Value Added by ADB Operations to the Roads and Railways Sector of the Peoples Republic of China

A Case Study from the 2007 Sector Assistance Program Evaluation of Asian Development Bank Assistance for Roads and Railways in the Peoples Republic of China

August 2007 Tyrrell Duncan Operations Evaluation Department

Abbreviations
ADB PRC EFYP ICB LCB MOC MOR TFYP Asian Development Bank Peoples Republic of China Eleventh Five-Year Plan, 2006-2010 international competitive bidding local competitive bidding Ministry of Communications Ministry of Railways Tenth Five-Year Plan, 2000-2005

Note
In this report, $ refers to US dollars.

Contents
Page I. II. Introduction Value Added by ADB Projects 1 x

I.

Introduction

1. While the preceding chapters showed that Asian Development Bank (ADB)-supported roads and railways in the Peoples Republic of China (PRC) were generally successful during the study period, they did not determine to what extent this success had to do with ADB. Since the PRC made enormous improvements in its roads and railways, and since these were largely financed and implemented without outside help, it cannot be taken for granted that ADBs involvement added value. Further questions need to be explored. For example, could the financing that ADB provided have been obtained from other sources? Were the features of ADBsupported activities any different from the other parts of the Governments large road and railway development programs? Was the quality of investments any better when ADB was involved? Did ADB support have a wider influence on other parts of the road and railway development programs, and on subsector policies and institutions? 2. This chapter presents the results of an assessment of the value added by ADB operations. It draws on the findings of a with project and without project ("with and without") survey of ADB-financed and non-ADB-financed road and railway projects. The survey sought to distinguish (i) whether the typical features of the ADB project package added value compared with domestically financed projects; and (ii) whether such value addition changed significantly during the study period, and, if so, how and why?

II.

Value Added by ADB Projects

3. The with and without survey was conducted using a semi-structured questionnaire administered through face-to-face interviews with executing agencies. The questionnaire focused on similarities and differences in terms of project identification, preparation, implementation, monitoring, and stakeholder involvement for a sample of ADB-financed projects and comparable domestically financed projects. The sample comprised 14 ADBfinanced projects approved during the study period (10 of the 20 expressway projects, and four of the seven railway projects) and 15 non-ADB-financed comparator projects (10 expressways and five railways). These were in six different provinces. In most cases the sample projects had been completed or substantially completed.1 4. The findings of the survey are summarized in Table 6. These indicate that ADB road and railway projects did add significant value but that some of the special features of projects added less value than was expected in the Report and Recommendation of the President. The extent of value added generally diminished when the same feature was included in repeated projectsbecause the Government was quick to assimilate good features within domestic policies and procedures.
1

The ADB-financed projects in the sample included 60% of the completed road projects and all the completed ADB railway projects.

Value Added by ADB Operations

Table 1: Value Added by ADB Projects Compared with Domestically Financed Projects
Value Added Compared with Domestic Projects At time that feature was introduced

ADB Project Feature A. Roads Finance Mobilization Standard Provisions International Competitive Bidding Accounting, Auditing, Reporting Anticorruption Measures Safeguard Policiesa Special Featuresb Design Standards, Construction Quality Corporatization Pricing & Cost Recovery Link/Local Roads Axle Load Testing

By end of study period

Comment on Value Added Mainly in poorer provinces Sound local competitive bidding is sufficient ADB procedures useful, mostly assimilated by end of period Already have measures domestic anticorruption

Now largely duplicating domestic laws and policies Initially influential, but no longer Initially influential, scope for refinement of model Initially influential, scope for initiative on sustainability Link roads are same, local govt. provides local roads Following Government resolution in 2004, testing equipment now being routinely installed and used Domestic projects now have similar features Domestic projects now have similar features Helped raise awareness but indicators often impractical Integral way to link project area to expressway Prepare provinces for competitive conditions Value added for local railways, not national railways

Road Safety Vehicle Emissions Poverty Monitoring Roadside Stations Transport Services B. Railways Finance Mobilization Standard Provisions

Value Added by ADB Operations

Value Added Compared with Domestic Projects At time that feature was introduced

ADB Project Feature International Competitive Bidding Accounting, Auditing, Reporting, Anticorruption Measures Safeguard Policies Special Features Full Cost Tariff Commercialization Link roads and Stations New Technology for Rail Operations Developing Area Around Stations Rail Safety Private Sector Participation Separate Passenger Corridors

