Document of

The World Bank

FOR OFFICIAL USE ONLY

AS C)

Report No. 6619-KO

STAFF APPRAISAL REPORT

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

January t1, 1988

Country Department IIAsia Regional Office

Tis document has a restided listribution and may be used by ripients only in the perfonnace oftheir offciad dutes. Its contents may not othendse be disclosed witout Wodd Bank auhoizaton.

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CURRENCY EQUIVALr.NTS

Currency Unit - Won (W)

US$1 W 800US$1,250 = W 1 million

(as of October 1987)

FISCAL YEAR

January 1 - December 31

WEIGHTS AND MEASURES

1 meter (m) = 3.2808 feet (ft)1 kilometer (km) ^k= 0.62 mile (mi)1 square kilometer (km 2) 0.3861 square miles (sq mi)1 hectare (ha) = 0.01 k2= 2.4711 acres (ac)1 kilogram (kg) 2.205 pounds (lbs)1 metric ton (ton) - 2,205 pounds (lbs)

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

ADB - Asian Development BankADT - Avarage Daily TrafficBPR - Bureau of Public RoadsEPB - Economic Planning BoardERR - Economic Rate of ReturnGNP - Gross National ProductKECC - Korea Engineering Consultants CorporationKHC - Korea Highway CorporationKMPA - Korea Maritime and Port AdministrationKNR - Korean National RailroadKRIHS - Korean Research Institute for Human SettlementsKRMTFS - Kyonggi Region Multimodal Transport Feasibility StudyMOC - Ministry of ConstructionMOER - Mini.stry of Energy and ResourcesMOF - Ministry of FinanceMOHA - Ministry of Home AffairsMOT - Ministry of TransportationSMESRS - Seoul Metropolitan Electrified Suburban Railway SystemVOC - Vehicle Operating CostsVOT - Value of Time

FOR OMCIAL USE ONLY

KOREA

KYONCGI REGIONAL TRANSPORT PROJECT

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY .... .... ... ***,,.*,,*.*.*....*** iii

I. THE TRANSPORT SECTOR .................... 1

A. Geographic and Economic Setting .......................... 1B. The Transport System I.................................... 1C. Transport Sector Issues and Objectives in the 1980s....... 3D. Previous Bank-Assisted Projects in Transport.............. 4E. The Bank's Role in the Sec t o r 4

II. THE KYONGGI REGION 5...............5

A. Introduction ... 5B. Population and Economic Development Trends 6C. Transport Network and Traffic .,e..................... 7D. Transport Administration and Organization 9E. Regional Development Policy ........................... 10F. Regional Transport Plan 11

III. THE PROJECT.......... 12

A. Project Formulation and Preparation ......... o............ 12B. Project Objectives...o........ ...**.*000oooo**o.... .,. 13C. Detailed Features 14Do Cost Estimates e**¢e@e**v*¢¢**¢¢¢v* 15E* Financing **¢¢¢*^*v*****+*v*X@es**17F# Implementation 17G. Procurement 18Ho Disbursements 19I. Auditing, Reporting and Monitoring 19J. Environmental Effects 19K. Transport Coordination and Project-Related Studies*#.*.*** 20

The project was appraised in October 1986 and the report prepared by A. Faiz(Economist), E. A. James (Financial Analyst), B.P. Kennedy (Engineer),C. Menckhoff (Transport Specialist), C. R. de Silva (Loan Officer), andR. Huenemann (consultant). The report was updated following a mission toKorea in August 1987.

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

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Page No.

IV. ECONOMIC EVALUATION ................... 021

A. Regional Traf%ic Pattern ....... O......,............. 21B. The "First Step Program" .............. *21C. Economic Evaluation 00...... ..... .... ............. e 21D. Toll Levels and Cost Recovery ....................... e 22E. Risks ........ ,...,..... ,.,,..,........,.......,*. 22

V. AGREEMENTS REACHED AND RECOMMENDATIONo ....... .....*******.** 23

ANNEXES

1. Government Statement on Transport Planning andCoordination in Kyonggi Region.............................. 25

2. Growth Trend of Domestic Traffic (1966-85)00..*.....**.0...*. 293. Transport Administration and Organizationo.......,.........o.. 314. Korea Highway Corporation......o...................f...........e 33

5. Summary of Investments Proposed by KRMTFPS*....0**. .**.*.. **.0 426. Expressway Design Standards ......................o.... .o.o.. 437. Project Cost Estimates.................................... 448. Project Implementation Schedule h e d u le....oe..............o.... 469. Estimated Disbursement Schedule he,d u le..o.o.......o........,.. 4710. Project Monitoring Indicese................................... 4811. Measurement of Economic Benefitso...o.................o.......o 4912. Selected Documents and Data Available in Project File..o...... 51

CHART

1. Organization of the Korea Highway Corporation(World Bank 30927)

MAPS

1. National Transport Network (IBRD 20214)2. Expansion of Seoul City between 1917 and 1985 (IBRD 20216)3. Kyonggi Regional Transport Project (IBRD 20188R)4. Seoul Metropolitan Management Plan Policy Development Areas (IBRD 20215)

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KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Loan and Project Summary

Borrower: Republic of Korea

Beneficiary: Korea Highway Corporation (KHC)

Amount: US$116 million equivalent

Terms: Repayable in 15 years including 3 years of grace, atthe standard variable interest rate

Project Objectivesand Description: The objective of the project is to help increase the

efficiency of transport in the economically dynamicKyonggi region around Seoul by (a) physically improv-ing the transport infrastructure and (b) supportingthe preparation of a comprehensive transport invest-ment program. As a first stage in multimodal trans-port investments needed to meet transport demand, twohigh-capacity toll expressways would be constructedunder the project as parts of future bypass roadsaround Seoul. In parallel with the expresswayconstruction, Government would further strengthentransport coordination in the region and also conducta traffic management study in secondary citiesaffected by the new expressways. Further, a dialoguewould be maintained with the Bank concerning plannedresearch on traffic flow and congestion analysispreliminary to preparation of a Highway CapacityManual for Korean conditions.

Benefits and Risk: The principal project benefits are savings in vehicleoperating costs due to network improvement. Thesewould accrue to the general public since a largeproportion of traffic in the area consists of busesand trucks. The risk in project implementation isconsidered low, since Korean authorities haveaccumulated considerable experience in large-scaleroad projects. Even in the unlikely event thatconstruction costs were to exceed estimates by 20%,the economic rate of return would be higher than 27%which is ample for economic justification.

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Project Costs: Local Foreign Total----- US$ million ---

Expressway construction 146.5 141.8 288.3Consultants' services forconstruction supervision 11.7 0.0 11.7

Base Cost 158.2 141.8 300.0

Physical contingencies 7.9 7.1 15.0Price contingencies 4.5 4.1 8.6Right-of-way acquisition 124.6 0.0 124.6

Total Project Costs /a 295.2 153.0 448.2

Financing Plan:Government 295.2 37.0 332.2World Bank - 116.0 116.0

Total Financing 295.2 153.0 448.2

EstimatedDisbursements: Bank FY 1988 1989 1990 1991 1992 1993

---------- …US$ ml lon - … --

Annual 10 16 38 32 14 6Cumulative 10 26 64 96 110 116

Economic Rate ofReturn: 31%

/a Includes taxes and duties estimated at US$49 million.

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

I. THE TRANSPORT SECTOR

A. Geographic and Economic Setting

1.1 The Republic of Korea has a land area of 99,100 km2, ablut 66Z ofwhich is mountainous. Agriculture is confined to about 22,400 km , or only23% of the total area, mainly in the river valleys, lower hillsides andcoastal plains. The climate is seasonal with very cold dry winters and hothumid summers. Annual rainfall averages 800 mm to 1,400 m with about 60%falling between June and August, and seasonal flooding is a major problem.The rugged terrain, extensive river system and severe winter climate make theconstruction of transport facilities, particularly roads, difficult andcostly.

1.2 Korea's export-led industrialization has been among the mostsuccessful examples of economic development in recent history. Between 1962and 1978, the real Gross National Product (GNP) grew by 101 p.a. and percapita income more than tripled in real terms. After a brief but seriousrecession in 1979-81, the Korean economy recovered its growth momentum, withreal GNP increasing by more than 9% in 1983 and 8% in 1984. Although itdeclined to 5% in 1985, a growth rate of 12% was registered in 1986 allowingKorea to return to the high export and growth trajectory envisioned for theperiod of the Fifth Five-Year Economic and Social Development Plan (1982-86).

1.3 The population is presently estimaLed at about 42 million and isgrowing at an annual rate 2f 1.2%. Population density is about 419 per km2 oftocal area or 1,853 per km of non-mountainous land. Urban population isestimated to be growing at an annual rate of 5.7% and has increased from 41Xof the total in 1970 to 65% in 1987.

1.4 Korea's increasing urbanization and industrialization have createdsignificant transport demands in the areas around the cities and industrialcenters and between them, particularly in the Seoul-Pusan (Kyongbu) Corridor,in Seoul City and in the surrounding region (Kyonggi Province). Passengertraffic tripled between 1962 and 1971 and tripled again by 1985; freight traf-fic increaned nine times and five times, respectively, during the same peri-ods. Major developments and changes in the transport sector complemented andsupported this transformation of Korea's economy (Map IBRD 20214).

B. The Transport System

1.5 For two decades, the transport system has been strained by thedemands of rapid growth and has required massive public sector investments intransport infrastructure. The Government allocated up to 23% of its totalcapital expenditure to expand and modernize transport infrastructure from 1967to 1977, tapering down to about 15% in the Fourth (1977-81) and Fifth Plans(1982-86). The Sixth Plan (1987-91) allocation for sector investments is atabout the same level.

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1.6 Substantial changes in the modal distribution of traffic are illus-trated by traffic statistics for the 1966 to 1985 period (Annex 2). Thepreviously dominant role cf the railways (82X of ton-km in 1966) has beenreplaced by a more balanced distribution of traffic among rail, coastalshipping and road for freight and among road and rail for passenger transport.During this period, for freight traffic, the road and coastal shipping sharesof total ton-km increased from 82 to 402 and from 102 to 29X, respectivel-,wihile movements by rail, although showing growth in absolute terms, fell to31% of total ton-km. These changes reflect both the economic advantages ofthe various modes and the different growth rates of the industries served, asrail and coastal shipping became concentrated on long distances and bulkcommodities while road transport handled the short distances and more generalcargo. For passenger traffic, rapidly expanding personal incomes have gene-rated large increases in personal travel, mainly by public transport such asexpress trains and buses. About half of all passenger traffic is in urbanareas. High taxatior. of private cars and gasoline has limited motorization toa level significantly below that of other countries with income levels compar-able to Korea's but has not deterred rapid growth in road transport. Between1966 and 1985, the rail share of total passenger-km fell from 43Z to 25X whilethe road share increased from 56Z to 732.

1.7 The Government of Korea's basic objectivise in the past has been toincrease and modernize the capacity of the transport system in line withprojected traffic growth and to avoid major bottlenecks. This objective hasbeen largely achieved. The present system is reasonably balanced and trafficis in general allocated economically among the various modes. Another objec-tive of the investments in transport has been to pursue broader concerns inKorea's spatial and economic planning. For example, considerable efforts havebeen made to develop new industrial complexes in coastal areas to takeadvantage of Korea's natural potential in harbors and to exploit low-costcoastal shipping while avoiding excessive congestion on road and rail.Projects are now better designed, construction quality has improved with therapid expansion of the construction industry, and maintenance systems havebeen established for the road network and strengthened for the railways.

1.8 In its efforts to ensure that appropriate development priorities arereflected in the allocation of scarce transport resources, the Government hasin the past tightly regulated the sector, with a restrictive licensing systemand administered pricing for all transport activities. The economic impact ofexisting regulations in the trucking industry on the cost of transportservices and energy use has been assessed under a Highway Sector Project (Ln.2392-KO), and some of the regulations constraining the efficiency of thetrucking industry, e.g., minimum fleet size and restrictive licensing, havebeen removed. The potential for improving efficiency in road transportthrough the use of intermodal freight terminals is being explored. TheGovernment is also reviewing existing road user charges to ensure that(especially) heavy vehicles pay their share of costs and generate sufficientrevenues.

1.9 Large investments in transport infrastructure have been complementedby a considerable effort to improve the efficiency of the transport systemthrough the establishment and strengthening of institutions to plan,

construct, maintain and operate the facilities and services* in the publicsector, institutions such as the Korean National Railroad (KNR)p the Bureau ofPublic Roads (BPR) in the Ministry of Construction (MOC), the Korea HighwayCorporation (KHC), and the Korea Maritime and Port Administration (KMPA) havebeen established or strengthened, in many instances with increasing financialand managerial responsibility. In the private sector, a highly efficientcontractor system has evolved for civil works which reflects both the policyof competitive bidding in the award of contracts and the large volume ofconstruction that has been carried out in Korea during the past 20 years.There are now some 500 firms capable of handling a broad range of publicworks. Furthermore, with government encouragement, the major constructionfirms have successfully expanded their construction activities overseas.

C. Transport Sector Issues and Objectives in the 1980s

1.10 Issues. In setting the major Sixth Plan objectives in the transportsector (para. 1.13), the Government has been responsive to the recommendationsmade by the last Bank transport sector review mission. The mission'sTransport Sector Issues Survey Report (No. 4423-KO dated December 27, 1983)concluded that there was considerable potential for increasing the productivi-ty of existing transport facilities and equipment, although most of theinvestments in the Fifth Plan period (1982-86) pursued development prioritieswhich were appropriate. The report noted that, with increasingly complextraffic patterns and higher traffic densities, growing requirements for main-tenance and the need to conserve energy, there is an even greater need toincrease efficiency in this capital-intensive sector, and three major areasrequire specific attention: (a) planning, (b) regulation and pricing, and(c) energy conservation. I

1.11 A Highway Sector Project (Ln. 2392-KO, approved in 1984) isaddressing the above issues. Transport planning is mostly done in the contextof five-year national development planning exercises. Under the ongoingHighway Sector Project, a road network master plan study has been completed asa basis for a highway sector plan which was incorporated in the Sixth Plan.The deregulation of road transport and reform of the pricing system arealready under way (para. 1.8). A transport energy saving plan has been pre-pared, five-year energy conservation programs have been completed for allmajor modes, energy audits of road transport companies are being conducted,and the potential for installing appropriate fuel conservation devices isbeing assessed, along with training and public information programs.

1.12 Despite considerable efforts, spatial planning of the transportsystem and integration of public transport services are still hindered bygenerally inadequate interagency coordination. This problem is especiallya'ute in the Creater Seoul area where the road network is denser and thepuLlic transport system more complex than in any other region; it wasaddressed in the Bank-supported Kyonggi Region Multimodal Transport Feasibil-ity Study (KRMTFS, 1985), the findings of which form the primary basis for theproposed project.

