China - Changchun Water Supply and Environmental Project

Uocument of The World Bank FOR OFFICIAL USE ONLY Report No. 11040-A STAFF APPRAISAL REPORT CHINA CHANGCCUN WATER SUPPLY AND ENVIRONMENTAL PROJECT DECEMBER 30, 1992 MITCOFICHE COPY heport No.:11040-CHA Type: (OAR) Titie: CHANGCHUN WATER SUIPPLY AND) ENV Autthor: PIETVELD, C Ext.:82924 Room:F8059 Dept.:ASTIN Environment, %uman Resources and Urban Development Operations Division Country Department II East Asia and Pacific Regional Office This docunent hs a resMtded distibuto and may be uad by ripiens only in the perfonmnce of their offid dutie Its contens may not otheise be dbcosed without Word Bank autoization.  CURRENCY EQUIVALENTS (As of June 1992) Currency Name = Renminbi (RMB) Currency Unit = Yuan (Y) $1.00 =Y 5.48 Y 1.00 = $0.18 WEIGHTS AND MEASURES 1 millimeter (mm) = 0.0939 Inches (in) 1 meter (m) = 3.2808 feet (ft) I square meter (m:2) = 10.7639 square feet (ft) I cubic meter (ml) = 35.3 cubic feet 1 hectare (ha) = 10,000 square meters 1 kilometer (Iam) = 0.62 miles (mi) 1 square kilometer (1an) = 0.3861 square mile (mtn) ACRONYNS AND ABBREVIATIONS CIDA Canadian International Development Agency CMC China National Machinery Import and Export Corporation CSC Changchun Sewerage Company CWSC Changchun Water Supply Company CWRC Cbangchun Water Resources Company EPB Environmental Protecion Buream HLLG High-Level Leadership Group lcd Liters per capita per day MOC Ministry of Construction MOWC Ministry of Water Conservancy NEPA National Enviromnental Protection Agency PMO Project Management Office PRC People's Republic of China SOEs Statements of Expenditure SPC State Planning Commission UCC Urban Construction Commission FISCAL YEAR January 1 - December 31  FOR OFFICIAL US ONLY -i - CHINA CHANGCHUN WATER SUPPLY AND ENViRONNTAL PROJECT CREDIT AND PROJECT SUMRY Ibmwr. People's Republic of China (PRC) _ bnfidaryt C bai~gcdun Municipalt Ameunt SDR 86.6 million ($120 mfllion equivalent) Term: Standard, with 35 yes maurity and a grce perid of 10 years COlending Terms: Tho Govrment of China would make the proceeds avaiable to the Changchun Municipality. The municpality would oulend Ihe proceeds: (a) to the Changchun Water Supply Company (CWSC) at a vaiable rate equal to the Bank rae plus a spread of 1.5 percent per annum at the same matur as IBRD loans; and (b) to the newly created Changchu Sewerag Company (CSC) at a fixed rate of 5.1 pcont per annum at the same matuit as IBRD loans. CWSC and CSC wi beot a fixed commment chaw of 0.5 percent and assum the foreign excag re hqject DewipUon Tbe main objectives of the project are to Improve water spply in Changchun to meet the domestc needs of the urban popuation, Support dustial growth, and control urban water polluton. The physical works wuld include: (a) construcdon of a water umvmbsion pipeline to convoy wat fom the Second Songhua River to an Impout reseroir curey sevzg Changcun; construction of pumping stations, epnsi and Impovement of water treat facliies and expansion of the capacity o' the wer disuton system; (b) construction of a trunk Intercepw sewer and a primary sewage treate plant and prremt of eqpmet and tments for eniomenta quality monitoring and control; and (c) tecical assaceto assistwihdesign and construcdosupevision, to fh maagement support to the water and sewerage companies including the preparation of a staff training program, and to implement a hardus waste study. nstiuonally, the project would reifor CWSC, develop CSC, strengte water polludon control, e sh approprte pricing policies, improve operation practies, promote masures fr water c ation ad me prsoU l maement, indcuding anig of staf. This document has a rsicted distribution and may be used by recipients only in the peformance of their oicia duties. Its contents may not otherwise be discosed without World Bank authotization.  0, ~ I11,1 tt^l8t [#tti lif  ill- Etlmated Cost.:L Loa Forei Tdgn - ($ million) Water Trw misn 36.0 44.5 80.6 Urban Water Supply 34.2 36.1 70.2 Sewag Colecton and Treatment 20.3 16.2 36.5 Tecinical Assstce 6.3 6.5 12.8 Totals Cost Ak 2i ml ml Physical Coningencie 14.3 15.0 29.3 Price Coingences 15.2 6.8 22.0 TowalPo ectost D3 12S. 2S1* Interest during Constrction 14.9 0.0 14.9 P_eauired ~~141.; 12.