Documentof TheWorld Bank FOROFFICIAL USEONLY ReportNo: 32336-CN PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OFUS$lSOMILLION TO THE PEOPLE'S REPUBLICOF CHINA FORA CHONGQINGSMALLCITIES INFRASTRUCTUREIMPROVEMENT PROJECT May23,2005 Urban Development Sector Unit East Asia and PacificRegion Thisdocument hasa restricteddistribution andmaybeusedbyrecipients only inthe performance of their official duties. Its contents may not otherwise be disclosedwithout World Bankauthorization. CURRENCYEQUIVALENTS (Exchange Rate Effective May 1,2005) Currency =Renminbi Yuan (RMBY) Y1.oo =US$O.12 US$l.OO = Y 8.28 FISCALYEAR January 1- December 31 ABBREVIATIONSAND ACRONYMS CAS CountryAssistance Strategy CESC ChongqingEnvironment& Sanitation(Group) Co. Ltd CFB ChongqingFinanceBureau CM ChongqingMunicipality CMG Chongqing MunicipalGovernment CPMO Chongqing ProjectManagementOffice CSCP Chongqing SmallCitiesMastructureImprovementProject CUEP Chongqing UrbanEnvironmentProject CWRC Chongqing MunicipalWater ResourcesInvestmentGroup Co. Ltd DWSC DianjiangCountyWater SupplyCo. Ltd EMP EnvironmentalManagementPlan FIDIC InternationalFederationof ConsultingEngineers ICB InternationalCompetitiveBidding IST InstitutionalStrengtheningandTraining MBD ModelBiddingDocument MoF MinistryofFinance NCB NationalCompetitiveBidding NDRC NationalDevelopmentandReformCommission N S NationalShopping PMO ProjectManagementOffice Q W G QianjiangDistrict RealEstateGroup RAP ResettlementAction Plan RPF ResettlementPolicyFramework RWDC RongchangCountyHongyuWater ResourcesDevelopmentCo. Ltd SCDC ShizhuCountyCity ConstructionComprehensive DevelopmentCompany SCGC ShizhuCommunications ConstructionGeneralCompany SBD StandardBiddingDocument TRDC TongnanCountyRoadDevelopmentCo. Ltd TWSC TongnanWater SupplyCompany YWDC YongchuanWater ResourcesDevelopmentCo. Ltd YTIC YubeiTongda Infkastructure CorporationLtd Vice President: Jemal-ud-din Kassurn, EAPVP CountryDirector: David Dollar, EACCF Sector Director: Keshav Varma, EASUR Task Team Leader: TomZearley, EASUR FOROFFICIALUSEONLY CHINA CHONGQINGSMALL CITTESINFRASTRUCTUREIMPROVEMENTPROJIECT CONTENTS Page A . STRATEGICCONTEXTAND RATIONUE COUNTRYAND SECTORISSUES ................................................................................................................... 1 RATIONALEFORBANKINVOLVEMENT ...................................................................................................... 2 HIGHER LEVEL OBJECTIVES TOWHICHTHE PROJECTCONTRIBUTES .................................................... 2 B . PROJECTDESCRTIPTION LENDING INSTRUMENT ................................................................................................................................ 2 PROJECTDEVELOPMENTOBJECTIVEAND KEY INDICATORS ................................................................... 2 PROJECTCOMPONENTS ............................................................................................................................... 3 LESSONS LEARNEDAND REFLECTEDINTHE PROJECTDESIGN ................................................................ 4 ALTERNATIVES CONSIDEREDAND REASONSFORREJECTION .................................................................. 4 C . IMPLEMENTATION PARTNERSHIPARRANGEMENTS .................................................................................................................. 5 INSTITUTIONALAND IMPLEMENTATIONARRANGEMENTS ....................................................................... 5 MONITORING EVALUATIONOFOUTCOMES/RESULTS....................................................................... AND 6 SUSTAINABILITY .......................................................................................................................................... 6 CRITICALRISKSAND POSSIBLECONTROVERSIALASPECTS ..................................................................... 6 LOAN CONDITIONS AND COVENANTS .......................................................................................................... 7 D . APPRAISALSUMMARY ECONOMIC FINANCZALANALYSES...................................................................................................... AND 9 TECHNICAL................................................................................................................................................ io FIDUCIARY ................................................................................................................................................. i o SOCIAL ........................................................................................................................................................ 10 ENVIRONMENT ........................................................................................................................................... 11 SAFEGUARD POLICIES ............................................................................................................................... 12 POLICY EXCEPTIONS AND READINESS ...................................................................................................... 13 This document has a restricteddistribution and may be usedby recipients only in the performance of their official duties I t s contents may not be otherwise disclosed . without World Bank authorization . ANNEX 1:SECTOR AND PROGRAMBACKGROUND ..................................................................................... 14 ANNEX 2: MAJORRELATEDPROJECTSFINANCEDBYTHEBANK............................................ 18 ANNEX 3: RESULTSFRAMEWORKAND MONITORING................................................................. 19 ANNEX4:DETAILED PROJECTDESCRIPTION................................................................................. 23 ANNEX 5: PROJECTCOSTS................................................................................................................... 27 ANNEX 6: IMPLEMENTATIONARRANGEMENTS............................................................................ 29 ANNEX 7: FINANCIALMANAGEMENT AND DISBURSEMENTARRANGEMENTS................... 34 ANNEX 8: PROCUREMENTARRANGEMENTS.................................................................................. 40 ANNEX 9:ECONOMICAND FINANCIAL ANALYSIS ....................................................................... 59 ANNEX 10:SAFEGUARDPOLICY ISSUES.......................................................................................... 69 ANNEX 11:PROJECTPREPARATIONAND SUPERVISION.............................................................. 76 ANNEX 12:DOCUMENTSINPROJECTFILE...................................................................................... 77 ANNEX 13: STATEMENTOFLOANS AND CREDITS........................................................................ 79 ANNEX 14:COUNTRY AT A GLANCE................................................................................................. 83 MAPS IBRD33928 andIBRD33929 CHINA CHONGQING SMALLCITIES INFRASTRUCTmIiVlPROVEMENTPROJECT PROJECTAPPRAISALDOCUMENT East Asia andPacific Region EASUR Date: May 23,2005 Team Leader: TomZearley Country Director: DavidDollar Sectors: Water Supply (37%), FloodProtection Sector Director: Keshav Varma (22%), Roads (35%), Public Sanitation (4%), IST Project ID:PO81161 (2%). Lendinginstrument: Specific Investment Themes: Other urban development (P), pollution Loan(SIL) management and environmentalhealth (P) Environmentalscreening category: A [XILoan [] Credit [] Grant [] Guarantee [] Other: For LoanslCreditslOthers: Total Bank financing: US$180million Proposed terms: Single currency, Variable SpreadLoan, 20 years, inclusive o f 5 years grace, front end fee of 1% subject to 50 basispoint waiver, and commitment fee of 0.75% FinancingPlan(USSm): Source Local Foreign Total Borrower 100.7 IBRD 1 117.0 84*5 I 63.0 1 180.0 Total 201.5 79.2 280.7 Borrower: PEOPLE'S REPUBLIC OF CHINA Responsible Agency: Chongqing Project Management Office Contact Person: Mr.ZhouLinjun,Director, Chongqing Municipal Management Office o fthe World Bank's Capital Utilization, 141F Sun o f Asia Mansion, 248 RenninRoad, Chongqing, 400014, People's Republic o f China, Tel: 86-23-63877677; Fax: 86-23-63877822; E-mail:cm~mo~public.cta,cq.cn Estimateddisbursements (Bank FYIUS$m) FY 2006 2007 2008 2009 2010 2011 2012 2013 Annual 13.0 37.6 42.4 55.4 15.7 9.2 4.7 2.0 Cumulative 13.0 50.6 93.0 148.4 164.1 173.3 178.0 180.0 Project implementationperiod: July 1,2005 -June 30,201 1 Expectedeffectiveness date: December 1,2005 Expectedclosing date: June 30,2012 Does the project depart from the CAS incontent or other significant No respects? Ref. PADA.3 Does the project require any exceptions from Bankpolicies? No Ref.PADD.7 Have these been approved by Bankmanagement? I s approval for any policy exception sought fromthe Board? Does the project include any critical risks rated "substantial" or Yes "high"? Ref.PAD C.5 Does the project meet the Regional criteria for readiness for Yes implementation? Ref.PADD.7 LoanEffectiveness: (a) Signingo f Project Agreement between ChongqingMunicipality(CM) and IBRD; (b) Signingo fsubsidiary loan agreementsacceptableto IBRDbetweencities/dis~cts/counties andtheir implementingagencies; and (c) Signing o f contracts by CMwith consultingfirms for (i) institutionalandfinancial strengthening and training; (ii) design review andcertification; and (iii) constructionsupervision and contract management. Condition of Disbursement: (a) Signingo f a memorandumo f agreementfor the sale o fraw water, betweenChongqing Municipal Water ResourcesInvestment Group Co. Ltd(CWRC) and Yongchuan city, as a condition o f disbursement of civil works o fthe Songjiregional water supply scheme; and (b) Signingofmemorandaofagreementfor the purchaseo frawwater betweenHuxiTown, BishanTown and CWRC, as a condition of disbursement o f civilworks o f the Tongguanyi regionalwater supply scheme. ImplementationCovenants: (a) Maintainthe CPMO, andlocal govemment PMOSthroughout implementationwith qualified and adequate staff; (b) Commencingno laterthan March 1,2006, carry out anupdate ofall available water resources, and a studyto formulate appropriate policies for water resource management inthe water scarcewestern regions o f Chongqing; and commencingJuly 1,2007, implement agreed recommendations; (c) Prepare and submit to the Bankno later than January 1,2007, an operations andmaintenance plan (including financing) o fthe flood protection, roads andenvironmental sanitation components; (d) OnlendBankloanproceedsonterms andconditions satisfactory to the Bank; (e) Prepare and submit to the Bank, no later than July 1,2007, a wastewater managementand implementation plan for the towns to be served under the Tongguanyi water supply scheme; (0CMtake allnecessarymeasuresto enableCWRCtobreakevenspecifically, inregardtothe supplyo frawwater to small towns underthe Songji andTongguanyi schemes, for aperiodnot exceeding 10 years following commissioning o f the schemes; (g) C Mprovide, or cause to provide adequatefundingfor counterpart requirements, debt repayment, and operations andmaintenance; (h)CommencinginJanuary 1,2006, C Marrangeto take allnecessarymeasuresto increasethe water resource andor abstraction fee for the water scarce regions of Chongqing, to promote watei conservation; (i) establishseparatecommercialaccountsfortheSongjiandTongguanyischemes; CWRC (j)YongchuanWater ResourcesDevelopmentCompany (YWRC) establishseparatecommercial accounts for the Yongchuan City water supply project; and (k)ChongqingMunicipalitycauseDianjiangcounty, Yongchuancity andJiulongpodistrictto carry out dam safety-related measures, ina manner satisfactory to the Bank, andbythe dates specified inthe EMP. Financial Covenants: (a) Commencing infiscal year 2006, DianjiangWater Supply Company and Tongnan Water SupplyCompany to: (i) produce total revenues to cover operations andmaintenance costs (including depreciation), andthe amount bywhich debt service requirements exceedthe provision for depreciation; and (ii) maintain a debt service coverage ratio o f at least 1.3 times. (b)Commencinginfiscal year 2009, or another dateto be agreed, and withrespectto the Songji, and Tongguangyi regional supply schemes, the CWRC andYWDC to: (a) producetotal revenues to cover operations andmaintenance costs (including depreciation), andthe amount by which debt service requirements exceed the provision for depreciation; and (b) maintaina debt service coverage ratio o f at least 1.3 times. A. STRATEGIC CONTEXT AND RATIONALE 1. Country andsector issues China i s experiencingrapid urban growth, with 40% of the populationcurrently living inurban areas, up from 29% in 1995. Over the next 15 years, that trend i s expected to continue with the urbanpopulation projectedto reach 50%. This increaseinthe urbanpopulation i s a result of several factors, notably the government's decision to reduce controls governingpopulation mobility and a falling demand for farm labor. This rapid urban growth i s pressuringcities to expand their public infrastructure, increase municipal services andprovide employment for migrants. To relieve some of these pressures, government policy is now focused on secondary cities andperi-urban areas, where the aim i s to create conditions and facilities necessaryto attract investments and to accommodate growing populations. Chongqing Municipality(CM) i s the administrative equivalent to a Chinese province, consisting of the main city o f Chongqing, and 31 other units of local government (4 smaller cities, 6 districts and 21 counties). These administrativeunits govern a land area covering 82,000 square kilometers (the size o f Austria), with a total populationexceeding 31million. The Municipality has a two-tiered economy, with 67% of the populationliving inrural areas earning, on average, Y2,098 per capita ($250) in2002, and the other 33% residing inurban areas earning, on average, Y7,238 ($870) per capita inthat year. This significant differential inearnings i s propelling movement o f surplus rurallabor to the urban economies at a fast pace. As part ofwestern China, Chongqing's overall development status lags well behindmore prosperous regions inmany respects. A relative lack o fbasic infrastructureis a significant development bottleneck, discouraging outside investment, contributingto poor environmental conditions, and limitingopportunities to promote growth. Within the Municipality, Chongqing city i s privileged by its relatively large resource base and its position on the Yangtze River. Furthermore, the construction ofthe Three Gorges Damand the implementation o f the Central Government's "GOWest" programhave created favorable conditions for the city's redevelopment and urban expansion. Since its separation from Sichuan Province in 1997, Chongqing Municipality, and the main city inparticular, have enjoyed a sizable increase intheir revenues (although from a low base) and a growing affluence o f its citizens. Withinthe maincity, environmentalinfrastructure development is proceeding at a fast pace; the Bank-financed ChongqingUrban Environment Project (CUEP) i s contributing to improving wastewater treatment and solid waste management. CUEP was recently restructured to support basic infrastructure improvements ineight districts and counties, mostly inthe western part of the Municipality. This initiative was an initial step to mobilize more international expertise and financial resourcesto accelerate urbanizationand infrastructure development inthe smaller local governments within the Municipality. Infrastructuredeficiencies generally found inthe smaller cities and towns are: (a) poor quality and intermittent supplies o f drinhng water, due to inadequate water resources and mountainous topography, which hinderthe development ofreliable municipal water supply systems; (b) inadequatetransportation networks, and structurally incompleteroad connections betweenurban centers and new expressways; (c) low resistanceto flooding and other natural disasters, as many cities are built alongrivers, on steep valleys or adjacent to flood plains, resultinginrecurring flood damage and insufficient land for urban expansion; and (d) unsatisfactory sanitation conditions, including insufficient drainage and wastewater treatment. 