China - Technical Cooperation Project

Docment of The World Bank FOR OFFICIAL USE ONLY Report No. 8825 PROJECT COMPLETION REPORT CHINA TECHNICAL COOPERATION PROJECT (CREDIT 1412-CHA) JUNE 25, 1990 Country Department III Asia Region This document has a restrited distribution and may be used by recipients only In the performance of their officil duties. Its content may not otherwise be disclosed without World Bak authorization.  ABBRFVIATIONS AA - Audit Administration CIDA - Canadien Internationai Development Agency ECPDI - East China Power Design Institute EIS - Epidemiology Intelligence Service EFD - External Finance Department FMDC - Foundry Management and Design Company IDA - International Development Association MOCI - Ministry of Chemical Industries MOC - Ministry of Communications MOF - Ministry of Finance MOPI - Ministry of Petroleum Industry MOR - Ministry of Railways MWREP - Ministry of Water Resources and Electric Power PCR - Project Completion Report RMB Chinese Currency SDR Special Draving Rights TA - Technical Assistance TCC - Technical Cooperation Credit UNDP - United Nations Development Program  ROFnCALLu NoLY THE WOItLD SANK WashiMnton C. 20433 U.SA ON" Cd Oituctm4wai June 25, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on China - Technical CooDeration Proiect (Credit 1412-CHA) Attached, for information, is a copy of a report entitled "Project Completion Report on China - Technical Cooperation Project (Credit 1412-CHA)" prepared by the Asia Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment Tlldwnmt ha a tWd dubudD and may be _m by scolents on* in the pogfomoo of *w ofki dutk& Its ntents mynotn othenrw be ddgW-d witbut World EBakauD""isit  FOR OMCAL USE ONLY CElI TZCBNICAL COOPERATION PROJECT (CREDIT 1412-CIA) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No. Preface ................................................. 1 . ......0.0 i Highlights ............................................................... jl PART ONEs PROJECT REVIEW I. INTRODUCTION ...........*..............1 Project Identity ..................... 1 Country Background and Priorities for Technical Assistance ................... .. 1 The Bank's Role and Strategy ............... ...... 1 II. PROJECT OBJECTIVES AND DESIGN ........................... 2 Project Formulation ........ ..................... 2 Project Objectives and Description ...................... 3 Project Design and Organization ......................... 3 Project Costs and Financing . ........... ... ............. . 5 III. IMPLEYENTATION EXPERIENCE ......... . . . . .......................... ... . 5 Arrangement for Project Implementation .................. . S Subprojects Financed Under TCC .......................... 6 Types of Technical Assistance Financed Under TCC ........ a The Management of Technical Assistance .................. 10 Project Relationships ..........................*......... 11 IV. PROJECT RESULTS ... ................... ... .. .... .. . ................ 12 Follow-up Investments . *........... ................. ... . 12 Impact on Human Resources Development ................ ... 12 Impact on Technological Environment ..................... 12 Impact on NationallLocal Institutions ................... 12 ANNEX: Subproject Description and Performance ................ 14 This document has a testricted distribution and may be used by fecipients only in the performnance of their oMchl duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Contd) PART TWO: STATISTICAL INFORMATION Related IDA Credits .................................. 44 Project Timetable ............................. . . 45 Cumulative Estimated and Actual Disbursements . 46 Subprojects Financed Under Credit 1412-CA.. . 47 Follow-up Investments Resulting From Subprojects Financed Under Credit 1412-CHA . 49 Sector Distribution of Subproject . 51 Status of Covenants ...... ............ 52 Staff Inputs .. .............. 53 Mission Data ........... 54  - i - CHI"A TECENICAL COOPERATION PROJECT (CREDIT 1412-CHA) PROJECT COMPLETION REPORT PREFACE This Project Completion Report reviews the Technical Cooperation Project in China for which an IDA Credit of US$10.0 million equivalent was approved on August 24, 1983. Although the original closing date was December 31, 1987, it had to be extended by one year due to delays in disbursements and completion of subprojects. The final disbursements under the project will be completed by June 30, 1989. This report was prepared by the Technical Assistance Unit, Asia Region on the basis of a review of the President's Report (No. P-3638-CHA), the Developmeat Credit Agreement of October 17, 1983, eight supervision reports (1983-89), correspondence in the Asia Information Center and a draft completion report prepared by the Borrower dated January 7, 1989. The Project Completion Report was prepared generally according tu the November, 1988 guidelines except that the draft prepared by the Government was incorporated into Part One of the report, since that was the arrangement which had been made earlier for this project. The PCR is divided into two parts: Part One consists of a report on the project as a whole, largely based on the Government's draft, and an annex providing a description of each subproject, a summary of the implementation, and a brief evaluation of each subproject financed under the project; and Part Two includes a summary of statistical data on the project, prepared on the basis of data supplied by the Bortower and information in the project files. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower on November 9, 1989, for comments by December 27, 1989, but none were received.  - ii - ca TECHNICAL COOPERATION PROJECT (CREDIT 1412-CHA) PROJECT COMPLSTION REPORT HIGHLIGHTS 1. Parts I and II of this Project Completion Report (the government input and the Bank input) are combined per earlier agreement between the government and the Bank. (Preface, pars. 3) 2. The Technical Cooperation Project was designed to supplement the flows of concessional funding in order to provide a ready selrce of financing for technical assistance to help prepare projects to be financed under the expanding Bank Group lending program in China. (para 1.4) 3. The project design was innovative in the context of China in that it represented a floating line of credit and funds for the sub-projects included wer.e not pre-approved. (paras 2.5 and 2.6) 4. Both the Government and IDA paid particular attention to arrangements for project coordination during the design stage, resulting in the appointment of a Technical Assistance Coordinator by the Government. (para. 2.7) 5. The Project required five years for completion, but resulted in 29 * sub-projects and was considered successful and effective. (para. 3.1) 6. The Project's primary objective of project preparation was achieved. (para. 3.5) 7. There were three categories of sub-projects approved under the Project: those costing less than SDR 200,000; those costing between SDR 200,000 and SDR 1,000,000; and, two sub-projects costing more than SDR 1,500,000 each. (paras. 3.6 - 3.8) 8. Several of the approved sub-projects had institution building aspects. (para. 3.9) 9. The Government staff assigned to the Project performed well, but frequent staff changes created the need for greater Bank staff inputs. (para. 3.19)  - iii - 10. Cooperation between the Ministry of Finance (MOP) and the participating line agencies was generally smooth but reporting by sub- project entities was often wanting. (para 3.20) 11. The complexity and size of the Project complicated the Bank's supervision, the responsibility for which rested primarily with the Asia Technical Assistance Unit. MOF and line agencies will be expected to take on more of this burden for future projects of this type. (para. 3.22) 12. The project resulted in the preparation of 21 Bank or IDA projects with an investment of $2.1 billion. (para. 4.1) 13. The Project had an extensive impact o.z national/local institutions and both the technological and human resource environments. (paras. 4.2 - 4.4)  CHINA TECHNICAL COOPERATION PROJECT (CREDIT 1412-CUA PROJECT COMPLETION REPORT PART ONE 1. INTRODUCTION Proiect Identity Project Names Technical Cooperation Project Credit Nos 1412-CH& RVP unit: Asia Regional Office Country: China Sector: Technical Assistance Subsector: Subprojects in various sectors Cou.ntry Backgtround and Priorities for Technical Assis-tace 1.1 Access to technical assistance for a broad rauge of economic sectors and activities is essential for achieving China's development objectives. A 3hortage of wvll-prepared investment projects has Inhibited the Governuont's ability to utilize fully the volume of development aid available frm bilateral and multilateral sources. The limited capacity of the Government to identif7 and prepare good projects is not only a constraint- to the pace of developmet but also tends to leave a large part of the initiative in project selection and design to aid donors. Chiua is itself working vigorously to improve access to commercially held technology through the promotion of Joiut ventures, licensing arrangements, service contracts and- other means. owever the scope for technical assistance is vast. ITa recognition of these needs, bilateral and multilateral agencies concerned with development assistance to China have increasingly included substantial amourts of technical and implementation aid in their overall commitments to the country. Technical assistance agreements have been signed with several.. goveraments including Japan, AustraliA, West Grmany and Canada. P number of other governments are also providing technical assistance, and substanti_L. assistance is made available through the United Nations Development Progrm (UNDP) as well as the World Bank Group. The Bank's Role and Strategy 1.3 A key element of the Bank's prograa in China has been to provide technical assistance to strengthen China's capacity to prepare and implement investment projects. Proj6et preparation and implementation are carried out by the various sectoral ministries and other llnq agencies, and technical- assistance is often required to introduca technology and other know-how. ot presently available in China. It is the Bank's policy to use UNDP and other sources of grant financing for technical assistance vhenever these are suitable and readily available. While the UNDP and other bilateral donors also finance technical assistance for preparation of Bank-financed operations,  -2- the amount of such concessional funds is limited, sometimes tied to procurement of services in a particular country, or not always available promptly at the time required. The basic justification for the Bank's lent ng for technical assistance has therefore been to provide an additional assured source of foreign exchange for technical assistance activities in cases where other financing was not readily available on apprupriate terms and conditions, or where bank financing facilitated more expeditious preparation of projects suitable for consideration by external aid agencies. 1.4 While the bulk of Bank-financed technical assistance to China has been included as components of larger investment projects in various sectors, the Bank has also undertaken to provide financing for IDA credits specifically tailored to address the technical assistance needs of the country. There was a need for a flexible source of technical assistance funds, beyond that attached to individual projects, to provide assistance quickly and for a btoad range of activities. Accordingly, IDA approved the Technical Cooperation Credit for US$10.0 million equivalent in September 1983 with the principal objective of providing a ready source of financing for technical assistance to help prepare projects to be financed under the expanding Bank Group lending program in China. This project was followed by two other free-standing, multi-sectoral technical assistance projects financed by IDA: the TCC II was approved in FY86 for US$200. million equivalent; and the Planning Support and Special Studies, approved in FY87, to provide US$20.7 million equivalent to finance planning studies as input to China's 8th Five Year Plan (1990-95), special studies of an inter-sectoral or innovative nature, and institutional development