1.13 Objectives. The Government's basic policy focus in the transportsector during the Sixth Plan is to (a) incrsase transport efficiency, capacity

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and quality; (b) provide transport facilities that are balanced regionally;and (c) improve transport administration.

1.14 The Government seeks to schieve the above objectives through a morerational distribution of the means of transport; through efforts to utilizeexisting facilities to the maximum degree, optimize new investment and energyconservation, and increase private sector participation in transport; andthrough investments aimed at improving transport in the largest cities and atextending the network of paved roads to upgrade the accessibility of mediumand small cities anJ rural areas.

D. Previous Bank-Assisted Projects in Transport

1.15 The Bank's past involvement in the transport sector has been sub-stantial. Since 1962, it has assisted KNR through nine railway project loansamounting to US$501 million, MOC and the Ministry of Home Affairs (MOHA)through six highway project loans amounting to US$690 million and KMPA throughthree port project loans amounting to US$288 million. KNR and KMPA were alsoassisted through a loan of US$122 million for a multimodal coal and cementdistribution project. Of these 19 projects, 14 have been completed. ProjectCompletion Reports and Project Performance Audit Reports have been issued andhave generally found that the projects were successful in upgrading transportinfrastructure and strengthening the institutions in charge. Recent opera-tions are concentrating on more inter.sive use of existing facilities, moreefficient maintenance and more emphasis on transport investment policies thatseek to develop complementarity among the modes of transport.

E. The Bank's Rile in the Sector

1.16 The Bank's policy dialogue is being strengthened through theincreasing emphasis on sector and subsector work directly linked to transportlending in Korea. This new approach was initiated in 1984 with a PighwaySector Project (Ln. 2392-KO) which helps to deepen and broaden the Bank'sinvolvement in the road subsector by extending assistance to MOC, MOHA, theMinistry of Transportation (MOT) and the Ministry of Energy and Resources(HOER). That project is providing a framework for these agencies to improvetheir planning and coordination and to conserve energy and deregulate landtransport. For railways, the Bank has traditionally made sector-type loans,financing -ime slices of KNR's investment plans; the most recent of these, theSeoul/Pusan Corridor Project (Ln. 2600-KO) continues this involvement. On thebasis of the recently completed Railway Efficiency Sector Report (No. 6692-KO,dated June 25, 1987), a railway efficiency project is likely to be identi-fied. For ports, Bank assistance has been directed at the modernization andexpansion of facilities to support Korea's export-led development. Container-ization was introduced at Pusan under two completed port projects (Lns. 917-KOand 1401-KO) and would be developed further under an ongaing project(Ln. 2726-KO), which presents another opportunity for the Bank to supportgovernment policy measures aimed at increasing the efficiency of containerhandling and further strengthening KMPA's progress in institution building,primarily to improve the management and financing of the port subsector.

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.17 Besides these subsector operations, the Bank is Issisting theGovernment in developing multimodal projects. The first was the Coal andCement Distribution Project (Ln. 2267-KO) approved in 1983, involving rail-wavs, ports and inland terminals. A second multimodal transport study wascarried out from 1983 to 1985 to review the feasibility of a high speed trainbetween Seoul and Pusan, together with the complementary improvement of roadtransport. The proposed project is based on a third multimodal transportstudy for the Kyonggi region which identified priorities in strengthening theexpressway and suburban rail networks to meet the high transport demand in thesuburbs of Seoul. A fourth possible study being considered by the Governmentcould address the need to modernize the transport network in the southerncoastal region to link Mokpo-Sunchon-Masan with Pusan-Ulsan-Pohang in theeast, where most heavy industries are concentrated, and with Kwangju, theCholla Nam provincial capital, in the west. The study could include thefeasibility of a new port at Kwangyang Bay and of road and rail links to thehinterland.

II. THE KYONGGI REGION

A. Introduction

2.1 The Kyonggi region, located in the northwestern part of the country,includes three provincial-level administrative units:

(a) Seoul City, the nation's capital, has a "special city" status underKorean law; the mayor is appointed by the President of the Republicand reports directly to the Prime Minister. The population in 1986was 9.7 million.

(b) Inchon Citys the country's second largest seaport, is a "directjurisdiction city" under the administrative control of MOHA. It isthe only major port on the western coastline and handles mostlyimports of industrial goods and raw materials. The population in1986 was 1.4 million.

(c) Kyonggi-Do (Province), which encircles Seoul and Inchon, includesthe two busiest transport corridors in Korea, namely Seoul-Inchonand the Seoul-Pyongtaek section of the Seoul-Pusan corridor. Theprovince is highly urbanized and includes a number of cities withpopulations raaging from 300,000 to 500,000 inhabitants, namelySuwon (the provincial capital), Songnam, Puchon and Anyang. Thereare another fifteen cities and towns in the province with more than100,000 inhabitants. The provincial administration comes under thejurisdiction of MOHA, while the shi (city) and gun (county) govern-ments report to the Provincial G_vernor. The population of Kyonggi-Do in 1986 was 5.1 million.

2.2 The Kyonggi region covers an area of 11,691 km2, of which Seoul Cityaccounts for 605 km (SX' and Inchon City 207 km (2U); agriculture representsabout 27Z of the lant us' in the re ione The population density varies froman average of 16,000 persons per km in Seoul City to an average 470 persons

per km2 in Kyonggi-Dos In 1986, the Kyonggi region accounted for about 401 ofKorea's total population and about 50% of its urban population.

2.3 In 1983, about 42% of the nation's GNP was generated by the Kyonggiregion, with Seoul City accounting for about 70% of the regional product.Much of the employment (particularly in Seoul) is concentrated in infra-structure and service sectors (58%), followed by manufacturing (29%), withagriculture and mining now relatively unimportant as job sources (13%).

2.4 The concentration of population and economic activity in the Kyonggiregion has resulted in an explosive demand for transport infrastructure andservices. High-priced gasoline and high taxation of car ownership have meantthat passenger traffic has been served primarily by public transport (buses,taxis and more recently the subway system). Nearly two million passengersride the Seoul subway system daily, while the aggregate average daily traffic(ADT) crossing the 16 bridges over the Han River is over one millionvehicles. Despite government policies aimed at curtailing population growthin Seoul, and despite major road and rail investments in the Kyonggi regionduring the Fifth Plan, the supply of transport infrastructure has not keptpace with traffic growth (partly because of recent increases in car ownershipdue to rising income). Most arterials operate at or near capacity throughoutthe day. However, the relationship between traffic volumes and roadwaycharacteristics has not been well calibrated in Korea, and a more detailedinvestigation would provide an improved basis for future designs and policydecisions (para. 3.29).

B. Population and Economic Development Trends

2.5 Seoul nestles in a small basin, surrounded by steep mountains to thewest, north and east and t#y the Han River to the south. Seoul's populationwas about 200,000 at the turn of the century, had grown to about 600,000 by1936 and to just over 1,000,000 by 1953 (Map IBRD 20216). In the 1950s,Korea's population growth had already slowed to about 2% per annum, and thisdemographic transition was reinforced by vigorous family planning campaignsfrom the early 1960s onward. The population of Seoul, by contrast, grewexplosively during the 1950s (16% p.a.) and continued to grow very rapidlyduring the 1960s (9% p.a.), reaching a total of 5.5 million by 1970. Becauseof the natural limitations imposed by the mountains, and the strategic limita-tion imposed by the presence of the Demilitarized Zone just north of the city,Seoul's rapid growth quickly exhausted the open space available in theoriginal valley, and further expansion was then focused primarily on areassouth of the Han River, necessitating the building of many bridges to accom-modate traffic flows within and through the city.

2.6 Seoul's rapid growth created many prnblems, espesially in housingand transport, and the Government responded with policies to displace certainactivities, especially industry, from the downtown area. A further importantmeasure was taken in 1971, when a "Green Belt" was created, in which newdevelopment is not allowed. The belt is located about 15 km from the citycenter, and varies in width from one to nine kilometers. The primary effectof this belt has been to encourage growth of the satellite cities that liebeyond the belt., Since 1977 the Government has moved most institutions

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concerned with science, technology and research to Taejon, about 200 km fromSeoul. Most central government ministries were also moved to the suburbantown of Kwachon, about 13 km from their previous location in the downtowncore. In recent years, the announced policy of Government was to impose aceiling of 10 million on the population of Seoul, but the population is nowalready more or less at that level, and continues to grow at around 2X peryear. By contrast, the population growth of Kyonggi-Do has begun to accele-rate, and is now about 4% per year. Thus the pattern of urbanization sinceabout 1970 has been marked by the spillover of Seoul City's growth into thesatellite cities in Kyonggi-Do.

C. Tronsport Network and Traffic

2.7 The transport system of the Kyonggi region is composed of two mainelements: the road network and the subway/railway network (Map IBRD 20188).Within Seoul, the basic pattern of the road network is a series of threeconcentric ring roads crossed by 14 major radial corridors. The first ring isadjacent to the central business district, the second (the southern arc ofwhich runs along the bank of the Han River) has a radius of about 5 km, andthe third (which is not yet complete) has a radius of about 15 km. Thelocation of the radial corridors is dictated by the mountains surroundingSeoul and by the alignment of bridges crossing the Han 'iver. Very recently,this highway pattern in Seoul has been further supplemented by an expresswayalong the south bank of the Han River (which runs between Kimpo airport to thewest and the Olympic facilities to the east) and by two north-south arterials(being built with the assistance of Ln. 2514-KO for the Seout Urban TransportProject). Outside of Seoul, the highway network into Kyonggi-Do comprisesthree main corridors: the first to the southeast, the second due south(served by two highways that converge at Osan), and the third running west tothe port city of Inchon. Cutting across these three corridors is an importantconnecting route, linking Ichon, Suwon, Panwol and Inchon, which can becharacterized as an east-west tangent about 25 km south of downtown Seoul.The expressways to be built as part of the project will extend and upgradeimportant segments of the road network as recommended by KRMTFS (seeparas. 3.6-3.9).

2.8 The rail network in the Kyonggi region has two components: thesubway system in Seoul (which is managed by an autonomous public corporation),and the regular rail lines of KNR. The subway system with four linestotalling 116.5 km and 102 stations is quite new, and its ultimate impact onthe region's transportation network is still unclear. The regular rail linesof KNR also carry substantial passenger traffic over a network that covers theentire Kyonggi region. The key rail lines into Seoul from Inchon and Suwonare electrified, forming the Seoul Metropolitan Electrified Suburban RailwaySystem (SMESRS), which in its train freqvency and passenger density resemblesa subway operation. Passenger convenience is served by a rail/subway single-ticket fare system. It must be noted, however, that the integration of thetwo systems is not complete. In particular, the potential links between KNR'snew Kunpo-Kwachon-Songnam line and two subway lines have not yet been workedout, though they are under study.

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2.9 Traffic throughout the Kyonggi region both on road and rail isalready heavy and is increasing at rates greater than 10X per annum. On theroads, traffic counts of 10,000 to 20,000 vehicles per day can be observedeven on modest two-lane highways far from Seoul. Closer tu Seoul, multilanehighways commonly carry 30,000-40,000 vehicles, atd several key corridors havban ADT of more than 50,000 vehicles.

2.10 Passenger Traffic. In 1983, there were 15.3 million (one-way)passenger trips a day in Seoul, a figure that grew by about 6% p.a. over thepreceding several years, even though population was growing at only 2% p.a.About 2.3 million of these trips crossed the Seoul City boundaries. Of theintercity passenger trips made in the Kyonggi region in 1984, 64% were by busand 19% by SMESRS, leaving only 17% for other modes. Since the subway systemwas still under development, traffic data for future years will undoubtedlyshow a growing share for the subway. What is most striking, however, is thesmall share of intercity passenger traffic carried by automobiles. Thisreflects the current low level of car ownership in Korea (only 14 cars per1,000 population), which is largely the result of expensive gasoline and thehigh taxes imposed on car owners. Despite these fiscal penalties, however,automobile registration in Korea has been growing by more than 15% p.a. inrecent years, so the modal split for passenger traffic may change rathermarkedly over the next decade or two.

2.11 In Seoul, despite a pattern of morning and evening rush hours inpassenger travel, the flow of vehicles on the streets is heavy throughout theday, because both passenger buses and freight vehicles travel at all hours.The importance of buses and trucks in overall traffic flows is strikinglydemonstrated by vehicle counts made during 1985 at 52 widely separated obser-vation points throughout the Kyonggi region: 45.22 of the vehicles weretrucks, 34.4% were cars (including taxis), and 20.4% were buses.

2.12 Freight Traffic. In 1983, freight traffic across Seoul's boundariesmeasured 362,000 tons a day, with another 110,000 tons moving circumferen-tially outside the city. For the country as a whole, rail freight traffic(measured in ton-km) has grown an average of 5% p.a., while freight traffic onthe roads has grown 14% p.a., with the result that trucks have become far moreimportant than railways as carriers of freight over short distances. In theKyonggi region, the modal split for freight is currently about 88% by road and12% by rail.

2.13 Traffic Safety. One of the unfortunate consequences of the rapiddevelopment of traffic in the Kyonggi region has been the increase in fatali-ties and injuries due to accidents. eaths and injuries in the regiontotalled about 38,000 in 1978 and d'out 64,000 in 1983 -- a growth of 11%annually. The improvement of roads under the proposed project can be expectedto contribute to a better safety record. Recommendations of a Road SafetyStudy done by MOHA under the Provincial and County Roads Project (Ln. 2228-KO)are now being implemented. Other actions to improve traific safety recommendedin the Study are also being pursued under the Seoul Urban TransportationProject (Ln. 2514-KO).

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2.14 Factors Affecting Traffic Demand. The primary force determiningfuture traffic levels in the Kyonggi region will be the rate of economicdevelopment. Nevertheless, the Government--through its policy decisions--hasthe power to shape the development of traffic to a significant degree. Forexample, a reduction in the taxes levied on car ownership, which has beendiscussed as a mechanism to further improve the profitability of the Koreanautomobile industry by stimulating the domestic market, would undoubtedlyincrease traffic congestion in the urban areas, which is likely to be severein any event, With this problem in mind, it has been suggested to considertolls or other restraints on noncommercial vehicles entering urban areas.Another desirable policy measure may be to permit the introduction of high-quality bus or minibus services at premium fares. Passengers' choices betweencars, buses and trains will also be affected by the relative prices and avail-ability of the alternatives.

D. Transport Administration and Organization

2.15 The administrative structure for transport in Kyonggi region iscomplex and involves numerous government agencies, ranging from the Office ofthe Prime Minister to municipal construct..on bureaus. Besides the regionaladministrations (see para. 2.1), four central government ministries, viz. theEconomic Planning Board (EPB), MOC, MOT and MOHA, have a direct involvement intransport matters in the Kyonggi region (further details are given in Annex3).

