China - Ship Waste Disposal Project

Document of The World Bank FOR OmCIL USE ONLY MICROFICHE COPY Report No. P- 5623-CHA Type: (PM) ReportNo.P 5623-CHA MOBAREK, I/ X82947 / F8025/ ASTIN MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 11 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SHIP WASTE DISPOSAL PROJECT MAY 19, 1992 This document has a restricted distribution and may be used by recipients only tn the performanee of tbeir official dutis Its contents may not otherwise be dissels without World Bank authorization.  CURREN EQUVALETS (as of January 31, 1992) Currency Unit - Renminbi (RNB) RMe 1 - US$0.186 US$1.00 - RMB 5.37 FISCAL YEAR January 1 - December 31 flIGTS AND MEASURES 1 cubic meter - 35.31 cubic feet 1 tonne - 1.1023 tons (short) ABBREVIATIONS AND ACRONYMS CIF - Cost, Insurance, and Freight DPA - Dalian Port Authority EPB - Environment Protection Bureau GEF - Global Environment Facility cOC - Government of China CPA - Guangzhou Port Authority ICB - International Competitive Bidding LCB - Local Competitive Bidding WARPOL - International Convention for the Prevention of Marine Pollution M"C - Ministry of Communications NDF - Ministry of Finance NIPA - National Environment Protection Agency EPA - Ningbo Port Authority PlC - People's Republic of China SOA - State Oceanic Administration SPA - Shanghai Port Authority SPC - State Planning Comission TPA - Tianjin Port Authority XPA - Xiamen Port Authority  FOR OMCAL USE ONLY PEOPLE'S REPUBLIC OF CHINA SHIP WASTE DISPOSAL PROJECT Credit and Project Summary Borrower: People's Republic of China (PRC) Beneficiaries: The Port Authorities of Dalian, Tianjin, Shanghai, Ningbo, Guangzhou and Xiamen Amount: SDR 11 million ($15 million equivalent) Terms: Standard, with 35 years maturity. Onlending Terms: Between the Borrower and each Port Authoritys 15 years, including five years' grace, at 1.5 percent per annum. The Port Authorities will bear the foreign exchange risk and the commitment fee. The Global Environment Facility (GEF) contribution will be passed on to the respective ports as a grant. Financing Plan: Local Foreigrn Total ----------------- $ million -------------- PRC 19.8 - 19.8 GEF 14.6 15.4 30.0 IDA 7.4 7.6 15.0 Total Economic Rate of Return: Not applicable Staff Appraisal Report: Report No. 9852-CHA, dated May 19, 1992 Map: IBRD 23131R2 This document has a restricted distnbution and may be used by recipients only in the perforz.Cl of their official duties. Its contents may not otherwise be disclosed without World Bank authowifvtion.  143(OWWUND AND UECO)OIKHDATION OF THE PRESIDENT OF TOE INTERNATIONAL DEVELOPMENT ASSOCIATION TO TIE EXECUTIVE DIRECTORS ON A PaOPOSmD CREDIT TO TER PEOPLE'S REPUBLIC OF CUINA FOR A SHIP WASTE DISPOSAL PROJECT 1. The following memorandum and recommendation o. a proposed credit to the People's Republic of China for SDR 11 mll1ion ($15 million equivalent) is submitted for approval. The credit would be on standard terms for 35 years, including ten years' grace. Together with a grant of $30 million from the Global Environment Facility (GEF), the credit would assist six of the largest ports in China--Dalian, Tianjin, Shanghai, Ningbo, Guangzhou, and Xiamen--in refurbishing existing and/or establishing modern new facilities for handling and disposing of, in an environmentally sound manner, ships' wastes that would otherwise be dumped in international or Chinese coastal waters to the detri- ment of the marine environment. The project would also establish a model that could be replicated and eventually extended to other ports in China, further enhancing GEF's global environmental objectives. Proposed onlending terms between the Government (GOC) and the Port Authorities are: interest rate of 1.5 percent per annum for a period of 15 years, including five years' grace. The Port Authorities will bear the foreign exchange risk. 2. Background. China has undergone rapid economic growth over the past decade, which has been reflected in substantial growth in foreign and domestic trade and consequent growth in international and domestic shipping traffic through its ports. As a signatory to the 1973 and 1978 MARPOL Conventions (International Convention for the Prevention of Marine Pollution), GOC has agreed to provide facilities for the reception, treatment and disposal of ships' wastes, including oil-contaminated ballast and bilge waters (MARPOL Annex 1), chemically-contaminated waters (MARPOL Annex 2), and sanitary sewage (MARPOL Annex 4) (but not garbage--MARPOL Annex 5). All six ports, at present receiving World Bank assistance under five different operations, handle signi- ficant volumes of traffic, foreign as well as domestic, and these generate some 1.25 million tons of wastes annually. Much of this is now believed to be discharged at sea or in the coastal waters of China. The problem will only get worse in the future with further growth in traffic. 