activities including in-service education ana training of officials, mainly in central government agencies responsible for thq implementation of China's economic, financial and industrial reform. Both (< these projects are under implementation. A third TCC has been ntc5oiated, and is scheduled for con- sideration by the Executive Directors shortLy. The first TCC should therefore be viewed as the initial seSment of a continuing process of strengthening Thina's capabilities for the development and management of investment projects and institutional strengthening. IT. PROJECT OBJECTIVES AND DESIGN Proiect Formulation 2.1 The Bank began discussing the possibility of ai IDA credit for technical assistance with the Government in the early 1980s. In light of the expanding Bark program in China, and the need to supplement existing sources of technical assistance, it was agreed in January 1983 to pursue consideration of a technical assistance credit. In February 1983, the Bank conducted a workshop on freestanding technical assistance projects for the Ministry of Finance using the IDA technical assistance projects in Bangladesh as a case study. A Bank appraisal mission visited China in March of the same year. Negotiations for the credit were held in July 1983 after the project was approved by the State Council. The Government and IDA agreed that the project be modelled on the freestanding technical assistance projects operating in Bangladesh i.e., projects composed mainly of discrete subprojects each one to prepare or test the feasibility of an investment project. The project was  -3- presented on this basis to the Bank's Board (President's Report No. P 3638- CIA) on August 24, 1983 as a first Technical Cooperation Credit (TCC). The Vevelopment Credit Agreement was signed on October 17, 1983 and the project became effective on December 21, 1983. Protect Obiectives and Description 2.2 The principal objective of the Technical Cooperation Project was to provide an assured and flexible source of financing for technical assistance for the preparation of high priority projects in cases where other preparation financing was not available on appropriate terms, or where IDA financing would expedite preparation of projects eligible for external financing. Further objectives included the provision of limited technical assistance for the inst2.tutional development of agencies involved with Bank Group operations. In addition, the credit was desipned to finance limited amounts of equipment required for implementation of the technical assistance provided. Underlying the immediate objectives was the longer term objective of strengthening China's capacity for project preparation and implementation and technical assistance management. 2.3 The project was designed to finance approximately 20-25 subprojects invo:ving high priority technical assistance needs. Individual subprojects, their method of implementation and allocation from the credit would be decided by the Government and IDA on a case-by-case basis. According to the Credit Agrement (Section 3.01), the subprojects would be of high priority in the Government's economic development plan and consistent with the Bank Group's lending strategy in the country, and would have no other equally suitable source of external financing. Subprojects or activities financed from the credit would include major inputs into large feasibility studies, assistance with or review of other feasibility and prefeasibility studies, other preparation work such as expert panels, individual specialists and study tours, and other activities designed to strengthen institutions responsible for project prrnaration and implementation. 2.4 It was estimated during preparation that the project would cover a three-year period (FY84-86), two years fer commitment and a third year to complete disbursements. The Closing Date for disbursements was established as December 31, 1987. Proiect Desion and Orzanization 2.5 The project was innovative in the context of China since it was the first in a series of freestanding TA credits provided by IDA to that country. It was prepared on the basis of the recognition by the Government and IDA that adequate fur"- for the preparation of projects to be financed by the Bank Group were not available from other sources, and that such preparation funds would be provided under the TCC on a case-by-case basis. There was a clear understanding between the Government and the IDA, however, that the Government would continue to utilize grant financing from UNDP and bilateral sources whenever it was suitable and readily available. The TCC would fill the need for an assured and flexible means of financing project preparation only when other sources were unavailable.  -4- 2.6 The project was designed to serve as a flexible line of credit, whereoy the approval of the overall credit did not depend on a prior determination of each discrete study to be financed by the credit. Since all of the subprojects could not be identified at the time of preparaticn, the proceeds from the credit were not pre-allocated. This permitted the Goveroment to request allocations for individual subprojects as the need arose. The simplicit- and flexibility of the credit procedures for commitment and disbursements of funds vas, in tusn, designed to pernit the proceeds to be used to meet urgent needs which often could not be foreseen with much lead time. The timing of the project was appropriate in that it provided an assured source of foreign exchange for technical assistance activities at a time when UNDP confirmed tbat only limited additional resources could be made avaitable for tne preparatioa of projects to be financed by the Bank at least through 1986. The prospects for bilateral financing. although brighter, were tied to various restrictions on their use. 2.7 During project design considerable atteution was paid to arrangements for coordination by both IDA and the Government. The number of varied suhprojects, each requiring separate attention, made coordination a crucial concern as did the monitoring of the project as a whole. During the project appraisal, the