2.16 The proposed project would be implemented by the Korea HighwayCorporation (KHC), which was created in February 1969 and is responsible forthe operation and management of almost all toll highways in Korea. Its statedobjective is to improve the national expressway network and contribute to thedevelopment of highway transportation. Besides building and operatingexpressways, KHC also carries out highway studies, designs, and supervision ofconstruction overseas. (KHC is described further in Annex 4).

2.17 Each transport agency within the region does a good job within itswell-defined responsibilities, but comprehensive planning and horizontalcoordination of the regional transport system are weak. The physical faci-lities are technically well constructed and efficiently maintained but are notwell integrated within a comprehensive regional transport operational plan andoften suffer from lack of continuity, poor interconnections and differingstandards.

2.18 The need for coordination of transport plans, investments andoperations in the country at large and more specifically in the Kyonggi regionhas been identified by various Bank studies (Korea Transport Sector IssuesSurvey, Report No. 4423; Korea Spatial Strategy Review, Report No. 5868; SeoulUrban Transportation Project, Report No. 5406). In practice, however, sometransport coordination does take place. An ad hoc committee composed ofrepresentatives from Seoul City, Inchon City, Kyonggi Province and KangwonProvince is convened as needed to review issues of special concern. Mostrecently, infrastructure investment programs for the Kyonggi region are beingcompiled and harmonized in the context of the Capital Region Improvement Law(para. 3.26). On operational matters, the cooperation between KNR and the

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Seoul Subway Corporation has been exemplary in coordinating the fare structureand train operations of the SMESRS and subway systems. During the preparationof the proposed project, the dimensions of the transport coordination problemand existing coordination mechanisms were extensively discussed with theGovernment. It was agreed to maintain a close dialogue on the subject throughregular consultations during the course of the project (paras. 3.26-3.27).

E. Regional Development Policy

2.19 The Second Comprehensive Nationa'. Physical Development Plan (1982-1991) provides the blueprint for spatial development in the Kyonggi region andcalls for policy measures to control the population and industrial concen-tration in Seoul City and its surrounding areas. Regional development strate-gies for the capital region include:

- creation of five spatial zones in the Kyonggi region related to thedegree of development and physical character stics of each zone, asdiscussed below;

- specialization of selected international and central managementfunctions in Seoul, with other facilities and services eithercontrolled or relocated to other areas;

- improvement of secondary cities in the region as growth inducementpoles or as special industrial zones according to their respectivecomparative advantages;

- improvement of transport, communication, supply and transactionfacilities and services on a regional scale to help establish anarea-wide urban system; and

- enactment of the Capital Region Improvement Law to insure effectiveexecution of improvement plans for the Kyonggi region (the CapitalRegion as defined under the law coincides with the Kyonggi region asdefined for the project).

2.20 Based on the policy guidelines for Integrated Regional SettlementArea development, MOC has prepared a Growth Management Plan for the capitalregion. This plan, also known as the Realignment Plan, aims to slow down thegrowth of population within Seoul City while controlling development in InchonCity and Kyonggi-Do in order to achieve balanced regional development. Itdivides the Kyonggi region into five areas (Map IBRD 20215): a (1) relocationzone including Seoul City, its suburban fringes to the north and east (includ-ing Uijongbu), and the green belt around Seoul City, where development is notallowed; (2) a reserved zone in north Kyonggi-Do for development in thefuture; (3) a nature conservation zone in eastern and southeastern Kyonggi-Do,where natural resources (water, forests and paddies) are to be protected fromurbanization; (4) a limited development zone extending from Inchon to Suwonand Osan and including the industrial city of Panwol, wbare some growth willbe allowed, mostly to accommodate the spill-over activities from Seoul City;and (5) a development promotion area in the southwestern part of Kyonggi-Do,extending from south of Panwol to Pyongtaek and Ansong where land will be made

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available for industrial and commercial uses with special x.ncentives todevelop activities and attract population fron other areas in the region.

2.21 Regional development guidelines for the Sixth Plan (1987-91) suggestthat the Government will contiaue to pursue the containment plan for the Seoulmetropolitan area. However, direct regulation of location of industries andeducational institutions will be reduced in favor of market-oriented toolssuch as taxation and incentive policies.

2.22 A recent Bank review of spatial strategies for Korea (ReportNo.5868-KO) suggests that the regional development strategy for Kyonggi regionshould aim to maintain Seoul, Inchon, and other expanding secondary cities inKyonggi-Do as dynamic manufacturing and increasingly important service andinformation centers and should carefully consider the relative costs andbenefits of relocating economic activities into the development promotion zoneat the southern tip of Kyonggi-Do. The proposed project aims to strengthenthe spatial fabric of the Kyonggi region -- first, by improving the transportlinks between the secondary cities in the region so they can develop withreduced dependence on Seoul City, and second, by strengthening efforts todevelop effective interagency transport coordination within the region.

F. Regional Transport Plan

2.23 Following a series of studies financed by the Bank, a consortium ofconsultants produced final recommendations for optimal investments in thetransport network of the Kyonggi region by 1991 and by 2001 (see MapIBRD 20188). The transport network in the Kyonggi region is planned toinclude an express, system consisting of a third ringway, with an averageradius of 15 km, linking Kuri with Kodok, Songnam, Pangyo, Anyang, Puchon andNunggok (from east to west); a new radial expressway linking Inchon withSeoul, south of the existing E-2 expressway; an east-west expressway linkingInchon via Munhak, Panwol, and Pajang with Shingal, the junction of theexisting Seoul-Pusan (E-1) and Yongdong (E-4) expressways; extension of theWest Expressway from Shihung to Yangsang; and a new southern expressway alongthe west coast from south of Anyang to the Asan Bay area. These links are inaddition to the new Seoul-Taejon expressway (Chungbu Expressway) which wascompleted in December 1987. This expressway development program would besupplemented by widening and paving of selected national and provincialhighways. The effect of the project expressways on the traffic patterns inthe secondary cities being served would be examined under the project(para. 3.28), Complementary investments in the railway system includecapacity expansion of the existing Kyongin and Kyongbu lines, particularly theaddition of a new double track between Kuro and Seoul; extension ofelectrification and SMESRS to beyond the southern border of Kyonggi-Do; andextension of the rail link between Panwol and Kunpo (under construction) toYangjae and eventually to Songnam and Ichon, including interconnection of thisline with Subways No. 3 and 4. Proposed transport infrastructure investmentsfor the Kyonggi region are summarized in Annex 5. The highest priorityproject components identified by the consultants as the "First Step Program"to 1991 can be summarized as follows:

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(a) Expressways:

(i) the Seoul-Sorae section of a new expressway between Seoul andInchon;

(ii) the Shihung-Nonggok section of the West Expressway;

(iii) the Shingal-Panwol section of the Shingal-Nunhak Expressway;and

(iv) the two missing sections needed to provide a complete express-way link between Pangyo and Kuri (that is, extending therecently c,mpleted Chur.gbu Expressway and linking it with themain Seoul-Pusan Expressway);

(b) Rail Lines: an additional double track between Kuro and Seoul, anda new rail link between Panwol and Kunpo (currently under implemen-tation); and

(c) Highways: various widening and improvement (paving) projects onhigh-traffic national and provincial roads.

2.24 From this list, the third and fourth expressway components (Shingal-Panwol and P&ngyo-Kuri) are included in the proposed project. Construction ofthe railway component (Kuro-Seoul) will begin in 1989 with governmentfinancing; detailed engineering is under way. A number of highway wideningand improvement projects have been programmed for detailed engineering andconstruction under a proposed highway sector project with financial supportprovided by the Asian Development Bank (ADB). Thus many components of the"First Step Program" are being developed, and the construction of othercomponents is under active consideration. In a Government Statement (Annex 1)to be confirmed prior to Board presentation of the proposed loan, reference ismade to the formulation of a 1988-91 implementation program of high-prioritytransport investments in the Kyonggi region.

III. THE PROJECT

A. Project Formulation and Preparation

3.1 Rationale. In 1983, during discussions on transport sector develop-ment with the Government based on the Transport Sector Issues Survey (para.1.10), a consensus emerged on the importance of coordinating and integratingthe different modal transport plans for the Kyonggi region. The Banksuggested that the merits of an integrated planning approach could be demon-strated through a specific project that would bring together sector agenciesin a coordinated effort. Recent government spatial policies have emphasizedthe high priority of dispersing the large population of Seoul by promotingurban growth centers to the south and east of the city. The Government isproposing to use the location of major new highways and rail lines toinfluence future settlement patterns as well as provide better access to the

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city. If such transport demands are to be met efficiently, it is essentialthat an integrated transport plan for the region be developed and implementedencompassing all modes of transport. The proposed project constitutes thefirst phase of such a plan which is being finalized by Government to meetgrowing demand over the next ten years, and supports existing mechanisms forthe coordination of transport planning in the Kyonggi region.

3.2 Project Preparation. Following the above-mentioned discussions, theGovernment initiated the first two intermodal studies in Korea: the Seoul-Pusan Transport Corridor Study and the Kyonggi Region Multimodal TransportFeasibility Study (KRMTFS), which was the genesis of the proposed project.

3.3 This latter study was done in three phases (financed under Loan1836-KO, Seventh Railway Project; Loan 2267-KO, Coal and Cement DistributionProject; end Loan 2392-KO, Highway Sector Project). In Phase I acomprehensive transport master plan was prepared for the Kyonggi region. InPhase II the economic and technical feasibility of the different components ofthe master plan were tested and investment plans for road and rail wereidentified for the period 1986 through 2001. In Phase III the detailed designwas prepared for the road and rail components included in the investmentprogram of the first construction stage. The two expressways considered forinclusion in the proposed project are part of the first-stage investmentprogram; rail components from Panwol to Kunpo (under construction) and fromSeoul Station to Kuro (the construction of which is planned to start in 1989)are also included in the first stage investment program.

B. Project Objectives

3.4 In addition to helping meet the road transport demand in two impor-tant corridors in Kyonggi region (para. 2.7) by financing the construction oftwo high-capacity toll expressways, the project would support the governmentobjectives of increasing the efficiency of transport in the region. Specificpolicy, institutional and technological objectives to be addressed under theproject include:

(a) to support the ongoing process of coordinating transport investmentplanning and monitoring the implementation of transport facilitiesin the region;

(b) to support the preparation of a comprehensive transport investmentprogram for the Kyonggi regioA; this program should take intoaccount the resources that are likely to be available for transportinvestments; and

(c) to improve traffic management in the secondary cities served by thenew expressways.

3.5 To help accomplish these objectives, the project would include:

(a) construction of four-lane divided, controlled access, toll express-ways between Pangyo and Kuri (23.8 km) and between Shingal andPanwol (23.4 km);

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(b) consultants' advisory services for the supervision of expresswayconstruction;

(c) regular consultation with the Bank in the ongoing process ofcoordinating transport planning, and in the preparation of aninvestment program for transport in the Kyonggi region; and

(d) a government commitment to conduct a traffic management study infour secondary cities where traffic patterns would be affected bythe new expressways.

C. Detailed Features

3.6 Pangyo-Kuri Expressway. The new 23.8 km four-lane divided tollexpressway with six interchanges, a 390 m twin tunnel and a 1,230 m bridgeacross the Han River would be part of the third ring road around Seoulmetropolitan area. The alignment would start from the Pangyo interchange onthe existing Seoul-Pusan expressway and pass by Songnam and Shinjang and endat Kuri. The expressway would providt a direct route between the northeasternand southern areas of Kyonggi region for local traffic and for the traffic nowusing the Seoul-Pusan expressway and for the future traffic on the new Seoul-Taejon expressway, scheduled for completion in late 1987. The proposedconnection would reduce traffic passing through downtown Seoul, alleviatingcongestion there (see Map IBRD 20188).

3.7 Traffic on the expressaay is projected to be 36,000 vehicles per dayin 1991, the opening year, and to rise to 57,000 in the year 2001, whenadditional capacity in the corridor would be needed.

3.8 Shingal-Panwol Expressway. The new 23.4 km four-lane divided tollexpressway witih live interchanges and two twin tunnels totalling 780 m inlength would be an extension to the west of the existing Yongdong expressway.The alignment would start from the Shingal interchange at the junction withthe Seoul-Pusan and Yongdong expressways and pass north of Suwon city, nearthe Pugok freight terminal and end near the important new industrial town ofPanwol. Under a planned second investment stage the expressway would becontinued to join the proposed new Seoul-Inchon expressway at Seochang. Theproject expressway would join a national road, recently widened to four lanes,which would carry the traffic moving beyond Panwol to Inchon. The newexpressway would facilitate traffic moving between eastern and southernKyonggi region and the industrial and port city of Inchon and the newindustrial and university city of Panwol (see Map IBRD 20188).

3.9 Traffic is projected to be 28,000 vehicles per day in 1991, theopening year, and to rise to 49,000 in 2001; additional capacity would beneeded in the corridor by about 2004.

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3.10 Status of Preparation. The feasibility and preliminary engineeringstudies for the expressways were financed under Loan 1836-KO (Seventh RailwayProject) and Loan 2267-KO (Coal and Cement Distribution Project) and done bythe French consultants BCEOM and the Korean consultants KRIHS (Korea ResearchInstitute for Human Settlements), KECC (Korea Engineering Consultants Corp.),and Yooshin. Detailed designs are complete, and final cost estimates havebeen prepared. KECC was responsible for the detailed design and bid documentsfor the Shingal-Panwol expressway in three sections. The consulting firmsDaewoo, Dowoo, Saman and Dongmyong prepared the detailed design and biddocuments for the Pangyo-Kuri expressway in four sections. The geometricdesign standards for the expressways are shown in Annex 6 and are appropriate.

3.11 Supervision of Construction. The supervision of construction toensure quality control and compliance with specifications would be done byKHC's engineers assisted by consultant expertise. KHC's engineers have beenclosely involved in major road projects, most recently with the constructionsupervision of the Seoul-Taejon expressway. Qualified and experienced localconsultants would also be available for this work; during the last two decadesunder Bank-financed and locally-funded projects, they have gained considerableexperience in major road construction.

3.12 About 70 KHC engineers would be assigned full-time to superviseexpressway construction. In addition, a total of about 60 man-years of localconsultants' services are envisaged to assist in the supervision ofconstruction of the two expressways. During negotiations, agreement wasreached with the Government on the terms of reference for these services andassurances obtained that the selection of the consultants would be acceptableto the Bank.

