China - Rural Water Supply and Sanitation Project

* - ~~~~~Doc.mmtofs The World Bank FOR OMCLAL ISE ONLY MICROFICHE COPY Report No. P- 5658-CHA Type: (PM) CHENG, I J X84046 / A7023/ AS3EH ReoNo. P-5658-CHA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT OF SDR I z .9 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A RURAL WATER SUPPLY AND SANITATION PROJECT p JANUARY 9, 1992 T_ doc has a etricted diston an.d may be db recipies ody i the perfome of tber official dies Its eontents way nt otherwie be disclosed witou Worlda Ban autoriatin  CURRENCY AND ENUIVALENT UNITS (as of May 1991) Rerninbi (RMB) Yuan (Y) 1.00 - 100 fen US$1.00 Y 5.31 WEIGHTS AND MEASURES meter (m) - 3.28 feet kilometer (km) - 0.62 miles liter (1) 0.264 US gallons lpcd - liters per capita per day cubic meter (m3) or ton of water - 284 US gallons ABBREVIATIONS AND ACRONYMS CPO - County Project Office CRWSTC - China Rural Water Supply Technical Center EEC - European Economic Community ICB - International Competitive Bidding LCB - Local Competitive Bidding MOF - Ministry of Finance MOPH - Ministry of Public Health NPHCC - National Patriotic Health Campaign Committee NPHCCO - Executive Office of the NPHCC NPO - National Project Office PPO - Provincial Project Office RWS - Rural Water Supply Project (Cr. 1578) RWSS - Rural Water Supply and Sanitation Project UNDP - United Nations Development Programme UNDP/WB - The UNDP/World Bank Water and Sanitation Program WHO - World Health Organization Gansu - Gansu Province Guangxi - Guangxi Zhuang Autonomous Region Hunan - Hunan Province Neimong - Nei Mongol (Inner Mongolia) Autonomous Region Xinjiang - Xinjiang Uygur Autonomous Region Yunnan - Yunnan Province GLOSSARY Province - China is divided into 23 provinces, five autonomous regions and three municipalities. In this report, the term "province" refers to provinces and autonomous regions. County - Chinese provinces/autonomous regions are subdivided into counties, cities, banners and branches. In this report, the term "county" refers to all of the afore-mentioned. FISCAL YEAR January 1 - December 31  FOR OMCIAL USE ONLY CHIN RURAL WATER SUPPLY AND SANITATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: People's Republic of China Beneficiaries: The six project provinces of Guangxi, Yunnan, Hunan, Gansu, Nei Mongol and Xinjiang Amou-nt: SDR 78.9 million (US$110.0 million equivalent) ,Tgrms: Standard IDA terms with 35 years maturit' ,On-lending From the Government of China to project provinces: 20 years Terms: including five years grace at fixed annual interest of two percent for the foreign exchange portion and four percent for the local currency portion. From the provinces to sub- project entities through project counties: maximum 20 years including up to five years grace at fixed interest of four percent per annum. Foreign exchange risk would be borne by the provinces. Financing Plan: Local Foreign Total --------US$ million-------- Provinces & Prefectures 23.0 -- 23.0 Counties & Townships 18.9 -- 18.9 Communities & Individuals 37.2 -- 37.2 IDA 25.1 84.9 110.0 TOTAL 104.2 84.9 189.1 Economic RstQ of ,Return: Not applicable Staff A22raisal Recort: Report No. 10028-CHA IBRD No. 23276 and IBRD No. 23348 Note: Figures may not total exactly due to rounding. r This document has a restricted distribution and may be used by recipients only in the performance of their oMcial duties. Its contents may not otherwise be disclsed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THR EIECUTIn. DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE PEOPLE'S REPUBLIC OF CHINA FORJ A = VATE= SUPPLY AND SANITfATION1 PROJECT 1. I submit fox your approval the following memorandum and recommendation on a prc. ,!sad Development Credit to the People's Republic of China for SDR 78.9 million (US$110.0 million equivalent) to help finance a Rural Water Supply and Sanitation project. The proposed Credit would be on standard IDA terms with a maturity of 35 years. The proceeds of the Development Credit would be onlent to the six project provinces of Guangxi, Yunnan, Hunan, Gansu, Neimong and Xinjiang for 20 years, including five years of grace, at fixed annual interest of two percent for the foreign exchange portion and four percent for the local currency portion. The Ministry of Finance would be responsible for IDA commitment and service charges. The participating provinces would bear the foreign exchange risk. 2. Back=round. The lives of China's 900 million rural inhabitants have improved markedly since 1949. There have been major gains in health, housing, agricultural productivity and economic conditions. Health improvements have resulted largely from better primary health care including health educition campaigns, improved nutrition, better maternal and child care, immunization, and improvements in drinking water and sanitation facilities. Nevertheless, at the end of 1990, about 70 percent of the total rural population was still inadequately served with water supply. More than 90 percent did not have means of proper sanitation, and unhygienic practices in the use of nightsoil in agriculture are widespread. Health and hygiene education is also limited. As a result, rural areas are still plLgued by dysentery, hepatitis, typhoid and cholera epidemics, and above all, common diarrheal diseases and helminth infections, all of which are clearly linked to poor water supply, sanitation and health/hygiene education. The conditions tend to be worse in the poorer and more remote areas of the country where development of the sector has lagged behind. 