overall responsibility for the implementation of the entire credit was given to the External Finance Department (EFD) of the Ministry of Finance (MOF). It was agreed that MOF would consult with the State Planning Commission if there was any question about the status of .he investment project which the TCC subproject would support. As a general rule MOF would not agree to process subprojects for project preparation until the project had been approved for Bank Group borrowing by the State Planning Commission. MOF would consult with the Ministry of Foreign Economic Relations and Trade concerning the availability of UNDP and bilateral financing for the proposed subproject. Within EFD a Technical Assistance Coordinator was designated to ensure management of the overall credit and coordination between subproject entities and IDA. For individual subprojects, the line ministries were responsible for presenting requests for TCC financing to MOF. After approval by HOF the subprojects were forwarded to IDA for approvel. Subprojects were approved by IDA on the recommendation of and supervised by the appropriate division of the former East Asia Projects Department, while overall credit supervision and coordination of the TCC was perforzied by the Technical Assistance Unit of the former East Asia and Pacific Regional Office. Prior to approval, the subprojects are cleared with the Country, Legal and Loan Departments. Since the reorganization of the Bank in 1987. most of the individual subprojects have been supervised by the Sector Operating Divisions in the China Department. Supervision of the remaining subprojects has been delegated to a staff member in thc Technical Department by the China Country Operations Division. Overall supervision of the TCC was the responsibility of the Technical Assistance Unit, with the help of a country officer. The line ministries haildled all technical aspects of the subprojects, and contrac4ed consultants, arranged study tours and other training, and procured equipment. The subproject beneficiaries were responsible for repaying the TCC funds to MOF in the first year following the grace period of the follow-up Bank loan or credit. Repayment of the principal, along with a 1? service charge was normally required five years after the subproject was approved.  -5- Project Costs and Financing 2.8 The credit amount - US$10.0 million equivalent - was calculated on the basis of an estimate of the technical assistance requirements expected for project preparaticn during FY84-85. The total project cost was estimated at US$12.0 million, with a foreign exchange cost of US$9.0 million. The IDA credit for SDR 9.4 million (US$10.0 million) would finance the full foreign exchange costs, as well as a portion of the local costs. The Government would finance the remaining US$2.0 million of local costs. No allowances were made for physical and price contingencies as the project was a line of credit to help finance a program defined in financial terms and for which the specific requirements were not known at the outset. 2.9 It was estimated that about 70% of the credit would finance consultant services and about 302 would finance study tours, other training and equipment. The credit would finance 1OOZ of foreign expenditures for consultant services. In addition, the credit would finance foreign expenditures for equipment and materials, and for study tours and other training programs associated with project preparation or implementation. The credit would also finance 1002 of local ex-factory costs for equipment made locally and 752 of local expenditures for imported items procured locally. The Government's contribution to individual subproject costs included the financing of counterpart staff, local consultants and support facilities. It!. IMPLEMENTATION EXPERIENCE 3.1 The First Technical Cooperation Project was implemented over a period of five years and was closed on December 31, 1988 after the credit was extended by one year to complete disbursements. Twenty-nine subprojects were approved under the project (of which one subproject was cancelled), committing 1002 of the funds. In general, the first TCC was considered by both the Government and IDA as successful and effective in achieving its objectives. The level of performance achieved under the project was high, particularly in terms of preparation of projects financed by the Bank and IDA. TCC I contributed to the rapid increase in lending by the Bank and IDA for investment projects in China. Arrangements for Proiect Imolementation 3.2 Project activities got underway with the establishment of guidelines and institutional arrangements within the Ministry of Finance to administer the First TCC These institutioanl arrangements were completed before the project became effective. Responsibility for the management of the overall credit was placed in the World Bank Division II of EFD which assigned two staff members to coordinate the TCC, a coordinAtor and an assistant coordinator. Simple procedures were issued for processi-g of subptojects and a one-page TCC subproject application form was also issued. Considerable time was spent during the initial supervision missions reviewing the new arrangements for the administration of the TCC. The Bank provided training to the TCC staff and organized a study tour financed from the UNDP Umbrella  - 6 - Project to Pakistan and Bangladesh to let the Chinese officials responsible learn first-hand how other countries manage technical assistance, and in particular how they administer free-standing technical assistance projects financed by IDA. Although project administration was subsequently affected by frequent structural and personnel changes (see para. 3.19), the institutional arrangements put in place by the original TCC staff continued to serve the project well. Suboroiects Financed under TCC - 3.3 The TCC became effective on December 21, 1983 and the first subproject -so approved on January 24, 1984. MOF and IDA approved 29 subprojec:, of hich 24 were completed and fully disbursed prior to project closing a' :b aubproject was cancelled; three others have been completed and are awaita.g f nal disbursements; and one subproject is still ongoing. A list of subprojects is included in Table 4. The 29 subprojects approved exceeded the appraisal estimate (Z0-25) and fully committed the credit funds by December 1986. Savings from some subprojects were subsequently reallocated to the uncommitted portion of tho TCC and later reallocated to other subprojects. The subprojects were implemented by 13 line ministries and provincial authori- ties. The credit account will remain open until June 30. 