2 million) was consistent with the Governments investment program(para. 1). Project design features in relation to safety were inadequately addressed.

10. Essential safety features not included or insufficient in the appraised design includedmerging access and exit ways, under- and overhead passes, wide shoulders, emergencystopping areas, line markings, and warning signs.14 These were also inadequately rectified bythe implementation consultants, who should have ensured that such design features wereconsistent with international practice. The lack of safety design features could have beenovercome with more attention to technical review (para. 60).

B. Achievement of Outputs

11. During implementation and following a review of the projections for traffic densities,several modifications to the detailed design were made. The section from Jiamusi to Bin Xian(278 km) was widened to 12 meters (m) by the addition of 1.5 m shoulders on each side. Thesection from Bin Xian to Harbin (53 km) was designed as the first stage of an expresswayconstructed with four lanes. Modifications to the project scope along the Jiamusi-Bin Xiansection included (i) adding 56 underpasses for local farm traffic, (ii) constructing 42 grade-separated intersections, (iii) improvements to the alignment over 8 km, and (iv) adding threeaccess and exit ways to improve access to Fangzheng, Huifa, and Yilan counties.15 All otherphysical outputs of the Project were implemented as planned.

12. Construction of the expressway helped achieve the Projects primary aim of improvingtransport efficiencies, and reducing congestion on the existing highway (paras. 22 and 23). Thequality of civil works is generally sound (Appendix 1). The incidence of pavement cracking anddeformation, as highlighted in the PCR, is small in relation to the total length of the expressway.Cracks have been sealed, damaged pavement areas repaired or reconstructed, and ridingquality preserved (para. 24). Minor pavement damage is a factor near approaches to bridges,where civil works were completed separate to construction of the expressway, and is largely theresult of overloading.16

14These take on added importance for an expressway designed for carrying traffic at high speed and combinedvehicle approach speeds of 240 km per hour.

15The purpose of items (i) and (ii) was primarily to improve access. The additional under- and overpasses helpedmake crossing the expressway safer, but remain on average 2 km apart. The graded intersections allow vehicleand nonvehicle traffic to directly cross the expressway and represent a safety hazard.

16Heavy vehicles carrying loads of more than 30 tons distributed over two axles are common. Heavy truck loadsconsist predominantly of coal, logs, and vegetables. Pavement and subgrade design is considered sufficient towithstand loads of up to 10 tons per axle.


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C. Cost and Scheduling

13. The actual project cost of $309.2 million equivalent was 6 percent below the appraisalestimate of $330 million. The foreign exchange cost of $142.1 million almost matched theappraisal estimate. The local currency cost of $167.1 million equivalent was lower by11 percent. The reduced overall project cost was due to early completion of the Project and

resultant savings on contingency provisions. Total disbursements under the ADB loanamounted to $141.51 million, and the undisbursed balance of $0.49 million was cancelled.

ADBs loan financed all the foreign exchange cost except $0.6 million financed by theGovernment. The Government financed the entire local currency portion.

14. The Project was completed 13 months ahead of schedule on 30 August 1997. Earlyimplementation was facilitated through advance action on the award of civil works contracts,procurement of materials and equipment, and engagement of consultants, as well as throughretroactive financing.17 ADBs loan became effective within 7 weeks of loan signing, which waswithin the 90-day period specified in the Loan Agreement. As a result of expeditiousimplementation, the loan closing date was advanced from 31 March 1999 to 23 June 1998. Acomparison of the actual implementation schedule with the appraisal schedule is shown in

Appendix 2.

D. Procurement and Construction

15. Thirteen civil works contracts (see Map) and 15 contracts for the supply of constructionmaterials and equipment were approved.18 All civil works contracts were awarded followingbidding procedures acceptable to ADB. Equipment and materials supplied under the Projectwere procured in accordance with ADBs Guidelines for Procurement and no disputes orcontractual difficulties were encountered. HHEC reported that the civil works contractors andsuppliers for the Project performed satisfactorily. Quality and performance of materials and

equipment procured met technical specifications. All equipment and facilities inspected alongthe project expressway were functioning satisfactorily.

E. Organization and Management

16. The organization and management structure for the Project proved appropriate, andagreed implementation arrangements were closely followed. The recruitment of internationalconsultants was initiated prior to loan approval and a consortium of one international consultingfirm and three domestic consulting firms was contracted under an agreement concluded inMarch 1995. The international consultants were recruited in accordance with ADBs Guidelineson the Use of Consultants. The domestic consultants were recruited using local procedures.The international consultants contributed to institutional strengthening through workingalongside their counterparts in HHEC, and providing training on international standards andpractices in project management, contract administration, and quality control. Engineering andprogress reports were submitted promptly, and supervisory responsibilities over contractoractivities and advisory assistance to HHEC were discharged satisfactorily. HHEC appreciated

17Retroactive financing was allowed for $14 million.

18Twelve contracts are shown on the map. The 13th contract, administered by way of force account, was to meetadditional works for design revisions and access roads.


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the efforts of the international consultants, particularly in the area of training, and considered theperformance of the international and domestic consultants satisfactory.

17. HHECs working relationship with ADB was satisfactory. Between April 1995 and August1997, ADB conducted three review missions, one TA Inception Mission, and one PCR Mission.The timing of the review missions to monitor implementation progress might have been better.The first review mission in July 1995, over four days, was largely by way of administrative

follow-up on inception arrangements and too early to reflect design concerns. The second wasover nine days in November 1996, when heavy snow conditions prevented physical inspection.The third was conducted during the opening of the expressway. Problems relating to safety andpavement cracking were therefore not evident, but might have been with more timely reviewsand relevant reporting requirements for the consultants.19 Coordination and progress meetingswere held during review missions with the Ministry of Finance, HPCD, HHEC, and consultantsto solve problems and minimize delays.

18. ADBs loan and project agreements included 23 covenants relating to implementationand operations of the Project. Apart from requirements for due diligence, conduct, andscheduling, special covenants included (i) reviewing and disseminating the outcome ofexperience gained through TA support, (ii) implementing environmental measures, and

(iii) establishing toll operations with regular review of charges. At project completion, five loancovenants had not been complied with. These related to reporting requirements and, althoughnot detrimental to the Project per se, reflected weaknesses in organization and coordination asmuch as unfamiliarity with requirements. Since project completion and circulation of ADBsPCR, all covenants have been complied with.

19 The overall effectiveness of the implementation consultants in ensuring that designs were made and implementedto international traffic engineering standards was impaired by reporting requirements that did not provide forrecommendations to be brought to the attention of the Borrower. Reporting was by way of monthly progress reportscollated quarterly. These were forwarded to the EA with copies to ADB. Comments relating to the appropriatenessof technical design and adequacy of safety features and alignments, while specific to the consultants terms ofreference, were not reported. There was also no requirement under the consultants terms of reference for a finalreport covering the consultants specific responsibilities.