D. Cost Estimates

3.13 The total project cost including physical and price contingenciesand right-of-way acquisition costs is estimated at Won 358.58 billion, orUS$448.23 million equivalent, with a foreign exchange component of US$153.00million or 34.1%. Project costs are shown on a year-by-year basis in Annex 7and are summarized in Table 1 below. All base costs are in October 1987prices. Physical c'itingencies are calculated at 5X of base cost estimatesand applied to all components. Price escalation factors have been applied toboth foreign and local costs at a rate of 1% per annum. Price contingenciesare equal to about 3% of total base costs plus physical contingencies. Taxesand duties are estimated at about US$49 million or about 15X of total costincluding contingencies but excluding right-of-way acquisition costs.

3e14 The costs of civil works are based on work quantities calculatedfrom detailed designs, and costed at unit prices. The unit prices for thework items were computed on the basis of MOC's standard manuals for labor andequipment productivity and the related annually updated costs combined withthe current costs of materials. The unit prices are consistent with theprices recently received in bids for major expressway works in the country.

3.15 The base cost per kilometer for constructing the two four-laneexpressways is about US$6.1 million, which is acceptable since the expressways

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Table 1: PROJECT COST SUMMARY

ForeignLocal Foreign Total Local Foreign Total exchange as

Component ----- Won billion -- US$ million ----- % of total

Pangyo-Kuri construction 67.23 65.11 132.34 84.04 81.39 165.43 49.2

Shingal-Panwol construction 49.94 48.36 98.30 62.42 60.45 122.87 49.2

Supervision of construction 9.35 0.00 9.35 11.69 0.00 11.69 0.0

Base Cost /a 126.52 113.47 239.99 158.15 141.84 299.99 47.3

Physical contingencies (5%) 6.33 5.67 12.00 7.91 7.09 15.00 47.3

Price contingencies 3.63 3.26 6.89 4.54 4.07 8.61 47.3

Subtotal 9.96 8.93 18.89 12.45 11.16 23.61 47.3

Right-of-way acquisition 99.70 0.00 99.70 124.63 0.00 124.63 0.0

Total Project Cost /b 236.18 122.40 358.58 295.23 153.00 448.23 34.1

/a October 1987 prices.

/b Includes W 39 billion (US$49 million) for taxes and duties.

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include a major bridge over the Han River and other significant bridge andtunnel works.

E. Financing

3.16 The Bank loan of US$116 million equivalent would finance about 26Zof total project costs, and be applied to the construction of the Shingal-Panwal Expressway as well as the Pangyo-Tongbu (Shinjang) section of thePangyo-Kuri expressway. The Government would provide about US$332 millionequivalent to meet the remaining capital costs of the project, including thefull costs of construction supervision, right-of-way acquisition, andconstruction of the Hail (Kodok) - Kuri section of the Pangyo-Kuriexpressway. The financing plan is shown in Table 2. The Bank loan will bemade to the Government and the proceeds will be onlent by Government to KHCthrough a Subsidiary Loan Agreement on the same terms and conditions as theBank loan; the signing of that agreement will be a condition of loaneffectiveness.

Table 2: FINANCING PLANTus$ million)

Government Bank Total

Expressway constructionPangyo-Tongbu (Shinjang) 60.3 51.1 111.4Hail (Kodok) - Kuri 54.0 - 54.0Shingal - Panwol 66.5 56.4 122.9

Supervision of construction 11.7 - 11.7

ContingenciesPangyo - Tongbu (Shinjang) 4.8 4.0 8.8Hail (Kodok) - Kuri 4.2 - 4.2Shingal - Panwol 5.2 4.5 9.7Supervision of construction 0.9 - 0.9

Right-of-way acquisition 124.6 - 124.6

Total 332.2 116.0 448.2

F. Implementation

3.17 KHC would be responsible for implementing the project. Expresswayconstruction is expected to start in December 1987 on the Hail (Kodok) - Kurisection and in April 1988 on the remaining sections of the projectexpressways; completion of the works is scheduled for late 1991. Advisoryconsultant services for the supervision of construction would be provided over

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the same period. An implementation schedule for the proposed project wasagreed with the Government during negotiations; it is presented in Annex 8.

3.18 About 380 ha of land would be acquired for the expressways,interchanges and access roads. Virtually all of this land is in the greenbelt area around Seoul, and thus only about 300 homes would have to bedisplaced. The Office of Environment was closely consulted during theplanning of expressway alignments and has approved the designs. Landacquisition commenced in late 1987 and, based on previous experience, isexpected to proceed rapidly. Howevert there could be some delays atindividual locations, which would affect construction progress at the initialstages; KHC's construction schedule therefore allows for a comparatively slowstart-up of civil works.

C. Procurement

3.19 Procurement under the project would be carried out as shown inTable 3:

Table 3: PROCUREMENT OVERVIEW AND BANK FINANCING(US$ million)

Procurement methodProject element ICB Other N.A. Total cost

Civil works 252.8 58.2 - 311.0(116.0) ()(116.0)

Services 12.6 - 12.6

Right-of-way acquisition - - 124.6 124.6

Total 252.8 70.8 124.6 448.2(116.0) -) -) (116.0)

Note: Figures in parentheses are the amounts to be financed by the Bank.All figures include estimated physical and price contingencies, aswell as taxes and duties where applicable. Civil works for Shirgal-Panwol and Pangyo-Tongbu/Shinjang sections ($252.8 million) areprocured by ICB, and those for Hail/Kodok-Kuri ($58.2 million)following local procedures.

3.20 A General Procurement Notice was published on June 15, 1987. About81% of expressway construction (US$252.8 million) under the project would becarried out under international competitive bidding (ICB) by prequalifiedfirms in accordance with Bank guidelines. The work has been packaged into

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seven large construction contracts, one of which (Hail/Kodok-Kuri) would befinanced entirely from Government Lunds. The other six contracts as well asany additional ones above US$8.0 million which might become necessary in thefuture would be subject to the Bank's prior review of procurement documenta-tion. The advisory consultants needed for construction supervision would befinanced entirely from government funds.

H. Disbursements

3.21 The Bank loan would be disbursed for expressway construction(Pangyo-Tongbu/Shinjang and Shingal-Panwol sections) at a rate of 461 of totalcontract cost. The costs for technical advisor; services and right-of-wayacquisition would be met entirely from government funds. To facilitatedisbursement, a Special Account would be opened in the Korea Exchange Bank,with an initial deposit of US$10.0 million, the estimated average expendituresfor a four-month period. Applications for replenishment of the SpecialAccount would be made when funds are drawn down to 50Z of initial deposit. Aschedule of estimated disbursements is given in Annex 9, which also shows theKorean highway project disbursement prcfile. KHC expects to substantiallycomplete construction by December 31, 1991; the loan closing date would heDecember 31, 1992.

3.22 Loan disbursements would be made against priced contracts for theexpressway civil works. Interim certification of civil works completed andcosted at unit rates in the contracts would be done by the consultants'supervisory team and certified by KHC. Disbursements for minor civil workscontracts costing US$3 million or less would be made against statements ofexpenditure based on actual payments to contractors.

I. Auditing, Rerorting and Monitoring

3.23 The disbursement procedures would facilitate the accurate auditingand accounting of project-related expenditures. !%HC's accounts are auditedeach year internally and also externally by independent auditors. Duringnegotiations, assurances were obtained from the Government that the accountsof project-related expenditures, including documentation of statements ofexpenditure, would be audited by independent auditors acceptable to the Bank,and that copies of the audited accounts would be sent to the Bank for reviewwithin six months of the end of the fiscal year.

3.24 Agreement was confirmed with the Government during negotiations onthe progress reporting and monitoring requirements for the project. Annex 10gives the format of Project Monitoring Indices to be used. Agreement was alsoreached with the Government on the preparation and submission by the Govern-ment of a Project Completion Report not later than six months after loanclosing.

J. Environmental Effects

3.25 Apart from the effect on traffic in the secondary cities, theconstruction of the expressways should cause no significant environmentalproblems. The design and specifications require that temporary and permanent

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culverts be provided for all irrigation and drainage canals to ensure thatfarm activities are not disrupted. The new expressways would improve theenvironment in many respects. The improved alignment with grade-separatedjunctions, combined with the separation of faster-moving vehicular trafficfrom slower-moving traffic, would improve road safety. Furthermore, thereduction of congestion in or near the cities and towns along the existingroads would substantially reduce the present noise and air pollution.

K. Transport Coordination and Project-Related Studies

3.26 Transport Plarning and Coordination in Xyonggi Region. The need forincreased coordination of transport plans, investments and operations in theKyonggi region has been identified by several studies, including KRMTFS andthe Bank's Korea Transport Sector Issues Survey (paras. 2.17-2.18). Partly asa result of these studies, and in response to the Capital Region ImprovementLaw (1982), considerable progres3 has been achieved in coordinating theplanning of regional transport facilities. A multisectoral Comprehensive Planfor the Improvement of the Capital Region was approved in 1984, which givesspecific directions for the elaboration (currently under way) of stagedimplementation programs for 1988-91 and 1992-96. The obiectives and detailedsteps of this ongoing process are described in a Government Statement onTransport Planning and Coordination in Kyonggi Region (Annex 1), the finalwording of which was agreed during negotiations (para. 5.1).

3.27 The Government expressed its desire for continued consultation withthe Bank on this subject. This would be confirmed prior to Board presentationof the proposed loan, together with an endorsement of the Statement containedin Annex 1 (para. 5.3). During negotiations, assurances were also obtained onthe Bank's review of the draft implementation program for 1988-96, and onyearly consultations concerning the execution of that program (para. 5.2).

3.28 Traffic Management in Secondary Cities around Seoul. The proposedexpressways would directly affect the traffic patterns in several satellitecities around Seoul, especially Anyang, Kuri, Songnam and Suwon. Thesesecondary cities (with populations of 200,000 to 500,000) are expandingrapidly into commercial and industrial centers, and traffic systems managementwill be needed soon to avoid congestion and transport-related pollution.Assurances were obtained during negotiations that MOC would conduct a trafficma'.agement study for these cities; this study would be completed in sufficienttime that its recommendations can be implemented before the projectexpressways are opened to traffic (para. 5.2).

3.29 Highway Capacity Study. The growth of traffic is beginning to causeunacceptable levels of congestion and delays on many parts of the Koreanhighway network (para. 2.4). This is expected to become particularly severein the rapidly developing and motorizing Kyonggi region. Until now, thegeometric design of the highways has been based on the U.S. Highway CapacityManual, but it has become increasingly evident that U.S. traffic flowrelationships are not directly applicable to Korean conditions because of thehigh proportion of trucks in the traffic stream and major differences invehicle performance and driving characteristics. MOC thus Lntends to conducta study leading to the development of a Korean Highway Capacity Manual. The

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study wvuld be conducted with assistance from ADB, but MOC wishes to continueits technical dialogue with the World Bank on that subject. The Bank agreedto participate in this dialogue.

IV. ECONOMIC EVALUATION

A. Regional Traffic Pattern

4.1 Fundamental to the Kyonggi Region Multimodal Transport FeasibilityStudy was its description of the existing traffic patterns in 38 zones in theregion and a projection of how these traffic flows will grow and shift overthe next 20 years (with particular attention to the years 1991 and 2001).These projections covered both passenger and freight traffic, on railways androads, For the region as a whole, passenger trips are projected to grow by4.7% p.a., while freight tonnaSe is projected to grow by 3.0% p.a. In view ofthe continuing strong growth of the Korean economy (para. 1.2), of theimportance of the Kyonggi region in the economy (para. 2.3), and of theresulting explosive growth of demand for transport in the region (para. 2.4),these projections are realistic, perhaps even conservative.

B. The "First Step Program"

4.2 As already indicated in para. 2.23, the Shingal-Panwol and Pangyo-Kuri Expressways are two of the major transport infrastructure projects in the"First Step Program" identified as most urgent by the KRMTFS. The studyexamined many possible investment projects, both railways and highways, singlyand in varying combinations--including a "do nothing" base case for purposesof comparison. These alternatives were evaluated in terms of their capacityto handle the projected traffic flows and of their economic rates of return(ERRs). From these results, an optimal network was identified for the year2001. The final step was then to analyze how project ERRs varied with timing,to identify the best sequence for project construction. It is from thisdetailed process that the "First Step Program" emerged.

C. Economic Evaluation

4.3 Both construction costs and maintenance costs, measured in economicterms, were included on the cost side of the ERR calculations. The benefitsused to calculate ERRs were primarily the savings in vehicle operating costs(fuel, lubricants, tires, maintenance, and depreciation) that occur because ofnetwork improvements, as compared to the "do-nothing" case. The benefits werecalculated using Korean VOC (Vehicle Operating Cost) characteristics appliedto the detailed, link-specific traffic forecasts and roadway conditions thatgovern vehicle operating speeds. To be conservative, vehicle operating speedswere assumed never to fall below 20 km/h, thus disregarding the very high VOCvalues associated with extreme congestion in the "do nothing" case; that caseassumed that the two new expressways would not be built, and that all trafficwould have to use other roads. The resulting ERR for the overall project is31%. The value of travelers' time (VOT) saved was also calculated on a veryconservative basis and would increase the ERR by an additional 4%. Theexpressways are likely to reduce accidents, but the corresponding savings are

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difficult to predict and were thus not included in the quantification ofbenefits. It is also difficult to estimate the precise impact of the projecton the poverty group since project benefits would accrue to the population atlarge rather than to any particular income group. However, given the largeproportion of buses and trucks in the traffic stream, the poverty impact isexpected to be significant. Further details on the economic evaluation areprovided in Annex 11.

4.4 Without taking account of VOT savings, the ERR for the Shingal-Paswal expressway was estimated at 39%Z and that of the Pangyo-Kuri expresswayat 24%. With the VOT savings, the ERRs would be 42% and 28%, respectively.These values are the result of an analysis made in 1987, which applied to theKRMTFS model updated input data, i.e., (a) revised traffic generationparameters resulting in generally higher traffic forecasts, (b) increased peaktraffic-flow conditions, and (c) updated cost curves based on a new economicanalysis of vehicle operating costs. The original KRMTFS analysis, shown inAnnex 5, had estimated slightly lower rates of return with 24Z for theShingal-Panwol and 19% for the Pangyo-Kuri expressways. However, even thoseearlier estimates were well above the opportunity costs of capital, thuseconomically justifying the expressway investments.

D. Toll Levels and Cost Recovery

4.5 Present government policy is to encourage expressway utilization bysetting tolls at a level substantially below the users' estimated benefits,with the result that relatively little traffic diversion (less than 10-15%)occurs. Traffic flows on the project expressways will be heavy in any event,certainly many times the 4,000 average daily traffic (ADT) threshholdprescribed in the Bank's "Interim Guidelines on Toll Road Proposals" as theminimum acceptable from the economic point of view. At the same time, asshown in greater detail in Annex 4, the toll revenues generated will besufficient to keep KHC in a strong financlial position, with a projectedoperating ratio of about 44% in 1991, and well able to service its debt.Thus, the proposed toll levels and consequent cost recovery on the projectexpressways are a reasonable compromise between disparate economic andfinancial objectives.