1989 to complete disbursements of the remaining subpro.jects. Any subpro4ects for which disbursements have not been completed by June 30. 1989 will be transferred to TCC II at that time. If there are still any remaining undisbursed funds in TCC I on June 30. 1989, an amount equal to the remaining undisbursed amount in TCC I will be transferred from TCC II to TCC I from funds already disbursed in TCC II. This accounting transaction will complete disbursement of all funds in TCC I. 3.4 The implementation experience of the various subprojects is reviewed in detail in Annex 1. Subproject activities are summarized and major highlights are reviewed in this section. 3.5 Proiect Preparation Obiective. The primary objective of the project was to finance project preparation activities and feasibility.studies in order to build a pipeline of projects for financing by Bank and IDA. This objective has been achieved. Out of the 29 approved subprojects. 24 were msainly for project preparation, and SDR 7.9 million were disbursed for this purpose. Of these, 21 subprojects (with total disbursements of SDR 7.2 million) contributed to the preparation of 21 investment projects and subse- quent Bank/IDA lending totalling more than US$2.0 billion. The 24 subprojects which financed project preparation activities can be divided into three categories in terms of size and types of technical assistance. 3.6 The large majority of the subprojects (16) fall under the first category which consisted of small, discrete activities, with allocations of generally less than SDR 200,000, designed to provide high priority technical assistance to meet specific project preparation needs. In all cases, the subprojects financed a single type of technical assistance, usually study tours, to assist with technical or project management aspects during the preparation of investment projects. Twelve subprojects exclusively financed study tours. For example, subprojects 13 and 14, with final disbursements of  SDR 171,891 and SDR 111,454 respectively, financed study tours on various health related and management topics to assist in the preparation of two IDA- financed projects in the health sector. Subproject #10 disbursed SDR 95,136 to finance study tours during the preparation of the Second Railway Project (Loan 2540-CHA). Similarly, SDR 70,026 was utilized to send two study tours under subproject Jll to make a selection of equipment to be procured under the Seeds Project (Credit 1577-CHA). Subprojects #25 (Freshwater Fisheries Project Preparation - SDR 41,224), #26 (Red Soil Project Preparation - SDR 32,953) and #27 (Xinjiang Area Deveropment Project Preparation - SDR 44,533) all required small allocations from the TCC to finance specialized study tours on technical, management and equipment selection issues during the preparation of the main investment projects. Two other subprojects (#7 and #23) provided funds for the Ministry of Water Resources and Electric Power to hire Special Boards of Consultants to review and assist with the preparation of the Lubuge and Yantan Hydropower Projects. 3.7 The second category includes seven subprojects with disbursements of more than SDR 200,00 but less than SDR 1.0 million. These subprojects combined several types of technical assistance, usually a combination of consultant services and study tours,.to assist in the preparation of invest- ment projects. For example, subproject #6 (Machine Tools Project Preparation) disbursed SDR 903,328 to cover the expenses of consultants to carry out feasibility studies for modernization of the facilities of the Shanghai Machine Tools Corporation and related study tours. Similarly, under sub- project #17 (Xinsha Terminal in Huangpu Port) TCC funds were utilized for hiring consultants and sending study tours to assist with the preparation of bidding documents for the Huangpu Port Project (Credit 1845-CHA/Loan 2877- CiA). Subproject t8 (Transmission Project Preparation) disbursed SDR 566,520 to finance consultants, study tours and other training to improve the design, construction, and operations and maintenance of transmission lines and substations. Likewise, SDR 774,246 were disbursed under subproject #22 (Shuikou Hydroelectric Power Project Preparation) to cover the expenses of consultants, study tours and other training carried out during the preparation of the Shuikou Hydroelectric Project (Loan 2775-CiA). 3.8 The third category consists of two large subprojects, each with disbursements of over SDR 1.5 million, which primarily financed consultant services, combined with small study tours and other training, to assist with preparation of large Bank-financed investment projects in those sectors. Almost the entire amount of SDR 1,634,231 disbursed for subproject t18 (Beilungang Thermal Project Preparation) was used to cover consultant expenses for feasibility studies, project engineering and detailed design, and prepara- tion of bidding documents. An additional US$10,000 was used to finance a study tour and other training for the design and selection of equipment. This subproject assisted in the preparation of the Beilungang Thermal Power Project (Loan 2706-CHA), signed on May 29, 1986 for US$225.0 million. The other large subproject was the Phosphate Project Preparation (subproject 116) which assisted in the preparation of the Phosphate Project (Loan 2958-CHA). TCC funds for the subproject were provided for consultancy services for finaliza- tion of the feasibility studies for the three subprojects financed under the main investment project. In addition, a study tour for mining was also carried out. The total disbursement under subproject f16 was SDR 1,631,549.  