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III. ACHIEVEMENT OF PROJECT PURPOSE

A. Operational Performance

19. Operational performance is measured in terms of the Projects achievements relative to

expectations at appraisal to meet traffic forecasts, relieve traffic congestion, and improvetransport efficiency, pavement quality, and overloading. The adequacy of maintenance is alsoreviewed. The Projects achievements and targets are summarized in Appendix 3.

20. Actual traffic volumes on the project expressway are significantly lower than projected atappraisal. The average number of vehicles per day (vpd) in 2000 was less than 3,000, asagainst the appraisal projection of about 4,500. The lower traffic volumes are attributed tocompletion delays in connecting highway links from Harbin and Jiamusi.20

21. In the first half of 2001, traffic flows increased significantly due to completion of theJiamusi-Tongjiang expressway section, which provides additional port access to Japan, theRepublic of Korea, and the Russian Federation.21 Traffic from 2000 onwards is expected to

increase by approximately 1 percentage point more than the appraisal projection of 4 percentper annum to 2018, but that will still not be enough to catch up with the appraisal projection forthat year.22

22. Approximately 60 percent of motorized traffic using Highway 101 (the existing road) wasdiverted to the project expressway. Actual diversion from the Harbin-Bin Xian section was lowerthan the appraisal projection of 70 percent, but higher for the remaining sections. Diverted trafficis mainly from the Harbin-Jiamusi railway (for passengers) and neighboring Shandong,Liaoning, and Jilin provinces for the transport of fruits, vegetables, and agricultural products toJiamusi and Tongjiang port. Benefit assessment surveys confirm that vehicle operators chooseto use the expressway because of savings in time and VOCs.23

23. Average journey times from Harbin to Jiamusi for a car are around 4-4.5 hours, implyingan average traffic speed of 74-83 km per hour. Without the Project, this journey took on average15 hours. Average VOC savings are around 40 percent. Users of the existing road also benefitfrom improved transport efficiencies.24

24. The riding quality of the road is high. The pavement is constructed with an estimatedaverage international roughness indexof 2.5.25 The geometric alignment has a design capabilityfor average vehicle speeds of 120 km/hour, but to travel safely at this speed would requireinternational safety features, dry weather, and moderate wind conditions.

25. The OEM visited the Projects maintenance depot near Fangzheng, and discussed withthe Manager the Projects effectiveness in maintenance operations. The OEM also made

several stops along the expressway where maintenance was being undertaken, and resealingand pavement replacement work was taking place. Maintenance teams from the five countiesthat the expressway crosses conduct expressway maintenance. Each maintenance team has a

20Including links to Tongjiang, Dalian, and Dandong ports, Boli, and Changchun.

21 Highway access to Tongjiang port was completed in October 2000.22

Estimated by HPCDs Highway Planning Division.23

Heilongjiang Harbin-Tongjiang Highway Company, Benefit Assessment After the Project, December 2000.24

Reduced traffic congestion allowed the existing road to be maintained at a lower international roughness index (IRI)and VOCs were reduced on average by 15-20 percent. Time savings were also identified as an important benefit.

25Highway 101 has an estimated IRI of 6 to 8, except over the section Harbin-Fangzheng, which is paved and has anIRI of 3 to 3.5.


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staff of about 120 and six maintenance vehicles. These include a grader for snow removal andpavement regrading, a front-end loader for dealing with cutting slippages, one road cleaner andliquid disperser for reducing ice hazards, two general maintenance trucks, and one generalservice van. Routine maintenance for clearing drains and trimming foliage is organized as alineman system with individuals responsible and engaged full-time for a specified 2-3 km ofexpressway. Daily patrol assessments report on the need for spot maintenance. Inspection ofthe depot vehicles and equipment on site suggests they were being used extensively. Spot

maintenance was clearly in evidence. The overall approach to maintenance adopted by HHEC,including technical capability, equipment, and funding (paras. 26 and 27), appears effective.

B. Performance of the Operating Entity

26. At appraisal in 1994, the financial forecasts anticipated HHEC depending on the financialsupport of HPCD for five years until toll collection began. With tolls, toll revenue was expectedto cover HHEC operating expenses, routine maintenance, and debt servicing but to beinsufficient to meet periodic maintenance requirements and recover the full capital costs of theProject. Since 1996, the Government has committed to setting toll revenues on ADB-funded

expressway projects at levels fully commensurate with satisfying debt service obligation,covering operation and maintenance (O&M) costs including periodic maintenance, andgenerating a satisfactory return on investment adjusted for inflation.

27. Actual revenues have been in line with appraisal projections. They have provedsufficient to meet operating expenditures, routine maintenance, plus significant unplannedrehabilitation expenditures.26 However, not until 2001 have they been sufficient to cover fulldebt-servicing requirements (Table 1). In the years 1998 to 2000, these had to be met byHPCD.27

Table 1: Projected versus Actual Revenues and Operating Profits

Appraisal Projection

(Y million)

Actual

(Y million)YearEndingToll

RevenuesGross

OperatingProfit

NetProfit

a

TollRevenues

GrossOperating

Profit

NetProfit

a

1998 28 27 (56) 98 (3) (25)1999 126 109 1 128 48 (98)2000 143 101 (4) 131 51 (100)Forecast2001 149 123 21 150

b90

b8

a Gross operating profit less debt service.b

May 2001 estimate.

28. Toll charges per vehicle between Harbin and Jiamusi (330 km) are considered adequate.They are the same both ways, and range from Y120 for a car to Y265 for a large truck (over15 tons).28 There have been no adjustments to the opening toll rates.29 The respective loan

26Such expenditures covering the sealing of cracks and pavement repairs were approximately Y50 million in 1999and Y40 million in 2000, and are expected to amount to around Y30 million in 2001 and following years.

27From Heilongjiang Provinces road maintenance fee levied on vehicle owners.

28Lesser toll charges of Y10 per car and Y20 for a heavy truck apply for travel on shorter sections. The price ofGrade 90 petrol is Y3.96 per liter.

29In the year 2000, a new toll category for extra large vehicles between 25 and 39 tons laden was introduced.


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covenant provides for tolls to be adjusted every five years taking into account inflation, increase intraffic volume, maintenance requirements, taxes, and loan servicing. The first adjustment isscheduled for 2004. HHEC has made recommendations for review thereafter every four years.The OEM found no evidence that tolls were prohibitive or causing traffic to use alternativeroutes. The existing road remains open, is lightly trafficked, and used predominantly forintertown movements.