1 The MunicipalGovernment is committedto use its improving financialposition to helpaddress these deficiencies, but wants the smaller local governments, who are responsible for infrastructure services to adopt better policies and institutional arrangementsto ensure their sustainability. This was one o f the mainreasons for requestingthe Bank's recent assistanceto focus on the smaller cities, districts and counties. The infrastructure investments proposed for Bank financing under the Project (CSCP) are consistent with the revised policy directions and urbanizationstrategy, as confirmed inthe Medium-TermDevelopment Plan of Chongqing, developed by internationaland local experts over the past year. 2. Rationale for Bankinvolvement The Bankhas worked successfully with ChongqingMunicipality on anumber ofprojects, including CUEP. Through the recent restructuringof CUEP, the Bank andthe Municipality have gained valuable experience inhelpingsmaller local governments inthe Municipality to design and adopt improved processes andprocedures for identifying and preparingpriority investments. UnderCSCP, the Bankwould expand support to the Municipalityby sharing its extensive global and China experience inurban development for water supply, flood protection, road infrastructure, institutionaldevelopment, and financial management. It would also introduceto a new group o f local governments andtheir local consultants more rigorous analyticalmethods to prepare and optimize project designs. The value-added duringproject implementation will include cost savings through procurement under Bank guidelines, as well as improvedproject management, constructionsupervision and quality control. Beyondthis, addressing urbanizationissues inChongqing's smaller populationcenterspresents a unique opportunity to partner with aprogressive municipality inwestern China. The involvement of the Bank could influence development policies, improve management practices, and introduce public sector reforms for service deliverybothinthe Municipality andpossibly elsewhere in China. Basedon a recently-completed study on Private Sector Partnerships (PSP) inurban services supported by the Bank, opportunities exist for introduction o f well-designed market mechanisms inChongqing city. The adoption o f PSP operations by smaller local governments would, however, be a longer term goal. 3. Higher level objectivesto which the project contributes Theproject supports two prominent themes ofthe Country Assistance Strategy: (a) facilitating an environmentally sustainable development process; and (b) addressing the needs of the poorer and disadvantaged people andregions of the country. It also supports the government's Tenth Five- Year Plan, and the Bank's urbanand water sector strategies for China, of improved livability and increasing sustainability and affordability o f water supply and sanitation services. B. PROJECTDESCRIPTION 1. Lending instrument Specific Investment Loan 2. Project development objective and key indicators The project development objective i s to support emerging small cities to improve the efficiency and effectiveness of infrastructure service delivery, to accommodate the rapid urban growth. Keyoutcome indicators include evidence o fimprovements in:(a) effectiveness andreliability of water supply service delivery; (b) financial viability and sustainability o f water supply services; (c) urban service revenues inareas upgraded; and (d) reducedtravel times and congestion between, and within mainurban areas. 2 3. Projectcomponents Theproject consists of five broadcomponents (for details see Annex 4): (a) Water Supply: (i) DianjiangWater Supply: enhancementof water treatment, and network expansion inthree areas of Dianjiang; (ii) Songji Regional Water Supply: supply o fraw water to Yongchuan city; (iii) Tongguanyi Regional Water Supply: Regional water supply scheme supplying 16towns inwater scarce areas inthe plannedwestern expansion areas; (iv) TongnanWater Supply: enhancement of water treatment, andnetwork expansion intwo areas of Tongnan; and (v) Yongchuan Water Supply: enhancemento f water treatment, andnetwork expansion inthree small towns located close to Yongchuan city. @) FloodProtection: (i) Nanchuan: floodprotection embankments to mitigate against serious flood damage and protect land for urbanexpansion; (ii) Rongchang: flood protection embankments to mitigate against serious flood damage; and (iii) Shizhu: extension of existing flood protection embankment on the south side of the river. (c) RoadImprovement and Construction: (i) Qianjiang: spine road innew development area; (ii)Shizhu: Shizhu expressway linkroad; (iii) Tongnan: linkfrom Chongqing-Chengdu expressway to the key secondary city of Tongba; and (iv) Yubei: accessroadto tourist site from Y-L expressway. (d) EnvironmentalSanitation: Public toilet upgradingandreconstructioninChongqing city. (e) InstitutionalStrengtheningandTraining: Technical assistanceto: (i) strengthen finances, management and operations of utility companies; improve management capacity o f parent unitsof local governments managing these companies, and develop a policy and pricingmechanism for the two regional water supply schemes; (ii) carry out an update of all available water resources, and formulate appropriate policies for water resource management, including investigations to establish the availability o f ground water inthe western areas of Chongqing; (iii) support initiatives inprivate sector participationinurban infrastructure services; (iv) carry out a study on the policy for provision of public toilets inChongqing city; (v) carry out independent monitoringo f safeguards implementation; and (vi) carry out training and study tours. Project Reforms and Innovations. The project incorporates the following institutional and financial reforms and innovations: (a) adoption of a regional water supply approach to address the needs o f a number of small towns inwater-scarce regions; (b) development of policies for managing localwater resources and for pricingraw water provisionto assure financial viability; (c) full cost recovery for water supply services, with operational subsidies provided, as necessary, inthe initialyears; (d) implementation ofall components bylocal government-owned companies; and (e) the use of independentspecialist consultants to: certify compliance with agreeddesign criteria, design principles andcost estimating, for subcomponents to pass eligibility criteria (for use of loan proceeds), and for independent construction supervisionarrangements, consistent with internationalpractice (FDIC terms). Inaddition, ChongqingMunicipalGovernment(CMG) hasexplicitly agreedtohelpparticipating local governments meet any shortfalls intheir hndingfor project-relatedobligations, i.e., counterpart funds, debt service repayments and operation and maintenance costs. This i s a special feature of the project as ithas enabled the financially weaker small cities and towns inthe 3 project to access loan financing, even though they may not be able to fully raise all of the required funds from their ownresources. 4. Lessons learned and reflected inthe project design China has the largest portfolio inthe Bank, and its quality i s among the best performing. OED and QAG assessmentshave confirmed satisfactory project implementation, outcomes and project management. Experience from a full range ofprojects financed bythe Bankinthe infrastructure sector points to the importance of borrower ownership, appropriateness and efficiency of planning of capital investments, as well as financing and institutionalarrangements for proper operation and maintenance. The project will incorporate these lessons as it makes efficiency and sustainability a mainproject objective. A keylessonfrompreviousBank-financedprojects is that local governments tendto over-design basic infrastructure, especially water supply and wastewater systems, due to the use of unrealistic populationprojections andper capita consumption levels, which lead to a waste of resourcesand higherthan necessaryuser changes. Thisconcern was addressedinthe proposedproject by scaling back the initialpopulationprojectionsandconsumption levels proposedby the participatinglocal governments, and agreeing on forecasts that reflect recent trends and/or sensible increments. Cost estimateshave been aproblemon some urbanprojects inChina, including CUEP. Adherence to traditional cost estimation methods (which are based on "norms" rather than market prices) have frequently resultedinoverall project cost estimates beingtoo high. Inthis project, internationalconsultants have conducted a rigorous independent check o f costs estimatesto ensure that the costs reportedinthe preparation studies for all components are as close to market levels as possible. Smaller local governments, especially inwestern China, tend to have weaker financial capacity, malungit difficult for them to provide counterpart funds on a timely basis, and to ensure adequate resources for operations andmaintenance. Inthis project, while the participating smaller local governments are expected to provide the neededcounterpart funds and budgets for operations and maintenance of the assets created, and their efforts will be reinforcedby appropriate covenants, any shortfalls intheir contributions will be covered through measurestaken by the larger, more financially capable CMG. Politically-mandatedearly completion deadlines on CUEP components have ledto hasty preparation, poor engineering designs and subsequentexcessive changes and variation orders on construction contracts. This issue was addressedinCSCP by agreeing with Chongqing authorities on a new framework for project preparation and implementation that requires the use o f separate independent qualified consultants to (a) to certify that ,subcomponentdesigns and implementationschedulesmeet agreed criteriabefore usingloanproceeds, and (b) supervise the construction of works inaccordance with internationalstandards (under arrangements similar to F D I C terms). 5. Alternatives considered and reasons for rejection Careful analyses o f different broadproject designs and individual components were carried out duringproject preparation, including the following: (a) a long list ofpotential components was initially identified,but progressively screenedand refined; dropping unsuitable or non-feasible projects that failed to meet the agreed criteria or 4 objectives' (see Annex 6, para. 4). Eight componentsplannedfor CSCP were transferred to the restructuredCUEP for financing with loan savings, as they were ready early for implementation and were consistent with the objectives of CUEP'. (b) anumber of subcomponentswere scaledbackor eliminated, as they failedto meet the criteria o f least cost solutions or were considered to be over-designed. (c) duringpreparation, alternative technical options were investigated, including (i) modification o froad alignments andbridge locations, alternative bridge designs and concepts; and (ii) modification or scaling backwater supply subcomponents, e.g., investments were tailored for medium-term needs only; scale of treatment plants and networks ofregional water supply schemes were revisedbasedon reduced water demand; options for conjunctive use o friver, reservoir and ground water were considered; and safety, efficiency, and cost of alternative intakes, pipe alignments, and storage were analyzed. (d) the public toilet component was considered only for Chongqingcity becauseofthe scale of the environmental and health impact on more than 600,000 people, whose environmental conditions will improve significantly. Problems o f this scale do not exist inthe smaller cities and towns with populationsranging from 30,000 to 100,000, andthe Municipalitywill address environmental issues of other towns on a case-by-casebasis. (0earlyinprojectpreparation, aprogrammatic approachto overallproject design, where afew subcomponents wouldbe appraisedinitially, and others would be added later during implementation ifthey met agreedcriteria, was also considered, butrejectedbecausethere was not enough support for this approach. C. IMPLEMENTATION 1. Partnership arrangements The project is free-standing and does not have any co-financiers. 2. Institutionalandimplementationarrangements Chongqing Municipalityhas established a leading group to give policy guidance to its agencies, departments andlocalbodies. Ithas nominated its existing Chongqing Project Management Office (CPMO) to coordinate the preparation activities o f the city/district/county local governments' proposed investments. The CPMO has hadprevious experience incoordinating the preparation and implementation of Bank-financed-projects, including CUEP. At the city/district/county level, project management offices (PMO) have also beenestablishedto provide policy guidance, and to coordinate the preparationand implementation of the various project components at the locallevel. Inview o f the technical and fiscal weaknesses of the local governments and their implementing agencies, CMG is taking on amajor role inproject preparation, andhas agreedto take all measures to assure fundinginthe event a local government cannot raise the entire counterpart funds, or provide funds for debt repayment and operation and maintenance. The Institutional Strengthening andTraining (IST) component includes assistance to local governments to strengthen the management and financial oversight o f implementing agencies for improved service delivery. ' Touristroadsin Wulong andWansheng, flood protectionandbundroads inQianjiang, Jiangjin, Beibei, Wanzhou, andWansheng; development areas (industrial estates) inYubei, Qianjiangand Chanshou; and an inter-urbanroadin Shizu. Five flood protectionsubcomponentsinDazu, Tongliang, Chanshou, Wulong andBishan, andthree water supply subcomponentsinBishan, Beibei and Jiangjin, 5 All implementingagenciesare ownedby either ChongqingMunicipality or the participating cities/districts/counties, which are empowered to borrow andrepay loans. With the exception of Dianjiang County Water Supply Co. Ltd.