^ ^ mincing Plan: Local Fori Ta - ($ million) Goverment of China 25.5 5.1 30.6 Jain Provinc Gover_ment 54.7 0.0 54.7 Chachun Municipality 61.0 0.0 61.0 IDA 0.0 120.0 120.0 TAd14.1 Es d Disburt: IDA FY i93 1994 199 I 1997 19 (S mniion) Anmual 7.2 22.0 32.0 30.0 r 15.0 11.0 3.8 CumulatIve 7.2 29.2 61.2 91.2 105.2 116.2 120.0 Enn_mi1 late of Return Water Supply 11 pecent Sewea 23 pferet Maps: IRD No. 24063 - Gener Layout IBRD No. 24064 - Water Supply Facilities DBRD No. 24114 - Sewerage Facilities bg Prjeanced oods aeaxpt frm Impo duies and taxes. a In cost for and ($9.9 miion).  -V - Contents 1 IlieSecto . * ......... .. .................. A. SectorBackgound ................................ 1 Genal ........... ......................... 1 WaterResources .................. 1 War Supply .......................... . 1 PdolutonControl . ............................. 2 B. Sectrinstitutions. . ... ............................... 2 C. a orSe"rlsues .............................. 3 D. Prevkos Bank Group nwolvementIn the SeCtDr . ......... 5 E. Roleof theankGroup in theSector ..... .................. 6 2 ProjectAra ....................................... 7 A. Udn GrowthandEconomicAdIty ...... 7 B. ktesldtd aandndust Water SupplySSavis . 7 C. W atrsupplyImasterPin 8....... . . 8 D. Resldent andInduwitrlaSewageDisposa .. 9 E. SeDgwlspd sa Master Plan .. .. .. . . .. ... .. . 10 P. PublicHeft .. ... 10 3 IuPlkroJec .......... 11 A. Projecobjecv tiv.... 11 C. Projectepaon........ 13 D. ProjectCostEsftlates . ...13 Tbis repot Is bad on the findinp of an appraisa mision wich visited China In May/une 1992. Ptojea tem membes uded Mr. Cado Riedd (Principal UbanNWater Suppy En and Task Manar), Mr. George Plant (So Soatary Enginer), Ms. Elizabedt Ranidn (cnomist), Mr. Wlliam KrNase (Financid Analyst, Consultat), Mr. Osam BIeda (EngieerConsultat), Mr. Edward Ke-Siong Hum irnmeta Eqgnrbm, Consultant), Ms. Xeng Llu (viron tl Engnew, Consultant), and Mr. Chieh Wu Engier, Consultant). Pee reviewers for the project we Mr. G. Y s (Wate nd Sanitn Advisor, NUW), Mr. S. Choi (Sfio Eca mist, AST" and Ms. A. Naam (dior Financial Anlyst, EC3IV). Ihe maaig Didon I EA2E. Th Dision Chif is Mr. Zah Ecok and the Diector is Mr. Shahid Jxvd Burki.  -Y- E. Fincing Plan ......... ................ ........... 14 F. ProjectManagementand memento ........ ... .. 1S ProjecteRqtig ........ #..4 ...4 444 *........... 1S G. Land Acquisiton ................................. is H. Pocurenment ..................................... 16 I .D sburseut ... ..* ... . ..... .. . .4. 17 1. PjSupervison ..... . .............4.4 *444444 18 - K Resetdlemet .................................... 18 4 lbe upnngAgecies ............................. 19 A. p ig and Operatig Agncis .................... 19 B. andaation Manod o CWSC andCSC ............ 19 C. Accounig and Audfitig ................. ........... 20 D. Bilingand Collection ... ......21 E. Personnel Margemaent . . .21 5 _1nan"aAralysis.....23 A. Past and Current Financial Condiion . . .23 B. Balance Sheet and Fr-.d Assets ........ ... .. 23 C. Cumet Water Supply ad Seweap Taif ....24 D. Financi Perfbmnace Forecast... 24 6 PirojetAnalysis. . . 25 A. ProJectJustifilcaon ..............*................. 25 D. Ieast-Cost Solution. .. 25 C. Project Benefits ..25 D. Econonic Rate of Retun ..26 E. Affordability.. 27 F. Eaviromnenta Impact .... ..... 27 0. Project Ris. ... ..28 7 Agrnene s Racdd and Re. ..ni.endatl.n 30 TAsS iN TmLT 2.1 Water Demand Projection 8........... ..... ..... .8 2.2 SewageProduionProjedon... .... 9 3.1 SumnmaryCostEsmates .. . .13 3.2 Project FnacinggPlan.. 14 3.3 ProcurementA ngent I ....... ...... 16  AwVI" 1. Exbstl Wte SupplyandSewereSystem . .................. 32 2. W Dem d and Sewr Foeass ............ ........* . 40 3. Descpddn of Component .......................... 52 4. Project mple mentatonSchemde ... . .......... 54 S. ScheduleofContractPacbgesand CostTables .................. 55 6. Esmated CrediDi Schedule ..............I...... . 60 7. SupervlonPIn ... ............................ ... 61 8. Proposed WaterSupplyandSewergeOrgalatos............... 63 9. Assmptions for Finci Projecdons ............................ . 73 10. Ei in act Assessment ...... ........... ........ . 81 11. ToxidcHazdous Waste Management and Indusid Park Studies - Daft TonsofReferen .........* * 95 12. Mangemet and Operationl Support fo Changchm Water Supply Cmpany: Draft Descridon ...... ....................... 