By end of study period

Comment on Value Added By end of study period ICB used by domestic projects ADBs strict procedures useful, but now mostly assimilated Already have measures domestic anticorruption

Now largely duplicating domestic laws and policies This requirement initially useful, now widely adopted Some initial value, now commercialization is widespread Domestic projects also have such construction roads Some ADB contribution but could add more value Introduced recently, full potential still to be realized ADB initially helped MOR to access the latest technology Introduced recently, full potential still to be realized ADB has encouraged this useful initiative of MOR

ADB = Asian Development Bank, ICB = international competitive bidding, MOR = Ministry of Railways = significant; = moderate. a Including environment, resettlement, indigenous peoples, HIV/AIDS, and other social safeguards. Source: Sector assistance program evaluation team.

1.

Finance Mobilization

5. The role of ADB financing in leveraging domestic project funding varied from project to project and from province to province, and changed over the course of the study period. What is quite clear for both road and railway projects is that the importance of ADB financing for project approval and start-up is less critical today than it was in 1997. In 1997, domestic commercial banks were skeptical about the traffic forecasts presented by local design institutes and unwilling to take on the financial risks they perceived to be associated with construction and operation of domestically financed transport projects.

Value Added by ADB Operations

Today, the domestic banks are more willing to consider transport projects, particularly in the more developed eastern and central provinces, where traffic levels are higher. 6. During the same period, the PRCs regional development prioritiesas expressed in the Tenth Five-Year Plan, 2000-2005 (TFYP) and Eleventh Five-Year Plan, 2006-2010 (EFYP)have given increased emphasis to financing projects in the poorer western provinces. These provinces have a weaker revenue base and rely more on outside loans for investments. This is posing new challenges for lenders and borrowers. Lower traffic levels mean that projects often have lower financial returns and higher risks, and require longer-term lending. Domestic commercial banks are still hesitant to finance these projects. However, interviewed executing agencies and implementing agencies said that domestic commercial banks were more willing to lend to ADB-financed projects. The banks were said to value ADBs strict procedures for appraisal, processing, and administration of projects. 2 7. Such leveraging impacts appear to be more typical of expressway projects and local railways than national railway projects. Expressways and local railways are set up as relatively autonomous local corporations at the provincial level. In the case of national railways, most of the decisions and priorities are set centrally by the Ministry of Railways (MOR) in coordination with the NDRC. When the MOR raises the public investment contribution and decides that a project is to go ahead, the financial risk for a domestic bank is much reduced, and the potential leveraging contribution of an ADB loan is similarly reduced. 8. Even though ADB financing is small relative to the PRCs total financing requirement for transport investment, ADB lending helps build confidence that has a spin-off effect on the willingness of domestic banks to participate in projects to be financed entirely from domestic sources. As a result, ADB can claim a greater influence on leveraging complementary domestic commercial funding. 9. ADBs detailed scrutiny of proposed projects relieves the domestic commercial banks of much analytic and bureaucratic work (loan transaction costs) that they are not geared up for, and which in itself would have rendered them unable to offer financing for TFYP and EFYP western development projects. From this perspective, ADB adds value in the form of free rides for the project officers and Board of Directors of the domestic commercial banks. 10. The Ministry of Finance confirmed that ADB financing also may enable some planned road and rail projects to start earlier than would normally be possible. The ADB funding and leveraged domestic bank financing free up road and railway budgets that can be allocated for other road and railway investments.

As observed by East Asia Department, ADBs role in leveraging financing remains highly relevant (more so in the Western regions) given the increased scrutiny by National Development and Reform Commission for investment projects. Also, leveraging investments from other development partners e.g. French, German, local banks, and private investorsis very high with ADB participation in a project.

Value Added by ADB Operations

11. However, under the TFYP and EFYP, there has been a significantly increased allocation of domestic investment finance for infrastructure in the western provinces. Assuming that this is sustained, ADBs value added in finance mobilization in these provinces is likely to diminish. ADB should prepare for the eventuality that within 5 to 10 years, depending on the province, the western provinces will start to gain more access to commercial financing and rely less on ADB. 2. Standard ADB Project Provisions 12. Procurement and Consultant Recruitment. While procurement of civil works and equipment for domestically financed road and railway projects generally follows local competitive bidding (LCB), for ADB projects the standard requirement has been international competitive bidding (ICB). Use of ICB is intended to secure international competition, on a transparent basis, so that clearly specified and defined goods and services can be reliably obtained through efficient, fair and transparence proceedures at competitive prices.