(DWSC) and TongnanWater Supply Company (TWSC), which were established in 1964, all other companies have beenestablished only relatively recently, some as late as 2003. The implementingagencies will own and, with three exceptions, Qianjiang, Shizhu and Yubeiroads, also operate and maintainthe project-financed assets. The names of the agenciesresponsible for preparingand implementing the various components are includedinAnnex 6; other details are inthe Project File. The CPMO will beresponsible for implementationofthe ISTcomponent; however, most activity will take place at the agency level. All feasibility studies, preliminary deigns, cost estimates andprocurement plans were completed byappraisal. Someagencieshave engageddesigninstitutes for preparation of detailed designs. Prior to implementation, detailed design reviewswill be carried out, and all biddocuments will be reviewedprior to bidding,by two key consultant firms which will berecruited in2005. 3. Monitoring and evaluation of outcomeshesults Annex 3 lists the main outcome indicators for the project, as well as the principalresults indicators for each component. The CPMO and local government PMOSwill regularly collect the data requiredfor monitoring and evaluation of outcomes/results andproduce semi-annual reports. CMG and the CPMO will review the results on the basis of the progress reports, andtake appropriate corrective action, when and where necessary. 4. Sustainability The Municipalityhasprovidedassurances that the necessaryhuman and financial resources will be available to carry out project implementation, and to operate andmaintainthe assets created. The local agenciesthat implement the roads and floodprotection subcomponents have provided assurances that adequatebudgets will be available for the satisfactory operationand maintenance o f these subcomponents once they are completed. The Municipalityhasprovidedassurancesthat fullcostrecovery inthe water sectoris anacceptedprinciple, andthat tariffs willbeadjusted periodically to meet this objective. Where such action i s not taken on account o f affordability or highunitcosts, the Municipality willhelp ensurethatproject-related finances areadequate. Participating local governments have created autonomous agencies to operate and manage the investments inwater supply, flood protection androads fundedby the project. 5. Critical risks and possiblecontroversial aspects The Project design assumesthat the rapid economic development of Chongqingwill continuefor at least the next decade, and that surplus rural laborers will continue to migrate inlarge numbers to urban centers within the Municipality. An unexpected slowdown o f economic activity or a reversal of recent migrationtrends could significantly alter projectedwater demands, reduce expected municipality and local government revenues, andresult inunderutilizedinfrastructure. This systemic riskispartly mitigatedbythe phasingofinfrastructureinvestment, to the extent possible, to respond to changes. Providing adequatewater supply, roads and flood projection i s a necessary, butnot sufficient condition, for sustaining economic growth. Annex 10 (Safeguards) and Sections D.4, D.5,and D.6 below discuss the due diligence measures taken to ensure that there are no major reputationalrisks, andthe measures which will be taken duringimplementationto ensure compliance with the Bank's safeguardpolicies. Risks associatedmore directly with the Project are summarized as follows: 6 RiskRating Risks RiskMitigation Measures - With Mitigation To project development objectives Inadequate tariff Commitment to full cost recovery, requiring Substantial increasesandor CMG tariff increasesandnecessaryfinancial support revenue support from CMG to ensure adequate revenues for jeopardizes counterpart fundingrequirements,debt service implementing agency and operating and maintenance costs. financial sustainability. Technical assistanceprogramto improve Modest efficiency and futurejustification of tariff adiustments. To components results CPMO and Technical assistanceprogram, including Modest implementing agencies internationalconsultant inputsto help with unable to efficiently detailed design, construction supervision, implement components contract management and training. and comply with Bank requirements Institutional and CMG commitment to formulate sound policies Substantial financial arrangements for the two raw water schemes, and for for Songji and implementingsatisfactory cost recovery Tongguanyiraw water arrangements. schemes will not be viable Road, river embankment Assurance obtained fromparticipatinglocal Modest and public toilet governments to prepare and furnishoperation investmentsnotproperly andmaintenance plans (including financing) operated and maintained by 2007. after completion. Institutional Engagement o f consultant by loan Substantial development of effectiveness for early implementation and implementing content of ISTprogram, and agreement that a agencies/local utilities is combination o f foreign and local consultants delayed and not fully shouldbe involved. effective Overall riskrating SubstantialModest 6. Loan conditions and covenants Loan Effectiveness: (a) Signingof Project Agreement betweenChongqingMunicipality and IBRD; (b) Signingof subsidiary loanagreements acceptableto IBRDbetweencities/districts/counties and their implementing agencies; and 7 (c) Signing of contracts by ChongqingMunicipalitywith consulting firms for (i) institutional and financial strengthening and training; (ii)designreview and certification; and (iii) construction supervisionand contract administration. ConditionofDisbursement: (a) Signing o f a memorandum of agreement for the sale o fraw water, between Chongqing Municipal Water ResourcesInvestment Group Co. Ltd(CWRC) andYongchuan city, as a condition o fdisbursement o f civil works o fthe Songji regional water supply scheme; and (b) Signing ofmemorandaofagreementfor the purchase ofrawwater betweenHuxiTown, BishanTown and CWRC., as a condition of disbursement o f civilworks of the Tongguanyi regional water supply scheme. ImplementationCovenants: (a) Maintainthe CPMO, and local government PMOSthroughout implementationwith qualified and adequate staff; (b)Commencingno later thanMarch 1, 2006, cany out anupdate ofall available water resources, and a study to formulate appropriate policies for water resource management inthe water scarce westem regions of Chongqing; and commencing July 1,2007, implement agreed recommendations; (c) Prepare and submit to the Bank no later thanJanuary 1,2007, anoperations andmaintenance plan (including financing) o fthe floodprotection, roads and environmental sanitation components; (d) OnlendBankloanproceeds onterms andconditions satisfactory to the Bank, (e) Prepare and submit to the Bank, no later than July 1,2007, a wastewater management and implementation plan for the towns to be served under the Tongguanyi regionalwater supply scheme; (f)ChongqingMunicipalitytake allnecessarymeasuresto enable CWRCto breakeven specifically, inregardto the supply o fraw water to small towns under the Songji andTongguanyi schemes, for a periodnot exceeding 10years following commissioning of the schemes; (g) ChongqingMunicipalityprovide, or cause to provide adequatefundingcounterpart requirements, debt repayment, andoperations andmaintenance; (h)CommencinginJanuary 1,2006, ChongqingMunicipalityarrangeto take allnecessary measuresto increase the water resource andlor abstraction fee for the water scarce regions o f Chongqing, to promote water conservation; (i) establishseparatecommercialaccountsfortheSongjiandTongguanyischemes; CWRC (j)YongchuanWaterResourcesDevelopmentCompany(YWRC) establishseparatecommercial accounts for the Yongchuan City water supply project; and (k)ChongqingMunicipalitycause Dianjiangcounty, Yongchuan city andJiulongpo district to cany out dam safety-related measures, ina manner satisfactory to the Bankandby the dates specified inthe EMP, FinancialCovenants: (a) Commencing infiscal year 2006, Dianjiang Water Supply Company andTongnan Water Supply Company to: (i) produce total revenues to cover operations andmaintenance costs (including depreciation), andthe amount by which debt service requirements exceedthe provision for depreciation; and (ii) maintain a debt service coverage ratio o f at least 1.3 times. (b)Commencinginfiscal year 2009, or another date tobe agreed, andwithrespect to the Songji, andTongguangyi regional supply schemes, the CWRCandYWDC to: (a) producetotal revenues to cover operations andmaintenance costs (including depreciation), andthe amount by which debt service requirements exceedthe provision for depreciation; and (b)maintain a debt service coverage ratio o f at least 1.3 times. 8 D. APPRAISALSUMMARY 1. Economicandfinancialanalyses EconomicAnalysis. Cost-benefit analysis was conducted for eachcomponent. The analysis examinedalternatives considered, including different technical specifications, different locations, and differences inthe scale o f each component, to ensure that the best alternative was chosento achieve the component objectives. Scenarios "with" and "without" component were also examinedto derive the incrementalcosts andbenefitso f eachcomponent. Economic costs for eachcomponent were identified as the basecost plusphysicalcontingencies, i,e., without inflationandtaxes. Benefit proxies were identified for each component, e.g., reductioninroad user costs for inter-urban roadprojects, reductioninflood damage costs for the bundroadcomponent, andinrespect ofwater supplyprojects, the increased value ofindustry production due to newly available water supply. The estimated economic internal rates ofreturn (ERR) for these components are all inthe range of 10to 20% (the discountrateusedis 10% as recommended by the central government, NDRC, in2002). Sensitivity analyses conducted to test the impact o f switching values o f critical variables confirmthat the estimated ERRSarerobust. Financial Anaiysis. When ChongqingMunicipalityseparatedfrom Sichuan Province in 1997, its fiscal receipts were Y5.4 billion; in2003 they were Y39.2 billion. Through prudent management, expenditures have risen lessthanreceipts, resultinginsurpluses. The average annual cost o f the project investments represents a small fraction o ftotal receipts. The project cost is therefore easily affordable to ChongqingMunicipality (see Annex 9). The financial analysis o fparticipatinglocal bodies' (except ChongqingMunicipality) actual andprojected receipts andexpenditures statementsindicatethat they should.be able to generate all, or a substantial portion, of their requiredcounterpart fundingrequirements on a timely basis for their proposed investments inflood protection androads from locally-generated taxes. Ifthere should be a shortfall, the CMGhas given assurancesto provide, or cause to provide adequatefunding for counterpart requirements, debt repayment, and operations and maintenance costs. Financial projections were completedfor each water supply company indicating the levels of tariffs requiredannually to meet the stated financial objectives. The projected tariffs for DWSC, TWSC andYWDC are affordable to the lowest income groups, and show that each company shouldbe able to operate andmaintainits investments as well as cover debt service from its expected revenue stream. For the regional water supply schemes (Songji andTongguanyi), the estimated production cost o fraw water is Y4.331m3 andY1.361m3,respectively, and will be far greater than the currently leviedraw water resource or abstraction fee o f Y0,401m3. To enable CWRC to be financially viable, it has to sell the water at these higher prices inorder to recover its costs. The risks for the company are: (a) there will not be enoughbuyers for the high-pricedwater; (b) the buyers may not be able to afford to pay the price charged; and (c) assets created may remain under-utilized because of the price charged. CMGhasprovidedassurancesto take all necessary measuresto enable CWRC to meet its financial covenants. Moreover, CMG has agreedto carry out a study to develop policies and pricingoptions for the two regional water supply schemes, and to subsequently implement the recommendations. The operations andmaintenance costs o f the floodprotection, roads and environmental sanitation component would come frombudgetary allocations from the parent localgovernment, or from the internally generated funds o fthe owners (see Annex 9). The proposed financial covenants would require DWSC and TWSC, commencing infiscal year 2006, to break-even on their operations, andto achieve a debt service coverage ratio o f at least 1.3 times. For the Songji, Tongguanyi and Yongchuan City water supply schemes, CWRC and YWDC would, commencingin2009, berequiredto break-even onoperations, andto achieve a debt service coverage ratio o f at least 1.3 times. For the floodprotection, roadandenvironmental 9 sanitation components, the financial covenant wouldrequire that, in2006, the agencies prepare an operations andmaintenance plan (including financing), satisfactory to the Bank. 2. Technical Project Preparation andImp~ementationFramework. The project preparationframework for CSCP draws heavily onthe innovative approach followed under CUEP inpreparingnew components for financing withthe loan savings. Inthe preparationstage, an internationalDesign Review and Advisory (DRA) consultant was requiredto agreewith local design institutes and `signoff on design criteria, design principles, costs, andprocurementarrangements. This process ledto efficient andleast cost designs, and avoided over-design o f facilities. For the implementation stage, the framework includes an intemationalconsultant for DesignReview and Certification (DRC), includingreview o f detailed designs, reviewandinterpretationo fresults of investigations; Subcomponents wouldbe preparedanddesignedby competent Chinese design institutes, and reviewed andcleared by internationalconsultants. With the mandated supervisory role for the DRAandDRC, detaileddesignswouldbetechnically sound, representthe least cost alternative, andbe basedon good engineering practice. An extensive analysis o fthe conceptual anddesign alternatives would be conducted, as described inAnnex 9. The detailedproject descriptionis contained inAnnex 4. An international consultant firmwillprovide Construction SupervisionandContract Management services as the representative o f the employers (under arrangements similar to FIDIC terms). The consultant will review and clear biddocuments prior to bidding, and function as Engineer under the contract, as the representative o f the Employer. 