99 13. Ecooic Rate of Retun Tables ............. . 106 14. SelectedDocumentsandDataAvaiablein theProjectFile ....... .... 108 MM BJRD No. 24063 GeneralAu .............................. . 120 I3RD No.24064 WateSupplyFacilities .......................... 121 I'RD No.24114 SewemrFacilides ...... ...................... 122  1 TH SECTOR A. SECTOR BACKGROUND 6wal 1.1 China has a rapidly growing urban population of about 300 million, larger than the total population of the United States. Although about 70 percent of China's 1.1 billion populaton lives in rural areas, emigration from the rural areas accouns for most of the recen rpd urba growth. 'here are now more ta 150 cities with populations of at least 200,000 sad thouands of smaller towns. Even though compared to other developing countries the ren urban growth rate in China is low, it is China's size which makes the development of uban infrastructure, in particular, for water supply and pollution control, an Immense taslc 1.2 Over the past 400 years China has been a country where survival of its people ws closely linked to water. The location of large umbers of its population along its rourses meant tht they were constniy thratened by severe droughts or catastrophic floods and epidemics of waterborne diseases. China has over the centuries developed a culture of hygienic habits which have dealt well wfith the disease rsks related to water consumption and ation. The introduction of modern urban water supply and sewage collection systems would Orher conute to improvement In the health status of the population. Wat Resources 1.3 RaIl is bigbly variable over China's extended territory, resulting in marked dIfee in availability of water resources. China's mean anmnal rainfal ranges from 2,400 -m to less than 25 mm. The central and northest regions have a mean annual rainfal in the range of 400-1,000 mm, while the northwest half of the country receives less than 400 mm in the average year. Ite rainfal pattern in densely populated eastern China is domnated by the southeast monsoon. Although China is reported to have more thu 50,000 rivers, only 1,580 have catchments greater tham 1,000 km2 and only 79 exceed 10,000 km2. The m anmnul runoff from the total land surface is about 2,600 biBlion ni. In all cases the runoff is highly seasonal, with most occuring in late spring to early auum Wat Supply 1.4 China has made considerable progress in harnessing its rivers and in construing water supply systems for its urban populations. In 1949 there were only 59 cities with water supplies with a total capacity of 2.4 mDilon m&/day, providing water to only 9 million people. in 1986, 302 cities had potable water supplies with a capacity of about 42 million m3/day. To this sbould be added the water supply developed and used by idusties with a capcity of about  -2- 63 milion mslday. t Is esmed tbat now pracdcally all major cites (353) have water supply systems which provide, mostly througb hous connections, the minimum necessay supply of Wa teO their populatios and Industry. 1.5 Watr supply covege In small (county towns) ks markedly differet. In 1989 it was rpntd that only 26 pecent of those towns (3,068 towns) had water supply facilites, seving about 50 million people. The cover rates in those towns are still low-ranging from 27 to 73 pe, with tin rates from 17 to 60 lcd. With the rapid in aking place ughout Chia, water available from the piped systems in both large and small towns i ofte indeqat ad indutries awe compeed to develop their own supplies or conute heavfly to the onuction of public system. Only about 30 percent of the rouly 770 mlion rural population has adequate water supply. The recently approved Rura Water Supply and Sanitation Ptoject focuses on this sector (Credit No. 2336-CHA, approved 1992). Poluon Control 1.6 China's traditional system of nigbtsoil collection in the cides graualy h being replaced by piped sewage collection systems which appear to be deficient in terms of design, construction quality and maintenance. China has used nightsoil as agricultural fertilizer for ceuries and hygienic practices of the general population have dealt atsfactorly with risks of disease related to this method of domestic waste disposal. However, the use of nightsoil by fame i less in demand now due to the widening use of chemical