13. In the road subsector, most expressway executing agencies and implementing agencies complained that, in practice, the implementation of ICB fell short of expectations. They complained that ADB insisted upon selection of the lowest responsive bid, whereas this was generally not the approach used under their domestic procurement procedures. Often when contractors for ADB projects were selected on the basis of lowest responsive bid, the executing agency claimed that it had to devote considerably more time and resources to managing the contractor to ensure adequate performance. Executing agencies said that the contractors often underpriced their bids and then resorted to frequent requests for contract variations. Such problems sometimes caused delays.3 14. Most expressway executing agencies and implementing agencies would prefer LCB. This view was also supported by the Ministry of Communications (MOC). In part this was based on the alleged transaction-cost complications discussed above. In addition, the MOC and the executing agencies feel that ICB is redundant for highway projects since there is very little, if any, technology, equipment, engineering and operating skills needed that are not available in the PRC today at highly competitive terms. ADB continued to insist on ICB when not a single ICB contract for an ADBfinanced expressway project was awarded to a foreign bidder during the study period. Under these circumstances the executing agencies alleged that, ICB may simply raise transaction costs and lengthen timeframes. While the general approaches of ICB
3

While the general approaches to international competitive bidding remain appropriate from procurement principles of economy, fairness and transparencyand the dissemination of these approaches among expressway executing agencies was useful element of ADB value added during the early part of the study periodtransaction costs and timeframes could be reduced in the future by selecting among domestic bidders only.

There are likely to be a variety of reasons why a contractor may underprice its bid, such as taking on risks of various kinds, extent of competition, the desire to gain entry into a new market, and the desire to retain staff during a business slowdown.

Value Added by ADB Operations

remain appropriate from procurement principles of economy, fairness and transparencyand the dissemination of these approaches among expressway executing agencies was a useful element of ADB value added during the early part of the study periodtransaction costs and timeframes could be reduced in the future by selecting among domestic bidders only. This is, of course, an ADB-wide issue, which requires consideration at the institution level. 15. However this is not correct and it needs to be appreciated that for ADB financed contracts local procurement procedures need to be acceptable to ADB. Accordingly, these local procurement procedures can not significantly differ from ICB procedures which are considered international best practice subscribing to the principles of economy, efficiency, fairness and transparency. Time savings under local procurement procedures from a reduced bid preparation will only be minimal, i.e. ICB 42 days versus LCB 30 days. 16. Unlike in the road subsector a large number of ICB contracts in the railways subsector were contracts for the supply of equipment and machinery for which international participation and competition took place. The use of ICB was therefore better appreciated than in the road subsector. Accordingly the MOR, as well as provincial railway executing agencies for ADB projects, said that ICB provided access to the more advanced technologies available internationally. It also was used to introduce new forms of procurement, such as turnkey contracts. ICB also provided a systematic method for bid evaluation and selection. Where prequalification, bidding documents, and specifications were of a satisfactory standard, ICB was considered the best approach to procurement. 17. Since the MOR has considerable technical capacity to draw upon and had used ICB successfully on ADB projects before, it had little difficulty conducting the preparatory aspects of ICB. The experience of using ICB for ADB-financed projects had helped the MOR and provincial railway executing agencies appreciate the merits of ICB. The MOR now uses ICB regularly for domestically funded projects, and has introduced its own ICB guidelines influenced by experience gained through ADB-financed projects. It now appears that the MOR and provincial railway executing agencies have built up enough capacity to use ICB when appropriate. While ADB should continue to use ICB for future railways project, it will be needed merely to remain on par with domestic projects, and will not be a source of additional value added. 18. Accounting, Auditing, Reporting, and Reviews. ADB applies a well-tested set of implementation arrangements, procedures, and project reviews to secure efficient, effective, transparent, and orderly project implementation and disbursements. In the early part of the study period these helped improve upon the methods being used by executing agencies. However, by the end of the period, the most useful elements had been incorporated into domestic procedures, and there was little further value addition by ADB.