C. Financial and Economic Reevaluation

29. The appraisal estimate for the Projects FIRR was based on the anticipated investmentcosts, expected toll charges, O&M costs, and forecasts for the volume of traffic. For calculatingthe EIRR, taxes were excluded from the investment costs, and O&M costs were expressed ineconomic terms. The financial benefits were calculated as a revenue stream for the forecasts ofvolume of traffic multiplied by the expected toll charges. The economic benefits were calculatedas (i) the savings in VOCs for diverted and generated traffic and reduced average traveldistance of 18 km; and (ii) savings in VOCs for remaining vehicles using Highway 101 due toreduced traffic congestion. The PCR repeated the approach adopted at appraisal using actual

inputs for investments costs, year of disbursement, traffic volumes, and O&M costs to FY1998.

30. Apart from including also time savings in the EIRR calculation because of theirsignificance (para. 23), the OEMs reestimates follow the same methodology and are calculatedbased on actual data covering operations to FY2000. Table 2 compares the appraisal estimateswith the PCR and PPAR reestimates. The lower PCR and PPAR reestimates reflect the reducedtraffic volumes compared with those forecast at appraisal, change in traffic mix, lower differencein VOC savings for cars compared with trucks, and higher maintenance expenditures. The FIRRreestimate of 1.1 percent includes a realistic provision for periodic maintenance and is based onthe current toll levels.30 The EIRR reestimate of 14.6 percent confirms the economic viability ofthe Project.31

31. The FIRR and EIRR reestimates are robust and relatively insensitive to changes in theforecast volume of traffic after FY2001. A 10 percent decrease in the forecast volume of trafficafter FY2001 will reduce the FIRR by 0.6 percentage points and the EIRR by 0.3 percentagepoints. Appendix 4 provides a detailed account of the methodology assumptions and sensitivitytests underlying the FIRR and EIRR estimates.

Table 2: FIRR and EIRR Estimates(percent)

Item Appraisal PCR PPAR

FIRR 3.7 3.3 1.1

EIRR 18.9 15.1 14.6

EIRR = economic internal rate of return, FIRR = financial internal rate of return,PCR = project completion report, PPAR = project performance audit report.

30If provision for periodic maintenance were kept at the same relative level as for appraisal, the FIRR would increaseto 1.8 percent.

31Without time savings, which were not considered in the appraisal and PCR calculations, the EIRR decreases to12.7 percent, and is still above the opportunity cost of capital.


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D. Sustainability

32. The civil works are sound, and should outlast the projected economic life of the Project.Revenues from tolls are sufficient to cover the costs of expressway O&M. Toll charges to meet

these expenditures plus loan servicing and taxes will be subject to review in 2004 and everyfour years thereafter. The completion and opening of the connecting expressway links at Harbinand Jiamusi will help ensure that increases in traffic volume and economic viability aresustained. Improved transport efficiencies, notably time savings, have improved access to theregion and markets; and with complementary planning programs of the Government (para. 36),the expressway promises to be an additional spur to economic growth. The training in safety,network planning, and operational management has brought to the Project (and other highwaydevelopments) a determined focus for meeting operating standards and reducing accidents.The FIRR/EIRR reestimates take into account the need for periodic maintenance in 2008 and2014. Overall benefits from the Project are considered sustainable.


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IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic Impact

33. Insufficient information was available for the OEM to reliably assess the socioeconomic

development impact of the project on poverty reduction, regional, and hinterland development.The Heilongjiang Harbin-Tongjiang Highway Companys Benefit Assessment Report ofDecember 2000 provides some idea of the benefits but offers no empirical evidence. Theexpected socioeconomic benefits from improved transport services to administrative, health,education, and commercial centers on which the Project was partly premised remain largelyassumed, as does the anticipated growth in employment opportunities arising from expansion ofindustries, services, and commerce. Benefits derived from the Project for relieving poverty alsoremain unsubstantiated.

34. Some idea of the economic activity and social impact is derived from an origin-destination vehicle survey conducted over 24 hours in September 2000. The survey identifiedby vehicle type the cargoes carried, cargo capacity, passengers, passenger capacity, and

origin-destination flows at eight toll points along the project expressway. Of 4,222 tons of cargo,coal accounted for 32 percent, construction materials 19 percent, food products 7 percent,farming and forestry products 5 percent, petroleum 4 percent, and general merchandise33 percent. Average actual loading was 94 percent of rated loading capacity. For passengervehicles, there were 48,936 passengers, representing 67 percent of vehicle carrying capacity.

35. The OEM collected statistics for the growth in regional gross domestic product beforeand after project completion for Harbin, Jiamusi, and the counties in between. Based on thesestatistics (Table 3), the project expressway has not provided any obvious spur to economicdevelopment. Many of the connecting links to the expressway have, however, yet to becompleted, so that it may be too early to measure economic development in terms of regionalgross domestic product growth.

Table 3: Average Annual Regional Gross Domestic Product Growth(percent)

Area 1994-1995(Before Project Completion)

1998-2000(After Project Completion)

Harbin 10.6 11.1Bin Xian County 20.5 10.9Fangzheng County 15.8 4.9Yilan County 17.5 2.8Jiamusi 8.0 9.2

Source: Heilongjiang Ministry of Communications.

36. Promising to help stimulate economic growth along the project corridor is theGovernments promotion of the development of three economic and technical developmentzones at Harbin and Jiamusi. They are the Harbin Development Zone of Economy andTechnique, Harbin Development Zone of High-Tech Industry, and the Jiamusi DevelopmentZone of Economy and Technique.32 Also helping to stimulate economic development are theexpansion of Tongjiang port for improving the efficiency of trade transfers with Japan, the

32Approved by the State Council in 1991, these development zones are aimed at improving conditions for high-techindustries in electronics, genetic engineering, energy development, and new materials development.


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Republic of Korea, and the Russian Federation. The connecting highway to Tongjiang port fromJiamusi was opened in October 2000. For the first half of 2001, HHEC reported traffic volumesto be much higher than in previous years. The increase is attributed largely to the trafficgenerated for Tongjiang port.

37. The Project sustained the engagement of a large workforce over nearly three years.Construction works are estimated to have directly employed more than 4,000 people. Wages and

salaries, together with local procurement of materials, totaled an estimated Y2.2 billion. Ongoingarrangements for management and O&M of eight toll plazas as well as traffic security createdpermanent positions for some 100 technical and 650 nontechnical staff.

38. The 262 households involved in resettlement proved much fewer than the392 envisaged at appraisal (para. 4). Arrangements appear to have been to everyonessatisfaction. Most residents are still working close to home due to the ample employmentopportunities available.33 The OEMs interviews with farmer representatives confirmed thatresidents were satisfied with their relocation arrangements, and that no remaining householdsneeded to be relocated. Resettlement arrangements were found consistent with ADBs policy.

39. The Project was gender neutral. An attitudinal survey of drivers, passengers, and people

working at the tollway stations and in maintenance activities reflected overwhelming satisfactionwith the Project.34 Topic areas included exhaust emissions, obstructions, noise, dealing withwaste soil, and road condition. About half of those surveyed were aware of the additional safetymeasures introduced.