fertlizers and an increasig reuctane to handle nightsoil. Also, many industries have some form of treatment for their wastes but few of these systems are operated efficiently. I'he more troublesame aspect of the present siion is that Industral waste dischrges, Including metallic and toxic chemical wastes, are very often mixed with domestic wastes. These wa_twaters are then either spread on amad or form part of irrigation water, with the risk that some of the comtients may ente the food chain. In many urban areas, sewage is discharged unted to the neaest watercorse, with assimilative capacity being exceeded in many localized reaches of stream and rnrs. In addition, treatment acilities for domestic and indusi sewage are either absent or grossly Inadequate in most cides. B. SECTOR SmunONs 1.7 Ihe Changau Municipality was recedtly elevated to an independent economic planming uniL Municipal governments in China have much greater responsibilities compared to cities in other oountries, because in addition to the service functions of a Municipality in industrial countries, they are also responsible for productiv enterprises such as those for construction and manufacturing. For example, in Changchun the municipal government consist of S Commissions (Planing, Urban Constuction, Foreign Trade, etc.), 42 Bureaus (Machine Idustry, Chemical Industry, Agriculture, Public Health, etc.) and the Courts. The daly opaions of the municipality are managed by a large management team consistng of a Mayor, an execuive Vice Major, six Vice Mayors and a Secretary General. 1.8 Ihe Cetal Government has decentraized most of the funcdons relating to urban management to the provinces and municipalities. As a rest, Central Goverment functions in these fields nDOw are limited to the provision of broad policy and tehnical guidance and sanction of major investmaent projects; all urban projects exceeding Y 200 million stil reuire roval of the relevant technical ministry and the State Planning Commission (PC). Because of ths  -3 - tole chage and because most project financing no unde the control of the local govemen=, the central thical ministries have a limte role in the munipal dociion- mrlng process. 1.9 lh. Minstry of Construction (MOC) is the agency responsIble for urb/region Ifrastructure .4velopment planning at the naiona level. It also provides guidance to the provincial and local autoities on urban land use, infrastructbr development plam and _ nimikoxladm on tec al standards. The National Euvironea Prtectio Agen (NEPA) is responible for tting ro policies and prvding guidance to the provinces on envhonmental matters. The Minitry of Water Conseanucy (MOWC) i the central orgnzaon responsible for detemining policies on the allocation and managemen of suce wat- resources in the coury. mplementa of these polici es caried out tough rver basin commisson, provincial wat conservancy deQp ents and waw conserva bueas at vario local goverment levels. However, allocation iad management of gouna are the respoibility of the Ministry of Geology and Mierals and the local goveornm deparments and bureaus. 1.10 Tbis decera i and the high level of uran infraucture ep by local gverm have significaly increased the autority and responsibilities of mnicipal goernm . Thi in tu i leadg to demands for bettwer ornization and management of municipa services. In the water supply and polutlon control areas, funcdonal separation of thes sector from the gener urban bureucrcies is occring, a fir step to deay idenable accountabilit for the performance of those sects. Investmet planig and control of municipl fiances is manage by the Municipal Planning and Finance Bureaus, hich need more techical and maageria skills to enable them to respond to the growing responsibilities. C. MAOR SECmRAL TSU 1.11 During the 1960s and 1970s China's Ceiral Government coned on idstrialization in u areas, but left urban services neglected. AldMugh in the past decade Chinas cities and towns have Invested considerable reources to improve the water supply and santation sectr, the sector will need to cote lrge-scalo investment for the foreseeable future to sustain economic growth and impro iroment quality. Carefl nvestm plain with prudent selection of invesent priorities are theref critical issues (see paras. 