3.9 Institution Buildina Obiective. A second objective of the project was to provide institution building assistance to strengthen institutions involved in Bank operations. 'While many institution-building activities are already financed under Bank and IDA project operations, there are other important activities which fall outside the scope of these projects. These include assistance to core agencies such as the Audit Administration (subproject #12) to strengthen its capacity to conduct audits of Bank-financed projects. In addition other types of- kigh priority subprojects were also approved to strengthen the Government's capacity to select and prepare investment projects. Thus for example, subprojects tl3 and 114 provided funds for training in how to prepare port master plans and control systems for development of China's ports. Finally, TCC funds allocated for subproject t24 were utilized to purchase composing and printing equipment for the Economic and Financial Publishing House in Beijing. 3.10 Sectoral Breakdown of Subproiects. Most of the subprojects financed were in the commercially oriented sectors of energy, transport and industry (see Table 7). Several agriculture and area development subprojects were also approved. The transport sector accounted for the largest number of subprojects. Nine subprojects in the transport disbursed SDR 1,115,995 (14.42); six subprojects in the energy sector disbursed SDR 3,134,307 (40.4S); and six agriculture and area development subprojects disbursed SDR 237,861 (3.1S). Other sectors covered included two subprojects in the health sector which disbursed SDR 284.345 (3.7Z) and four subprojects in the industry sector with total disbursements of SDR 2,740,995 (35.3?). TYDes of Technical Assistance Financed Under TCC 3.11 It was estimated at appraisal that about 702 of the project funds would finance consultant services and the remaining 30? would finance study tours, other training and equipment. Of the total disbursements of SDR 8.6 million as of March 31, 1989, the expenses on foreign consultants amounted to approximately SDR 7.0 million, accounting for about 802 of project funds. Study tours accounted for another 102 of project funds; training components accounted for slightly less than SZ of project funds while computers and other equipment accounted for slightly over 52 of project funds. Approximately 942 of the funds for equipment was utilized to purchase computers and editing equipment for the Economic and Finance Publishing House. 3.12 Consultants. Foreign consultants were utilized in 14 subprojects. The terms of reference of consultants generally included services to: (a) prepare and review feasibility studies; (b) assist with project engineering and detailed design; (c) review and participate in the overall design of projects; (d) proyide advice and expertise on technical matters; and (e) prepare bidding documents and participate in prequalifications and bid evaluations. The selection and invitation of consultants followed the Bank's Guidelines for the Use of Consultants by World Bank Borrowers dated August 1981, and the work of the consultants was generally carried out in three stages: (i) on-site investigation and data collection by foreign consultants, followed by data processing and further review at the consultant's headquarters; (ii) visit of Chinese technical personnel to consultant's  - 9 - headquarters to review and discuss the consultant's findings; and (iii) follow-up visit by consultants to China to review results and fi3dings. 3.13 For large consulting contracts, it proved useful for a small team of Chinese experts to visit the home office of the consulting firm before the consultant's report was finalized. This arrangement was used in several subprojects, including subprojects #6, #8, #16, #18 and #22. This allowed for timely exchange of views on proposed recommendations, and generally resulted in an improved final report which wai more likely to be acceptable to all parties concerned. There were other advantages as well: it we. less likely that the final report would have to be reviewed, saving time and money; and it was less expensive for the Chinese staff to visit the consulting firm's home office than to have the consultants return to China at this stage. 3.14 To strengthen China's ability to prepare and implement projects, further steps need to be taken to ensure that consultant's terms of reference include appropriate provision for training of counterpart staff. For example, additional man-months could be included in consultants' contracts specifically for training of local counterpart staff. Also, in certain cases it may be desirable to have local and foreign consultants work in combination on specific assignments to facilitate the transfer of technology. 3.15 Study Tours. Study tours also constituted an important activity under the project, accounting for over lOS of the disbursed funds. The subprojects financed under the first TCC were designed to ensure transfer of knowledge to strengthen the line ministries' ability to select and prepare projects. A key part of this process was the professional study tours which provided government officials with exposure to technologies they lack and opportunities to visit potential suppliers and meet sources of consulting expertise. During the five years of project implementation. more than twenty project entities utilized the TCC funds to send study tours and other training groups abroad. The study tour participants were generally involved in the technical and management work of the projects and returned to work with the sponsoring agencies. Approximately forty study groups with over 300 participants visited more than 15 countries including Japan, India, Egypt, Yugoslavia, U.S.A., Thailand, Singapore. France and Sweden. The majority of the study tours were carried out to assist in the preparation of major investment projects. 