3. At the highest level, the Government recognizes the need to improve the water supply, sanitation and health/hygiene education sub-sectors in parallel in order to reduce incidence of water-borne and sanitation related diseases. However, this integrated approach is not yet well understood and accepted by most local government officials, civic leaders and rural families. They generally still regard improvements in water supply as by far the most important among the sub-sectors. This can be demonstrated by reviewing development records and the willingness of local government and users to contribute to water supply construction. On the other hand, recognition of the health consequences of poor sanitation is not widespread and it must be anticipated that demand for improvements will take time to develop and will need to be stimulated. 1 In the context of the proposed project, sanitation refers to physical facilities as well as the promotion of hygiene and prevention of disease by achieving and maintaining sanitary conditions.  - 2- 4. The fundamental problem of the sector is the lack of cocrdinated planning and Ii-estment programs at the national as well as local levels. The service coverage targets reflected in national plans in most cases have never been translated into concrete and realistic investment strategies and plans at the provincial, county and township levels, which are the prime movers for development, both in terms of initiative and financing. Other issues and constraints include lack of funding and financing mechanism, weak institutional framework, and limited knowledge and experience with the latest technological developments. 5. Lessons Learned from Previous IDA Operation. The Bank Group's involvement in the sector started in 1982. The first Rural Water Supply Project (RWS) (Cr. 1578-CHA for SDR 82.1 million), approved in 1985, was designed to provide safe drinking water to some six million rural inhabitants in the four relatively well-off provinces of Zhejiang, Sichuan, Liaoning and Shaanxi and the Municipality of Beijing. Technical assistance, institutional development and training were included as components. The physical implementation is now complete. Design, construction and operation and maintenance manuals primarily for piped water supply systems have been published and disseminated in an effort to provide guidance and standards. Experience with and benefits of competitive procurement have also been gained. 'Where sub-projects are operational, statistics on improved livelihood have been very encouraging. However, it was observed that health improvements would onlr be maximized if complementary improvements in sanitation services and health/hygiene education were provided as integral parts of the undertaking. The key difference between RWS and the proposed project is the inclusion of the two complementary components. 6. Rationale for IDA Involvement. The project would support the Bank Group's objective of increasing its focus on poverty and the environment in lending to China. The continuation of IDA's participation in the rural water supply sub-sector is essential to sustain the momentum generated under RWS. The integrated approach of the proposed project would provide an opportunity to develop and demonstrate appropriate models for national replication. Experience and lessons learned from the earlier project are being shared in workshops. Various manuals developed and published under RWS are being disseminated to new project areas to facilitate sub-project planning and design. During project preparation, existing water supply manuals were reviewed and gaps were identified. A supplemental manual on non-piped technologies is being prepared. Water quality guidelines appropriate for the rural setting were developed. In addition, a first sanitation planning and design manual is also under preparation. 7. Progject Objectives. The overall project objective is to improve health and productivity of the poorest and most needy inhabitants of rural China by increasing coverage of water supply, supported by sanitation services, health/hygiene education, technical assistance and training. Through project preparation and implementation, immediate objectives set for the project are to: (a) develop long-term strategies to prioritize investments at the county level; (b) develop affordable and sustainable programs to maximize project impact; (c) establish and maintain properly staffed institutions and provide technical assistance and training to support adoption, implementation and operation of such programs; (d) increase coverage  -3- in water supply, sanitation and health/hygiene education; and (e) enhance replicability of project activities through development of models, standards and manuals as well as dissemination of experience and lessons learned. 