1.19 and 1.20). linasingly, the sector investments will need to be funded fiom local resources, and thereore, upgading of local government and utility finaing i another area of critical 1.12 Whilo ther is reognition at various levels of govenme of eXcessivO water Us by industry, me_ares to convert ma ng processes to consere water are often costy. To address the sitution, Chinese citie re curtly setting wae use quotas for various industries, with heavy financial penaldties for exceding the quotas. The rles for quot levels are, however, arbitrarily defined, and the penalties charged do not reflect rsource cost. Formalization of a policy to tie these charges to the marginal cost of watr productio and distrbion will be needed to ensure economical use of water. Reaistic comumption levels on this basis could then be obtned to pride a more reasonable base for cities to plan their water splies.  -4- 1.13 In most cities, municipal water supply s organized as a muicipal deprtm or water spply omp under the Municipal Public Utiity at Uba Construction Bus. FN authorty is wtb the mayor or one of the vice-mayors. Many resitios ist which mpeo the operationof te water supply enttas a true public utity. For ample, they do ot have fnadal autonomy and are dpdat on the municipaity for long-term plnning, capital ilnv ent, settin waer rates, tratment of surplus eang and meetin operational deficits. To Improve perfrmance In the urban water supply subector, there needs to be delegaion f great opratil autonomy to the water supply companies, together with stricter fhicW dscipline and accounability. An established water supply company operating on a well-orgni, efficient, commercial basis must be assured when consideration Is given to panslon of watr supply services or Inoduction of water pollution control facilities. OnDy In jl way can cost revy and oper-aional objectives be certain. 1.14 Th ea demand for water pollution cool will need to be folowed by the establi of autonomous sewerage utilities. At present municipl sewae sytm ar mosly mnaged by municipal constuction dartments. As long as there are no sewage tratment plans operated by those mnmicipalities, from a technical point of view, it is logical to include the mintenance of sewage systems with the general road mainece. The construction of ewage tratment plants, however, requires efficient operation and mainteace of these plas and the control of pont discharges into the sewage collecton system, especially from Industry. The management of !he billing and collection of sewerage charges would be most efficient if handled by the water supply companies. 1.15 NEPA and the prolcial and municipal Enviromnl Protection Bureaus (PBs), as wel as Urban Construction Commissions (UCCs), have established guidelines and rl s on quantty and quality of industral effluent discharged to sewers or to watercourses. However, it is often politically too difficult for these agencies to deal with large industties which in many cases noe the major pollutrs. Thus, pollution abatement measures, such as the levylns of dcares based on effluent quality and quantiy, have ofte not been effective. The charges have frequently been forcibly depressed so that polluting industries opt t continue to pay the chages rather thaD take appropriate measues to reduce pollution. Most provincia goverments are aledy aware of the need for environmental protection, and some measues are already being taken There is an urgent need to strengthen and equip EPBs and UCCs, and to trdn their staff to carry out their fumctions more effectively. 1.16 Very large investments wil be made in the water supply and sewerage sectors in China over the next decade and beyond. It can be assumed dat the urban popuation now served with water supply and sewerage systems is about 120 million and tat this should increase w 600 million (ess than 50 percent of the totad Chine wopulation) by 2010. This is an increase of 480 million people to be served. A minimum Investment of $150 per person to be served, would imply an investment of $72 billion over 20 years, or roughly $3.6 billion per year. In the Implementaion of such a large program, there Is potential for wasting of resources. Ihere Is a need for ineased peraatng efficiency and improved construction practices and operation and . Iiherefore, there is a requirement for betetr sector analysis and policy formlation, techical as wefl as financial, which would lead to rational priodization of investmenlts.  - s . D. PREVIOUS BANx GROUP INOLVEMENr IN THE SEIOR 1.17 The Bank Group has thus far approved six projects in the water supplylsaton sector in China. These projects have, for the most part, proceeded satsfacrily, with tely in2plenentat on. tional and financial/commecial reorms bave been confirmed to be the major Issues to be addressed. The projects are: (a) Rural Water Supply Projt' (Credit 1578-A, SDR 82.1 million, 1985)-which financed equipment, goods, civil works, traning, and to development of management and monitoring systems for water supply systems in about 4,650 villages, within four provinces and Beijing Municipality. The project was completed in 1991 and a Project Completon Report has been prepared (Report No. 11251); (b) Shanghai Sewerage Project (Credit 1779-CHA, SDR 78.9 mlio; Lon 2794- CHA, $45 million, 1987)-which finances a link and intercepting sewer system to collect, transport and treat sewage for disposal in the estuaiy of the Changiang; studies on management and organizaion, sewerage tariff, Huangpu River Basin Management, and sewer system rehabilitation; and staff training. The project is being implemented on schedule, with project completion expected by June 1993; (c) MediumaSized Cities Development (Credit 2201-CHA, SDR 62.2 million, Loan 3286-CHA, $79.4 million, 1991)-which finances invesm in educatin and health services, housing, tsansportatlon, water supply and sewerage, industrial development and pollution control in three medium cities-hanphou, Shashi and Luoyang. Included also Is technical assistance for urban planning and management. Project irplementation began in Jamnary 1991 and is scheduled for completion in December 1996; (d) Uaonlng Urban Infatur Project (Credit 2219-CHA, SDR 54.2 mIllion, 1991)-which assists in the financing of the nitial phase of a long-term investment program aimed at addressing the shortages and poor qualt of water supply in the three cities of Shenyang, Fuwin, and Yingkou, as well as shortcomings in urban transport in Shenyang; - (e) Beijing Environmental Project (Credit 2312-CHA, SDR 60.1 million, Lon 3415-CHA, $45.0 million, 1991)-which is financing Investmanis in district headng, sewerage, solid waste management and industi pollution abatement, and technical assistance for environmental master planning, hazardous waste control and institutional management; (f) Thnjin Urban Development and Envionment Poject (Credit 2387-CA, SDR 73.3 miUlion, 1992)-which is fiancing investments drainage, seweroge, solid waste, roads, traffic management and urban transpor and for traing of municipal staff in operations. Technical assistance is being provided to improve Tianjin's planning and municipal management capacities; and  -6- (g) Rural Water Supply and Sanitation Project (Credit 2336,CHA SDR 78.9 million, 1992)-which is fnancing Investme In wat supply, san on facilites, health and hygiene education and tchnica asistancein 75 poor and water-scarce courles In six undedeveoped Inand prvinces. 1.18 Sector work carried out by the Bank/IDA includes: (a) the Sh a Secwt M (Urban), Report No. 4227-C , Decmber 1982; (b) Report No. 5206CCHA, May 1985, which Includes a chapter on spatial and urban Issues; (c) an uban ctor survey in Lslong Pvnce in 1985 in coopeaon with the United Naons Doevopment P mme and the Australian Intenational Development Assistance Bueau; and (d) an Urban Sector Study in Zhejiang Province, China-Zhejiang: Challenges of Rapid Urbanization, Report No. 6612- CHA, August 1987, and (e) the Envirownenta Str Paper, Report No. 9669-CHA, Apri 1992, which focuses on the development of long-term environmental protecton and naurl resources policies and programs. E. ROLE OF Tm BANK GROUP IN =E SEcroR 1.19 Ihe Bank/IDA sees its principal role as fosterig a continug dWogue on sector issues and Wtions, thereby supporting and implenting the Central Governments decentraiztion strategy and delegaion of responsibility for the prvision of water supply and sanitation services tc municipalities. ITe Bank Group's apprach ams at the creation and/or shening of the imtitutionallfinancial framewors which lead to lncreases in financin fows and improvements in: (a) cost recovery, (b) investmet planning, and (c) Implementation and fiacing capabilities of local governments and the companies/entities they conol. 