3. In view of the above, there is an urgent need to equip the ports with facilities to handle the wastes, thereby eliminating their discharge in international waters. The facilities to be established at the project ports would also serve as a model for other Chinese, as well as regional, ports. Most of the facilities available at present in the six ports need to be rehabilitated, modernized, and/or expanded. Provision of proper facilities would facilitate the stricter enforcement of the relevant laws and regula- t:ons. 4. GOC promulgated *the Marine Environmental Protection Law of the People's Republic of Chinaw on August 23, 1982; it came into force on March 1, 1983. It includes provisions for the prevention of pollution damage to the marine environment by coastal construction projects, by offshore oil explora- tion, by land-based pollutants, and by vessels. Another law was promulgated for control of the dumping of wastes at sea on March 6, 1985. Authority for  -2- enforcing the laws is given to the rational Environment Protection Agency (NEPA), which oversees the Provincial Administrations that actually carry out the work. In almost every port, there is an Environment Protection Bureau (EPB) that polices pollution on land, the Harbor Superintendency Bureau (under MOC) that monitors pollution in waters of the port area, and the State Oceano- graphic Administration (SOA) which controls pollution of sea waters outside the ports' jurisdiction. 5. Rationale for IDA Involvement. GOC has designated environmental protection and improvement as on important goal under its eighth five-year plan (1991-1996). However, heavy demands on the available resources, parti- cularly foreign exchange resources, including demands for investments in additional port capacity and in modernization of facilities and equipment, constrain the ability of the Port Authorities to finance the extensive facil- ities necessary to handle ships' wastes. Without proper facilities the pollution by the dumping of ships' wastes in the three seas bordering China will continue unabated, and will in iact continue to grow with the projected growth in the country's foreign trade and associated shipping traffic. This is a situation where a modest contrib.tion from the Association in siupport of GEF's efforts to assist GOC in establishing modern ship waste handling facil- ities will demonstrate not only the environmental benefits of such facilities to China but also the feasibility of recovering the cost of such facilities through appropriate charges to users. 6. Project ObJective. The objective of the proposed project is to reduce pollution of international and territorial waters caused by ships' wastes through: (a) improved monitoring and analysis of the nature and magnitude of the problem; (b) improved policy, regulatory and incentive frameworks; and (c) the provision of facilities to receive, treat and safely dispose of ship wastes. Towards this end, it will provide financial and technical assistance to GOC and the six Port Authorities for the construction and/or rehabilitation and expansion of ships' waste disposal facilities. While limited to the six ports serving a major part of China's sea-borne international traffic, the proposed project will serve as a model for other ports in the country, as well as for ports in other countries, particularly those in the region, and provide a solid basis for environmental monitoring activities and oil spill contingency planning. 7. Project Description. The project has two components: a national component and a ports' component. The national component comprises: (a) the establishment of baseline data on international ship traffic, related waste types and quantities through preparation of a pilot inter-port ship waste monitoring system to facilitate monitoring and enforcement; (b) preparation of a comprehensive oil spill contingency plan for each port; (c) preparation of the term3 of reference of a study for a Large Marine Ecosystem monitoring program for the Yellow Sea; (d) undertaking of a study to assess and develop a system for the treatment of chemically contaminated water; (e) provision of facilities to upgrade environmental monitoring capabilities at the ports, coastal waters as well as international waters, and promotion of coordination among the various authorities; (f) preparation of a tarrif schedule based on cost recovery.for ship waste reception and disposal; and (g) provision of consultant services and training. The ports' component comprises: (a) provision or development of appropriate waste reception and disposal facili- ties at the ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen and Guangzhou;  - 3 - and (b) the establishment or upgrading of environmental monitoring and enforcem6et by the Port Authorities. 