Value Added by ADB Operations

19. Regarding project monitoring, a relatively widespread criticism from executing agencies was that ADBs monitoring indicators were less relevant and suitable than those used for domestically financed projects. This was particularly the case for railway projects. Too often, ADB indicators had been selected hastily during project processing missions, and without giving sufficient attention to the practical requirements of data collection. The executing agencies considered ADBs project monitoring indicators a burden, with little or no value added. 20. All the executing agencies and implementing agencies interviewed said that strict domestic systems for combating corrupt practices were now well established, including whistle-blower protection. The special audit required by ADB projects added little value in this context, and there were no instances where the special audit identified corruption. 21. Safeguard Policies. Executing agencies and implementing agencies were asked if ADB safeguard policies differed from those applied in domestically financed projects, and if they had added value in the form of better overall project performance and impact. Half of the executing agencies said that ADB safeguards differed; the other half said they did not. Only one out of 15 executing agencies and implementing agencies said that ADB safeguards had improved the project performance and impact. 22. Regarding the individual safeguard components of ADB loans, there was a consensus among executing agencies and implementing agencies that ADBs environmental impact assessment requirements no longer add value. The domestic environmental impact assessment requirements were said to be sufficiently rigorous. 23. All projects during the study period included resettlement plans. Of the executing agencies and implementing agencies interviewed, a little more than half said that ADB resettlement policies differed from those used for domestic projects; the remainder said there was no difference. Most executing agencies and implementing agencies felt that ADBs resettlement plan did not add value. However, many said that ADB monitoring of resettlement plan implementation sometimes helped ensure more timely payment of compensation compared with domestically financed projects 24. An indigenous peoples development plan (or ethnic minorities development plan) was relevant for only half of the ADB-financed projects in the with and without sample. About three-quarters of the executing agencies and implementing agencies said that the plan for the ADB projects was different from that for domestically financed projects, and a third felt that the ADB plan was a little better. However, some executing agencies and implementing agencies also said that ADBs plans had been poorly conceived and added little value. This was particularly so in areas where the population comprised numerous different ethnic groupswhich did not fit with the idea of a single majority group together with small and vulnerable minority groups that seemed to lie behind ADBs approach to indigenous peoples.

Value Added by ADB Operations

25. Components to Mitigate HIV/AIDS in Highway Projects. Almost all executing agencies said that these components complicated project implementation, while adding no value compared with domestic projects. Prevention of diseases (including HIV/AIDS) and accidents fall under jurisdictions other than expressway executing agencies. Fairly comprehensive domestic health measures and disease prevention information was already in place, including actions to mitigate HIV/AIDS threats at construction sites. Some executing agencies said the domestic measures differed from ADBs, while other executing agencies said they were similar but had been developed independently of ADB support. It was also noted that issues like HIV/AIDS would have to be addressed at the sector and central level through policy dialogue to improve interagency coordination and compliance. 3.
Executing agencies and implementing agencies said that the special features added value when they were introduced, but that this gradually eroded as these features were mainstreamed into domestic project design and implementation

Special Features of ADB Projects

26. All ADB-financed road and railway projects contained special features. Some were already in place in 1997 for both road and railway projects. These included link- and localroads components, corporatization and commercialization of provincial railways, and systems for tolling and full-cost tariffs. Others were introduced during the study period, including road safety (from 1998), axle load control measures (1999), and vehicle emissions controls (from 1999).

27. The feedback from the interviewed executing agencies was that the special features often complicated implementation of the project while they were meant to address special issues associated with projects. Sometimes these features led to division of the responsibility for financing, implementation, or monitoring between several different ministries and agencies. 28. Executing agencies and implementing agencies said that while many of the special features covered important issues, ADB had limited in-house expertise to make much contribution through its staff. This problem was particularly important in the area of railway engineering and operations. A related issue here is one of the capacity of a single staff to accomplish a large and growing workload, and bearing in mind the complexity of railway projects4. If the ADB project teams had been more skilled, ADB could have added more value. 29. In many cases, executing agencies and implementing agencies said that the special features added value when they were introduced, but that this added value gradually eroded as these features were mainstreamed into domestic project design and implementation. This success made many special features redundant. There is a need to (i) remove features that have already been mainstreamed, and (ii) identify new project features capable of adding value.
4

During the review period, ADB was served by two highly expreinced railway specialsitsts, the first from 1997-2001, and the second from the second half of 2002 to the present. East Asia Department, however, noted that nothing was missed or unattended by not having additional railway sector experts.

Value Added by ADB Operations

a.