E. Risks

4.6 The estimated ERRs might conceivably not materialize, either becauseof lower benefits than currently projected or because of higher constructioncosts. For example, government policies discouraging car ownership or usecould depress traffic levels and hence project ERRs. However, given theimportance of trucks and buses in Kyonggi region traffic patterns and thecurrent rapid rise of car ownership, the growth of traffic that will occureven with restrictive policy measures in force will still require significantinfrastructure investments such as the proposed expressways.

4.7 The construction costs have also been estimated conservatively, andprice competition is expected to be keen when the expressway tenders arelet. Even in the unlikely event that construction costs were to exceedestimates by 20%, the overall rate of return would be higher than 27% and thusremain at acceptable levels.

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V. AGREEMENTS REACHED AND RECOMMENDATION

5.1 During negotiations, agreement was reached with the Government andKHC on:

(a) terms of reference for advisory consultants needed for constructionsupervision (para. 3.12);

(b) project implementation schedule (para. 3.17);

(c) progress reporting and monitoring requirements for the project(para. 3.24);

(d) preparation and submission by the Government of a Project CompletionReport not later than six months after Loan Closing Date(para. 3.24); and

(e) wording of a Government Statement on Transport Planning andCoordination in Kyonggi Region (para. 3.26).

5.2 During negotiations, assurances were obtained from the Governmentand KHC that:

(a) the selection of advisory consultants needed for constructionsupervision would be acceptable to the Bank (para. 3.12);

(b) the audited accounts of project-related expenditures prepared byKHC's independent auditors would be sent to the Bank for reviewwithin six months of the end of the fiscal year (para. 3.23);

(c) the Bank would be sent a draft of the transport elements of the1988-96 Capital Region Improvement Program, and be given anopportunity to comment on those elements before the program isfinalized (para. 3.27);

(d) consultations would take place at least once each year between theBank and MOC on the execution of the program (para. 3.27); and

(e) MOC would carry out a study on improving traffic management inAnyang, Kuri, Songnam and Suwon, at an early enough time thattraffic management measures recommended by that study can beimplemented before the project expressways are opened to traffic(para. 3.28).

5.3 Signing of a letter confirming the Government's endorsement of theStatement on Transport Planning and Coordination in the Kyonggi Region wouldbe a condition of Board presentation (para. 3.27).

5.4 Signing of a Subsidiary Loan Agreement satisfactory to the Bankwould be a condition of loan effectiveness (para. 3.16).

- 24 -

5.5 With the above agreements and assurances, the proposed project issuitable for a Bank loan of US$116 million for a term of 15 years, including agrace period of 3 years, at the standard variable interest rate. The Borrowerwould be the Republic of Korea.

- 25 - ANNEX 1

Page 1

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Letter from Ministry of Construction

December 9, 1987

Mr. Cautam S. KajiDirectorCountry Department 2, Asia RegionInternational Bank for Reconstructionand Development

1818 H Street, NWWashington, DC 20433

Dear Mr. Kaji:

Re: Proposed $116 million loan for Kyonggi Regional Transport Project

Herewith attached is a Statement on Transport Planning andCoordination in the Kyonggi Region which reiterates the Government'sobjectives for improving transport efficiency in greater Seoul and describesthe mechanisms to achieve this. We welcome continued collaboration andconsultation with the World Bank on this subject.

With best regardts,

Sincerely yours,

Lee Kiung JinDirector General

Bureau of Public RoadsMinistry of Construction

- 26 -ANNEX 1Page 2

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Government Statement on Transport Planning and Coordination in Kyonggi Region

1. This statement has been prepared in connection with a proposedproject which would support the construction of two expressways in KyonggiProvince, with the overall objective of improving accessibility and costeffectiveness of transport in the region. In its broader context, thisobjective requires that this and subsequent investments be made in a plannedand coordinated manner. The sections below set out the main directions whichGovernment intends to pursue in respect to transport planning and coordinationin the Kyonggi region.

Background

2. The region, consisting of Seoul City, Inchon City and KyonggiProvince, has experienced phenomenal growth in recent decades and now accountsfor about 401 of Korea's population. Since the early 1970s, the pattern ofurbanization has been marked by the spillover of Seoul's growth into KyonggiProvince. The increase in population and economic activity and the moredispersed pattern of urbanization have resulted in an explosive demand foradditional transport infrastructure and services.

3. To expand the transport system, several agencies have built newfacilities and initiated new transport services. While each agency performsefficiently within its well-defined responsibilities, there is scope toimprove comprehensive planning and horizontal coordination of the overalltransport system. The physical facilities are technically well constructedand efficiently maintained but more complete integration within acomprehensive regional transport plan, improved continuity and better plannedinterconnections could further enhance the benefits to the traveling publicand the economy at large.

4. With the objective of strengthening overall transport planning inthe region, the Ministry of Construction (MOC) and Korean National Railroadcommissioned the Kyonggi Region Iultimodal Tranisport Feasibility Study. Thefinal report was published in December 1985 and is now a principal basis forfuture transport investments in the region. These are being refined andprioritized in the framework of the Capital Region Improvement Law (1982),taking into account the guidelines formulated in the multisectoralComprehensive Plan for the Improvement of the Capital Region (1984).

Comprehensive Plan

5. The Comprehensive Plan gives the following basic directions for thedevelopment of transport, communications and distribution facilities:

- 27- ANNEX-

Page 3

(a) A comprehensive transport system will be formulated in a way thattrinsport facilities are to be integrated and systematicallyconnected.

(b) A metropolitan-wide transport system will be developed, taking intoaccount the functional interrelation between Seoul and other citiesin the region, and between cities and their hinterland within theregion.

(c) Systematic transport system management will be extensively appliedto solve transport problems in Seoul, thereby reducing the urgencyof investing in new facilities.

(d) Interarea transport facilities will be improved and user chargesreorganized in such a way that dispersion of population andindustries can be promoted.

6. With regard to the road network, the Comprehensive Plan states thattransport corridors between Seoul and urban areas in Kyonggi region will beimproved to accommodate the growing travel demand and that secondary roads andbypasses will be constructed in densely populated areas. Supplementaryarterial networks and ring roads will also be developed. With regard to railtransport, the Comprehensive Plan calls for the continuous expansion of thesubway and electrified railroad network into an integrated system.

Implementation Program

7. The Comprehensive Plan has been formally adopted, and MOC is nowpreparing a detailed Implementation Program. Pursuarit to policy directionslaid down in the Comprehensive Plan, Seoul Metropolitan Government, InchonCity, Kyonggi Province and the relevant transport agencies have submitted, toMOC, their respective investment proposals which will be consolidated into aCapital Region Implementation Program for the period 1988-96. Before thisImplementation Program is finalized, all concerned Ministries and lineagencies will be consulted by MOC. The draft Implementation Program willembody investment proposals in every sector including transport and willidentify specific new major roads, subway and railroad connections as well asother transport facilities in the Kyonggi region to be built through 1996.

8. A committee has been established to implement the Capital RegionImprovement Law. It is the Capital Region Improvement Deliberation Committeechaired by the Prime Minister which will meet as needed (or make decisionsthrough circulation of documents) to review the Implementation Program, and todirect major investment decisions. The Vice Chairmen of the Committee are thehead of the Economic Planning Board who is also Deputy Prime Minister andPlanning Minister, and the Minister of Construction, while the other membersare the Ministers of Home Affairs, Defense, Education, Finance, Industry,Transportation, Public Information, Health and Social Affairs, the head of theOffice of Environment, the Mayor of Seoul and representatives of the privatesector and the academic and research communities. In addition, technicalpolicy guidance will be provided by the Capital Region Improvement SteeringCommittee, which is chaired by the Vice Minister of MOC and whose members are

- 28 - ANNEX 1

Page 4

the concerned Directors General of the Ministries represented in the higher-level committee and the Ministries of Energy and Resources, Communications,the Government Legislation Agency and Emergency Planning Agency, as well aslocal government institutions (Seoul, Inchon, Kyonggi Province).

Program Staging and Investment Priorities

9. Taking into account the findings of the Kyonggi Region MultimodalTransport Feasibility Study as well as other criteria, the Capital RegionImplementation Program will define a first-stage plan of high-priorityinvestments to be made by 1991. Any discontinuities in the rail and roadnetworks as well as the need for intermodal transfer facilities will beidentified as part of this process and resolved in consultations among theagencies concerned. The resulting first-stage plan will provide a frameworkguiding individual investment decisions by the government agencies responsiblefor transport in the region.

10. Upon completion of the Capital Region Implementation Program, MOCwill monitor the execution of that program to assist in harmonizing theinvestment priorities determined by the responsible agencies. It will reportat yearly intervals to the above committees which will, if required, initiateany corrective actions to improve the integration of the transport system.

Conclusion

11. A firm decision-making process has now been established for infra-structure investments in the Kyonggi region, in accordance with the objectivesof the Capital Region Improvement Law. We are confident that this new processwill substantially strengthen transport planning and coordination andcontribute to improved transport efficiency.

K2tF.A

KYOuIW REGIONAL TRANSPORT PROJECT

Growth Trend of Dowestic Freight Traffic (1966-85)

Units: 1.000 tons: million ton-km

1966 1962-66 1971 1967-71 1976 1972-76 1981 1977-81 1982 1983 1984 1985Traffic 2 t In- 'r?iWf 2 to- Traffic 2 S in- Traffic X S in- Traffic S Traffi cTraffic 2volume share crease volute share creas volume share crease voluee shere crease volute share volume share voldn share volum share

Railways 24,064 46.9 9.4 31,955 25.1 5.8 43,629 17.8 6.4 48,761 12.1 2.2 47,437 11.0 50.476 10.0 53,661 9.8 55,346 8.9NishoaysCoiarcial N/A - - 73,934 58.0 - 93,751 38.2 4.9 104.256 26.0 2.1 108.576 25.2 126.403 2S.0 143,629 26.4 148,699 23.9Private 6 govt. NI/A - - 10.320 8.1 - 94,439 38.4 55.7 226.547 56.4 19.1 247,575 57.6 299.808 59.3 315,910 58.0 383,903 61.6

Subtotal 24,528 47.8 9.9 84,254 66.1 28.0 188.190 76.6 174.4 330.803 82.4 11.9 356.151 82.8 426.211 84.3 459.539 84.4 530,602 85.5Marititm 2,686 5.3 13.2 11,263 8.8 33.2 13,829 5.6 4.2 22,206 5.5 9.9 26,454 6.2 29,086 5.7 31,731 5.8 34,179 S.5Aviatton - - - 7 - 49.1 5 - (5.7) 18 - 28.5 30 - 43 - 58 - 68 0.1

Total 51 ,278 100.0 9.8 127.479 100.0 20.0 245.653 100.0 5.2 401.788 100.0 10.3 430,072 100.0 505.818 100.0 544.989 100.0 620.195 100.0Ton-km

Railvays 5,450 81.6 9.3 7,841 48.9 7.5 9,7Z6 44.6 4.4 10,815 37.5 2.2 10,892 36.9 11,629 33.6 12,033 32.3 12,296 30.9tthvrayeCommercial N/A - - 3,302 20.6 - 4,374 20.0 5.8 4,868 16.9 2.2 5,097 17.2 5,943 17.2 6.762 18.2 7,068 17.8 sPrivate & gov t. N/A - - 237 1.5 - 2,172 10.0 55.7 5,217 18.1 19.2 5,674 19.2 6.896 19.9 7.266 19.5 8,784 22.0Subtotal 558 8.4 11.6 3.539 22.1 64.7 6.546 30.0 13.1 10.085 35.0 9.1 10.771 36.4 12,839 37.1 14,028 37.7 15.852 39.8

Maritime 672 10.0 36.7 4,653 29.0 50.2 5,533 25.4 3.5 7,927 27.5 7.5 7,861 26.7 10,099 29.3 11,141 29.9 11,639 29.2Aviation - - - 2 - - 2 - (2.5) 7 - 26.S 11 - 17 - 22 0.1 26 0.1Total 6,68 100.0 11.1 16.035 100.0 19.1 21.809 100.0 6.4 28.834 100.0 5.8 29.555 100.0 34,584 I00.0 37.244 100.0 39.613 100.0

Sources: (1) Fifth Fve -Tear Economic and Social Develoreent Plan. Trnsportation Sector Plan (1982-86), December 1961, Transportatton Sector Planning Task Force, NDT, Korea, op. 2-3.(2) StatistitcaL Yearbook of Transportation - 1981, KOT, Korea, r ,If, 113, tSS, 157.(3) Statistical Yearbook of _ransportation - 1973, NOT, Korea, pp. 76-71, 101.(4) Statistical Yearbook of Transpoorttion - 1985, FOT, Korea, pp. 10-11, 169, 171.(5) Statistical Yearbook of Transportation - 1986, DOT, Korea, pp. 26-27, 1R8-191.