8. The total cost of the project is estimated at $64.8 million, with a foreign exchange component of $23.0 million. Of the total financing required, GEF would provide $30 million equivalent, the Association would finance $15 million equivalent, and GOC and the Port Authorities the remaining $19.8 million. The procurement methods and the disbursement schedule are shown in Schedule B and a timetable of key project processing events in Schedule C. The project is expected to be completed by June 30, 1995, and disbursements completed by June 30, 1996. 9. Agreed Actions/Conditions. During negotiations with GOC, agreement was reached on the following key matters: (a) GOC will submit to the Association, by June 30, 1994, a proposal for an appropriate tariff schedule, based on cost recovery, for the services of the waste disposal facilities and this will be introduced by all six ports by June 30, 1995, taking into account the A_sociation's comments; (b) the Xiamen Port Authority will establish, by June 30, 1993, an adequately staffed Environment Protection Bureau, to supervise and operate the proposed ship waste disposal facilities; and (c) GOC and each of the Port Authorities will jointly set up a coordinating team at each port comprised of representatives from the concerned Port Authority, EPB, NEPA, and SOA under terms of reference agreed with IDA, by December 31, 1992. 10. Environment Aspects. The design and implementation of the project and the operation of the project facilities after completion would comply with GOC's laws and regulations on environment protection, which are more than adequate by international standards. Worker safety and environment safety features will be incorporated in the design of all components. Completion of the project will help to reduce pollution resulting from the discharge at sea of oil-contaminated waters, sanitary sewage and garbage/solid wastes. 11. Benefits. The six ports selected for the project handle some 90 per- cent of the international shipping serving the sea-borne foreign trade of the People's Republic of China. In addition, these ports serve a significant portion of the country's domestic maritime traffic. In several of the ports, the lack or poor capability of waste reception facilities obliges the Port Authorities to allow ships to discharge their wastes at sea or has created considerable delays in serving the ships. This contributes to port ineffi- ciency and to pollution of both international and Chinese coastal waters. Provision of the proposed facilities should contribute to a major improvement to the marine environment quality and serve as a model for establishing similar facilities in other Chinese ports. 12. Risks. The main risks relate to project implementation and cost recovery. As this is a substantially new activity for most of the ports, technical assistance through close project supervision will be provided to ensure satisfactory implementation. As to cost recovery, PRC's record in the matter of introducing ^u3quate cost recovery mechanisms has so far been good,  -4 and GOC has indicated that there would be no difficulty in the ports introduc- ing a cost-based tariff schedule for the new services. 13. Recommendation. I am s4tisfied that the proposed credit would comply with the Articles of Agreement of the Association, and recommend that the Executive Directors approve the credit. Lewis T. Preston President Attachments Washington, D.C. May 19, 1992  Schedule A CHINA SHIP WASTE DISPOSAL PROJECT Estimated Costs and Financing Plan ($ million) Project Cost1 of which Local Foreign Total IDA GEF National Component: Environment monitoring & tracking 0.65 1.35 2.00 0.54 1.09 Oil spill contingency plam=ing study - 0.45 0.45 - 0.42 Chemically contaminated water treatment study - 0.25 0.25 - 0.23 Subtotal 0.65 2.05 2.70 0.54 1.74 Ports' Component: Disposal Facilities: Dalian 1.15 2.05 3.20 0.78 1.60 Tianjin 7.00 2.00 9.00 2.05 3.92 Shanghai 16.30 8.50 24.80 5.20 10.08 Ningbo 4.80 1.70 6.50 1.83 3.55 Guangzhou 5.36 3.20 8.56 2.08 4.17 Xiamen 3.52 1.61 5.13 1.37 2.68 Technical assistance to Xiamen Port Authority - 0.03 0.03 - 0.03 Subtotal 38.13 19.09 57.22 13.31 26.03 Base Cost 38.78 21.14 59.92 13.85 27.77 Physical contingencies 1.48 0.86 2.34 0.55 1.07 Price contingencies 1.54 1.00 2.54 0.60 1.16 TOTAL COST 41.80 23.00 64.80 15.00 30.00 Financing Plans PRC and t'e Port Authorities 19.80 - 19.80 GEF 14.60 15.40 30.00 IDA 7.40 7.60 15.00 Total 41.80 23.00 64.80 1 In January 1992 prices. The project is exempt from taxes and duties.  -6- Schedule B CHItIA Shin Waste Disposal Protect Procurement Method and Disbursements ($ million) Procurement Method ___________________________--_------- Total ICa LCW Other NIF Civil works - 10.85 2.00 6.92 19.77 (IDA) - (1.40) - - (1.40) (GEF) - (1.53) (0.54) _ (2.07) Equipment 38.80 - 2.00 3.50 44.30 (IDA) (12.60) - (1.00) - (13.60) (GEF) (26.20) - (1.00) - (,77.20) Technical assistance - - 0.73 - 0.73 (MA) - - _ _ (GEF) - - (0.73) - (0.73) Total 38.80 10.85 4.73 10.42 64.80 (IDA) (12.60) (1.40) (1.00) (15.00) (GEl) (26.20) (1.53) (2.27) (30.00) Noes (1) Itsma In parenthes.rpeetto oto,fnnedb hIAcei - - nd OEP grant, rpepfntiytIQ. (2) NIFt Non-IDA or nE o tinan