Roads

30. Highway Design Standards and Construction Quality. At the beginning of the study period, ADB projects added value by supporting the establishment of improved highway design standards and construction quality. However, MOC and road project executing agencies said that domestic highway design standards have now been established, and that PRC design institutes and engineers now adhere to international standards of design and construction quality. ADB-financed projects and domestically financed projects now differ little in terms of highway design, standards, and construction quality. Project implementation procedures likewise differ little. ADB projects therefore no longer add value in these areas. 31. Highway Commercialization and Corporatization. Training and capacity building support for the establishment and efficient operation of expressway enterprises was a feature of all 18 ADB-financed road projects during the study period. This special feature of ADB expressway projects provided expressway operators with valuable lessons and experience in setting up and managing road companies and collecting revenue for sustainable road management. 32. However, the proliferation of individual expressway companies, where each company is financially responsible for its own loan servicinghas become myopic and suboptimal. The one toll road, one toll company approach has increased time costs by increasing the amount of toll stops and inflating toll collection costs. It has also meant that there is no mechanism for assisting expressways facing debt-servicing problems caused by initial traffic shortfalls. Rather than promoting further proliferation of individual expressway companies, ADB by the latter part of the study period could have added more value by encouraging the development of province-wide expressway companies or other umbrella arrangements. 33. Highway Pricing and Cost Recovery. Provincial executing agencies said that the pricing and cost-recovery procedures used by domestically financed projects and ADB-financed projects were similar. There was some transfer of knowledge and experience from ADB-financed projects to domestically financed projects, especially in the early part of the study period. This was an area of clear value added arising from special features of ADB projects and technical assistance. Effective pricing and costrecovery methods were vital to ensuring the overall financial sustainability of the NTHS, and to avoiding the risk of expressway companies with lower traffic levels defaulting on their commercial loans. This was an area where there was untapped potential for ADB to have a positive influence and add further value. ADB influence has been limited in this area because it continued to address pricing and cost-recovery on an individual project basis. Addressing this issue on a sector or provincial-level basis would have added more value. 34. Link Roads and Local Roads Attached to Expressway Projects. The executing agencies provided a range of answers to the question of whether including link and local roads added value to ADB-financed expressway projects. The majority

10

Value Added by ADB Operations

said that link-road components were similar in ADB-financed and domestically financed projects; therefore, ADB did not add value in this regard. On the other hand, local-roads components of ADB projects differed from domestically financed projects in that such roads were specifically intended to connect to poor towns and villages. 35. Inclusion of all-weather local roads to serve the poorest communities in the project area became a feature of ADB support early in the study period. This was meant to add value by increasing the poverty reduction impact of ADB expressway projects. However, the potential for this was limited as only about 5% of project cost was typically assigned to local and link roads, and in some cases this was financed from the government counterpart contribution rather than from the additional resources provided by the ADB loan. 36. The survey of executing agencies, and interviews with MOC and MOF have not provided full clarity as regards to the additionality of ADB-supported local roads to poverty villages. A couple of executing agencies claimed that the foreign funding of local roads indeed added to the total funding committed to rural roads, especially early in the study period, and therefore helped reduce poverty. However, the large majority of executing agencies claimed that these roads were already included in the provincial and country budgets and would have been built anyway. Given the EFYP's greatly increased focus on local roads, this will surely be the case in the coming years. 37. Most executing agencies said that ADBs insistence on including local roads in expressway projects complicated implementation of the projects without adding much value. Expressways and local roads came under different jurisdictions and were normally funded from different budgets. Local roads could not be financed through toll revenues unless some of the expressway toll revenue was earmarked for repaying the cost of the local roads. Executing agencies would prefer that ADB concentrated on financing the expressway component, since that would simplify institutional arrangements, administration, and repayment. They said that local-roads programs should be managed and financed directly by provincial and country authorities in accordance with their existing plans.
Executing agencies would prefer that ADB concentrated on financing the expressway component, since that would simplify institutional arrangements, administration, and repayment. The local roads programs should be managed and financed directly by provincial and country authorities in accordance with their existing plans.

38. ADBs preoccupation with including local roads in expressway projects is based on the argument that such roads contribute to poverty reduction. As discussed above, most local roads would have been built anyway. Moreover, ADB has failed to recognize that poverty reduction in the PRC tends to be driven by job creation in urban areas, which provides opportunities for migrants from poor areas to find better paid jobs (i.e. poverty reduction by means of trickle-down effects). However, the rate of rural migration in the PRC is closely linked to enhanced capacity to transport people and goods. From this perspective, expressway loans contribute greatly to poverty reduction. In addition, job