3. Fiduciary The financial management assessment has concluded that the project would meet the Bank`s financial management requirements, as stipulated inBPlOP 10.02. The project will have inplace an adequateproject financial management system that would provide, withreasonable assurance, accurate andtimely informationonthe status o f the project inthe reporting format agreedwith the Ministryo f Finance (MoF) andthe Bank. For further details on financial management, see Annex 7. The procurement capacity assessment has concludedthat there will be a needto further enhance the procurement capacity of the CPMO andthe PMOS,through training, advisory support from the Bank office inBeijing, and guidance from supervisionmissions. For furfher details on procurement, see Annex 8. The Procurement Capacity Assessment i s available inthe Project File. The CPMO has selectedtwo firms, namely the China Technology Import and Export Corporation (CTIEC), andthe consortium o fCMC InternationalTendering Co. and CITIC International Tendering Co. (CMCICITIC), as procurement agents for bothICB andNCB procurement. These companies are experienced andcompetent procurement agents, familiar withthe Bank's procurement procedures. 4. Social Socialbeneflt: People inthe project areas will benefit significantly from the proposed constructionofroads andembankments, water supply works andpublic toilets. Several studies on social aspects were carried out, including a poverty impact assessment, willingness to pay and affordability, social assessment o fpublic toilets, and a study on ethnic minorities inproject areas. 10 The findings o f these studies show that localpeople support the proposedproject activities, since they canbenefit from the project interms of improvedroads, safer andmorereliable drinking water, better flood protection, and more sanitary public toilets. Social impacts:The key adverse social impacts o fthe project are largely relatedto land acquisition and demolition o f structures for different components o fthe project. Inaccordance with locallaws andregulations, andthe WorldBankOP4.12 onInvoluntary Resettlement, Resettlement Action Plans (RAPS)have beenprepared for the different components. The RAPS are basedon detailed census o f the affected people, inventory o f affected assets, socioeconomic surveys and extensive consultations withthe project affectedpeople. The resettlement impacts are modest and scatteredamong many urbanandrural areas inChongqing, with about 13,700 people affected by land acquisition and house demolition, and4,050 muo f land acquired for project purposes. MajiagouReservoir, which i s not includedinthe project, will be used for storing andtransferring water under the Tongguanyi Regional Water Supply subcomponent. With respect to resettlement relatedto the constructionofthe reservoir, it was determined that BankOP 4. 12 didnot apply becauseresettlement was completed inMay 2002, approximately two andhalfyears before the Bank's identificationmissionfor this project, andthe constructionof the reservoir was carried out as part o f Chongqing's water resourcesmaster planto serve multiple purposes, including irrigation, flood control and water storage. Nevertheless, the Bankcarried out a due diligence review onthe completedresettlement activities andconcludedthat affectedpeople were satisfied withthe compensationthey received, their newlivingconditionsandresettlementarrangements. Additionally, the incomes and livingstandardso f displaced personshave been improved or at least restored. WilZingnesstopay and affordabiZity for improved service: A willingness to pay and affordability survey were conducted by ChongqingUniversity. The findingso f the survey show that more than 96% of surveyed people are willing to pay for improved water supply service and that the expectedprice ofwater supply is affordable. Ethnic minority: There are some Mia0andTujia minority groups inthe project areas, A social assessment hasbeencarriedout andthe conclusion i sthat (a) there are no differences betweenthe Hanandthe minorities inthe project areas interms o f their social, cultural andeconomic identity, e.g., language, culture, tradition, livelihood, and (b) minority groups, who are included inthe PAPS,willnot be adversely affected. Thus, the Bankoperationalpolicy OD 4.20 is not applicable. 5. Environment The project will improve urban environmental conditions andinfrastructure insecondary cities to foster sustainable growth, improve livingconditions for its citizens, and facilitate urban employment creationthroughpromoting the fuflction and economic growtho f urban areas throughout Chongqing Municipality. The water supply subcomponents will provide a reliable potable water supply to more than 900,000 peoplein6 countiesldistricts who suffer serious water shortage andpoor water quality, The river embankment subcomponents will improve the flood control capacity up to 1/20year levelinfour countiesldistricts, which will significantly reduce the naturaldisastersand humadproperty loss, and also improve sanitation conditions, urban infrastructure, traffic, landscaping, investment environment, etc. The roadsubcomponents will improve the localroad network andprovide convenient access to the localpublic, thus promoting economic growth and 11 the urbanizationprocess. The public toiletsrehabilitation subcomponent will significantly improve urban sanitation services andthe environment. 6. SafeguardPolicies Safegu-d by the Project Yes N o EnvironmentalAssessment (OPIBPIGP4.01) [XI E l Natural Habitats (OPIBP 4.04) [I [XI Pest Management (OP 4.09) E[I l [XI Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [XI InvoluntaryResettlement (OPIBP 4.12) [XI [I IndigenousPeoples (OD 4.20, beingrevisedas OP 4.10)* [I [XI Forests (OPIBP 4.36) [I [XI Safety o fDams (OPIBP 4.37) XI [I Projects inDisputedAreas (OPIBPIGP 7.60) [I [XI Projects on International Waterways (OPIBPIGP 7.50) * Inthe [I [XI context o f China, Indigenous Peoplesrefer to minority nationalities a. What is thesafeguard screening category of theproject? (S1, S2, S3, S4) Category S2. b. What is the environmentalscreeningcategory of theproject? (A, B, C, F1) Category A. c. Ifapplicable, what are thekey safeguard~oli~issues raised by theproject? The key environmental safeguard issues are associatedwith potentialimpacts from water diversion, sludge management, and induced increase ofwastewater from water supply subcomponents; dredging sediment disposal from river embanhent subcomponents; soil erosion, spoil disposal, noise impact from road subcomponents; and spoil andhumanwaste disposal, and on site treatment for toilets without sewer connections, andproper design and operationrelatedto the public toilets rehabilitation subcomponent. Other lesser impacts are generally construction-associated including dust, noise, wastewater, solid waste, camp site sanitation, landoccupation, safety, traffic disturbance, etc. d. Ifapplicable, what are the main results of any safeguard policy-related studies, and how have they been incorporated into theproject? To address environmentalissues, environmental impact assessments (EIAs) have beenprepared for eachindividual subcomponent andapproved by ChongqingEnvironmental Protection Bureau. Consolidated EIAreports were prepared by localexperts for each sector with assistanceo f internationalconsultants. These were submittedto the Bank inDecember 2004, and found acceptable. The EIAreports comprehensively addressedall the above potential impacts andrisks, based on relevant national technical guidelines andinternational experiences. An Environmental Management Plan (EMP) was developed which specifiedindetail the environmental management and supervisionorganizations, as well as responsibilities, mitigationmeasures, monitoring andreportingprograms, budget estimates and capacity buildingrequirements. The EIAsconcludedthat the proposedsubcomponents will nothave a significant adverseimpact, provided the mitigationmeasures are properly implemented. 12 The Dam Safety SafeguardPolicy (OP 4.36) i s triggeredby the projectbecausethe project uses water from five existingreservoirs and one nearly completedreservoir (Majiagou) invarious locations inChongqingMunicipality. The Bankteamhasreviewedthe safety o fthese dams and has found them generally satisfactory, To address some safety-related concerns identifiedduring the Bank's review of the reservoirs, the legal agreementsandthe EMPrequire that specific actions be taken by agreeddates. Supervision missions will monitor progress during implementation. e, @?tatis the borrower's capacity to implement thesafeguard policies recommendations,and if the capacity is i ~ u ~ c i e nhow will this capacity be brought to the required level? t , ChongqingMunicipality is a repeat borrower andhas gained muchexperience withBankpolicies andrequirementsthrough the implementationofCUEP. CMGis expanding andstrengthening its CPMO for better projectpreparation and implementation, includingrecruitingpersonnel to monitor safeguards implementation, The project will also support training, capacity buildingand implementation assistancefor the CPMO andother PMOS.These'sub-components are scattered throughout 10districtslcitiesl counties, andwill be implementedby local project owners. Capacity buildingand training programs have beenplanned for the project management staff, contractors and supervisionengineers. Inaddition, the Bankwill closely supervise safeguard implementation. CPMO will establish a participatory safeguardsmonitoring system, which has proved to be an effective methodfor strengthening safeguards implementation inCUEP. J: @?tattypes of consu~tationshave been conductedrelated to safeguard issues? How did these consul~ationsinfluence project design? Public consultationhas been conducted effectively throughout the EIAprocess, including socio- economic surveys, interviews with local authorities, environmental questionnaire surveys and public meetings. Inall, more than 2,700 peoplewere consultedandtheir concerns were incorporatedinto the project design and EMP. Draft EL4reportswere disclosed locally during March-October 2004 inaccordancewithBankrequirements. The Consolidated EAswere disclosed inInfoshop onJanuary 11,2005. g. @?tenand wheresafeguard studiesweremadeavailable in the cooperating country? December 2004, inproject cities. 7. Policy exceptions andreadiness No exceptions arerequiredfromBankpolicies. The Project meets all keyregionalreadiness criteria. (See detaileddesign andimplementation framework agreed for CSCP). 13 Annex 1:Country and Sector or ProgramBackground CHTNA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT 1. Introduction. A central element o fChina's currentnationaldevelopment strategy isto encourage urbanization, mainlythrough the transfer o f surplus labor from the rural economy to the urbaneconomy. At present about 40% of the country's population lives inurban areas, up from 29% in 1995. Expertsagree that so longas the urban areas can accommodate the population growthandkeep congestion andpollution costs incheck, this could leadto efficient economic outcomes as well as risingemployment, Large cities, with a diversified industrial base(which exists inChongqing), offer agglomeration economies and their economic performanceas well as employment rates tendto be lessvolatile. 2. A WorldBankreview o fthisnationalstrategy has suggestedthat urbancenters inChina willneedto take initiativesinthree policy areas: a) strengthenthe businessenvironment (including the quality o furbanmanagement, urban infrastructure, andregulatoryregimes); b) support improvementsinproductivity andinnovations for businesses; and c) enhance labor markets, particularly byreforming the householdregistration ( h u h ) system and strengthening worker training programs. 3. A teamofinternationalconsultants fundedbythe Government ofFranceworkingwith ChongqingMunicipalityhasprepared a strategic report titled "Territorial Development and PopulationForecast", which provides analysis of population and forecasts, employment, social sector growth, anddevelopment trends for the counties anddistricts where most o f the proposed project components are located. The report provides a strategic framework andrationale for the various components. Italso confirms the accelerated movement o fpopulation from farmingareas to urbancenters, especially smaller cities andtowns, over the past decade. And, itpoints out that duringthis period, populationchangeswere supportedbypublic sectorjobs, whichneedto be replaced inthe future by creatingenvironments that are more attractive for private sector investment and employment creation. The Municipality sees increased infrastructure development as one of the factors neededto help stimulate and sustain such investment. 4. Chongqing'sMedium-TermDevelopmentStrategy. Chongqing's urbanizationlevel was 33% in2000, about three percentage points below the national average. The gap between averageurbanincomes and averagerural incomes inthe Municipalitywas quite large (RMB 7,238 vs RMB2,098 in2002): The Municipality wants to encourage urbanizationinorder to achieve the benefits o f higher labor productivity, lower infiastructure andpublic service costs, through economies o f scale, and increasedjob opportunities, especially for surplus agricultural workers. Chongqing has set ambitious targets for urbanization levels at 50% in2010 and 65% in 2020. 5. Looked at spatially, ChongqingMunicipality wants to guide population growth and economic activities toward a number o fkey smaller cities, districts and counties outside o f the 3 Chongqing's average urbanincome per capita is about equal to the national average urbanincome, butits averageruralincome is 20% lessthanthe nationalaverage ruralincome. 14 core urbanarea.4 The Municipality's present urbanstructure (outside o fthe core area) consists of 6 district maintowns, 25 county maintowns, 95 central towns, and423 generallordinary towns. The Municipality's aim i s to help two medium-size cities-Wanzhouand Fuling-reach a population size o f over 500,000 inthe near future, andto reinforcethe growth in7 other priority districts (Qianjiang, Yongchuan, Hechuan, Jiangjin, Nanchuan, Changshou, andKaixian). Together, they would form the top of the urbanhierarchy, andholdabout 5 percent o f Chongqing's total populationin2010. 6. Inordertoreachthesetargets,theMunicipalityhasdecidedtotakethreemeasures: e First, encourage surplus ruralworkers to move into towns, supported byrelaxing procedures andrequirements to obtainresidentialpermits, thus making it easier for them to accessthe urbanjob market, as well as educational opportunities for their children. Second, improve urban services andthe quality o f life indistricts and counties, by providingwater supply, wastewater treatment, solid waste treatment, flood protection, roads and various other public facilities inurbanareas. Third, develop the economy andimprovejob opportunities, byhelpingandencouraging rural enterprises to move into industrialzones or around county center towns. 