Growth Trend of Domestic Passenger Traffic (1966-85)

Units: 1.000 p ssengers: mdllion pass-km

1966 1962-66 1971 1967-71 1976 1972-76 19S1 1977-81 1982 1983 1984 1985Traffic 2 7 In- Treffic T I In- Traffic 2 2 In- Traffic S z In- Traffic S Traffic I Traffic I fTraffic Svolum shore crease volume share create volume share crease volume share crease volume share volu_ share volume share volume share

PassengersRailways

Rail Intercity 138.299 8.3 9.4 128,159 4.1 (1.5) 148,562 2.8 3.0 172,765 1.9 3.1 161.548 1.6 153,710 1.5 147,122 1.4 145.964 1.3Seoul suburban %/A - - N2A - - 100.107 1.9 - 268,364 2.9 21.8 282.062 2.9 315,713 3.0 341,939 3.1 357.158 3.1

Subtotal 138.299 8.3 9.4 128.159 4.1 (1.5) 248,669 4.7 14.2 441.129 4.8 12.1 443,570 4.5 469.423 4.5 469.061 4.5 503.122 4.4

Subway - - - - - 33,914 0.6 - 88.326 1.0 21.1 89,298 0.9 115,623 1.1 212,637 1.9 325.238 2.9HighwaysIntercity 277.076 16.7 - 339,886 10.7 4.2 651,624 12.2 13.9 910,657 9.9 7.0 978,402 10.0 969.279 9.2 947,246 8.7 948,974 8.3Urban 1,234,480 74.6 - 2,684,343 85.0 16.8 4.399.359 82.4 10.4 7.772,473 84.2 12.0 8.280,850 84.5 8,932.045 85.1 9.253,373 84.8 9,652,013 84.3

Subtotsl 1.511.558 91.3 20.8 3.024,229 95.7 14.9 5.050,9S3 94.6 10.8 8.683,130 94.1 11.4 9.259.252 94.5 9.901.324 94.3 10.200.619 93.5 10.601.047 92.6

Maritime 5,909 0.4 9.6 6,371 0.2 1.5 5,994 0.1 (1.2) 9,230 0.1 9.0 9,602 0.1 8,979 0.1 9,371 0.1 8.534 0.1Aviatton 192 - 25.4 1,105 - 44.8 795 - (6.8) 1,555 - 14.4 1,844 - 2.163 - 2.869 - 3.467 -

Total 1.655.958 100.0 19.5 3.159.864 100.0 13.8 5,340.355 100.0 11.1 9.223.370 100.0 11.5 9.803.566 100.0 10.497.712 300.0 10.914.557 100.0 11.441.409 100.0

pass-kni

Raitl interctty 8,665 42.5 10.0 8,750 27.1 0.2 12,441 21.2 7.3 16,552 18.2 5.8 15,838 16.5 16,073 16.2 15,961 15.6 16,616 15.6 1Seoul suburban */A - - N/A - - 1,864 3.2 - 4,976 5.4 21.7 5,1f9 5.5 5,615 5.7 5,923 5.8 5.979 5.6

Subtotal 8.665 42.5 10.0 8.750 27.1 0.2 14.305 24.4 10.3 21.528 23.6 8.5 21.034 22.0 21.68S 21.9 21.884 21.4 22. 21.2

Subway - - - - - - 388 . - 1,2# 1.4 26.5 1,309 1.4 t,556 1.6 2.310 2.2 4.477 4.2HighwaysIntercity N/A - - 11.936 37.0 - 25,030 42.7 16.0 35.559 39.0 7.3 38,211 39.9 38,417 38.6 38.723 -37.9 38,878 36.4Urban N/A - - 10.981 34.1 - 18,369 31.3 10.8 31,756 34.9 11.6 33,899 35.4 36,40 36.6 37.675 36.9 3,9147 36.6Subtotal 11.464 56.2 19.9 22.917 71.1 14.9 43.399 74.0 13.6 67,315 73.9 9.2 72.110 75.3 74.817 75.2 76.398 74.8 78,025 73.0

)Iaritint 196 1.0 7.6 256 0.8 S.5 249 0.4 (0.6) 480 O.S 14.0 610 0.6 557 0.5 81 0.6 570 0.5Aviation 55 0.3 25.0 314 1.0 41.7 276 0.5 (2.h) 557 0.6 15.1 654 0.7 840 0.8 1,012 1.0 1.182 1.1

Total 20.380 10C.0 15.0 32.237 100.0 9.6 58.617 100.0 12.7 91,138 100.0 9.2 95.717 100.0 99.458 100.0 102,1S5 100.0 106.849 100.0

Sources: (1) Fifth Fid Social Develogent P.A as Transportationo Sector Plan (1982-86), December 1981. Transportation Sector Planning Tak Force, 3DT, torea, pp. 2-3.(2) StatisticlTero& of Taransportation - 1981, MOT, Korea. ov. 16-17, 60-63, 110-113.(3) Statistical Tearbook of transportation - 1973, MlT, Korea, pp. 76-77.(4) Statistieal Yearbook of Transportation - 1985, NOT. Korea, Po. 9, 121-123.(5) Statistical Yearbook of Transportation - 1986, OMT, Korea, pp. 24-25, 31-35, 140-148.

-31 - ANNEX 3Page 1

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Transport Administration and Organization

1. The Economic Planning Board (EPB) approves all transport infrastruc-ture investments in the Kyonggi region proposed by the line ministries,reviews all government budgets annually and allocates priorities, and isconcerned with transport pricing such as setting of fares for buses, taxis andsubways and tolls for expressways.

2. The Ministry of Construction (MOC) is concerned with all aspects ofnational physical planning and construction activities in the public sector.It is also exclusively responsible for national roads (through its Bureau ofPublic Roads) and expressways (through the Korea Highway Corporation), andsets standards for urban roads and streets. MOC is also responsible fordevelopment of industrial ports. Because of MOC's pervasive involvement ininfrastructure planning, regional and urban planning has a physical ratherthan an economic orientation and central decisions tend to overrideconsiderations of cost effectiveness and local priorities.

3. The Ministry of Transportation (MOT) has overall, responsibility forthe planning, development and operation by the Korean National Railroad (KNR)for railways, by the Korea Maritime and Port Administration (KHPA) for ports(except industrial and fishing ports which are under MOC and the Ministry ofAgriculture, respectively), by the Civil Aviation Bureau for aviation and bythe Waterways Bureau for inland waterways. MOT is also responsible forregulation of all transport modes. The Transport Coordination Bureau in MOTis theoretically responsible for coordination of transport investments andpolicies but, in practice, has not been effective because of resistance fromother ministries involved in transport.

4. The Ministry of Home Affairs (MOHA) has overall responsibility forprovincial and county roads, although it is intended to shift the planning ofthese roads to MOC. The Local Administration Bureau of MOHA plans andmonitors provincial and county roads programs and also assists cities andcounties to develop their road networks.

5. The interaction of various administrative and functional levels ofthe Government results in a complex organizational array with respect to theconstruction and operation of transport facilities in the Kyonggi region.Within Seoul City, the city administration is directly responsible fortransport planning, construction of transport. infrastructure, trafficmanagement, and provision and operation of its public transit systems, otherthan suburban rail lines (SHESRS) operated by KNR. The subway system in SeoulCity is managed by the Seoul Metropolitan Subway Corporation, a semiautonomouspublic corporation under the city administration. Inchon City is alsodirectly responsible for the management and operation of the transport system

-32 - ANNEX 3Page 2

under its jurisdiction, although its transport programs and plans have to beapproved by MOHA. Two exceptions are the Port of Inchon, which is managed byKHPA, and the SMESRS system within the city boundaries, which is run by KNR.

6. The expressway system within Kyonggi Province is managed by theKorea Highway Corporation (KHC), which will be the implementing agency for theproposed project, and the national roads by MOC's Bureau of Public Roads. Thenational and suburban rail lines are run by KNR and the Kimpo airport by theCivil Aviation Bureau of the MOT. The Bureau of Construction of the KyonggiProvincial Government is responsible for the construction and maintenance ofintercity provincial roads, while its Bureau of Transportation regulatesintercity buses and commercial vehicles and licenses them. The Kyonggigovernment is also responsible for enforcement of traffic and safetyregulations through the police department. The city and county governmentshave responsibility for construction and maintenance of local roads withintheir respective jurisdictions. There is fairly good cooperation among theroad construction bureaus at local, provincial, and central levels, partlybecause HOC has a regional office of construction in Kyonggi Province at Suwonand partly because the Kyonggi provincial government provides grants to cityadministrations for urban road and street improvements.

-33 ANNEX 4Page 1

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Korea Highway Corporation

Organization and Management

1. The Korea Highway Corporation (KHC) is headed by a president whoreports to a board of directors comprised of representatives from MOC andother public and private sector agencies (Chart 1). The president is assistedby a vice-president and four managing directors who are each responsible forplanning, general affairs, engineering and construction. In addition, KHC has9 departments and a highway research laboratory at the head office, 4 regionaloffices and 2 field construction offices under the head office, and 23 fieildmaintenance offices for the maintenance of existing expressways.

2. At end-1986, KHC had a total of 2,718 staff members, including 1,132qualified and experienced professional engineers, specialists and techniciansin the various fields of planning, design, construction, maintenance andmanagement.

Current Network

3. The public road network in Korea is divided into five classes:national expressways, national highways, special city roads, and city and gun(county) roads. The total length of the network is 53,654 km. Paved roads ofall classes totalled 29,071 km in 1986, accounting for only 54% of the totalnetwork. KHC is responsible for managing almost all of the expressways (whichtotal 1,415 km and therefore represent less than 3% of the public roadnetwork). The construction of expressways in Korea began with the Seoul-Inchon expressway in 1967; it was the first highway handed over by MOC to KHCfor management in February 1969. The following table shows how the networkmanaged by KHC had developed by mid-1987.

- 34 - ANNEX 4Page 2

KHC-MANAGED NETWORK, 1987

Numberof Design Date of

Route Length Width lanes speed completion(km) (m) (kph)

Seoul-Inchon 24.0 20.4 4 80-120 Dec 1968Seoul-Pusan 428.0 22.4 4 80-120 Jul 1970Onyang-Ulsan 14.3 22.4 4 80-120 Dec 1969Taejon-Jonju 79.5 23.4 4 80-120 Dec 1970Shingal-Saemal 104.0 13.2 2 80-120 Nov 1971Jonju-Sunchon 172.3 13.2/23.4 2/4 70-120 Nov 1975Sunchon-Pusan 176.5 13.2/23.4 2/4 70-120 Nov 1975Saemal-Kangnung 97.0 10.7 2 50-120 Sep 1975Kangnung-Tonghae 30.0 10.7 2 50-120 Sep 1975Taegu-Masan 86.3 13.2/23.4 2/4 70-120 Dec 1977Pusan-Masan 20.6 23.4 4 80-120 Sep 1981Taegu-Kwangju 182.9 13.2 2 80-120 Jun 1984

Total 1,415.4

Planning and Design

to MOC still retains overall responsibility for expressway planning.KHC jointly participates with MOC in all phases of development including theidentification and selection of roads for the national five-year developmentplans. In the case of the Kyonggi Regional Transport Project, KHC wasresponsible for the completion of feasibility studies and detailedengineering. KHC's policy guidelines for toll road development includeensuring that:

(a) paving of the existing national and local roads is given priority;

(b) construction of expressways aims to bring all parts of Korea withina one-day trip zone; ant

(c) the development of the various classes of the network (national,provincial, etc.) is interrelated in such a way as to promote theleast-cost development of each individual class.

5. KHC uses the national geometric design standards shown in Annex 6.Recently, however, there has been a general policy to use concrete (instead ofasphaltic concrete) pavements for high capacity, multilane expressways. Theuse of concrete seems to be linked to the development of local cement produc-tion, the reduction of imports of oil and oil-based products and an expectedlower maintenance cost. KHC recently completed the 1988 Olympic Expressway(connecting Taegu and Kwangju) as a concrete-paved road.

-35 - ANNEX 4Page 3

Maintenance and Operation

6. Maintenance and operation costs are funded from toll revenues andcarried out bv the four regional offices, which together control a total of 21field maintenance offices. The regional offices are responsible for(a) planning of operations and maintenance, (b) operation of toll gates,(c) renovation and rehabilitation of roads, and (d) operation and managementof safety devices such as those for vehicle speed surveillance and others.The field offices carry out the actual maintenance and other activities suchas (a) patrols, snow clearing, etc., (b) traffic control including the removalof disabled vehicles, (c) periodic inspection of structures and pavement,(d) repairs to roadways and structures, and (e) information services to motor-ists. A typical field office is responsible for 50-70 km of expressways.This division of responsibilities has worked very well and the toll roads havebeen properly maintained. The provision of adequate funds from toll revenuesensures adequate maintenance.

Toll Policy

7. The two major factors considered when deciding to levy tolls are(a) the selection of roads for tolling and (b) the level of tolls to becharged. Article 2 of the toll road law authorizes tolls on:

(a) highways where those who transit or use them benefit markedly fromsuch transit or use, and

(b) highways, the use of which is not unavoidable due to the existencein the vicinity of another highway that could be transited.

So far, this policy has led to the levying of tolls on most major intercityexpressways, especially when there is an alternative route nearby. As aresult of past discussion with the Bank, KHC carries out the appropriatefinancial and economic analyses of the impact of tolls on all proposed tollexpressways.

8. The level of tolls is determined by KHC and approved by the EPB.These tolls are a combination of a fixed entrance ramp fee (W 200) plus basicrates per km as indicated below:

- 36 - ANNEX 4Page 4

TOLL RATES AND USER BENEFITS

Benefit Basic rate X ofVehicle class (won/km) (won/km) Benefit

I. Passenger cars,trucks < 2.5 t 59.57 20 33.6

II. Buses 174.72 42 24.0

III. Trucks < 10 t 196.79 23 11.7

IV. Trucks > 10 t 264.33 46 17.4

The basic toll rate by law cannot exceed the "benefit"--which is really theoperating cost and time savings accruing to users of the expressways.Examples of tolls on major routes include: Seoul-Pusan, W 8,800, and Seoul-I Inchon, W 700. Due to the success of its tolling operations, KHC surpluseshave been increasing by over 10% p.a. in the recent past. The project roadswill also be tolled and will contribute to the revenue surplus.

C. Budget, Accounts and Audit

9. KHC prepares its own budget in consultation with MOC. Most bud-getary needs for widening of expressways and, very recently, for a portion ofnew construction costs are provided by KHC's own toll revenues. In preparingits budget, however, KHC has to comply with general government policy onexpenditures, which is somewhat restrictive.

10. KHC uses standard government accounting prdcedures. Its annualstatements are audited internally, as well as by independent firms for thebenefit of its private-sector creditors.

H. Financial Objectives

11. KHC's objective (by law) is to recover the cost of the toll roadnetwork development directly from users. The law further states that thetolls, user fees and other income may be used only for:

(a) repayment of principal and interest of costs incurred in the newconstruction or rehabilitation of toll roads, and

(b) costs incurred in the new construction, rehabilitation, maintenanceand management of other highways.

In addition, KHC is required to set aside any remaining profit in "projectexpansion" and "profit" reserves.

- 37 - ANNEX 4Page 5

I. Past Financial Performance

12. KHC has in the past been reasonably profitable. This is largelybecause of the 17% p.a. growth in vehicles using the toll road system duringthe past decade and the relatively low costs of the toll collection system.The salient features are reproduced below for the period 1983-86. Details aregiven in the tables at the end of this annex.

1983 1984 19l5 1986

Total revenue (W billion) 108.0 124.5 175.4 232.7

Income before tax (W billion) 50.6 62.4 69.3 93.3

Operating ratio 53 50 60 60

Return on assets (x) 13.9 14.4 13.8 12.0

Essentially the corporation is in a period of rapid revenue growth which,coupled with a well-controlled growth of expenditure (less than 8% p.a.), hasproduced the profitable position shown in the financial statements.

J. Current Position and Investment Plans

13. KP is currently in a sound financial position. Its balance sheetshows very little long-term debt in 1985 (less than 10% of total assets)largely because most of its assets were provided by the Government. Other keyratios such as the return on assets (12% or more) verify its sound position.