3.16 Traininz. This component was included in seven subprojects and accounted for about 5Z of disbursed funds. Training was usually combined with other forms of technical assistance and was used for both project preparation and institution building objectives. For example, subproject I8 (Transmission Project Preparation) allocated SDR 150,000 for training Chinese staff in project design, construction, and operation and maintenance. This was provided in conjunction with consultant services for design optimization for transmission lines and substations, and study tours to improve staff expertise in design and operation of transmission lines and stations. Similarly, subprojects #21 and 122 also combined training with consultant services and study tours to assist with project preparation. Training components were also included for institution-building subprojects such as subproject t12, and  - 10 - training to strengthen the Government's capacity to select and prepare projects was provided under subproject 114. 3.17 Eguimment. TCC funds were utilized to procure equipment under two subprojects. The project financed composing and editing equipment for the Economic and Financial Publishing Mouse (subproject 124) and computers for the Audit Administration (subproject 112). The Manacement of Technical AssistanGe 3.18 The Role of the Borrower. The processing, supervision and management of the TCC was adequately carried out due in part to the close cooperation between EFD's Project Cocrdinator and the Bank's Asia Technical Assistance Unit. EFD acted as a clearing house for requests by the line agencies. The Project Coordinator and his assistants had the following tasks: (a) prepare project management regulations and subproject approval procedures: (b) review subproject applications; (c) participate in the negotiation of large consulting contracts and review study tours and training plans; (d) supervise the accounts of the subprojects and make periodic settlements; (e) manage the Special Account; and (f) coordinate communications between IDA and the line agencies. Given the nature nf the TCC, a special accounting system was developed using SDR. US dollar and RMB as the denominating currencies. 3.19 In the past five years, the EFD's technical assistance staff performed well, and no major problems or delay of settlements occurred. During this period. seven people were involved in the administration of the TCC. In addition, EFD's technical assistance staff is also managing TCC II, the Planning Support and Special Studies Project, UNDP Umbrella Project, and the Japanese Grant Facility. The quality of work and management capacities have been enhanced through training and study tours, and several staff members have been promoted to other positions. The simple TCC application form served as a useful instrument for processing subprojects. The average period of time between application for TCC funds and approval of subprojects was less than two months. EFD's accounting system allowed for the smooth disbursement and settlement of accounts, and audit reviews were successfully carried at the end of each year. Financial statements were periodically submitted to the related agencies. OP also issued a report to strengthen the management of study tours and training abroad. Although the arrangements set in place by EFD's first management team have served the project well, administration of the TCC was affected by frequent personnel changes. A new Accounting Division was established within EFD in late 1984, and the responsibility for the TCC was shifted from the World Bank Division 11 to the Accounting Division at that time. This was accompanied by a change in the project management personnel. There were further changes in February 1987 when a new Project Coordinator was appointed to administer the TCC. He was recently succeeded jy a new Coordinator in early 1989 upon the creation of the Technical Assistance and Training Division. These frequent changes have meant that additional time had to be spent during Bank missions to train the new staff. 3.20 Cooperation and administrative coordination between the MOF and the line agencies have been generally smooth, although some disagreements emerged regarding (a) size of subprojects. (b) size of study tours financed  - 11 - under the TCC, and (c) whether TCC funds could be utilized for preparation activities for projects that are not included in the current World Bank lending program. Reporting of subproject activities and results by the line agencies to HOF has been spotty and of uneven quality. Several subprojects did not maintain regular records and could not report or. implementation progress. In the future. MOF will ensure the timely preparation by line agencies of reports on individual subprojects. 1 3.21 The Role of the Bank. Bank staff have been actively involved during all stages of project preparation and implementation. Particularly since this was the first project of its kind in China, considerable time was spent during the initial supervision missions to review project guidelines and institutional arrangements. 3.22 IDA SuDervision. The reporting procedures for individual subprojects was complicated in that technical responsibility and day-to-day supervision was carried out by project officers from various sector divisions within the Region as well as other units within the Bank while the overall project was supervised by the Technical Assistance Unit. Because each subproject was not considered a separate project for supervision purposes, the task fell to the Technical Assistance Unit to prepare a supervision report for the entire project which was actually composed of 29 discrete subprojects. Eight supervision reports for this project were prepared by the Technical Assistance Unit during the life of the project. Although earlier supervision reports included detailed description of the status of individual subprojects, with the rapid increase in the comuitment of funds the TCC subprojects became too numerous for detailed supervision by the Technical Assistance Unit. The monitoring and reporting of ine'.vidual subprojects could be further strengthened by emphasizing their substantive aspects in supervision reports. M.