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Implementation Completion Report (ICR) Review - Second National Highway Project, Hunan - Guangdong

1. Project Data:   
ICR Review Date Posted:
Project Name:
Second National Highway Project, Hunan - Guangdong
Project Costs(US $M)
 1132.8  1127.4
Loan/Credit (US $M)
 400  395.6
Sector, Major Sect.:
Roads and highways,
Cofinancing (US $M)
 0  0
L/C Number:
Board Approval (FY)
Partners involved
Closing Date
12/31/2003 12/31/2004
Evaluator: Panel Reviewer: Group Manager: Group:  
Kavita Mathur
Peter Nigel Freeman Alain A. Barbu OEDSG

2. Project Objectives and Components:

a. Objectives
The objectives of the project (which were not revised) were to:

(a) relieve road transport congestion and improve the integration of inter-regional trade and commerce between Hunan and Guangdong by assisting in the development of two key sections of the National Trunk Highway System (NTHS) in the principal North-South transport corridor;
(b) strengthen institutional capacity at the Hunan and Guangdong Provincial Communication Departments (PCDs) and related institutions;
(c) develop a policy dialogue in the areas of the commercialization and corporatization of provincial expressway companies, highway maintenance management, and transport and economic integration; and
(d) improve the safety of road transport.

b. Components (or Key Conditions in the case of Adjustment Loans):
Costs by components are not available, they are grouped under following subheadings: civil works (appraisal cost US$825.1 million, actual cost US$1,036.0 million), training/technical assistance/studies (appraisal cost US$23.5 million, actual cost US$8.8 million), and land acquisition and resettlement appraisal cost US$55.1 million, actual cost US$76.9 million). Appraisal figures exclude price contingencies of US$229.2 million).
The project components were:
(a) Construction of: (i) Xiangtan to Leiyang Expressway (XLE), a 169-km divided, four-lane, access-controlled toll highway in southern Hunan; and (ii) Xiaotang to Gantang Expressway (XGE), a 109-km divided, four-lane, access-controlled toll highway in northern Guangdong. The works would include construction of administration, service and maintenance facilities as well as the supply and installation of electrical, electronic and mechanical (E&M) equipment for tolling, telecommunication, traffic monitoring, and lighting of interchanges, toll plazas and service areas;
(b) Interconnecting roads programs: (i) in Hunan, consisting of new construction and upgrading of four roads, with a total length of 39 km, including a new 16 km divided, four-lane, Class I, Xiangtan-Zhuzhou Highway (XZH); and (ii) in Guangdong, consisting of new construction and upgrading of 10 short road sections, with a total length of two km;
(c) Construction of Loudi-Lianyuan Highway (LLH), an auto-only, access-controlled, Class II, connecting road of 60 km length;
(d) Construction supervision services for XLE, XGE, the interconnecting roads programs in Hunan and Guangdong including XZH, and LLH;
(e) Studies/technical assistance in: (i) highway maintenance management in Hunan, (ii) expressway commercialization and corporatization in Hunan; (iii) transport and economic integration in Guangdong; and (iv) expressway safety in Guangdong and Hunan;
(f) Staff training programs in Hunan and Guangdong, covering all aspects of highway planning, design, construction, operation, finance, and maintenance; and
(g) Equipment for: (i) control of construction quality and monitoring of the environment; (ii) operation and maintenance of XLE and XGE after their completion; and (iii) maintenance of the provincial road network, the Road Data Bank (RDB) and the Pavement Management System (PMS) in Hunan.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Civil works incurred cost overruns due to the adverse geological and topographical conditions of
mountainous alignments. In Hunan, the actual costs of civil works and E&M works (US$454.2 million) were 104% of the costs estimates including contingencies (US$438.2 million). In Guangdong the actual costs for civil works including the E&M works (US$555.6 million) were 95% of the cost estimates including contingencies (US$586.4 million). US$4.4 million was cancelled.
The project effectiveness was delayed for eight months from March to November 1997 due to the slow approval of the Guangdong expressway feasibility study by State Planning Commission (SPC) and design by the Ministry of Communications. The closing date of the project was extended due to: (a) the delays in the procurement of the Electrical and Mechanical equipment in Hunan and (b) difficulties in the transferring of the project staff in Guangdong.

3. Relevance of Objectives & Design:

The project objectives were clear and in line with the Bank’s Country Assistance Strategy (CAS 1995) and the Progress Report of March 26, 1996, supporting China’s needs to rapidly modernize and expand its highway system. The project was the second in the series of national highway projects on the Beijing-Zhuhai (Jingzhu) expressway in the provinces of Guangdong, Hunan, Hubei, Hunan and Hebei. All four national highways projects supported an integrated approach to corridor development. Besides investments in priority expressway links, the project also supported continued institutional development and sectoral reforms aimed at modernizing the management of the highway system.