40. A negative and unintended impact of the Project has been the high incidence of seriousaccidents (262 in 1998, 222 in 1999, 187 in 2000) caused by the lack of adequate safetyfeatures in the design of the Project (paras. 9 and 10).35 Ninety-five percent of accidents occuron the Bin Xian-Jiamusi section. Many of them occur at grade crossings (footnote 12) wherelivestock, farmers, animal carts, and tractors cross between their homes and farmlands.Inadequate road signs, insufficient warning lights, no emergency stopping areas, narrowshoulders that force stopped vehicles to leave 2 or 3 feet of their vehicle protruding onto the

expressway lane, and speeding were the major reasons for accidents. Following the release ofADBs PCR, several measures were introduced to reduce the incidence of accidents. Thegradual reduction in serious accidents is attributable in part to implementing recommendationsof the PCR and TA 2177-PRC (para. 47).

B. Environmental Impact

41. An environmental impact assessment study was undertaken in October 1993 for theproject appraisal. The study found no environmentally sensitive areas that could not be avoidedthrough appropriate design considerations. The Government gave assurances that appropriate

mitigation measures would be implemented against adverse impacts relating to landslides, soilerosion, and drainage disruptions. No other significant environmental risks were anticipated fromthe Project.

42. Monitoring after project completion included measuring the concentration of air pollutantsfrom vehicle emissions and the asphalt road surface sections, and measuring noise levels from

33Households were reported by officials to have been relocated to new homes with improved water piping, andaccess to electricity, medical care, and supplies.

34Conducted as part of the Benefit Assessment Survey (footnote 20).

35The geometric alignment allows for average travel speeds of 120 km per hour, but because of the lack of safetyand warning features, driving at this speed is unsafe.


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traffic movements. Emission and noise levels were within acceptable international limits and lessthan before the Project along the existing road. In response to environmental concerns, theGovernment introduced pollution-control measures for the Harbin-Yilan gasworks and Yilan textilemill, which were contributing to air and water pollution along the expressway corridor.

43. Site visits and interviews with HHEC officials confirmed that operation of the expresswaymet current national standards for air pollutant levels, and rehabilitation of borrow (excavation)

pits. Special measures were in evidence for side slope protection and improving the naturalsetting.36

C. Impact on Institutions and Policy

44. The institutional capabilities of HHEC, HPCD, and the Heilongjiang Safety ManagementOrganization were enhanced through the project preparatory TA, consultant guidance duringimplementation, and the two attached advisory TAs.

45. The Projects feasibility study reviewed by international consultants in 1994 provided the

basis of ADBs appraisal (footnote 1). The review examined the engineering designs, costestimates, organization and implementation arrangements, and concluded that they weresound. Heilongjiang experts in engineering design, construction, finance, and managementprepared project details, including those for housing relocation.

46. The prime tasks of TA 2177-PRC (footnote 2) to review the scale and nature of the roadaccident problem in Heilongjiang Province and to prepare a strategic action plan and five-yearmaster plan for road safety were successfully accomplished. The TA support included anoverseas study course for 17 staff from Heilongjiang Public Security Bureau (HPSB) and3 officials from other government agencies,37 and seminars to explain TA recommendations.The OEMs interviews with three of the participants found that the study was well received andthat seeing safety control in operation had been of benefit for the participants to appreciate the

purpose and effect of recommendations under the TA. All except 1 of the 17 participants fromHPSB continue to have road safety responsibilities. The TA recommendations for theHeilongjiang Province included plans for educating the general public in safety practices,enforcing regulation, and introducing road and vehicle safety standards. Detailed action plansfor the cities of Daqing and Jiamusi were developed. TA 2177-PRC was independentlypostevaluated in January 2001 as part of a more general study of the effectiveness of TA roadsafety assistance to ADB developing member countries and rated highly successful.

47. Subsequent and ongoing safety actions arising from the recommendations under TA2177-PRC include (i) safety education awareness programs for the public in Harbin and Jiamusiand for villagers along the expressway; (ii) an increase in the expressway patrol force from 8 to32 cars; and (iii) the addition of electronic monitoring and surveillance equipment. Fines for

speeding have been tripled from a nominal Y5. A new measure allowing apprehending officersto jail offenders for 15 days is reportedly proving effective. Coinciding with these actions, thenumber of serious traffic accidents on the project expressway fell by 16 percent in 2000, but isstill too high (para. 40). Other recommendations, including the introduction of road safety andvehicle safety standards, are being pursued as part of HPCDs Five-Year Safety Plan. Takinginto account the overall achievement of TA objectives, extent of follow-up action, and staff

36Side slope protection measures included an angle cut and a combination of stone pitching concrete latticeemplacements, grass, and shrub plantings on the slope. Landscaping and reforesting were evident at borrow pits.

37The study course in Victoria, Australia was arranged by the Australian Road Research Board and TransportResearch Limited.


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commitment, TA 2177-PRC is rated successful. This assessment is less than adjudged inJanuary 2001 on account of the fact the recommendations of TA 2177-PRC have yet to be fullyimplemented under HPCDs Five-Year Safety Plan so that their impact and sustainability remainunproven.38

48. TA 2178-PRC aimed at helping HPCD enhance the skills of provincial transport plannersin highway planning, and to prepare a 30-year investment program for a system of feeder roads

linking to the expressway. The former was to be achieved through training in origin-destinationsurveys and the application of transport planning computer software. The OEMs interview withofficials and engineers from HPCD, HHEC, and the Heilongjiang Survey and Design Institute(HSDI) confirmed that the TAs implementation provided appropriate skills in highway networkplanning.39 HPCD and HSDI applied the skills acquired for the planning of a new provincialhighway in Heilongjiang. The knowledge and experience gained in Heilongjiang have sincebeen disseminated to other provinces through the Ministry of Communications. HPCD advisedthat several provinces are using the Heilongjiang planning method. Taking into account theoverall added effectiveness and sustainability of outputs, TA-2178 PRC is judged highlysuccessful.40

38 OEDs assessment of January 2001 recognizes this in its report: TE-33, Table 7.5, p. 46. Though some reduction isevident, the number of serious accidents on highways in Heilongjiang and other PRC provinces remains high.

39The improved skills included (i) methodologies for designing origin-destination traffic surveys, (ii) instruction oncalibrating traffic counts, and (iii) how to evaluate the economic benefits of road investments.

40While the high success of this TA is not in question, HPCD officials pointed out that the TransPlan computersoftware provided under the TA was designed for a United Kingdom (UK) road system. The consultants for the TAwere from the UK, and they were unfamiliar with the PRCs transport system and language. In retrospect, itappears that it might have been more effective to have selected bilingual PRC nationals for training andfamiliarization in the UK. The computer software could have then been customized to suit the PRCs transportsystems before TA training in the PRC began.