14. KHC will in future finance a larger portion of its investment planfrom its own funds and by borrowings, both foreign and domestic. Its 1987-91investment plan calls for the expenditure of some W 1,538 billion, mostly forthe Seoul-Taejeon and the Kyonggi expressways, widening of 240 km of otherhighways from 2 lanes to 4, and the renovation and concrete repaving of the428-km Seoul-Pusan expressway. Of the total funds reiired, KHC's own fundswill provide 47%, the Government 46% and long-term lc4ns 7% of inv stmentneeds. The following table shows the financing plan for the period 1987-91.

- 38- ANNEX 4Page 6

ExpendituresItem 1987-91

(W bln)

KHC internal generation 69509Government contribution 690.0Net borrowing 152.3

Total funds available 1,538.2

Funds required for investment 1,538.2

K. Future Performance (1987-91)

15. As the preceding tables show, KHC should be able to implement itsdevelopment plans and still remain in a sound financial position. Some of themain financial projections for this period are given below. Details are givenin the tables appearing at the end of this annex.

1987 1988 1989 1990 1991

Total revenues(W bln) 195.7 230.3 234.6 260.0 286.2

Income before taxes(W bln) 102.2 110.1 135.5 148.0 159.1

Operating ratio 48 52 42 43 44Return on assets (Z) 10.6 8.8 9.2 8.7 7.8

The main assumptions underlying these forecasts are that traffic growth willaverage 11% p.a. on the toll road network and that there will be no realincrease in tariffs. Even given these conservative assumptions, KHC'sfinancial position will still remain sound. The growth in revenues willcontinue at a similar pace as in the past, and the operating ratio will remainlow, under 5OX. The return on total assets will be acceptable but willdecline from previous levels largely because of the high costs of the newexpressways to be added to the network. Due to inflation, they will cost muchmore than the roads currently in the system and hence total assets willincrease considerably over the period. The decline in return on total assetswill cease with the end of the period of intensive construction activities.More important, KBC will at all times be able to service its debt.

KOREA HIGHWAY CORPORATION: INCOME STATEMENT (1983-91)(Won million)

Actual Est. Forecast1983 1984 1985 1986 1987 1988 1989 1990 1991

RevenueTolI 102,463 116,014 126,423 149,095 172,460 196,100 225,644 250,690 276,555Others /a 5,487 8,517 49,002 83,602 23,213 34,203 8,982 9,291 9,610

Total Revenue 107,950 124,531 175,425 232,697 195,673 230,303 234,626 2981 286,165

ExpendituresOperatinx xendituresOperatlon and maintenance 48,479 53,205 55,034 53,723 60,819 73,560 78,710 84,000 89,800Administration and management 5,426 5,582 5,464 6,031 6,917 8,366 8,950 9,050 10,210Others /a 388 376 41,355 76,221 22,098 26,282 840 950 990

Subtotal 54,293 59,163 101,893 135,975 89,834 108.208 88,500 94,000 101,000 I

Nonoperating Expenditures %Interest 1,153 1,020 952 862 762 8,500 7,100 14,400 22,400 1Others 1,917 1,926 3,350 2,537 2,901 3,500 3,550 3,600 3,620

Subtotal 3,070 2,946 4,302 3,399 3,663 12,000 10,650 18,000 26,020

Total Expenditures 57,363 62,109 106,155 139,374 93,497 120.208 99,150 112,000 127.020

Income Before Taxes 50,587 62,422 69.270 93,323 102,176 110,095 135,476 147.981 159,145

Taxes 2,878 3,021 3,515 6,543 6,447 7,730 8,940 9,760 10,500

After-Tax Income 47,709 59,401 65,755 86,780 95,729 102,365 126,536 138,221 148,645

Highway cost recovery 45,993 57,213 63,322 84,343 92,793 99,290 122,740 134,080 144,185

Net Income 1,716 2,188 2.433 2,437 2.936 3,075 3,796 4,141 4,460

/a Includes special Government allocation of W 160,176 million for Chung-bu Expressway in 1985-88, and equal auount forconstruction expenditure.

KOREA HIGHWAY CORPORATION: BALANCE SHEET (1983-91)(Won million)

Actual 1st. Forecast1983 1984 1985 1956 -T87- 1988 1989 1990 1991

AssetsCurreot Asset'sQuick assets 20,558 19,078 15,256 20,144 482 20,000 20,000 20,000 20,000Tnventories 4,133 3,152 3,480 2,479 4,479 4,000 4,000 - 4,000 4,000Oth,er c,irrt,'t ajset% /a 1,086 885 26,354 43,690 26,232 3,000 3,000 3,000 3,000

Thtal Current As,ets 25,777 23,115 45,090 66,313 31,193 27.000 27,000 27,000 27,000

Less: Current LiabilitiesPayables and accrued llabilities 5,015 4,274 32,453 85,942 123,111 28,846 88,110 169,489 116,544Current portion of long-term debt 1,566 1,579 1,809 1,976 1,993 2,000 2,000 2,000 2.000

Total Current Ltahttities 6,581 5,853 34,262 87,918 125,104 30,846 90,110 171,489 118,544

Net Working Capital 19.196 17,262 .0,828 (21.605) (93,911) (3,846) (63.110) (144,489) (91,544) g

Fixed Assets 0Hixed at cAst) 321,941 382,644 448,916 749,948 995,016 1,196,416 1,436,816 1,694,316 1,941,216Other (net) 23,967 33,000 43,450 48,825 62,177 51,777 99,477 149,677 178.077

Total Fixed Assets 345,908 416,644 492,366 798.773 1.057.193 1.248.193 1.536.293 1.843.993 2,119,.;-

Total Assets 365.104 432,906 503,194 777.168 963.282 1.244.347 1.473.183 1.699,504 2.027,749

Liabilities and EquityLong-term debt - IRR - - - - - 34,000 61,200 83,200 98,500

Other 32,995 35,878 38,500 39,813 46,531 44,531 42,531 40,531 38,531Equity 332,tO9 397,028 464,694 737,355 916,751 1,165,816 1,369,452 1,575,773 1,890,718

Total Liabilities and Equity 365,104 432,906 503.194 777.168 963,282 1,244,347 1.473.183 1.699.504 2.027,749

Ja Including work-in-progress for Chung-bu Expressway.

KOREA HIGHWAY CORPORATION: SOURCES AND APPLICATIONS OF FUNDS (1983-91)(Won million)

Actual Est. Forecast1983 1984 1985 1986 1987 1988 1989 1990 1991

SourcesIntprnal Cash GenerationIncome 47,709 59,401 65,755 86,780 95,729 102,365 126,536 138,221 148,645Plus depreciation, etc. 7,941 8,320 9X274 8,249 13,248 16,700 17,100 18,100 19,300Subtotal cash generation 55,650 67,721 75,029 29 108,977 119,065 143,636 156,321 167,945

Government contribution - 5,600 66,834 92,747 90,000 200,000 100,000 100,000 200,000IBRD loan - - - - - 34,000 27,200 22,000 15,300Total Sources 55,650 73,321 141,863 187,776 198,977 353,065 270,836 278.321 383,245

ApplicationsInvestmentsHighway widening and construction 19,890 49,812 120,763 186,210 221,645 201,400 240,400 257,500 246,900Kyonggi Region /a - - - 1,000 6,100 127,200 122,700 98,900 71,600Others 19,890 49,812 120,763 185,210 215,545 74,200 117,700 158,600 175,300Highway improvement 8,135 12,013 12,446 20,527 21,847 36,300 77,100 79,500 52,300Other capital expenditure 4,128 5,299 7,680 7,092 19,571 23,300 10,600 20,700 29,100Subtotal investments 32,153 67,124 140,889 213,829 263,063 261,000 328,100 357,700 328,300

Other expenditure 1,777 6,552 5,599 4,404 6,227 - - - -Debt service (non-IBRD) 1,556 1,579 1,809 1,976 1,993 2,000 2,000 2,000 2,000Change in noncash working capital 20,164 (1,934) (6,434) (32,433) (72,306) 90,065 (59,264) (81,379) 52,945Total Applications 55,650 73,321 141,863 187,776 198,977 353.065 270,836 278,321 383,245

/a Including debt service for IBRD loan.

'a

KOREA

KYONGGI 8EGIONAL TRANSPORT PROJECT

Summary of Investments Proposed by KRETFS

Estimated cost EstimatedSection Length (million won) ERR /a traffic volume (vpd). 1991

From To (km) Constr. RJW (1) Total Car Due Truck Remarks

EspresswaySeoul Inchon 24.93 108,339 37,499 26 42,103 17,781 6,714 17,608 ROW 2:3; paving 2:2 lanes - cone. pav.Shingal Munhak 40.20 166,020 25,843 22 ) 29 308/b 10,997 3,492 14,819 tOW 2:3; paving 2x2 lanes - conc. pav.Shingal Panwol 25.00 85,400 13,900 24 } * -Pangyo Kurt 25.60 129,345 65,000 19 30,459/c 12,774 4,967 12,718 RON 2x3; paving 2x2 lanes - conc. pav.Shthung Panvol 12.47 48,117 9.167 26 21,691 9,388 3,040 9,263 ROW 2:3; paving 2x2 lanes - conc. pav.Anyang Kwangmyong 6.50 21,271 3,055 24 23,251 10,507 3,680 9.064 2x2 lanes - conc. pav.Dalyami Asanman 41.30 128,352 19,606 28 - - - - West Coast Exp. - 2:2 lanes - conc. pav.

RailwayKuro Seoul Main 12.00 100,109 14,412 22 182,630/4 - - - New double trackSuwon Pyongtaek 34.00 125,797 2,567 18 55,85371 - - - New double track, Kyongbu lineKunpo/Kumjong /e Yangjae/Sadang 26.86 187,972 8,655 15 43,00071 - - - Extension of Panvol-Sadong line with

connections to Subways F3 and 94

Highway Widening From ToAnyang Nongok 5.87 3,149 2,989 34 9,435 3,395 1,983 4,057 2-lane -> 2x2Nunggok Kimpo 12.50 20,341 1,233 86 39,772 13,777 11,110 14,885 2-lane -> 2:2Kiipo Kanghwa 9.88 18,718 1,125 20 1,991 712 473 806 New 2-lane bridge only NTobong Uijongbu 6.41 7,036 2,244 19 22,221 8,422 5,457 8,342 New 2:2 laneTonong Tokso 7.29 6,081 3,164 16 14,508 8,283 3,489 2,736 2-lane -> 2:2Tokso Yangsu 14.17 34,797 2,883 22 13.242 3,443 4,105 5,694 2-lane -> 2:2, partly new 2x2Tongduchon Chongok 11.18 9,306 4,008 39 6,536 4,147 166 2,223 2-lane -- > 2:2Osan Songhwan 14.69 14,367 3,316 34 35,690 18,045 6,450 11,195 2-lane -> 2:2Songnam Kwangju 21.29 14,672 803 36 23,196 7,429 2,813 12,954 2-lan -> 2x2Dokhyon Suwon 9.43 8,177 3,587 59 22,682 8,482 4,970 9,230 2:2 > 2:3, partly new 2x2

Highway Improvement (Paving)Puchon Kaewha 7.73 2,302 338 114 8,100 1,600 1,400 5,100 )Panwol Shlnchon 12.20 6,308 1,248 34 2,100 620 670 810 jKisan Kumtu 10.07 3,053 612 29 440 100 200 140 1 Trafflc estimates are not reliable andIldong Idong 5.01 1,581 61 48 1,800 480 430 890 s may be subject to wide variation,Yangpyong Chongoyong 27.74 17,477 1,059 18 360 145 55 160 1 depending on daily and seasonal varia-Yangpyong Toechon 18.24 7,916 1,709 16 480 170 90 220 } tions.Panwol Palan 21.10 23,603 575 25 1,050 360 230 490 )

/a The ERRs are based on the expectation that all the expressway and rail links will be completed by 1991. ERR's for Shingal-Panwol andPangyo-Kurt expressways are original estimates; they have been recalculated In 1987, based on updated traffic flow and cost data (see pars.4.4)

/b Updated 199o trafflc projections: 27,830 vehicles per day./c Updated 1991 traffic projectIons: 35,794 vehicles per day.7-i Peak hourly volume--persons/hoor in year 2001.fe Including connections with subway lines 3 and 4.

Source: Kyonpgl Regi0n Mutttiodal Transport Feasibility Study, prepared for MOC and KNR by BCEOSI-KRIHS-KECC-Yoosbin, December 1985.

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Expressway Design Standards

50 km/hr IO k/bEressway k/hr IZO kmlhr RemarksRoad type Full control of Full control of Full control of Full control ofaccess (1st class) access (let class) access (1st class) access (lst class)Number of lanes 4 4 4 6Do-sign speed (km/hr) 80 100 120 120Width (m)

0lF-al width 24.40 24.40 24.40 31.60 Expressway:tx0.Sn; side strip to be addedPavemunt width 4 e 3.6 4 0 3.6 4 e 3.6 6 0 3.6Separator vidth 3.00 3.00 3.00 3.00Shoulder width 3.50 3.50 3.50 3.50

Structure loading forbridges (tons) 0D-24 DB-24 0D-24 01-24

Tunnel width (a) 9.00 9.00 9.00 12.60 For 2-lane tunnel; for 3-Lsne tunnelarid Width (o)groo" area 23.40 23.40 23.40 30.60 Longs:xpAX>100 N; lId.Pav.L>50 N

Rural area 23.40 23.40 23.40 30.60 Short:Exp.L<100 R, Vid.Pav.L<50 Radius of Curvature (a)Desrrable 400 70 1,000 1.000inimou 280 460 700 700

Gradlent (S)Fst rable 4 3 2 2Maxim 7 6 S 5

SUPerelevatlon (S)2 2 2 2Naximem 6 6 6 6

Clearance (a) 4.7 4.7 4.7 4.7Pavement type Concrete pavement Concrete pavement Concrete pavement Concrete pavementStopping sight distance(a) 110 160 210 21n

Hinimom Radius of Ver-tical Gurve km)crest 3,000 6,S00 t1,000 11,000Sag 2,000 3,000 4,000 4,000

Code of future status El 32 33 E5,E6 2x2 expandable 2x3 (36)

KYWIN RIE6IUL TRAIWIT PROJECT

Project Coat Estiostes

422c mtlliom in 9ctobr 1967 prices)

---------------------------------------------------------9------------------------------1990-…-------199 ------- ---------- 2--------------------------Tota ---… -

Local Foruign Total Local Fernqsp Total Local Foreign Total Local Foreign total Local Fmrcapo Total Local Fores gn Total

I P.qIYo-Ksi 02.6 tel 4.706 4,556 9,214 17,460 16,929 34,409 26,909 27,996 51,907 6,74 9,445 17,205 7.395 7.162 14,557 17,229 65.112 132,3412 9hanqal-P.uol (23.4 Wa 3,491 3,31 4,962 12,964 12,575 25,559 21,473 20,797 42,270 4,492 6,297 12,779 5.493 5.320 li,613 49.937 48,364 98,3013 SaWerisaoa of Contruction 655 0 455 2,431 0 2,431 4,021 0 4,021 1,216 0 1,211 1.029 0 1,029 9,350 0 9,350

Total base cot 6,657 7,943 16,800 32,695 29,504 62,399 54,403 48,795 103,196 16,448 14,752 31.200 13,917 12,412 24,399 121.516 113,47m 2399912…--- … --------------------- ~-- -- - --- - --- …-…----------- ---

Physacal coatimpncaes 252) 443 397 940 1,445 1,475 3,120 2,720 2,440 5,140 622 738 1.560 191 424 1,320 6,326 5,674 12,000

total 9.300 6,340 17,440 34,540 30,971 45,5t9 57,123 51,235 106,355 17,270 15,490 32,740 14,613 23,106 27,7t9 132,942 119.150 251,912

Price coatlqmese~AalI (2) 1.002 1.00 2.002 1.002 1.002 2.002 1.002 1.002 1.002 1.002 1.002 1.00?Coqamm.dd wi 0.75 0.75 1.761 1.74 2.7M 2.79 3.602 3.602 4.642 4.0142,ANont 70 63 133 606 545 1,153 J,566 1,424 3,012 651 589 2,245 707 434 1,341 3,429 3,255 6,684

RtVbt-of-42ac qMgitlot 99,700 099, 700 0 0 0 0 0 0 0 0 0 0 0 099, 700 0 99,700

Grand Total 209,070 9,403 117,473 35.146 31,524 66,672 56,712 52,159 111,370 17,926 14,079 34,005 15,320 13.740 29,010 236,173 122,405 356576*==a= mxm in332w. ssu*in #uMM on==i ,, uzs== sui=Mm asm3. inamo *su mm= scam= in 3*3

lfates: 1. Eaclaae rate: 22912.60 to 6002. All figun re e rondel.