7. Strategic Choice of Project Components/Subcomponents. CSCP i s designedto support the Municipality's medium-term development strategy, through a mix o f investments, policy and institutionalreforms, andcapacity buildingandtraining. The localgovemments and their subcomponents that will receive support under CSCP have beenidentified andpreparedon the basis o ftheir fit withinthe overall strategy, andtheir readiness and willingness to use the technical support and loan financing o fthe World Bank. At appraisal, 12individual investment components inthree major categories were assessed and approved for Bankfinancing: five water supply components; four roadcomponents; andthree river embankment components. Inaddition CSCP includes a sanitation improvement component for the core o f Chongqingcity. 8. Water Supply. According to the outlines o f the govemment's 10thfive-year plan, Chongqing Municipalityi s expectedto develop infrastructureto support the rapideconomic growth inthe westem expansion areas. Water resource management studies identified major constraints affectingthe security o f sustainable water balance inWestem Chongqingand recommendedthe execution o f four major water schemes for usingYangtze River (Tongguanyi and Songji), JinjiangRiver (AnjuQiong) andYutan reservoir. Chongqing Municipal Water ResourcesInvestmentCo. Ltdwas set upbythe Municipality to develop all necessary infrastructure and facilities to ensure appropriate water supplyto meet future demand inthe westem development corridor andexpansion areas. 9. Withthe acceleration o fthe urbanizationprocess, the shortage o f domestic andindustrial water supplies intowns and cities will be increasingly critical. The construction o f urbanwater supply facilities hasbeendirectly relatedto the improvement o f livingconditions o fpeople. The shortage o f water intowns andcities o f Chongqingi s the combinedresult of: (a) limitedwater resources; (b) poor water quality, (c) lack o f water conservationmeasures, and (d) insufficient water production and distribution systems. Effectivemeasures are badlyneededto generally 4 In2000, totalpopulationinChongqingwas 30.7 million, with 13.2millioninurbanareas of which (i) millioninthe metropolitan core area, (ii) millioninthe intermediate urban level, and (iii) 3.1 3.4 6.7 millioninthe basicurbanlevel. 15 improve the water supply capability inpoverty-proned areasby constructingmore water sources, pipeline networks andwater purification plants. 10. The project contains five water supply components: three involve the enhancement and strengthening of supplies to 6 small towns inthree counties, and two involve the pumpingo fraw water from the Yangtze River to augment supplies inwater-scarce areas. One ofthese latter projects will supplyYongchuan (which hasbeen identified as a major growth center), andthe other will provide additional water resourcesto meetthe anticipateddemand in 16key towns in the area immediately to the west o fthe main agglomeration o f Chongqing (Le., Jiulongpo and Shapingba districts and Bishancounty). This areahasbeenidentified as a priority growth zone to relieve the increasingpopulationpressureson Chongqing City. 11. Flood Protection Improvements. Chongqinghas a very complicatedtopography and geology, characterized by landsides, crags and instablemassifs. Manyo fthe riversidecities do not have flood control embankments and substantial areas close to the town centers are thus prone to flooding. The key to solving this problem is to construct comprehensive riverbank improvement schemes that integrate such fknctions as flood control, riverbankrebuildingand landslide elimination, as well as providing the opportunity for urban expansion, roadnetwork improvements, additional green space, and the provision o f interceptor sewers. 12. There are three river embankment subcomponents, designed to protect landandbuildings within the existing cities from flooding. These subcomponents also includethe provisiono f riversideroads and footways, bridges, interceptor sewers and environmentalenhancements. In addition to the protection o fexistingbuildingsandproperty fiom flooding, the three schemes allow current flood-prone areas (close to the town centers) to be developed for urbanuses. In RongchangandYongchuan, the schemes involve the constructiono flengths o fbundroad onthe riverside, which will formpart ofthe future town expansion plan. InShizhu, a riverside walkway i s proposed together with the creation o fnew development landand environmental improvements. Sections o finterceptor sewer are included inall cases, linked to existing (or committed) wastewater treatment plants. 13. Road Construction. Chongqingi s a mountainousmunicipality where the poor transport network i s a major cause o f inefficiency andpoverty. The constructiono froads can enhance the economic development capability o f districts and counties, improve the roadtransport conditions around the city, and form a foundation andplatformfor socioeconomic development inthese districts andcounties. The roadcomponents are intwo categories: linkswith expressways (3 subcomponents) andurbanexpansion (1subcomponent). (a) Linkages with Expressways. The Municipality i s strategically locatedat a hubwithin the emergingnational expressway network5. These expressways provide the opportunity to create linksto someofthepoorerandmoreremotecities andcounties, thereby improving their overall accessibility, and bringingthe cities more effectively into the mainstreamurbannetwork and economy o fthe Municipalityandbeyond. The project includes three such linksbetweenthe national expressway network and small cities -Nanbin(Shizhu County), Tonging (Yubei District) andTangba (Tongnan County). The proposedroads are Class 2 two-lane roads, and their construction will significantly reduce travel times between the project cities, the expressway network, andother key urbancenters. The Municipality is at the intersection of expressways linking Chengdu with Shanghai, and Xian with Guiyang, together with anumber ofmore localroutes 16 (b) UrbanExpansion. The fourthroadsubcomponentcomprises the constructiono furban distributor roads within a new urbanexpansion area inQianjiang, which i s designed to accommodate the anticipated rapid population andemployment growth. The city hasbeen identified as a major growthcenter inthe generally impoverishedsouth-eastern sector o fthe Municipality: it i s anational-levelpoverty district andminority populationarea. 17 Annex 2: Major RelatedProjectsFinancedbytheBankandlor other Agencies CHINA: CHONGQINGSMALL CITIESJNFRASTRUCTUREIMPROVEMENT PROJECT Latest Supervision (PSR) Sector Issue Project Rating (Bank-financed *ejects only) Implementation Development Progress (IP) Objective IRank Financed Municipal govemance and Zhejiang UrbanEnvironment S S institutional building, pollution Project (Ln.47240), (1129104) management and environmental health, access to urbanservices and housing, infrastructure services for private sector development, other urban development Urbanenvironment, pollution Shanghai UrbanEnvironment S S management andenvironmental . Project (Ln.47050), (6117103) health, access to urbanservices for the poor, environmental policies and institutions Water resource management, Tai Basin UrbanEnvironment S S pollutionmanagement and Project (Ln.47480), (8103104) environmental health, other urban development, infrastructure services for private sector development Urbanenvironment, air andwater Second Beijing Urban S pollution, waste management Environment (Ln.4561), (6120100) Access to urban services for the SecondTianjinUrban S poor, environmental health, water Development and Environment resource management, municipal Project (Ln.46950), (05120103) govemance and institutionbuilding, wastewater, solid waste, industrial pollution Other Development Agencies Water supply, municipal and JapaneseBank for Implementation performance industrial wastewater treatment, air Intemational Cooperation reportedsatisfactory. Assistance pollution management (several focusedprimarily on investment. projects) Urbanservices, environment, water Asian Development Bank Performance reported resources (several projects) satisfactory. I 18 Annex 3: Results FrameworkandMonitoring CHINA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT ResultsFramework PDO Outcome Indicators To significantly improve efficiency, 1. Evidence that an upwardtrendhas beenestablished effectiveness and financial viability of inthe effectivenessandreliabilityofwater supply mdassociatedoutcomesofthe ,infrastructureservice delivery among servicedelivery inparticipating small cities, districts and xoject. participatingsmall cities, districts and counties of ChongqingMunicipality (via technical and counties inChongqing. social audits); 2. Evidencethat anupwardtrendhasbeen established inthe financialviability andsustainabilityofwater supply services inparticipating local governments. 3. Evidence of increasedurbanservicerevenuesinareas upgradedunder theproject (e.g., flood protection areas). 4. Evidence ofreducedtravel times andreduced congestionbetweenparticipatinglocal govemments and the mainurban areas. IntermediateResults(outputs) Output Indicatorsfor EachComponent Use of Results Monitoring One per Component Water Supply: Water Supply: To verify the delivery o f expected Infrastructurecapacity increasedand Evidence o f satisfactory completion ofwork, as project outputs. systems augmentedinfivejurisdictions planned a Financialmanagement introducedand Increasedpercentage of population with accessto management capacity strengthened safe water Increase inratio o f actual tariff to recommended cost recoverytariff FloodProtection: FloodProtection: Strengthenflood protection; createbund Evidence of satisfactory completionofwork, as roads; andmake environmental planned improvements, infour local governments Increase innumber of residentsprotected flom floods Increaseinamount of developable land Roads: Roads: Upgrade and construct urbanandaccess Evidence o f satisfactory completion o f work, as roads infour local govemments planned. Evidence o f increasedefficiency inurban road serviceprovision andmaintenance EnvironmentalSanitation EnvironnmentalSanitation Upgrade andre-construct public toilets Evidence o f satisfactory completion o fwork, as inChongqingCity planned InstitutionalStrengthening& Training InstitutionalStrengthening& Training Institutionaldevelopment of operating Evidence of satisfactory completionofwork, as agencies; planned Project management Evidence ofproactive andeffective management o f emerging problems, andtimely andhonest reporting ofprogressand concems byproject managers. 19 Arrangements for monitoringof key performanceindicators IDataillectionandRe!ting Targe Jalues Baseline MTR ICR Frequencyand Data Collection Responsibility (2005) Reports Instruments for Data Collection 1. Evidence that an No Some Considerable Technical Technical CPMO upwardtrendhasbeen evidence evidenceof evidence of and social audit md social audit Consulting establishedinthe ofan upward upward reports 'eports firm(s), hired effectiveness and upward trend trend Financial 1 User sample by CPMO reliability o f water trend reports survey reports supply servicedelivery User sample Financial inparticipatingsmall survey reports, as .eporting. cities, districts and required(MTR & counties ofChongqing ICR stages) Municipality (via Project technical andsocial progressreports audits). (quarterly) Supervision 2. Evidencethat an No Some Considerable missionreports (at upwardtrendhasbeen evidence evidence o f evidenceof least annual) establishedinthe of an upward upward Evaluation financial viability and upward trend trend missionreports sustainabilityo fwater trend (MTRandICR supplyservices in stages) participatinglocal govemments. 3. Evidence o f No Some Considerable increasedurban evidence evidence evidence. servicerevenuesin areas upgradedunder the project (e.g., flood protection areas). Evidence o freduced No Some Considerable travel times and evidence evidence evidence reduced congestion betweenparticipating local govemments and the mainurbanareas. 20 ResultsIndicatorsfor Baseline MTR ICR EachComponent IBL) Water Supply Increasedpopulation 0 334,000 372,000 withaccess to safe water (insmall towns). Increasedpopulation 0 480,000 753,000 with access to safe water inregional water scheme areas Increaseinthe ratio o f BL 0.75 1.o actual tariff to recommendedcost recovery tariff. Evidence of Not yet Partial Full satisfactory completion started completion; completion, o fwork, as planned. work as planned satisfactory FloodProtection: Evidence o f Not yet Partial Fulland satisfactory compietion started completion; satisfactory o fwork, as planned. work completion, satisfactory as planned Increaseinnumber of 0 32,000 46,000 residentsprotected from floods. Increasein amount of 0 181ha 259ha developable land Roads: Evidence o f Not yet Partial Full satisfactory completion started completion; completion, o fwork, as planned. work as planned. satisfactory Evidence of increased N O Partial Considerable efficiency inurban evidence evidence evidence road serviceprovision andmaintenance. 