1.20 Sufficient experience has been gained tough Bank Group inesmet In hoe sector to date to prepare a comprehensive analysis of secora issues. The Cental Governm and the Bank Group are planming sudies to prepare Provcial Sector Development amd Investnt Plans during 1993. Such studies would have a regiona focus and be caried out in one or two provinces initially, with particular attention given to cost recovery and opatonl efficiency issues. The studies would produce comprehensiv sector rports whih would include a siuation analysis, a sector development strategy, and a fiamewok for investment plans. They are expected to be the models for other provinces to use to develop sound strategies and bases for future sector investments. These plans also will pwvide guidance to the Central Governme on sector issues and form the strategic framework on which future policy and investment decisions can be based, as well as servig as a coordinaion instubmn for the mobilizadon of donor sance to the sector.  -7- 2 PROJECT AREA A. UWAN GROW AND ECONOMC ACmm 2.1 Chaugchun Municipality has an area of 18,880 km. Ihe area DOw covered by the City of Changchun is pproximately 107 mw and preed to grow to 150l k by the year 2000. Major expansion is expected In the south and southwest parts of the city with less epasion possible in the east and the west. Due to family size limions and control on city size in ChiUs, the population of Changchun has grown at a modest amnal rate of 1.5 percent during 1985-90. The population of 1.8 million in 1990 is esdmated to grow to 2.1 million In the year 2000, with an esimated annual populaion growth rate of 1.5 percent, deasang to 0.7 percent between 2001 and 2010. 2.2 Cbangchun depends on its industry for economic growth. In 1985 Industry accounted for almost 85 percent of the cits GDP; in 1990 it rose to 91 percent Producvt of the light Industries is slowly gaining momentm I 1990 light Induty conited 47 percent to. the city's Industri GDP, and in 1991 almost 55 percent. Cumenty over 3,400 factories and enterprises are located throughout the city and include truck, tractor, bicycle, railcar, Instrument, chemical, pharmacical products, texffiles and food factories. For example, an automobile manufactring plant (VW) is currendy under construction and scheduled to produce 100,000 units per year in 1995. The long-term plan for the city, as approved by the Centra Govermment, encourage industial development in three major areas: (a) automobile and trsportlagrlcultural equipment manuf g, (b) food processing industries, and (c) high- tecnology industries serving (a) and (b). B. REAMAL AND INDUSThIAL WAMR SUWLY SERVICES 2.3 Within the built-up area of the city, which is the service area of the Cangchun Water Supply Company (CWSC), most of the residential, instiutonal ad IustrI users are served by two water treatnent plants located within the city. The water dItbuton system consists of about 220 km of trun mains (300 mm to 1,000 mm), and many smaller (ess tha 300 mm) distribution mains which branch from the truak mains. Due to corrosion, low-quality pipe materid, poor Joints, and lack of system maintenance, unacuted-for water is estimated to be about 20 percent of total water production. The act status of unconted-for water is difficult to quantify; 40 percent of CWSC's customers remained umned in 1992. Ihere were 6,000 commerial connections, of which 40 percent were metered and 2,500 huIustrI coectins, of which 72 percent were metered. The extg water supply system is deribe in Annex 1. 2.4 Although the city is highly indu.1rialized, it is situated in a water-short region. Throughout much of Changehun's recent history, water supply has been unable to keep pace  -8- with ncreasing domestic and indusial demand (see AMU-Water Demand and Sewag Forecasts, Figre 2). 2.5 Industry is expected to grow rapidly, both in the mmber of establsbmen as well as in production output. In recent years, growth in both industrW and domestic wae demand have been equal (about 35 percent each). ITe remainder represenmt stitutioa commercial demand. However, with already approved expansion of industry and the inrouction of new activities, this proportional split is eWpected to chnge, wh Industy acounting for about 46 percent of demand by 1997 and residenial demand acounti fo 32 percent. 