-IOF. now having considerable experience with the Bank's procurement procedures, should assume greater responsibility for supervision and monitoring of procurement and contracting, and ensure that line agencies prepare and submit subproject progress reports on a regular basis. For project preparation subprojects, completed subproject reports and Bank comments prepared by the task manager (and cleared with the Country Operations Division) should suffice. For study tours and other training not connected with project preparation, reports should be prepared by the relevant line agency at the completion of the activity and submitted to IDA. Proiect Relationships 3.24 The relationship between the Bank and the Government was generally good and staff of both IDA and MOF were generally in accord with the actions needed to implement the TCC. Since this was the first TCC project in China, coordination between IDA and Government was particularly close during the early years of the project. The relat.onship between MOF and the line ministries was also generally good although some disagreements emerged between HOF and some agencies regarding the nature and size of subprojects.  - 12 - IV. PROJECT RESULTS Follow-up Investments 4.1 The primary result of the TCC was the preparation of investment projects for financing by the Bank or IDA. The subprojects under the project generally achieved this objective by leading to Bank/IDA follow-up investments. The 24 uproject preparation' subprojects with total disbursements of about US$8.0 million equivalent resulted in the preparation of 21 Bank or IDA-financed investment projects for-a total follow-up investment of over US$2.1 billion. For example, the largest subproject funded by the TCC (subproject #18, Beilungang Thermal Power Project Preparation) disbursed US$1.5 million equivalent to assist in the preparation of an investment project supported by a Bank-financed loan if US$225.0 million. The 21 follow- up investments projects included 1l loans approved by the Bank for a total investment of US$1.5 billion and six IDA credits for US$600 million. In addition, four other follow-up projects were financed by both Bank and IDA. Imnact on Human Resource Develonment 4.2 Subproject activities under the TCC were designed to ensure transfer of knowledge to strengthen the line ministries, ability to select and prepare projects. The Chinese have worked closely with Bank staff and foreign consultants provided under the TCC to design subprojects so that they could learn as much as possible from the expatriates. Substantial transfer of knowledge was achieved through on-the-job training provided by foreign consultants, study tours, seminars and other impromptu lectures. The study tours and other training have contributed to significant improvements in the quality of project personnel, and several trained suaff have assumed key positions in project management and technical operations. Impact on Technological Environment 4.3 The TCC subprojects enhanced the ability of the local agencies to select and prepare projects for external financing. As a result of the project, line agencies have developed the capacity to carry out various technical and management activities associated with the preparation of an investment project. These include the significant improvements in the ability of line agencies to prepare feasibility studies and detailed design, prepare bidding documents for civil works and equipment, and carry out civil works and detailed engineering, although substantial inputs for these tasks continued to be provided by foreign experts. Impact on National/Local Institutions 4.4 The project guidelines and institutional arrangements set in place under the TCC, along with study tours and training of the TCC staff, have enhanced the accounting capacity of MOP to administer technical assistance in general and freestanding technical assistance projects in particular. Subprojects for project preparation not only resulted in viable investment projects, but also strengthened the capacity of the Chinese agencies involved to prepare future investment projects. Unlike in some other countries, in China the foreign consultants did not prepare full feasibility studies, and  _ 63 - they were not given the responsibility for project design. Rather, the consultants assisted with the preparation of feasibility studies and assisted with the preparation of the project design. By retaining the main responsibility for these tasks themselves the Chinese officials learned more from the foreign consultants than they would have otherwise. Subproject activities have also contributed to the strengthening of core agencies involved in Bank operations such as the Audit Administration.  -14 -A- Page I of 30 CHINA TECHNICAL COOPERATION PROJECT (CREDIT 1412-CRA) Subproject Description and Performance Subproiect No. 1 Title: Dalian Bulk Grain Terminal Implementing Atency: Ministry of Communications Date of Application: January 10, 1984 Date of Approval: January 24, 1984 Allocation: SDR 144,000 Disbursement: SDR 83,722 Descriptions Consultants to review the design of the silo and grain terminal at Dalian, and to assist with specifications for preparation of tender documents. Visit of four Chinese officials to Holland to review design. Implementation: This first subproject was approved on January 2, 1984, and the official allocation of funds was made on February 17, 1984. Contract negotiations went smoothly and the contract was signed with GEM Consultants (Netherlands) on February 9, 1974. The consulting team arrived in China in mid-March 1984. Follow-up Activiies: None Evaluationt The consultants worked closely with the staff of the Beijing Water Transport Planning and Design Institute, completed their review of the design and submitted their report to the agency. MOC reported satisfaction with the work of the consultants. The technical assistance provided transfer of technology to the Chinese. However, since the project was subsequently dropped from the Bank's lending program, assistance with preparation of bidding documents was not carried out. Savings of about $75,000 was transferred to the unallocated TCC funds to be,reallocated to other projects.  ANNEX - 15- Page 2 of 30 .