21 ResultsIndicatorsfor Baseline MTR ICR 0 PublicSanitation Not yet Partial Full and Evidence o f started completion; satisfactory satisfactory completion work completion, o f work, as planned. satisfactory as planned Institutional Strengthening& Training Evidence of Not yet Partial Fulland satisfactory completion started completion; satisfactory o fwork, as planned. work completion, satisfactory as planned Evidenceo fproactive Not yet Satisfactory Satisfactory and effective started. MTRrating ICRrating managemento f emergingproblems, and timely andhonest reporting o fprogress andconcernsby project managers. ~ 22 Annex 4: Detailed Project Description CHINA: CHONGQINGSMALL CITIESlN?RASTRTJCTUREIMPROVEMENT PROJECT (a) Water Supply Component (TotalCost: US$98.2 million;Y836.5 million) (i) DianjiangCountyWater Supply. This sub-component comprises enhancement of water treatment, and network expansion inthe largest town o fDianjiang-Guixi (pop.94,OOO). [Total cost: US$12.6 million; Y107.4 million] (ii) TongnanCountyWater Supply. This sub-component comprises enhancement of water treatment, andnetwork expansion intwo areas of Tongnan. [Total cost: US$10.6 million; Y90.2 million] (iii)YongchuanTownWater Supply. This sub-component comprises expansion of water treatment capacity, and networks inthree small towns locatedclose to Yongchuan City. [Total cost: US$4.4 million; Y37.3 million] (iv) SongjiRegionalWater Supply.The first phaseofthe schemewill provideraw water to Yongchuan town, located inthe westem expansion area o f ChongqingCity. The schemewill be expanded to cover additional towns inthe future. The component comprises intake facilities onthe left bank o fthe Yangtze river at Maoziyan, first stage pumpingto an elevated settlingtank, a 13.64 km.gravity transmission pipelineto the existing Shangyoureservoir, from which water willbereleased under gravity through an existingtunnel to a river channel near Yongchuan City, and discharged to a 13.2 km. PCCPpipe to supply Yongchuan city. Provision will be made for a connection to supply Shuangzhuthrough branch channel fed from a diversion gate ina weir. Although water willbe suppliedto Yongchuan city only, the schemeisregional innature, becausethe net effect o fthis supply is to release local resources to the other smaller towns inthe area. [Total cost: US$23.4 million; Y199.5 million] (v) TongguanyiRegionalWater Supply. The schemewillproviderawwater to meet the requirements o f 16towns inthe western expansion area, immediately west o f Chongqing City. The project comprises intake facilities on the leR banko fthe Yangtze river at Tongguanyi, first stage pumpingto an elevated settling tank o f 230,000 m31d capacity, gravity transmission pipeline (9.9 km) to the recently-completedMajiagou regulatingreservoir (7.845 million m3),second stage pumpingstation, and about 100 km. pipe network to supply rawwater to 16towns inJiulongpo, Shapingba, andBishan,with branches to Bisheng, Qingjiang, andDingjiatowns. About 30percent o fthe water producedwill be suppliedto the new town o f Huxi, where a 20 km2university complex i s under development. The smaller cities will continue to use the local reservoir sources as longas possible, andthe water fromthe Tongguanyi scheme will be usedto meet the requirements duringthe dry season (thususingthe two sources conjunctively). The scheme will be phased as necessary, andthe works to service the university complex (i.e., Huxicity), andto thenext `valley' startingwiththe tunnel, willbeconstructedafter Huxi andBishan, respectively, commit to buythe raw water (i,e., inan agreement stipulating quality, quantity, duration andprice). The civil works for the intake, pumpingstation, and conveyance mains will be constructed to their ultimate capacity requirements, but the pumpingequipment will bephasedto suit demand. [Total cost: US$47.2 million; Y402.1 million] 23 @) FloodProtectionComponent(TotalCost: US$57.6 million;Y489.4 million) (i) NanchuanCity. River embankment works areproposed onbothbanks ofthe Fengzui River, over a lengtho f 4.8 kmadjacent to the town center. A potential development area o f45 ha, (1,500 existingpop) will be protectedfrom flooding, allowing an expansion of the town, including areas north ofthe river. The project includes 4.0 km o f bundroad, three roadbridges and one footbridge accessing a temple locatedon an island. Approximately 7 kmo f interceptor sewer will be constructed, connecting to an existing wastewater treatment plant. potal cost: US$19.0 million; Y161.6 million] (ii)RongchangCounty. The subcomponent includesthe constructionofflood embankments on bothsides o f the Laixi River over a lengtho f 5.1 kmthrough the town. The scheme will protect an existingpopulationo fapproximately 8,100 from flooding and release 136ha o f land for development. About 6.1 kmo friverside bundroad will be constructed together withthree bridges. [Total cost: US$27.6 million; Y234.1 million] (iii) Thesubcomponentincludesconstructionofapproximately4.1kmofriver Shizhu. embankment onthe left bank ofthe Longhe River, which extends the existing2.2 kmo f embankment protectingthe city center. An additional 1.1kmofprotectedslope i s proposedfor the rightbank o f the river. Iti s proposed to provide footways on the river embankments and interceptor sewersto connect withthe existingwaste-water treatment plant, An additional 78 ha o f existing andpotential development landwill be protected from flooding, including anexistingpopulationo f 3,700. [Total cost: US$11.0 million; Y93.7 million] (c) RoadsComponent(TotalCost: US$93.2 million; Y791.0 million) (i) QianjiangDistrict. The subcomponent comprises the constructionof9.7 kmof urbandistributor roads locatedinthe newurbanexpansion areaandlinkingthe two main growth areas - Zhengyang andZhangjiaba Towns, which have ultimate populationso f 60,000 and 20,000, respectively. The mainnorth-south distributor(Zhengyang Road) will be 8.5 kmlong, with a4-lane cross-section withina 44 mright-of-way: a 1.2kmconnectingroad (widthof 35m) will linkwiththe existingHighway319. Footwaysandsegregatednon-motorized vehicle (NMV)laneswill be includedwithinthe cross-section. A 222 meterlongbridge on Zhengyang Roadwill span the Qianjiang River. [Total cost: US$40.7 million; Y346.1 million] (ii) County. Thesubcomponententailstheconstructionofa4.6kmlinkroad Shizhu betweenNanbinTown (County Town of Shizhu) and the proposedDianjiang-Lichuan Expressway at Sandian. (The expressway ispart of a route betweenChengduand Shanghai). Iti s proposed to construct a 15 mwide Class 2 roadwith a 12msingle carriageway, includingprovision for NMV and slow-moving agricultural traffic. The road will connect with an interchange at Sandian, being constructed aspart o f the expressway (due to open in2008). A substantial proportion o fthe road (1.2 km) will be a viaduct. [Total cost: US$12.3 million; Y104.5 million] (iii)Tongnan County. The subcomponent includesthe construction ofan 11kmlong linkroadto connect Tangba withthe Chongqing-Suining-Chengdu Expressway at 24 Tianjia. The roadis proposed as Class 2, with an 8 mcarriageway and an overall width of 12m. [Totalcost: US$12.3 million; Y104.0 million] (iv) YubeiDistrict. This subcomponent will support the constructionofa 14.4km access road to Tongjing from the Chongqing-Linshui Expressway at Caoping. The road will be Class 2 with anoverall formationwidtho f 10mand a single 7m carriageway; the terrain through which the roadpasses is severe, necessitatingthe constructiono f 1.1km o f viaduct andthree tunnels with a total lengtho f 2.7 km. Tongjing is the major town in the relatively impoverishednorthernportionof Yubei District (the south o fthe District forms part o f the ChongqingCity agglomeration) and contains a national level tourist site (hot springs). [Total cost: US$27.9 million; Y236.4 million] (d) EnvironmentalSanitationComponent(TotalCost:US$11.1million; YS9.7 million) The environmental sanitation intervention for Chongqingcity is intended to support and complement investments made under the CUEP. (i) PublicToiletUpgradingandConstruction. The first phaseofapublic toilet program for Chongqing city includes the upgradingandreconstructiono f about 233 public toilets, andprovision o f three pickup service vehicles. This sub-component focuses exclusively onreconstructiono fthe demolished public toilets, as well as upgrading o fthose inextremely shabby condition, inthe most neededcommunities inthe city. Italso includes a study to develop a strategy for public toilet provision. (e) InstitutionalStrengtheningandTrainingComponent (TotalCost: US$4.4 million;Y37.7million). The following is a list o f technical assistancewhich would be includedinthe project. (i) buildingtosupportto(a)DianjiangandTongnanWaterSupplyCompanies; Capacity (b) parent unitsofDianjiangandTongnan county governments, that manage the companies responsible for water supply operations; (c) ChongqingMunicipal Water ResourcesInvestment Group Co. LtdandYongchuan Water ResourcesDevelopment Co. Ltd;andtheparent unitsofJiulongpoandShapingbaDistrictgovernments, Bishan County government andYongchuan City governments, that manage the companies responsible for water supply operations; (d) Nanchuan, Qianjiang, Rongchang, Shizhu andYubei local governments, that manage the companies responsible for flood protections androads; and (e) development o frecommendations for policy andpricing options for supply o fraw water from the Tongguanyi and Songji regional water supply schemes; Capacitybuildingsupport would include development o f (i) departmental objectives, (ii) job descriptions, (iii) appropriate performanceenhancement measuresandperformance indicators, (iv) management training programs, (v) courses instrategic planning, (f) management information systems, (vi) financial management procedures, and (vii)a program for the regularreviewof water tariffs to ensure financial objectives are met; (ii) forinitiativesinprivatesectorprovisionofurbaninfrastructureservices, Support following onthe recently-completedPPIAFstudy on PSP operations; 25 (iii) todeveloppolicyforpublictoiletprovision; Study (iv) Studyto update ofall available water resources, anda studyto formulate appropriate policies for water resource management inthe water scarce western regionsof Chongqing; (v) Independent monitoringofsafeguardsimplementation; and (vi) Studytours andtraining. ImplementationSupport Included inthe costs of the Water Supply, FloodProtectionandRoads components are consulting services necessaryto support detaileddesignsreview andphysical implementation o f the project investments, as described below: (i) ReviewandCertification(DRC)services,fordesignreviewandcertification@e., Design sign-off), duringdetaileddesign and biddocument preparation(conforming to design and implementation requirements), incorporated the legal agreements; (ii)Construction supervision and contract management under arrangements similar to FDIC terms, for all project towns; and (iii) fordomesticconsultantservicesforpreparationofdetaileddesigns,and Support geotechnical andtopographic investigations, for small utility companies and counties. 26 Annex 5: Project Costs CHINA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT mn) % %Total % %Total Foreign Base Foreign Base Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs A. Water Supply DianjiangCounty 70.5 24.0 94.5 25 5 8.8 3.0 11.8 25 5 Songji RegionalWater Supply 131.0 45.0 176.0 26 9 16.4 5.6 22.0 26 9 Scheme Tongguanyi RegionalWater Supply 265.6 89.9 355.4 25 18 33.2 11.2 44.4 25 18 Scheme TongnanCounty 61.1 18.7 79.8 23 4 7.6 2.3 10.0 23 4 YongchuanCity 25.9 7.3 33.2 22 2 3.2 0.9 4.1 22 2 SubtotalWater Supply 554.1 184.8 738.9 25 37 69.3 23.1 92.4 25 37 B. FloodProtection NanchuanCity 113.6 31.1 144.7 21 7 14.2 3.9 18.1 21 7 RongchangCounty 162.1 47.0 209.1 22 10 20.3 5.9 26.1 22 10 Shizhu County 61.3 21.4 82.7 26 4 7.7 2.7 10.3 26 4 Subtotal FloodProtection 337.1 99.4 436.5 23 22 42.1 12.4 54.6 23 22 C. Roads Qianjiang District 231.3 75.7 307.0 25 15 28.9 9.5 38.4 25 15 ShizhuCounty 71.6 21.4 93.1 23 5 9.0 2.7 11.6 23 5 Tongnan County 74.8 18.8 93.6 20 5 9.3 2.4 11.7 20 5 Yubei District 165.6 46.1 211.7 22 11 20.7 5.8 26.5 22 11 SubtotalRoads 543.3 162.1 705.4 23 35 67.9 20.3 88.2 23 35 D. EnvironmentalSanitation 88.6 0.3 88.9 40 11.1 0.0 11.1 4 E. InstitutionalStrengthening&Training 8.9 22.7 31-6 72 2 1.1 2.8 4.0 72 2 1,532.1 469.2 2,001.3 23 100 191.5 58.7 250.2 23 100 PhysicalContingencies 54.3 24.0 78.3 31 4 6.8 3.0 9.8 31 4 Price Contingencies 120.9 43.8 164.7 27 8 3.3 1.3 4.6 29 2 Total ProjectCosts 1,707.3 537.1 2,244.4 24 112 201.6 63.0 264.5 24 106 27 % %Total % %Total Foreign Base Foreign Base Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs I.InvestmentCosts A, Civil Works 1,084.9 430.7 1,515.6 28 76 135.6 53.8 189.5 28 76 B, Equipment& Materials 7.7 6.2 13.9 44 1 1.0 0.8 1.7 44 1 C. Construction Management 25.1 10.8 35.9 30 2 3.1 1.3 4.5 30 2 Services D. Design Review & Certification 5.0 2.2 7.2 30 - 0.6 0.3 0.9 30 E.Technical Assistance 40.9 14.4 55.2 26 3 5.1 1.8 6.9 26 3 F.Training 1.3 5.1 6.4 80 - 0.2 0.6 0.8 80 G. LandAcquisition& Resettlement 196.0 196.0 - 101 24.5 - 24.5 - 10 I. Engineering& Management 171.2 -- 171.2 91 21.4 - 21.4 9 1,532.1 469.2 2,001.3 23 1001 191.5 58.7 250.2 23 100 Physical Contingencies 54.3 24.0 78.3 31 41 6.8 3.0 9.8 31 4 Price Contingencies 120.9 43.8 164.7 27 8 3.3 1.3 4.6 29 2 Total ProjectCosts 1,707.3 537.1 2,244.4 24 112 201.6 63.0 264.5 24 106 28 Annex6: ImplementationArrangements CHINA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT 1. A LeadingGroup, headedbyaDeputyMayor, hasbeennominatedto guide formulation and givepolicy direction for the preparation andimplementation o f CSCP. (It i s the same leading group that playeda similar role for CUEP.) The LeadingGroup has designated the Chongqing Development andReform Commissionas the municipal agency responsible for managing CSCP implementation. The Commissionhas designated the existing ChongqingMunicipalProject Management Office (CPMO) to manageand coordinate the implementationo f CSCP. 2. CPMO's responsibilitiesinclude: (a) overall project coordination, management and monitoring; (b) annual budget preparation; (c) project-wide quality assurance; (d) progress reporting (on physical implementation, safeguards implementation and financial management), to CMGandthe Bank, includingcost management, projectimpact andenvironmentalimprovement assessment; (e) interagency coordination andprocurement support; and(0training and technical assistancefacilitation. The participatingcitiesldistrictslcounties (see Table below) have also established andstaffedproject management offices (PMO). The responsibilitieso fthe PMOsat the c i t y l d i s ~ c ~ c olevelyare to guide the preparation and execution o f the project components ~ t withmtheirjurisdictions. They willreceive functional guidance from, andreportto the CMPO. The skill mix of the CPMO andPMOs will be adjusted as necessaryto reflect the needso fthe various phases ofprojectpreparation and implementation. 3. The agencies appearing inthe table belowhave beendesignated as beingthe project ownerlimplementingagency, andwithresponsibility for the operationandmaintenance o f the proposedproject-financed facilities when completed. All implementing agencies are ownedby CMGor the participatingcitiesldistrictslcounties, witha legalperson, withpowersto borrow and repay loans. They have also been designatedto (a) borrow (and repay) WorldBank loan proceeds; (b) enter into a subsidiary loan agreement with the parent d i s ~ c ~ c i t y l c o ~and t y ;(c) raise the necessarycounterpart funds. Itis a condition o f effectiveness o f the Loanthat at least six Subsidiary LoanAgreements, including CWRC, will have been authorizedor ratified. Table: InstitutionalArrangements 29 (9 Qianjiang District QWG Qianjiang District Government (11) .. ShizhuCounty SCGC SWPC (iii) TongnanCounty TRDC TRDC (iv) Yubei YTIC Yubei District Government EnvironmentalSanitation (i) II Chongqing City Public ICESC I CESC Toilet Program -aregionalschemecovering,initially,onecounty-levelmunicipality(i.e.belowadistrictbutabovea 11 county) -Yongchuan City. -aregionalschemecovering16townsinJiulongpoandShapingbadistrictsandBishancounty, 21 CESC Chongqing Environment & Sanitation (Group) Co. Ltd, established inDecember 2002 under the Company Act CWRC Chongqing MunicipalWater Resources InvestmentGroup Co. Ltd, established in November 2003 under the Company Act DWSC DianjiangCounty Water Supply Co. Ltd, established in 1964 EWRC Embankment LiminWater Resource Company, responsible for maintainingthe embankment works, reporting to the RongchangWater ResourcesBureau NDCC NanchuanUrbanNew City Development & Construction Co. Ltd, established in November 2003 under the Company Act QWG QianjiangDistrict Real Estate Group, established inJune 2003 under the Company Act RWDC Rongchang County HongyuWater Resources Development Co. Ltd, established inApril2001under the CompanyAct SCDC ShizhuCounty City Construction Comprehensive Development Company established in 1986 SCGC ShizhuCommunications Construction General Company, established in 1996 SWPC ShizhuCounty Water Resource & Power Development Company Ltd, established in 1996under the Company Act TRDC Tongnan County RoadDevelopment Co. Ltd, established in 1998 under the Company Act TWSC TongnanWater Supply Company, established in 1964 YWDC Yongchuan Water Resources DevelopmentCo. Ltd, established inApril 2002 under the Company Act YTIC Yubei Tongda Infrastructure Corporation Ltd, established inApril 2002 under the Company Act More detailedinformation onthe above companies is available inProject Files, Frameworkfor ProjectPreparationandImplementation 4. Principlesfor SubcomponentFormulation,DetailedDesignandImplementation. In the feasibility study andpreliminary design stage, subcomponents selected for Bank financing were screenedfor cost-effectiveness, consistency with incremental development, and in conformity with agreeddesign criteria, designprinciples andrealistic unit cost rates. The role o f the DesignReview Advisory (DRA) consultant duringproject preparationwas to review and agree with project owners on these issues for inclusion o f subcomponents for Bank financing. 