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V. OVERALL ASSESSMENT

A. Relevance

49. The Projects rationale to support the Governments investment program for developing

a national highway system and improving transport efficiencies was consistent with ADBscountry operational strategy. The Projects premise to relieve poverty and help developHeilongjiangs hinterland is also consistent with ADBs current strategic agenda. The Project isassessed highly relevant.

50. Without the Project, traffic congestion along the existing corridor would have impededaccess between the cities of Harbin and Jiamusi and slowed output through the northeast portof Tongjiang to Japan, the Republic of Korea, and the Russian Federation, and to the southernports of Dalian and Dandong. Resource exports of coal mining and forestry would haveremained dependent on slow road and rail haulage to Harbin and Jiamusi. StrengtheningHeilongjiang Provinces institutional capacity for highway planning, construction, operation, andmanagement would have been denied, as would the need to gain experience and

understanding of road and pavement design to meet traffic loads and extreme weatherconditions, and reduce accidents. The regions farming communities would not have benefitedfrom reduced transport costs and easier access to markets.

B. Efficacy

51. The primary purpose of improving transport efficiencies, reducing VOCs, relievingcongestion along the existing road, and facilitating access for intercity traffic was achieved. Theaverage journey time for cars between Harbin and Jiamusi was reduced from 15 hours toaround 4.5 hours. The two TAs attached to the Project proved appropriate, enhanced safety

awareness and planning and design knowledge, and resulted in recommendations that havebeen largely taken up.

52. The quality of civil works is sound. Problems observed in the PCR associated withpavement cracking and deformation have been adequately addressed through sealing and/orpavement reconstruction. Safety deficiencies in design have been prioritized for remedy underHeilongjiang Provinces five-year program, and actions to date have resulted in a reduction ofaccidents. The expressway is well maintained, and ongoing improvements aimed at reducingoverloading and improving safety are a priority concern attended to with a strong commitment.

53. Technical inputs for review at appraisal and implementation were ineffective inidentifying early design deficiencies associated with pavement construction and safety, and

these inputs could have been managed with more focus. Overall, the Project is ratedefficacious.

C. Efficiency

54. The Project benefited from a strong project management team. Implementationsupervision proved effective and brought forward completion of the expressway by 13 months.The recalculated project EIRR of 14.6 percent attests to the overall efficiency of operations andconfirms the economic viability of the Project. The Project is rated highly efficient.


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D. Sustainability

55. Since the quality of the civil works is sound, they should long outlast the end of theprojected economic life in 2018. Revenues from tolls are more than adequate to covermanagement operations and capital outlays for routine and spot maintenance. Toll charges arescheduled for review every four years starting in 2004. High economic growth, theGovernments trade and industrial development programs, completion of the connecting trunk

links from Harbin and Jiamusi, and improved port facilities at Tongjiang will help ensure thattraffic growth projections on the expressway are achieved. The FIRR/EIRR reestimates take intoaccount the need for periodic maintenance, and with appropriate attendance, the economicbenefits are sustainable. Any toll adjustments in 2004 and thereafter are not included in theFIRR recalculation. The Projects sustainability is assessed as likely.

E. Institutional Development and Other Impacts

56. The Project advanced local capability in civil works for highway construction andenhanced HPCDs planning capacity and implementation experience. Awareness of the need to

incorporate safety features, promote safety awareness among residents, and enforce trafficrules were important outcomes of the attached TA. Savings in VOCs, which were expected tobenefit farmers and reduce poverty, were only passed on to farmers in part because of controlsby the Government on the price of key farm inputs (para. 61). Other socioeconomic benefitsderived from reduced journey times were not monitored and as a result, the impact of improvedtransport efficiencies on production and on access to education and health services remainsunsubstantiated, even though a generally accepted consequent benefit. Such impacts from theProject are, therefore, assessed as moderate.

F. Overall Project Rating

57. The Project is rated successful in the new four-category system (footnote 9). Detractingfrom a higher assessment are (i) the weaknesses in the pavement and highway safety designthat would likely have been avoided with more attention paid to technical aspects (paras. 10 and60), and (ii) the failure to demonstrate adequately that economic development and povertyreduction objectives were achieved (paras. 33 and 61).

G. Assessment of ADB and Borrower Performance

58. Taking into account ADBs good working relationship with HHEC, and its effectiveness inensuring that procurement and contracting was carried out in accordance with competitivebidding procedures, ADBs performance is assessed as satisfactory. Detracting from this areweaknesses in project design procedures for evaluating and reviewing technical inputs, and thetiming of review missions. These weaknesses resulted in a failure to detect design deficienciesearly.

59. The Borrowers performance is assessed as satisfactory. Detracting from a higherassessment is the lack of attention given to monitoring and substantiating benefits towardreducing poverty derived from the regional and hinterland development impact, on which theProject was partly premised.


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VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

60. Technical Inputs. HSDI designed the project expressway in accordance with technicalstandards issued by the Ministry of Communications. The feasibility study was carried out byHPCD in 1993 and reviewed by ADB in 1994. The implementation consultants were required toensure that designs and construction were carried out to internationally accepted engineeringstandards. Although the technical expertise was available, and the project expressway was a firstof its kind in Heilongjiang Province, deficiencies in pavement design and rapid implementation ledto a higher than expected incidence of pavement cracking and deformation. Important designfeatures for road safety, such as emergency stopping were also left out. This could largely havebeen avoided with more rigorous attention, at appraisal and during implementation review, totechnical inputs.

61. Poverty Impact. The Project was expected to improve livelihood opportunities in eight

poverty areas. The benefit assessment report of HHEC and the PCR failed to evaluate the impactof the Project on reducing poverty and in so doing undermined an important premise of theProject. Sample evidence from the OEMs interviews with farmers suggests that savings in VOCswere only partly transferred in the form of cheaper freight costs. Fertilizer and chemical prices, forexample, were not reduced as a result of savings in VOCs because of rigidities in theGovernments pricing system. Farmers reported no change in production mix or their overall levelof production. By failing to monitor the project impact on development of the region, an importantelement of feedback and policy implication was missed. If ADB and the Government are to betaken seriously in their common goal to reduce poverty, more comprehensive efforts must beundertaken in projects for measuring poverty reduction impacts.

B. Lessons Identified

62. Key lessons from the Project are the need for (i) more rigorous reviews of designfeatures at appraisal and during implementation so as to identify early and/or avoid technicaland safety design deficiencies (paras. 10 and 60); and (ii) more rigorous attention to elucidatingthe project rationale, purpose, targets, and how these will be realized, so that there is a clearbasis for monitoring and evaluating benefits (para. 61).41

C. Follow-Up Actions

63. ADB should take into account the lessons identified and ensure that (i) all future reviews offeasibility studies comprise adequate technical review of engineering and safety design, (ii) futureexpressway projects are planned with greater attention to ensuring that design specifications areconsistent with meeting project objectives and expectations for the quality of project outputs, and(iii) the responsibilities and specific advisory tasks of future implementation consultants are morediligently managed and evaluated for achievement of purpose.