4. Achievement of Objectives (Efficacy) :

Relieve road congestion and improve inter regional trade: Substantially Achieved.
The Xiangtan to Leiyang Expressway (XLE) in Hunan was opened to traffic in December 2000 and the
Xiaotang to Gantang Expressway (XGE) in Guangdong opened in April 2003. All interconnecting and
other roads included in the project were completed and opened to traffic by project closing. Overall construction quality was good.
The diversion rate in Hunan Province was 72.5 (compared to 74% estimated at appraisal) and in Guangdong Province was 93% (much higher than the 55% estimated at appraisal). To improve inter-regional trade and commerce, an "Expressway Economic Zone" was developed in the city of Shaoguan in Guangdong Province.
In Hunan Province, although the interconnecting roads were completed, the linking of the new expressway network to the existing road network was a notable weakness of the project. For example, the interchanges were not located in the most appropriate sites, some local governments lacked funds to upgrade their connecting roads, and the locally financed section of the Zhuzhou had inconsistent design standards relative to the National Highway 2 financed sections.
Strengthen institutional capacity at the Hunan and Guangdong PCD's: Highly Achieved.
The target indicator for man months of training anticipated from the project (276) was far exceeded (425.5). Overseas training was provides in areas relating to operational management, maintenance management, information systems, traffic engineering and management, tunnel maintenance and highways safety. HPCD successfully internalized and recognized the benefits of the international competitive bidding process for provincial projects and extended its use to other projects. Specialized units on environment, quality control and road safety were established. In Hunan province, the development of the road data base (RDB), the pavement management system (PMS) and bridge management system (BMS), combined with the maintenance study has contributed to improve maintenance in the province. The PMS has not been maintained with up-to-date data and includes only bituminous roads. The BMS, on the other hand, has been maintained and populated with recent data.
Develop a policy dialogue on commercialization and corporatization of provincial expressway companies and highway maintenance management: Substantially Achieved.
Hunan Province: The expressway commercialization study provided useful guidance to HPCD for moving the toll road sector of the province towards market based activities. The toll rate study provided further useful guidance for adjusting toll rates on the expressway to the market and to be consistent with other provinces. The highway maintenance study made recommendations regarding the collection of
information necessary for the organization of maintenance and modern technology for pavement maintenance.
Guangdong Province: The study on transport and economic integration provided useful information on
transportation and its potential role in economic development. It also gave valuable suggestions on planning and decision making for new transport networks, and identified transport nodes where goods and passenger terminals could be located for modal interchanges.
Although the studies were satisfactory, they were completed between 2 and 4 years behind schedule, illustrating the continuing difficulty of the Bank in convincing its Chinese clients of the value of such TA.
Improve the safety of road transport. Highly Achieved.
Hunan Province: All road safety sub-components were implemented satisfactorily. In addition, a number of road safety manuals were prepared and provincial road safety seminars were held. The number of accidents involving fatalities decreased from 18 per 10,000 registered vehicles in 1999 to 5 in 2003, way below the 2005 benchmark of 10.
Guangdong Province: Black spot eradication program was implemented. The number of accidents involving fatalities decreased from 20 per 10,000 registered vehicles in 1999 to 12 in 2003.

5. Efficiency:

There were instances of problems due to under-estimation of costs at the design stage and the sometimes unrealistic time frame to complete the work.
The ex-post Economic Rate of Return (ERR) for Hunan (XLE) was 19% compared to the appraisal estimate of 26.3%. The lower ex-post estimate was mainly due to lower traffic volume. While SAR estimated 20,000 vehicles per day, actual flow was 14,000 vehicles/day.
The ex-post ERR for Guangdong (XGE) was 19.7% compared to the appraisal estimate of 18.1%. The actual traffic was 14,000 vehicles/day compared to appraisal estimate of 8,000 vehicles/day.
For other roads, ex-post ERR was 38.5% compared to appraisal estimate of 28.4%. The ex-post ERR for the entire project was 20.2% compared to appraisal estimate of 22.4%.
6. M&E Design, Implementation, & Utilization:

Adequate performance monitoring indicators were developed at appraisal and baseline data was provided. The baseline data/methodology were reviewed and discussed with the Hunan and Guangdong PCD's. Performance indicators were monitored to a limited extent during implementation as the data reported in the ICR is for December 2003 and more current data were not available.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

The implementing agencies continually followed only partially the agreed mitigation measures for environmental safeguards, thereby allowing negative environmental impacts to occur, with the intention of mitigating these impacts later on. However, after the Bank pointed out these deficiencies improvements were made. Construction camps for example, were gradually improved and areas of disposed material were landscaped. Air, water and noise impacts were monitored regularly and were found to be within the contractual limits, except for some dust nuisance from trucks due to insufficient spraying during construction.
  • The ICR notes that the Bank's resettlement procedures were followed and project affected persons were generally satisfied with the process and the compensation they received.

8. Ratings:
OED Review
Reason for Disagreement/Comments
Institutional Dev.: 
Bank Perf.: 
Borrower Perf.: 
Quality of ICR: 

- When insufficient information is provided by the Bank for OED to arrive at a clear rating, OED will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

The Bank should ensure that sound feasibility studies have been undertaken with solid cost estimates for the financing of important civil works and realistic time frames for the completion of the work.
  • Inter-provincial highways involving more than one authority should coordinate in such a way that learning experiences are shared.
  • It is important to pay close attention to the interconnecting road programs and standards during project design.

10. Assessment Recommended?  Yes

          Why?  This project should be assessed as part of a cluster of transportation projects in China to ascertain overall sector performance in this large client portfolio. The projected traffic, toll revenues and accident rates should also be checked against actual trends.

11. Comments on Quality of ICR:

The quality of ICR is satisfactory. It covers all the relevant issues relating to the implementation experience and the outcome of the project. The ICR is not clear on whether an Expressway Road Safety Organization was created in the Guangdong province.

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