30 Generic issues that wouldbe addressedfor the water supply subcomponents are: (a) Population projections. Reasonablepopulation growth projectionsmustbe adopted for planningpurposes. (b) Waterdemandprojections. Comprehensive water consumptioncriteriausedfor developing facilities are excessive, and shouldbe revised. Domestic water consumption of 95 lpcd (II9 lpcd with leakage allowance) recommended in GBiT JO33112OO2should be adoptedfor developing water demand and wastewatergenerationprojections. (c) Wastewatergenerationprojections, As discussedabove, wastewater generation projections needto be similarly revisedfor the proposed wastewater investments. 5, DetailedDesignReview and Certification (DRC). Inthe detailed design stage, the above process will be continuedbythe DesignReview and Certification (DRC) consultant. Project owners will review changes suggestedby, andagree with, the DRC, and obtain `sign o f f for the subcomponents to be eligible for funding, The agreedFramework allows financing only least cost and sustainable investments, which avoidundue burdens onproject owners. If reasonable understanding cannot be reached with the counties andor project owners, the DRCis authorized to recommend exclusion o f such subcomponents from financing under the project. The following guidelines have been agreed: (a) The international consultant will set up guidelines for feasibility study analyses, field investigations, design criteria (actual pollutionloading, realistic demand projections, etc.), detailed design preparation, cost estimating (using market rates; not quota or "norm" rates), procurement planning,implementation arrangements, good design and construction practices (incorporated in an OperationsManual). (b) The internationalconsultant will endorsework (i.e., sign off) at the following key stages: (i) FeasibilityStage,confirmandsignoffonconsistencywiththeactual At developmental context, informedbymaster plans or development plans, satisfactory options analysis, preliminary analysis o f construction, accuracy, agreement on design criteria, and treatment process. (ii) DetailedDesignStage:,confmandsignoffontheuseofreliablewatersupply At source, topographic andgeo-technical information, detaileddesigns, safeguards (EA, EMP, Resettlement Policy Framework andRAPS),specifications and cost estimates, and design accuracy. (iii)BiddingStage:reviewandcommentonbiddocuments,biddingprocess,award At recommendation, and mobilization, and confirmation that comments and suggestions o f internationalconsultant have beenincorporated. (iv) During~ ~ ~ l e ~ e n t a provide Project Management, andConstruction t i o n : Supervision andContractManagement services, under arrangements similar to FIDK terms (non-co~~liancemay result in no Bank~nancingor disapproval of variations). (v) Certijkation. The Bankshouldbeprovidedevidence ofjoint sign-offbyDRAand localdesign institute o f feasibility study andpreliminary design, detailed designs, drawings, technical specifications, and draft biddingdocuments by DRCand the design institute, and preparation o fTORhpecifications for topographic andgeo-technical investigations, andthe review o ftheir outputs. Where suchreasonable agreementsare not possible, the D M R C consultant willbe requiredto state the disagreement andrecommendthat such subcomponents not be included for financing. The international DRC consultant will informthe CPMO andthe 31 Bank o f specific cases of departure or non-compliance from the framework duringpreparationor implementation. Basedon such information, the Bankmay take action appropriate to the degree o f the non-compliance. 6. Construction SupervisionandContractManagement. As withthe ongoingCUEP components, construction supervision andcontract management services will beprovidedby a team, under the leadership o f an internationalconsultant. Inaccordance with current practice, the ChiefResident Engineer(CRE) will provide overall oversight andbriefreview of draft bid documents prior to bidding, andwill have the comprehensive powers o f the Engineer (as representative of the Employer) to enable himto provide the full range o f services, under arrangements similar to FDIC terms. 7. ProjectManagementandCoordinationby CPMO. The CPMO is expectedto playan important role inguidingthe small towns intheir preparationand implementation activities, arranging (ie., contracting) umbrella consultant services for design reviewand certification, and construction supervision, andprovide oversight withrespect to the project towns' compliance withthe provisions of the legalagreements. Inreadiness for thistask, staffresourceshavebeen strengthened, andmore specialist resources (for technical and safeguardsmatters) will be added. The list o f fmctions to be performedbythe CPMO is: (a) Coordinate, facilitate and supervise the preparationand implementation activities inthe small towns; (b) Ensure due diligenceinprojectimplementationbyallproject entities; (c) Advise the Bankinthe case of disagreements over designreviews; (d) Engagethe consultants for (i) designreview and certification ORA services); (ii) construction supervision and contract management; (iii) institutional strengthening and training; (iv) initiatives for PSP operations, and (v) anupdatedstudy o f all available water resources, including assessment o f groundwater availability and the development o f policies for water resource management inthe western regions o f Chongqing; (e) Appoint localtendering companies to assistsmall cities to prepare biddingdocuments in accordance with Bankprocurement procedures; (f) Prepare procurement manual andfinancial management manual to serve as a guideline for PMOS; (0 Assist andoverseeprocurement activitiesbyprojectagencies; (h) Supervise the implementationofsocialandenvironmental safeguards; (i)Ensurethatimplementingagenciesobservethefinancialmanagementsystem,including project account keeping and auditing; (j) Coordinateandsupervise capacity buildingactivities insmalltowns; (k) Serve asthe focal point for thisprojectamongthe Bank, central, provincial govemments andproject implementationentities, to advise andguide implementing agencies, andorganize and implement training programs; (1) Prepare consolidated municipalproject progress reports, andsubmitreports to CMGas necessary, andwith a halfyearly progressreport to the Bank describing physical and safeguards implementation, and consolidated financial statements; (m) Maintainconsolidated project cost information, update themperiodically as necessary, to monitor the utilization o floanproceeds; and (n) Reviewwithdrawal applications submittedfromcounty gove~ments~mplementing agenciesbefore sending them to the Finance Bureau for processing. 8. CMGhas reinforced this experienced CPMO recently with new staff for financial and procurement functions. These new staffneed time to gain experience, and would require 32 guidance and support from the current more experiencedmanagement. The CMGhas given assurances that itwill provide additional inputsas necessary. 9. Additional management challenges will be posedbythe relatively large number of implementing agencies, including enterprises, which have been formed only recently. One such enterprise is the CWRC, which i s a very large utilitycompany that will provide services inthe areas covered by the Tongguanyi and Songji Regional Water Supply schemes. This company formed in2003, will own, rehabilitate, construct town facilities, andmanage all water supply, wastewater and water resources inthe area under itsjurisdiction. The company has already taken over water supply facilities infive towns, and has one wastewater treatment plantunder construction. This company will supply raw water inbulkto Yongchuan city initially. 33 Annex 7: FinancialManagementandDisbursement Arrangements CHINA: CHONGQINGSMALL CITIES INFRASTRUCTUREIMPROVEMENT PROJECT Summary ofthe FinancialManagementAssessment 1. The Financial Management Specialist (FMS) conducted an assessment o fthe adequacy o f the project financial management system o fthe Chongqing Small Cities Improvement Infrastructure Project (CSCP). The assessment, basedon guidelines issuedby the Financial Management Sector Boardon October 15,2003, concludedthat the project meets minimumBank financial management requirements, as stipulated inBPlOP 10.02. Inthe FMS' opinion, the project will have inplacean adequateproject financial management systemthat canprovide, with reasonable assurance, accurate and timely information onthe status o f the project inthe reporting format agreed with the project andas requiredbythe Bank. 2, Fundingsources for the project includeBankloanandcounterpart funds. The Bankloan proceeds will flow from the Bankintothe project's Special Account to be set up at andmanaged bythe ChongqingMunicipalFinance Bureau(CFB), to the relevantcityldistrictlcounty finance bureaus to the project implementingentities, andfinally to contractors and suppliers. The Bank loanwill be signedbetween the Bank andthe People's Republic o f China (PRC) through its MinistryofFinance(MOF), andon-lendingarrangementsfor the Bankloanwillbe signed between PRCthrough its MOF, and ChongqingMunicipalitythrough its CFB, betweenCFB and relevant cityldistrictlcounty govemments through their respective fmance bureaus, and finally betweenthese city/districtlcounty finance bureaus andimplementing entities. Interms o f disbursement technique, the project will disburse basedonthe traditional disbursement techniques, and will not use PMR-based disbursements, inaccordance with the agreement between the Bank andMOF. Counterpart funds will be funds from implementing agencies, loans from localbanks, and govemment appropriations. Audit Arrangement 3. The Bankrequires that project financial statementsbe audited inaccordance with standards acceptable to the Bank. Inline with other Bank financedprojects inChina, the project will be auditedinaccordancewith InternationalAuditingStandardsand the Government AuditingStandardsofthe People'sRepublic ofChina (1997 edition). The ChongqingMunicipal AuditBureauhasbeenidentified as auditors for the project. Annual auditreportswillbe issued inthe nameof ChongqingMunicipalAuditBureau. 4. The annual audit report o fproject consolidated financial statements will be due to the Bankwithin 6 months after the endofeachcalendar year. Thisrequirementwillbe stipulated in the loan agreements. The responsible entities andtiming are summarized below: Component Submittedby Due date Consolidated project financial ChongqingMunicipal ManagementOffice June 30 statements o fthe WorldBank`s Capital Utilization (CPMO) 5. Inaddition, annualauditreportsonfinancialpositionandoperatingresultsofthe implementing agenciesresponsible for the water supply component, inbothEnglishand Chinese, will be due to the Bankwithin 6 months after the end o feachcalendar year. The financial 34 statements for these entitiesare notfiduciary requirements, butrather for sustainabilitypurposes. The requirementsfor these audits will not be includedas partofthe loancovenant but rather includedinSchedule2 ofthe ProjectAgreement. Forthe FloodProtection, Roads and EnvironmentalSanitationcomponent, only the projectaccounts ofthe agencies will be subject to audit, together withthe Special Account and StatementsofExpenditures. Below is the listingof allthe implementingentitiesfor this project: rater Supu!v: DianjiangCounty Water Supply Co. Ltd(DWSC); ChongqingMunicipal Water ResourcesInvestment Group Co. Ltd(CWRC); TongnanWater SupplyCompany (TWSC); andYongchuanWater ResourcesDevelopmentCo. Ltd(YWDC). Flood Protection: NanchuanUrbanNew City Development& ConstructionCo. Ltd (NDCC); RongchangCounty HongyuWater ResourcesDevelopment Co. Ltd(RWDC); and ShizhuCounty City ConstructionComprehensive DevelopmentCompany(SCDC). Roads: QianjiangDistrict RealEstate Group (QREG); Shizhu Communications ConstructionGeneral Company(SCGC); Tongnan CountyHighwayDevelopmentCo. Ltd(THDC); andYubeiTongda InfrastructureCorporationLtd(YTIC). Env~~onmentalSanitation: ChongqingEnvironment& Sanitation(Group) Co. Ltd (CESC). FinancialManagementandReportingArrangements 6. ImplementingEntity. All ofthe projectcomponents are locatedinChongqing Municipality. The PMOwill continueto bethe ChongqingMunicipalManagement Office ofthe World Bank's CapitalUtilization(CPMO), which is currently managingandcoordinatingthe ongoingChongqingUrbanEnvironmentProject. CPMO is also responsible for preparingthe consolidated projectfinancial statements. At the city/district/county level, projectmanagement offices (PMO) have beenestablishedto providepolicy guidance andto coordinatethe preparation and implementationofthe various project componentsat the local level, The project components will implementedby localcompanies that do nothave experiencewithpreviousBank-financed projects. However, these are all existingstate-owned commercialenterprisesthat haveexperience with operatingacompany. Fulldetails, includingabrief descriptionofeachagency are included inAnnex 6. Inregardsto the project-relatedaccounts, these companieswill reportdirectly to the ChongqingFinanceBureau. 7. FundsFlow. Fundsflow for Bank loanwill follow Bank andMOF requirements. One Special Accountwill be establishedandmanagedby CFB, which hasbeencompetent in - processingwithdrawal applicationsand overseeingfundflows for several previousBank financed projects. The funds flow will be as follows: The World SA --+ City/County/ Implementing ---+ Contractors1 Bank * managed District Entities Suppliers I Finance I Bureau I I Counterpart funds will follow domestic procedures depending onthe source offunding. 