41These lessons are recognized within ADBs Infrastructure Energy and Financial Sectors Department (East) andhave been addressed under Loans 1783/1784-PRC: Chongqing-Guizhou Roads Development Project, for$120 million and $200 million respectively, approved on 21 November 2000.


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64. The Government should initiate as soon as possible measures to ensure that pavementsand highways for remaining NTHS developments are designed to satisfy international safetystandards and are constructed with a more durable pavement surface. For future corridordevelopments, a more responsive mechanism for transferring the gains from lower transportcosts to the price of farm inputs such as fuel, fertilizer, and chemicals should be introduced.Finally, HHEC should continue its efforts aimed at reducing accidents, including introducing and

enforcing more stringent road and vehicle safety regulations.


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APPENDIXES

Number Title Page Cited on(page, para.)

1 Engineers Summary 18 4, 12

2 Implementation Schedule 25 4, 14

3 Purpose, Targets, and Actual Outcomes 26 6, 19

4 Financial and Economic Reevaluation 28 8, 31


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18Appendix 1, page 1

ENGINEERS SUMMARY1

A. Design

1. The project expressway was designed with two standards. The Harbin-Bin Xian section(53 kilometers [km]) was designed and constructed as part of a staged development as a fully

controlled access expressway of four lanes. In the first stage of construction, two lanes wereconstructed with a carriageway width of 13 meters (m), including a hard shoulder width of2.25 m for each lane. Pavement thickness varies at 20-25 centimeters (cm).2 In the secondstage, two additional lanes are to be constructed to provide for an overall carriageway width of20.5 m. Construction is under way and several kilometers are now complete. The pavementfrom Harbin to Bin Xian is constructed of asphalt-concrete to expressway standard of thePeoples Republic of China (PRC). The Bin Xian-Jiamusi (278 km) section is designed to thePRCs class 2 highway standard. The carriageway was to be 9 m wide with a shoulder width of1.5 m.3 The pavement is of concrete structure except for 48.4 km, which is asphalt-concrete.The pavement thickness is 10-18 cm. Parallel to the project expressway runs Highway 101 (theexisting road) which remains open. Highway 101 is designed to class 3 and class 4 PRCstandard for unpaved gravel roads, and has an average carriageway width of 6 m.

B. Geometrics

2. The alignment is of a high standard and appropriate for average vehicle speeds of120 kilometers per hour (kph). Although the alignment is designed for such speeds, designaspects relating to safety were inconsistent with international practices. These remain eitherunderdesigned or omitted (para. 11).

C. Earthworks

3. The project earthworks were substantial, reflecting a need to elevate the pavementabove areas subject to flooding.4 Much of the earth fill was obtained from borrow pits and metal

quarries near the road. Where earthwork cuts were required, the batter face is decorated withstonework and planted with grass or shrubs. Superficial failure of the stonework is commontogether with surface slips, and are caused by a combination of frost heave and design failureas a result of cutting slopes at too steep an angle.

D. Drainage

4. Drainage provisions appear appropriately designed with no obvious problems due toinsufficiency of culverts to cope with flooding and snow runoff. Side ditch drainage along cuttingareas is surfaced with stonework that is breaking with frost heave. The stonework failures are ofminor consequence and do not seriously impair drainage function. Damaged slopes and sidedrains were being reconstructed at the time of the site visit of the Operations Evaluation Mission

(OEM).

1

Technical reports relating to the feasibility study, the project completion report of the Heilongjiang HatongExpressway Corporation, mission reviews, discussion inputs with national engineers as well as the OperationsEvaluation Missions site inspection are used to draw overall conclusions.

2Also known as the surface course.

3The proposed carriageway width of 9 m was too narrow. To better reflect international design practices, thepavement width was expanded, with an approved change of scope, to 12 m.

4Earthworks involved the excavation and fill of a reported 22.9 million cubic meters.


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E. Pavement

5. Sixty-eight percent of the expressway is paved with concrete and the balance withasphalt-concrete. Inspection of the pavement conditions revealed (i) pavement deformation onthe hilly Fangzheng-Yilan asphalt-concrete pavement section (about 25 km) as highlighted in

the project completion report (PCR); (ii) some surface unevenness on the Harbin-Bin Xian(53 km) asphalt-concrete section with an international roughness index (IRI) between 3 and 4;(iii) an abnormally high incidence of transverse cracking along the asphalt-concrete pavementsections that had been sealed; and (v) minor pavement cracking and deformation on thecement-concrete sections.

6. The concrete pavements are uniformly constructed with twin 4.5 m wide slabs, and 1 mwidening strips each side plus 0.5 m concrete carriageway edging strips. The widening stripsshow no signs of cracking and are functioning satisfactorily.

7. The initial performance problems with asphalt-concrete have been remedied withappropriate attention to resealing and relaying of damaged surface areas. As settlement of the

earth base has compacted, the incidence of damage has decreased. Experimentation by theHeilongjiang Hatong Expressway Corporation (HHEC) with various pavement constructions forasphalt-concrete point to a lower incidence of pavement cracking and deformation on futurehighways (which may include the widening of the project expressway from Bin Xian to Jiamusito four lanes).5 Asphalt-concrete pavement is preferred to concrete as a pavement surfacebecause of its better riding quality, easy repair, and closeness to asphalt-concretemanufacturing plants.6

8. The settlement problem observed by the PCR Mission between kilometer pegs 345 and369 (see Map) was due to the inadequate geotechnical survey and pavement design,deficiencies in quality control during the construction stage, and insufficient time for earthcompaction. Crackings and ruttings are attributed to an inferior quality of pavement construction,

and thermal shrinking of the base surface associated with extreme weather conditions.Notwithstanding the observed technical failures associated with pavement cracking anddeformation, the overall quality of the project expressway has been restored with appropriatemaintenance, and is of a high standard. Average road roughness by the IRI is estimated to be2.5.

F. Pavement Loading

9. The OEM was advised that the legal maximum (all-up) truck loading for expressways is30 tons, and that standard design axle loadings are 10 tons for expressways and 8 tons forclass 1 highways. Ten-ton axles would normally relate to an all-up 30-ton loading. Truckstypically freighting coal, forest logs, and vegetables are overloaded. The OEM found, however,

5

Different pavement structures were used, reflecting differences in availability of materials, soil-testing results, andtrials. For the concrete pavement, four different base courses were applied (with varying mixes of cement stabilizedsand, gravel, and crushed stone) and three different subbase courses. The total base and subbase depth rangedfrom 58 to 78 cm. For the asphalt-concrete pavement, two different bases and subbase courses were applied.These consisted of (i) a subbase course (layer) mix of cement, and lime-stabilized soil and gravel over a sand-gravel bedding; (ii) a base course of lime, flash, and cement-stabilized sand and crushed stone; and (iii) a surfacecourse consisting of 4-7 cm of hot mixed asphalt macadam over 4-9 cm of medium-course graded asphaltconcrete. The total base and subbase depth ranged from 46 to 73 cm.