2.6 Resictions on water supply have been imposed on both industria and dometc consumption, and availability of water supply wfll continue to cOnDStr Consution t the present proposed project and beyond. It is eated that the production capacity in the city, approximaely 409,000 m3/d, fell short of demand by about 50 pecent in 1991. By 1995, ths shortfall is expected to increase to 60 percent. In 1991 the shortfaUl of water available for insttutdonal use was estimated to be 4.2 million rm'. The average anmial water shortage in the industria sector since 1985 has been about 4 million mi. Table 2.1 mmm the waW demand projection through the year 2000. Table 2.1: WATER DEMAm PRojcTioN ('000 lIday) Categories 1990 1995 2000 Growth Z p.a. (actual) 1990-2000 industrial 315 383 466 4.0 Residential 230 302 395 5.6 Institutional 107 118 131 2.0 Commercial 15 16 17 1.3 Unaccounted-for 167 205 252 4.2 Total 834 1.024 1.261 4.2 C. WATER SUPPLY MASER PLAN 2.7 In 1988 a feasibility study for a Changchmn Water Supply Project was completed by he locd design instiu (Jilin Hydraulic Exploration and Desig Institute; Chin Nothest MunicW Design Ibstitute; and Changchun Exploration Desig Inste). At the suson of IDA in December 1989 and during the following preparation phse, the proje eanded fom a sw imestme project for water producdon for Cbangmn to a opei action and investme plan in water supply and pollution control for the cit. As a resul, a feasibility study was undertak by international consultants funded by the Canadian Inteational Development Agency (CIDA). Through these studies, a long-term detaied Water Supply Mter Plan was developed and priority investments identified for Changehun Municipality. e iwesMint proposals included additional water tanmission mains, water treatment and  -9 - distribution facilities; institutdonal developmet to strengthen the wsr supply was also recommended. D. R NA AND INusruS IA SEWAGE DSwoSAL 2.8 Approximtly 40 to 50 prcet of the city is seced by swers. Historicaly, the sewe system in Changchun was developed in the various drinae are using the shortest rout, to discharge Into the streams, rivers, ponds or drainage cou within the cky. Some sewers, particularly those in the predominantly indust easter area of the city, date to the 1930s. About 67 percent of the sewers were built prior to 1940. Much of the sewage collecon system (60-70 percent) is in poor condition due to lack of mainteance and repair. In the older of the nine drainage districts of Changchun, combined sewer systems conveying domestic, industri and stormwater flows are common, with newer oonstion incoporatng separate sanitary and storm sewers. The sewer system consists of about 324 km of combined sewers, 243 km of storm sewers and 212 km of sanitary sewers. In 1988, a 3.2 km inteceptor sewer of 1,800 mm and 2,200 mm concrete pipe was Installed in the bed of the Ytong River from Yongan Bridge to Dongda Bridge. This interceptor sewer cmrently discharges raw sewage int the Yitong River, downstream of the Dongda Bridge, at a tempormy lowlift sewage pumping staton. A more detailed description of the exting sewerage system and industial waste disposal practices is given in Amex 1. 2.9 The large industrial and population conceon, together with a lack of effective intrvention by Changehun Municipality, has cased srious water pollution problems in the receiving waters of the city. Most sewage is disbarged untred to the Yitong and Xina Rivers. The situation is most severe In the Yitong River immedaty downseam of the city core. Only one small, mixed domesticindstrial, treament pla of the No. 1 Auto Plant is being opaed. In the 1960s a primary teatment plant was built in the northeast area of the city, wih the intenon of reusing treated water f rigation. For unknown reasons this plant was hardly ever used and is in a condition of total disrepair. 2.10 An analysis of the existing situation indicates ta the ratio of sewage to water supply is about 0.8. This factor was applied to the projected water supply (by use category) to project the sewage volume. Table 2.2 summaizes sewage generation from 1990 to 2000. Table 2.2: SEwAGz PROUCTION PftRO rMON C(000 mIday) Categories 1990 1995 2000 (actual) Residential 184 241 316 Industrial 252 306 372 Institutional 84 94 104 Commercial 12 A 13 Total 2 653 805  - 10- E. SEWAGE DISPOSAL MA.