Value Added by ADB Operations

11

creation in the PRC depends to a large extent on continued economic growthwhich is also partially dependent on developing the NTHS to reduce transport bottlenecks. 39. Road Safety, Axle Load Controls, and Vehicle Emission Controls. These are now included in all ADB road projects in the PRC. Almost all executing agencies said that such features in ADB projects did not differ markedly from domestic projects. Of the few that said the ADB measures were different, only half credited the ADB features with adding value. 40. One factor that complicates implementation of highway projects is the sharing of jurisdiction in traffic safety, emission controls and axle load controls among various ministries and agencies that rarely communicate with each other to find joint solutions for controlling emissions, overloading, and traffic safety hazards. 41. ADB can add value by continuing to support road safety, axle load controls, and emission controls. However, instead of adding these to individual expressway projects administered by single executing agencies, it should develop a rolling, medium-term program of advisory technical assistance projects that bring together the various ministries and agencies to address these problems in a coordinated manner. There is scope for ADB to transfer best practice experience from other countries. 42. Competition Framework for Transport Services and Developing Roadside Stations. In two recent ADB-financed projects, plans were developed to improve competition in the transport services industry and establish roadside stations to encourage local entrepreneurial activities benefiting from proximity to the expressway. According to executing agencies and implementing agencies, about half of the domestically financed projects had similar features, but these were not influenced by the ADB-financed projects. However, it is too early to draw conclusions about whether these features of ADB projects add value. b. Railways
ADB played a useful confidence-building role in supporting the concept of separate corridors, since this has considerable potential for improving rail efficiency. Its presence also encouraged private investors to take part in such projects for the first time in the Peoples Republic of China. It is likely that ADBs involvement in such projects will continue to add value for several years, but as confidence builds up, ADB will have to find new ways of adding value on these corridors.

43. Full Cost Railway Tariffs. The national railways have undergone massive structural reforms during the past two decades. Among the most prominent changes has been restructuring the tariff schedules to reflect fullcost recovery and generate enough revenue to repay loans. Throughout the 19972005 study period, all seven ADB loans included covenants requiring full-cost tariffs for the project line. Earlier in the study period, ADB's insistence on full-cost tariffs played a useful role in helping ensure that railway investments were run according to sound financial principles. By the end of the period, full-cost tariffs were the norm for all railway projects, with or without ADB financing. 44. Commercialization of Railway Companies. All railway projects advocated commercialization. ADB-financed

LJVRs

helped

12

Value Added by ADB Operations

demonstrate the benefits of operating railways in a commercial manner. By the late 1990s, when MOR embarked on major reforms of the national railways, all new railways followed commercial approaches and this aspect of ADB projects no longer added much value. 45. Railways Link Roads and Stations. Whether a railway project is ADB-financed or domestically financed, it requires construction roads linking the site with the nearest all-weather road. After project completion such roads are turned over to local governments, which are given responsibility to manage and maintain them as local roads. This process has taken place independently of ADB lending, and for all railway projects. MOR and railway executing agencies and implementing agencies did not think that ADB financing affected the quantity of link roads and local stations. 46. At the outset of the study period, social concerns and poverty reduction were not important factors in siting link roads for domestically financed projects. Partly as a result of ADB insistence that these link roads and stations be built to serve poor communities, MOR established guidelines for this purpose in 2004. Since then, cooperation between MOR and local communities seems to have improved the siting and maintenance of these roads. Now that this is institutionalized, ADB provisions for link roads no longer add value compared with domestic projects. 47. New Technology for Railway Efficiency and Safety. Since 2000, four ADBapproved railway projects in the PRC have included advanced technology for signaling, communications, safety equipment, transport and dispatch management information systems, mechanized track maintenance, and freight and container yard operations. Investing in such advanced technology has been a high priority of MOR, and most likely these are investments that MOR would have implemented independently of ADB loans. However, MOR and several railway executing agencies and implementing agencies said that ADB loans added value by providing a channel for improved access to technologies, equipment, and international expertise. There is scope for this channel to add even more value, but to do so ADB will need to bring on additional and more specialized railway experts. Another ADB contribution in this area has been the piloting of new technology on ADB-financed projects. If proven successful, the technology is later replicated in other projects, including domestically financed projects. 48. Separate Passenger and Freight Corridors and Private Sector Participation. Under the TFYP, the Government decided to develop separate passenger and freight corridors on busy routes. ADB played a useful confidence-building role in supporting the concept of separate corridors, since this has considerable potential for improving rail efficiency. The presence of ADB financing also encouraged private investors to take part in such projects for the first time in the PRC. It is likely that ADBs involvement in such projects will continue to add value for several years, but as confidence builds up ADB will have to find new ways of adding value on these corridors.

Value Added by ADB Operations

13