6Construction cost is reported to be about the same.


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only isolated evidence of pavement failure caused by overloading. Obvious damage wasobserved at bridge approaches and where earth settlement remained soft. The Project was notdesigned with weigh facilities for checking overloading; overloading is difficult to control.

G. Maintenance

10. The county jurisdictions through which the expressway passes carry out maintenance ofthe project expressway. Five maintenance construction teams, each with some 120 staff, areresponsible. Each maintenance division is equipped with vehicles to carry out grading (usedlargely for snow clearing), loading, trucking, and transporting equipment materials and workers.At the time of the OEMs site visit, all maintenance divisions were actively deployed on routineand spot maintenance, including pavement reconstruction. The OEM saw no evidence of areasrequiring maintenance and repair that had been long unattended.

H. Safety Design

11. The PCR reported on specific safety deficiencies, including narrow shoulders, noemergency stopping areas, no emergency telephones, no hazard warning lights, unprotected

bridge piers, and 80 uncontrolled access points. To these may be added insufficientunderpasses, unprotected and untied guardrail terminals, unprotected drainage ditches,inadequate signage, low-standard entry and exit lanes, uncontrolled road intersections, andinadequate signage and markings for no passing. The overwhelming need to control speed forthe prevailing conditions is also evident. Many vehicles are in an unsafe condition to travel atspeed.

12. Although recommendations of the PCR and TA 2177-PRC relating to implementing aroad safety improvement program, closing of uncontrolled access roads, providing additionalsafety and engineering features, and enforcing the speed limit more strictly have all been actedupon and the number of accidents has fallen, the accident rate is still high, and the need tomore strictly enforce speeding regulations and address the wider causes of accidents including

unsafe vehicles is apparent.7

As the recommendations of TA 2177-PRC have yet to be fullyimplemented under HPCDs Five-Year Safety Plan, their overall effectiveness remainsunproven.

I. Highway 101 (Existing Road)

13. The OEM conducted several site visits to the parallel Highway 101. The visits confirmedinformation from the Heilongjiang Provincial Highway Administration Bureau that the existingroad, except the Harbin-Fangzheng section, is unpaved with an estimated IRI of between 6 and8 (see photographs). The Harbin-Fangzheng section is paved and well maintained with anestimated IRI of less than 4.

7 The Heilongjiang Public Security Bureau statistics for the period 1997 (opening) to October 2000 show

671 extremely harmful accidents resulting in 359 deaths. Ninety-five percent of these accidents occurred on theJiamusi-Bin Xian section, which is not completely access restricted and does not have a center divide separatingoncoming traffic. The accident and fatality rates are respectively 83 and 44 per 108 vehicle-km, approximately threetimes the international norm for an open access rural highway with substantially higher traffic volumes, and some15 times that for a controlled safety-designed expressway.


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14. With and without project scenarios of the likely road maintenance strategies andresulting conditions were programmed to calculate the economic internal rate of return(Appendix 4) based on the above assessment of road conditions, and a review of maintenance.

Photograph A1.1: Existing Road (Highway 101)

J. Recommendations

15. Recommendations reflected in the follow-up actions of the main text (para. 64) include(i) continued experimentation with pavement design and materials to achieve a more durablepavement surface, (ii) introducing safety audits on all proposed road projects, and (iii) treatingas a matter of urgency the need to complete requisite safety features including measures forintroducing and enforcing more stringent road and vehicle safety regulations.


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Photograph A1.2: Asphalt Pavement Cracking

Photograph A1.3: Asphalt Pavement Cracking Repaired


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Photograph A1.4: Transverse Cracking

Photograph A1.5: Lateral and Transverse Cracking Repaired


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Photograph A1.6: Safety Design Hazard:Stopped Truck and Car Wider than Road Shoulder

Photograph A1.7: Overloaded Truck


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Activity

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S

O

N

D

F

M

J

J

A

S

O

N

D

J

F

M

AM

J

JA

S

O

N

D

J

FM

A

M

J

J

A

S

O

N

D

J

FM

AM

J

J

A

S

A.ConsultingServices

1.

Prequalification

2.

Tendering

3.

BidEvaluation

4.

ContractAward

B.LandAcquisitionandRelocation

C.CivilWorks

Packages1-13

D.FacilitiesandEquipment

E.ConsultingServices

1.

ConstructionSupervision

2.

OverseasTraining

Atappraisal.

Actual.

M

A

J

1997

1998

IMPLEMENTATIONSCHEDULE

19

93

1994

1995

1996

Actual

project

completion

Planned

project

completion

25

Appendix 2


34/40


35/40

Purpose/Scope Targets Actua

3. Project Activities/Inputs

Procurement of materials, plant, andequipment for construction, laboratories,and toll operations.

13 contract packages (civil works). No specific targets for equipment.

13 co 15 co

Construction of expressway, interchanges,and toll facilities

Implementation consultants for supervisionand training

Project costs ($ million)Civil works 208.2Equipment 11.8

Land acquisition 21.3Implementation consultants 5.3Contingencies 63.4Interest during construction 20.0

330.0

ProjecCivil wEquip

Land Imple

consIntere

cons

Consultant inputs for safety and highwayplanning strengthening

Financing plan ($ million)ADB 142.0Government 158.0

330.0

FinanADBGover

TA costsRoad Safety Program $600,000Highway Network Planning $600,000

ActuaTA 21TA 21


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FINANCIAL AND ECONOMIC REEVALUATION

A. Background

1. Before the project expressway was opened to traffic on 30 August 1997, vehicle trafficused Highway 101 (existing road). Highway 101 extended from Harbin to Jiamusi linking several

county towns and villages. The highway was 360 kilometers (km) long, 5-6 meters (m) narrow,unpaved except for 62 km between Harbin and Bin Xian, and prone during the winter topavement damage in the form of large mud and gravel holes and wheel gouging. Averageroughness by the international roughness index (IRI) was 10, an index generally indicating abad road condition. The average daily traffic volume in 1993 was 1,847 motorized vehicles,about half of which were trucks. Traffic volume was increasing at around 12 percent per annum.Because of the bad road condition and congestion near the towns, average vehicle speedswere less than 30 km per hour. The total time to travel from Harbin to Jiamusi was around15 hours.

2. Without the project expressway, the volume of traffic on Highway 101 was expected toreach the road design capacity of 2,000 vehicles per day (vpd) in 2002, after which major

reconstruction to accommodate future traffic growth and congestion would be required.