8. Project Description. The proposed project would serve about nine million rural inhabitants of 75 counties in the six under-developed inland provinces of Guangxi, Yunnan, Hunan, Gansu, Neimong and Xinjiang. The project would comprise five components: (a) Water, Suply - construction of facilities; provision of equipment and utility vehicles; continuation of development, introduction and dissemination of new technologies; (b) Sanitation - construction of facilities in selected demonstration and pilot villages in each project county; provision of the foundation for replicable programs through demonstration; (c) Health/Hygiene Education (HHE) - provision of HHE to all project counties; construction of training facilities; development and dissemination of training and HHE materials; provision of supplies, equipment and utility vehicles; (d) Technical Assistance and Training (TAT) - provision of TAT in management, finance, procurem rnt, training of trainers, and technical aspects of the first three project components at all levels; and (e) Institution Establishment and Project Nanagement - construction of project offices; provision of office supplies and equipment; and financing of project management and supervision activities. 9. Project Imnlementation. The proposed project would be carried out by project offices at the national, provincial and county levels. The project cost is estimated at US$189 million equivalent, with a foreign exchange component of US$85 million equivalent (45 percent). The IDA Credit woulb finance US$110 million equivalent (100 percent of foreign exchange and 24 percent of local costs). A breakdown of project costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in China are given in Schedules C and D, respectively. Two maps are also attached. The Staff Appraisal Report, Report No. 10028-CHA, dated January 9, 1992 is being distributed suparately. 10. Project Sustainability. In line with the national sector policies of self-reliance and cost recovery, water charges would cover full operating cost and some capital cost. Physical facilities to be built under the project are expected to be adequately operated and maintained by the beneficiaries. Public and communal systems would be operated and maintained by water companies and caretakers under the township governments. Private facilities serving single families would be maintained by the households. 11. Actions Agreed. Assurances were obtained from China that: (a) the project offices would be maintained with qualified staff in adequate numbers; (b) comprehensive project implementation plans for the following year would be prepared and submitted to IDA for review and approval no later than October 15 of each year; (c) project cost accounts would be audited annually and audit reports would be submitted to IDA within six months after the end of each financial year; and (d) water charges for all sub-projects would cover operations and maintenance costs plus debt repayment not covered by government subsidies, and operations and maintenance costs and depreciation after the debts have been amortized. Satisfactory completion and distribution of design  - 4 - manuals for low-cost rural water supply technologies and rural sanitation facilities would be a condition of Credit disbursement for civil works. 12. Pr2ject Benefits. The project would benefit about nine million persons in 75 rural count.es. It is expected to alleviate human suffering associated with poverty and ill healhh. It is also expected to bring about better quality of life throcgh improved physical living conditions and institutional environment. 13. Poverty Impact. Thrcmig;A improved access to basic levels of water supply, time and energy saved on water collection would be spent on child and elderly care and productive activities. By bringing about improved sanitation services and hygienic practices, the project is expected to have substanttal health benefits in disease reduction. It would reduce morbidity which is costly both in terms of product_re time loss and medical expenses. During construction and operation phases, the project would provide training and income-earning opportunities for women and men. Experience gained would also enhance the ability of participant communities to compete for jobs of similar nature in their neighboring localities, thub putting the poor's most abundant asset, their labor, into most effective use. 14. Environmental Impact. The project would have a positive impact on the environment through improved practices for the disposal of human wastes, construction of enclosures for animals, collection and compost of manure, drainage improvements, protection of groundwater and other water sources from contamination, and monitoring of water quality. The provision of a safe and reliable water supply, improved environmental sanitation facilities, and intensive health and hygiene education programs is expected to result in a substantial improvement in awareness of environmental quality. 15. Risks. Shortage of qualified personnel in project management and implementation might hamper progress. The country's policies on self-reliance and cost recovery concerns might block poor communities from participating and limit investment in the smnitation and health education components. The project addresses these risks by: (a) strengthening management and provision of technical assistance and training for all implementing agencies; (b) production and dissemination of "user-friendly" manuals; (c) establishment of review criteria for sub-project selection; (d) promoting community participation and commitment from the start and through every stage of sub- project planning and implementation; and (e) development of long-term strategies and sustainable investment programs for sanitation and health/hygiene education. 16. Recommendation. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed Credit. Lewis T. Preston President Attachments Washington, D.C. Jamuary 9, 1992  -5 Schedule A CHIN RURAL WATER SUPPLY D