OF

F.IIIE

K110.9 Sl WML 1 TRONPY P4JT

Projet Cost Estioates

(IlS '000 in Otabwr 5987 price)

------ ----------- --------I----------1991------ 1992-- - -- t tal-Local Faweip total Local Fortip Totsl LKcal Foreip Total Local Forup Total Local Forein Total Lmol Frign Total

I Pany-Kort 123.9 k.) 5.083 5,696 11,581 21,850 21,1U1 43,0tl 36,136 34,9" 71,134 10,925 10,591 21,504 9,244 8,93 18,1 94,036 81,390 16,4262 ,ietga-Peanl 1(23.4 to) 4,370 4,231 8,601 16.230 15,719 31,949 26,941 25,996 52,937 9.115 7,959 15,974 6,864 6,450 13,516 42,421 60,451 122,8763 Supervision of Construrtios 819 0 819 3,039 0 3,039 5.026 0 5,026 1,519 0 1,519 1,236 0 1,286 11,63 0 11,6total base cost 11.071 9,929 21,000 41,11-9 3,880 77,999 68,003 60,94 128,97 20.S59 13,440 36,999 17,396 15.603 32,999 158,14 141,945 299,0

Pt"ical continqmenct" (5J SSt 491 1,050 2.056 1,844 3,900 3,400 3,050 6,450 1,029 922 1,950 970 790 1,650 7,907 7,092 15,000

Total 11,625 10,425 22,050 43,175 36,724 81,f99 71,403 64,04 135,447 21,W17 19,362 40,949 18,266 16.393 34.649 166,052 148,937 314,990Price coetinoncies

AMu it) 1.00 1.001 1.001 1.00 1.002 1.00? 1.0 1.00 1.001 1.400 1.00- 1.001Comoae (2) 0.75? 0.751 1.74? .76t 2.7M1 2.7M 3.69 3.960 4.914 4.864Aomnt 97 78 165 760 682 1,442 1995 1,7BI' 3,765 820 736 1,556 64 m 1,677 4,53 4,06 8,605

RIit-of-Ias equasitiam 124.625 0 124,625 0 0 0 0 0 0 0 0 0 0 0 0 124,625 0 124,625Grand Total 136.337 10,503 146,840 43,35 39,404 83,341 73,38B 65,924 139,212 22,407 20,0M 42,505 19,150 17,176 36,326 29,217 153,007 448,224

Ibtn: 1. Etc_a , rate: 9 1.00 - Om 80 .2. All fhqurs ae romgoed.

- 46- ANNEX 8

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Project Implementation Schedule

Start Complete

General Procurement Notice 06/15/87

Issue prequalification (PQ) documents forcontractors and get responses 09/03/87 10/31/87

Evaluate PQ submissions, including Bank review 11/01/87 01/15/88

Terms of reference for supervision consultants 07/01/87 11/11/87

Pangyo-Tongbu (Shinjang) and Shingal-Panwol Expressways

Bidding documents, including Bank review 07/01/87 01/15/88

Bid period 01/16/88 02/29/88

Evaluation of bids, including Bank review ofevaluation report and KHC recommendations 03/01/88 03/25/88

Request proposals for supervision consultanciesand select consultants, including Bank review 01/16/88 03/30/88

Construction of expressway 03/30/88 12/31/91

Hail (Kodok)-Kuri Expressway Section (funded b- Government)

Engineering documents 07/01/87 10/22/87

Construction nf expressway Dec 1987 12/31/91

-47 ANNEX 9

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Estimated Disbursement Schedule

Estimated cumu- Disbursement profileIBRD fiscal year lative disbursements of Korean highwayand semester US$ million Z projects (%)

1988December 31, 1987 - -June 30, 1988 10 9

1989December 31, 1988 18 16 7June 30, 1989 26 22

1990December 31, 1989 38 33 33June 30, 1990 64 55

1991December 31, 1990 88 76 76June 30, 1991 96 83

1992December 31, 1991 103 89 89June 30, 1992 110 95

1993December 31, 1992 116 100 100

-48 - ANNEX 10

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Project Monitoring Indices

Estimated Percent completedProject component quantities 12/31/88 12/31/89 12131/90 12/31/91

Pangyo-Kuri Expressway

Lot 1 WEarthwork! (m3) 2,506,000Paving (o ) 147,000Culverts (number) 36Bridges (number) 17Final cost (W billion) 50

Lot 2garthwork! (a3) 2,437,000Paving (m ) 173,000Culverts (number) 44Brldges (number) 11Final cost (W billion) 65

Lot 3Ea thwork! (m3) 2,097,000Paving (3 ) 150,000Culverts (number) 72Bridges (number) 11Final cost (W billion) 48

Lot 4Earthwork! (m3) 1,026,700Paving (m ) 62,000Culverts (number) 19Bridges (number) 2Final cost (W billion) 56

Shingal-Panwol Expressway

Lot 1Earthwork! (m3) 3,644,000Paving ( ) 232,000Culverts (number) 62Bridges (number) 12Final cost (W billion) 47

Lot 2Earthwork! (mi) 4,612,000Paving (a ) 206,000Culverts (number) 46Bridges (number) 14Final cost (V billion) 55

Lot 3Earthwork! (i3) 3,054,000Paving (a ) 159,000Culverts (number) 62Bridges (number) 6Final cost (W billion) 37

- 49 - ANNEX 11

Page 1

KOREA

KYONGGI REGIONAL TRANSPORT PROJECT

Measurement of Economic Benefits

1 As the U.S. Highway Capacity Manual and similar studies have madeclear, the "capacity" of a road (for a given level of service) is a site-specific concept, which results from the interaction of three types of localconditions:

(a) roadway conditions, such as width of lanes, severity of gradients,length of weaving sections, and horizontal alignment;

(b) traffic conditions, such as the percentage of heavy vehicles and thedaily and hourly peaking patterns; and

(c) control conditions, such as intersection controls, speed limits andrules governing the use of lanes (restriction of the median lane tohigh-occupancy vehicles only, for example).

The speed at which vehicles can travel on a particular road is a non-linearfunction of the volume of traffic relative to capacity, and vehicle operatingcosts (VOC) in turn are a non-linear function of vehicle speed, as shown inTable 11.1. The result of these complex interrelationships is that VOC on aparticular road segment may exhibit little variation over a wide range oftraffic volumes and yet change dramatically as capacity is approached. Thus,the benefits of a proposed expressway, as compared to an arterial (withoutmajor intersections), are typically rather modest for moderate levels (bothbecause the VOC saving per vehicle is small and because relatively fewvehicles are involved), yet the benefits can be very substantial when trafficflows are heavy.

2. The benefits used in the Kyonggi Study to calculate ERRs were pri-marily the savings in VOC (fuel, lubricants, tires, maintenance, and depreci-ation) that occur because of network improvements, as compared to the "donothing" case. These benefits were calculated from the detailed, link-specific traffic forecasts and roadway conditions that govern vehicle ope-rating speeds, using Korean vehicle operating cost characteristics. Theunderlying calculations incorporated several conservative assumptions:

(a) expressway capacity per lane was taken as 2,500 passenger car unitsper hour, although the U.S. Highway Capacity Manual suggests afigure of 2,000 cars per hour;

(b) arterial capacity per lane was taken as only 10% less than express-way capacity, although the true difference is no doubt greater; and

(c) vehicle speeds were assumed never to fall below 20 km/h, thus trun-cating the high values of VOC associated with extreme congestion.

- 50 -ANNEX 11Page 2

Because of these assumptions, the ERRs reported in Chapter IV can be con-sidered to be conservative values.

3. Estimates of the value of time (VOT) saved were also included in thebenefits used to calculate ERRs. VOT estimates based on marginal-rate-of-substitution calculations were found to vary widely and were discarded. VOTbenefits were therefore estimated from conservative productivity calculations,ranging from W 400 to W 1,200 per passenger hour for work-related trips andone-third of these values for non-work trips. (For comparison, Korean CNPdivided by total hours worked was about W 1,600 in 1984, and the hourly wagein manufacturing in the same year was about W 990.)

Table 11.1: VARIATION OF VEHICLE OPERATING COSTS WITH SPEED, PAVED ROADS(Won per km)

Small Large Small Medium LargeSpeed Car Bus Bus Truck Truck Truck

40 98.65 197.33 285.01 228.45 293.12 358.4948 87.89 172.33 254.48 196.84 257.55 318.1656 80.65 154.15 234.48 174.20 232.09 291.3864 76.18 141.58 223.87 158.26 214.65 276.0772 72.87 131.98 216.66 146.22 202.95 265.5480 71.23 125.82 216.46 138.03 194.46 263.3888 70.26 122.24 221.54 132.79 190.23 267.71

Source: Feasibility Study Report for ADB Fourth Road Improvement Project, byKRIHS, KECC, DOHWA, KCA, July 1987.

- 51 -ANNEX 12

KOREA

KYONCGI REGIONAL TRANSPORT PROJECT

Selected Documents and Data Available in Project File

A. General Reports

A.1 The Second Comprehensive National Physical Development Plan,1982-1991, May 1982, Government of the Republic of Korea

B. General Reports and Studies on the Sector or Subsector

B.1 Korea Transport Statistics

B.2 Statistical Yearbook for Kyonggi-Do, 1984, Kyonggi ProvincialGovernment

B.3 Statistical Yearbook for Seoul City, 1984, Seoul City Government

B.4 Korea Transport Sector Issues Survey, December 27, 1983, World Bank

B.5 Comprehensive Plan for the Improvement of the Capital Region,July 11, 1984, Ministry of Construction

B.6 Feasibility Study Report for ADB Fourth Road Improvement Project,General Report, July 1987, KRIHS, KECC, DOHWA and KCI

C. General Reports and Studies Relating to the Project

Col Kyonggi Region Multimodal Transport Feasibility Study$ Final Report,December 1985, BCEOM (France), KRIHS, KECC and Yooshin (Korea)

Part I - General ReportPart II - Highway Preliminary Engineering StudyPart III - Railroad Preliminary Engineering Study

C.2 Shingal - Panwol and Pangyo - Guri Expressway Study, Review Report,March 1987, Dorsch Consult

KOREAKYONGGI REGIONAL TRANSPORT PROJECT

Organization of the Korea Highway Corporation (KHC)

Auditor President - -- Board of Directors

Auditing Office Secretary Office

Public . .ein. Assistance DepartmentInformation Office Vice President for lth IRF World Meeting

Managing Director Managing Director Managing Director Managing Directorfor Planning for General Affairs for Engineering for Construction

Accounting General e Emergency t HighwayPlanning and Afar uies Planning Danenat. Depovt.i abraor DetCntruto Re-search

Dept rocurement A Dept. Dept .Dept.DetLbroy

Chungbu Regional Off. Chung Chong Regional Of f Yongnam Regional Off Honam Regional Oft Field Construction Off. 12);~ ~ ~~~~~- Cun Chn*;gonlO t Reioa Off.

Inchon Maintenance Off. |FChonan Maintenance Oft Taegu Maintenance Off. Chonju Maint. Off

Suwon Maintenance Off. || Taejon Maintenance Off. Pusan Maintenance Off. Kwangju Maint. Off.

Ichon Maintenance Off | h Youngdong Maint. Oft | 4Changnyong Mait Off. Sunchon Maint. Off

Wonju Mainance Off. | Kumi Maintenance Off. 4 Masan Maintenance Of f. Jinju Maintenance Oftf

Taegwanryong Maint. Oftf Nonsan Maintance Oft. Koryong Maint. Oftt Namwon Maint Oft

Kangnung Maintenance Of sinchon Maintenance Off f Toll Off (19) Toll Off (15)

Kyongan Maintenace Off. Tol Off. (21)

Tol Off (22) a:w40418p,

CR150 _>/ DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA

REM. PEOPLES <FAFNN

REPUBLIC -R--E2

kht k Q

EXPES WAVST

E FINANCED EFRBF FKA

UNDER PROJECT

'FR N.~M I*A - - . 1lX.M 3@3 - aC,FF

/shn. =I t rJ REPUBLIC OF KOREA

REF -S ~~. y 76¢21i -- K¢hi4 j TO- KYONGGI REGIONALk-4> t I F Fr-- \KFFFAF4 4>->TRANSPORT DEVELOPMENT PROJECT

,-e,',.,' %,;- ' 't ~TRANSPORT NETWORK

____ ROFDCR PRODINCE

,EPPESSWA F

.R - KPRESSWAYS (PLANNED)

° FFFFAF4.e NATONAL ROADS (PAED)

NAnONAL ROADS (UNEARD

REOSENC ROADS PAVED)

- \ - PROVINCE ROADS JUNPAVED)

RAILROADS

INDERNA'DONAL ARPORTS* FIRST CLANS PORTS

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