B. Appraisal Methodology

3. The appraisal team considered the volume of traffic using Highway 101 and costs ofupgrading to accommodate anticipated future traffic. As about 80 percent of the traffic onHighway 101 was intercity traffic, it was predicted that 70 percent of this traffic would use theproject expressway because of the lower transport costs and shorter travel time.1

4. The economic benefits from the project expressway were calculated as the sum of(i) vehicle operating cost (VOC) savings for vehicles using the highways that would otherwisehave to travel on Highway 101, (ii) savings in road maintenance costs, (iii) VOC savings from

reduced congestion accruing to traffic that remained on the old road, and (iv) VOC savings fordiverted and generated traffic. Time savings, while acknowledged, were not included in theeconomic internal rate of return (EIRR) estimate.

C. PCR and PPAR Methodology

5. Calculation of the EIRR for the Asian Development Banks (ADBs) project completionreport (PCR) and project performance audit report (PPAR) follow the appraisal methodology,but are imputed with data reflecting actual investment costs, year of investment, and first-yeartraffic volumes. The PPAR reestimate reflects the actual volume of traffic for three years to June2001.

1. Vehicle Operating Costs

6. VOCs were estimated using the Ministry of Communications VOC model, calibratedfrom the World Banks Highway Design and Maintenance model version IV (HDM-IV). Datainputs for VOCs were compiled from the Research Institute of Highways study on road user

1 Intercity traffic included origin-destination movements between Harbin, Bin Xian, Fangzheng, Jiamusi, and Yilan.

Because tolls were to be installed on the project expressway, some uncertainty prevailed as to the proportion oftraffic that would divert and use the expressway.


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costs for different vehicle types and road conditions (gradient, curvature, and roughness).2

Table A4.1 shows the average VOC by vehicle for different roughness in the project area(covers expressway and Highway 101).

Table A4.1: Average VOCs for Different Road Roughness in the Project Region(Y/km)

Roughness Trucks Passenger VehiclesIRI Small Medium Large Car Minibus Large Bus Trailer

2 2.57 5.61 4.95 1.34 4.49 5.51 7.413 2.61 5.72 5.06 1.36 4.55 5.62 7.584 2.66 5.84 5.17 1.38 4.61 5.73 7.765 2.71 5.95 5.29 1.40 4.67 5.84 7.946 2.76 6.07 5.41 1.42 4.74 5.96 8.137 2.81 6.19 5.53 1.43 4.80 6.08 8.328 2.87 6.32 5.65 1.45 4.87 6.20 8.519 2.92 6.44 5.78 1.47 4.94 6.32 8.7110 2.97 6.57 5.91 1.49 5.01 6.44 8.9111 3.03 6.71 6.04 1.51 5.08 6.57 9.1212 3.09 6.84 6.17 1.53 5.15 6.70 9.3313 3.15 6.98 6.31 1.56 5.22 6.84 9.5514 3.20 7.12 6.45 1.58 5.30 6.98 9.7715 3.27 7.27 6.60 1.60 5.38 7.12 10.00

IRI = international roughness index.

7. Inherent in the VOC model, the costs of tradables (e.g., fuel, oil, and rubber) areexpressed in border prices with provision for internal transport and administration costs. Thecosts of nontradables are converted to economic costs by excluding taxes and applying astandard conversion factor of 0.9.

8. All costs (capital investment, operating maintenance, and VOCs) are expressed in localcurrency at the world price numeraire. A residual value of 50 percent of construction costs isincluded in the last year of evaluation, i.e., 2018.

2. Scenarios in Maintenance Costs

9. Scenarios of the likely road conditions for Highway 101 were programmed based on thesite visits of the Operations Evaluation Mission (OEM) and conditions applying at appraisal.Without the Project, Highway 101 was assumed to remain with an average IRI of 10.Maintenance costs, adjusted to 2001 prices, were as applied at appraisal. For the with-projectcase, maintenance costs reflect those currently needed to maintain Highway 101 with an IRI of6 to 8 (depending on section). The difference for the with- and without-project case is imputed

as the maintenance savings on Highway 101.

3. Savings in Travel Time Costs

10. Savings in travel time costs were not included in the appraisal and PCR calculations ofthe EIRR. However, because of (i) the stated importance of time savings as the motivating

2

The Research Institute of Highways is a division of the Ministry of Communications.


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reason for using the project expressway, and (ii) the data research available relating to timevalues, an imputation is made in the VOC planning model and included in the PPAR calculation.

D. Economic Internal Rate of Return Results

11. Table A4.2 summarizes the appraisal, PCR, and PPAR results. Table A4.3 compares

the PPAR actual and forecast traffic volumes with those at appraisal. Tables A4.4 and A4.5provide details of the recalculation of the financial internal rate of return (FIRR) and EIRR.Differences between the appraisal, PCR, and PPAR estimates are largely explained by thedifferences in investment cost, implementation period, traffic volumes, and traffic mix. Inaddition, the PPAR calculation for the EIRR includes an estimate for time savings benefits, asimputed under the Highway Design Institutes HDM-IV model.

Table A4.2: Comparison of FIRR and EIRR Results

Item Appraisal PCR PPAR

FIRR 3.7 3.3 a 1.1

EIRR 18.9 15.1 14.6

EIRR = economic internal rate of return, FIRR = financial internal rate of return, PCR = projectcompletion report, PPAR = project performance audit report.a PCR result excludes realistic provision for periodic maintenance.

Table A4.3: Actual and Forecast Traffic on the Harbin-Jiamusi Corridor

Average Daily TrafficAppraisal PPAR

Year Expressway Highway 101 Total Expressway Highway 101 Total

1998 3,775 1,096 4,871 2,760 322 3,0811999 4,128 1,199 5,327 2,932 512 3,4442000 4,520 1,313 5,833 2,964 1,305 4,2692001 4,728 1,373 6,101 3,129 1,332 4,4602002 4,946 1,436 6,382 3,303 1,358 4,6612003 5,173 1,502 6,675 3,486 1,385 4,8722004 5,411 1,571 6,982 3,680 1,413 5,0932005 5,660 1,644 7,304 3,885 1,441 5,3262006 5,921 1,719 7,640 4,101 1,470 5,5712007 6,193 1,799 7,992 4,329 1,500 5,8292008 6,478 1,881 8,359 4,570 1,530 6,1002009 6,776 1,968 8,744 4,824 1,560 6,3852010 7,088 2,059 9,147 5,093 1,591 6,6842011 7,317 2,125 9,442 5,307 1,623 6,9302012 7,552 2,193 9,745 5,530 1,656 7,1862013 7,796 2,264 10,060 5,763 1,689 7,4522014 8,047 2,337 10,384 6,006 1,723 7,7282015 8,306 2,412 10,718 6,258 1,757 8,0152016 8,574 2,490 11,064 6,521 1,792 8,3142017 8,850 2,570 11,420 6,796 1,828 8,6242018 9,136 2,653 11,789 7,082 1,865 8,946

PPAR = project performance aud

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