35 8. Accounting Organizationand Staffing. Adequate project accounting staffwith educationalbackground andwork experience Commensuratewiththe work they are expected to perform, i s one ofthe factors critical to successful implementationof project financial management. Basedondiscussions, observation, andreview o f educational backgroundand work experience o fthe staff identified for financial and accounting positions inimplementing entities, the FMSnotedthat the staff is qualified andappropriate to the work they are expectedto perform 9. To strengthen financial management capacity and achieve consistent quality o f accounting work, the ChongqingFinance Bureauwill prepare a project financial management manual {the Manual). The Manual will provide detailed guidelines on financial management, internal controls, accounting procedures, kindandasset management, and withdrawal application procedures. The Bank hasreviewed a draft o fthe Manual andprovidedfeedback to the ChongqingFinance Bureauonthe suggestedchanges. The final versioin o fthe Manual will be distributedto all the relevant financial staff before loan effectiveness, 10. Financialand accounting staff ofthe implementing entities currently lack experience o f working on a Bank-financedproject. To ensure that staffrecruited for the project will have good understanding o f Bankpolicies andrequirements, a well-designed and focused training program will be providedbyCFB and CPMO to all relevant staffpriorto effectiveness. The training program will include, butnot be limited to the following: 0 Bank's financial management policy anddisbursement procedures 0 Fundassetlcontractmanagement 0 Format and content ofproject financial statements e Audit requirement 11. Accounting PoliciesandProcedures. The administration, accountingandreportingof the project will be set upinaccordance with the Circular #13: "Accounting Regulations for World BankFinancedProjects", issued inJanuary 2000 byMOF. The circular provides in-depth instructions o f accounting treatment o fproject activities and covers the following: 0 Chart o f account 0 Detailedaccounting instructions for eachproject account 0 Standard set o f project financial statements 0 Instructions on the preparationo fproject financial statements 12. The standard set o fproject financial statementsmentioned above, has been agreedto betweenthe Bank andMOF, andapplies to all Bankprojects appraised after July 1, 1998 and includes the following: 0 Balance sheet 0 Statemento f source and use o f hndbyproject component 0 Statemento f implementation o f loanagreement 0 Special account statement 13. Eachof the implementing entities will manage, monitor andmaintainrespective project accounting records. Original supporting documents for project activities will be retainedby originating implementingentities. Inaddition, eachimplementing entity will prepare financial statementswhich will then be submittedto CPMO. CPMO will review and approve these 36 financial statements. Subsequently, CPMOwill prepare consolidatedproject financial statements for submission to the Bank for review andcomment ona regular basis. 14. ReportingandMonitoringofFinancialStatements. Inline withthe newly issued Financial MonitoringReport (FIvR)guidelines, the un-audited consolidatedproject financial statement will be submitted as partof FMRto the Bank on a semi-annual basis (by August 15 and February 15 of the subsequent year). 15. InternalAudit. There isno formal independentInternalAudit department for the project. Some of the implementing entities have an internal audit department. However, this will not impact the project's financial management as CPMOmanagement and monitoring, and yearly external audits, will serve as the mechanismto ensure that financial management controls are hnctioningappropriately. 16. InformationSystem. There isno uniformaccounting software beingusedbythe implementingentities, although all the implementing entities involved are or will be using accounting software for their current activities. It is uncertain at this stage ifthey can integrate the project activities into their current system. The F M S will review the adequacy of their financial accounting and reporting systemprior to project effectiveness. DisbursementArrangement 17. Inline withthe agreement betweenthe BankandMoF,the project will usetraditional disbursement techniques andwill notusereport-based disbursement. 18. Bank loan proceeds wouldbe disbursed against eligible expenditure as shown inthe table below. ExpenditureCategory LoanAmount FinancingPercentage in$million Civil Works 165.00 82%of expenditures Goods 0.50 100%of foreign expenditures, 100%o flocal expenditures for locally manufactured goods (ex-factory), 75% of local expenditures for other items procuredlocally Consultancy Services and 11.50 100%o f expenditures training Front-end Fee 0.90 100% Unallocated 2.10 100% TotalAmount ofthe 180.00 Loan 37 19. RetroactiveFinancing. Retroactivefinancing inthe amountof$3,000,000 is provided to finance anticipated expendituresincurredfrom March 1,2005 for works andconsulting services. 20. Disbursement methods, such as replenishment,reimbursement, direct paymentand specialcommitment, will be availableto the project. The SOE limitswill be set up inline with procurementpost-review threshold, as follows: ExpenditureCategory ContractsLess thanUS$ Equivalent Civil Works $5,000,000 Goods $500,000 Consultancy Services andTraining $100,000 IndividualConsultants $50,000 21, One special account (SA) will be established inCFB. The authorizedallocation of SA is proposednot to exceedUS$lO million which is equivalentto about 4 months o feligible expenses reimbursableviathe specialaccount. The initial authorizedallocation from the Bank would be US$7 million, untilthe aggregate withdrawals and outstandingSpecialCommitments will be equalto or exceedUS$70 million. The Bank funds would be disbursedfrom the special account set up at CFB to local governmentfinance bureaus, then to the project implementingentities, and finally to suppliersandcontractors. Approval by Implementing cityldistrictfcounty Approvalby Approval city/district/county by CFB World Entities PMOS -. finance bureaus FinancialManagementAction Plan 23, The following time-bound actions areproposed: Acition Responsibleperson CompletionDate 1. FMquestionnaire IIYubeiTongda andCPMO - I1Before loan disbursement completedby Yubei Tongda Infrastructure Corp. and provided to the B&k 2. Recruitment of all CPMO Before loan disbursement requiredfinancial staff at all implementingagencies, and Bank confirmation 38 24. SupervisionPlan. A detailed supervision planfor this project willbe includedas parto f the China Audit Strategy document which i s currently inprocess. This document will take into consideration the size o fproject and the riskidentified. 39 Annex 8: Procurement CHINA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT A. General 1. Procurementfor the proposedproject would be carriedout inaccordance with the World Bank's "Guidelines: ProcurementUnder IBRDLoans and IDA Credits" dated May 2004, and "Guidelines: SelectionandEmployment o f Consultants by World BankBorrowers" datedMay 2004, andthe provisions stipulated inthe Legal Agreement. For each contract to be financedby the Loan, the different procurement methods or consultant selection methods, the needfor pre- qualification, estimated costs, priorreview requirements, andtime frame have been agreed betweenChongqing Municipality and the Bank, as contained inthe Procurement Plan. The Procurement Planwill be updated at least annually, or as required, to reflect the actual project implementation needs andimprovements ininstitutional capacity. 2. ProcurementofWorks.Works procuredunderthisproject wouldinclude: roads, water supply facilities, floodprotection embankments, andpublic toilets. Procurement will useChinese ModelBiddingDocuments (MBDs)agreedwiththe World Bank, andthe Bank's Standard BiddingDocuments(SBD) when anappropriate MBDisnot available for allICB andNCB contracts. Contracts estimated to cost above US$15 millionwill be procuredthrough ICB procedures; those below US$15 million, and above US$300,000, throughNCB procedures; and those belowUS$300,000 usingthree-quotations (which will apply to the Public Toilets component). Electrical andmechanical equipment for water supply facilities will be procured under the relatedcivil works contracts. 3. Procurementof Goods. Goodsprocuredunder this projectwould include equipment for the ISTcomponent andmaintenance vehicles for the public toilet upgradingcomponent. Vehicles andequipment will be procuredunder goods delivery contracts. Procurement will use the Chinese Model BiddingDocumentsWDs) agreedwiththe World Bank, andthe Bank's Standard BiddingDocuments(SBD), when an appropriate MBDi snot available for all ICB and NCB contracts. Contracts estimated to cost above US $500,000 will be procuredthrough ICB procedures; those below U S $500,000 million, and above US$lOO,OOO, throughNCBprocedures; andthose belowU S $100,000, through shopping. 4. DirectContracting.Direct contracting(not Bank-financed) that amounts to about $1.25 million will be used for contracts with the local power companies to provide electricity supplies to pump stations, buildings,and facilities under the project. 5. PriorReviewRequirements.All contracts estimated to cost above US$5 millionfor civilworks andUS$500,000 for goods per contract, and all direct contracting will be subject to prior review bythe Bank. 6. Selectionof Consultants. International consultants willbe selected for: institutional and financial strengthening, design review and certification, construction supervisionand contract management, updating of water resources study andinitiatives for PSPoperations. Shortlists o f consultants for services estimated to cost less than US$300,000 equivalentper contract may be composed entirely o fnational consultants, inaccordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines. Quality andCost Based Selectionwill apply to contracts with the 40 estimated cost o fUS$200,000 or above each. Quality BasedSelection may apply to contracts below US$200,000 each, andselection basedon consultants' qualificationmay apply to contracts below US$lOO,OOO. Some consulting services may be providedbyindividual consultants. 7. Procurementprocedures and SBDs to be usedfor eachprocurement method, as well as model contracts for works andgoods procured, will be presented inthe procurement manualto be preparedby Chongqing MunicipalPMO. B. Assessment ofthe agency's capacityto implementprocurement 8. Procurementactivities will be carried out by each implementingagency under the coordination o fthe CPMO andthe city/district/county PMOS,with assistancefrom the procurement agents (tendering companies and international consultants). At the municipal level, a procurement officer has beendesignated to be responsible for procurement, under direct leadership from the CPMO Director. International consultants will work closely with the CPMO to manage the procurement activities. At the implementing agency level, two persons have been appointedfor procurement ineachimplementing agency; one for coordinating government authorities andthe other at the working level for implementation. China Technology Import and ExportCorporation, consortium of CMC International Tendering Company andCITIC InternationalTendering Company, have beenrecruitedto be the procurement agents for this project. China Technical Import andExport Corporation andCMC InternationalTendering Company worked on the on-going ChongqingUrbanEnvironment Project, andprovidedvery valuable support to the project. 9. An assessment o fthe capacity o fthe Implementing Agency to implementprocurement actions for the project was carried out by an accredited procurement specialist on January 31, 2005. The Procurement AssessmentReport i s contained inthe ProjectFiles. 10. The key procurement risk under the project i s the large number o f implementing agencies, andtheir lack o f experience with WorldBankprocedures. Corrective measureswhich have been agreed are: procurement will be under direct coordination and controlby the CPMO; the project will include a component to recruit international consultants as Engineer for construction supervision and contract management, includingprocurement management; and experienced design institutes andtendering companies are recruitedfor project preparationand procurementassistance, 11. The overall project risk for procurement i s average. C. ProcurementPlan 12. At appraisal, CMGhaddeveloped aprocurementplanfor project implementationwhich provides the basis for the procurement methods. The final planwas agreedbetweenCMG and the Banktask team on February 5,2005, and i s available with the CPMO and inthe project files. Itwill also be available inthe project's databaseandinthe Bank's externalwebsite. The Procurement Planwill be updated inagreement withthe task team annually, or as requiredto reflect the actual project implementation needs andimprovements ininstitutional capacity. 41 D. Frequency ofProcurementSupervision 13. Inadditionto thepriorreviewsupervisiontobecarriedout fromBankoffices, the capacity assessmentofthe ImplementingAgency hasrecommendedsupervision missions every twelve months to visit the fieldto carry out post review o fprocurement actions. I m N \o E: . . . s 2 3 2 cE: m 0 s 2 s t s! a m \o IA d 2 0 Zi 3 2 v) f . . -s f 3 3 IA 0 2 I 2 0 z z o\ P v) 2 3 N z 0 z8 sB8 6) 13 'c! 0 2 0 c) \o d v3 v3 . . . e - 2 r 3 e 3 0 0 e 3 3 3 2 v) 0 v) 0 10 0 vi 0 m m 0 vi m t- W 3 . . s . . z f t 3 3 0 vi 8 f3 E f3 E 0 F z !2 02 0 2 !2 0 2 2 m !2 z vi 0 m d 3 P 0r? OI vi 2 3 m 2 . 3 z 0 v, ee!E 0 2 0 z 0 z t s:* a- M 2 0 N 2 . . - v, Q\ 0 v) 0 I Lo o\ L 0 z W 'c! 13 N 8 E b Y 4-l 0 2 rg 43 ili f? si 0 2 0z 0 z m U z rh x 43 04 0 d z 0 2 c 2 N 4-l s N d 9 N m 3 d 02 e, 2 2 0 z 0 z B 0 z 0 z I o\ a 0 '? 0 N s 0 z 0 0 0 v! c) 0 N 2 s n 2 s W 4- W W N m 2W $ W s m 0 z ch 2 a0 c1 v) N 3-z z m $5 8 b) v1 w23 0 m vi VI 3 3& e VI 0 3 2 % 3 c . c - 3 M -. 0 0 3 VI vi 0 0 0 d i;! a 0 z 3 m r 4 2 x 00 3 P VI B 3 Yr) vi z"* Q l- W 0 Q M 8 I" Bvl M I 0 z 0 z 0 2 0 z 8 um z z 3 Q W zli * m E: m W 03 f; . c 3 . ri W E: E: 3 --. s 0 p! E 0 z 0 z - 0 2 m 2 W - 0 2m 0 r- f f 3 2 vi . VI W W W c e e N 3 43 / s 4 I 0 2 0 N 5 . . . ss 3 0 W 8 4: e a vi 0 0 vi 2? I 0 F;; 2 F;; 2 I 0 z 8 8 ) 52 0 2 I 0 z 0 z 0 z u m um z i2 8z z N 2 N 2 u) 2 I 2 0 . VI m s 0 - .3 3 0 3 - 0 2 00 2. Consulting Services 2 3 4 5 5 Ref. No. Description of Estimated Selection Xeview Expected Assignment Base Cost Method iy Bank Proposals (Ymillion) Prior I 3ubmission Post) Date Package Financialhstitutional QCSS ?rior 4 Supporb'Training and Equipment. A1,DWSC & TWSC 10.7 Water Supply Cos. CWRC and YWDC A2. Dianjiang, 3.1 Tongnan, Bishan& Yongchuan Counties, Jiulongpo & Shapingba Districts A3.Regionalwater 1.o supplyandwastewater pricing study Al&A2. Equipment& 4.0 Software Al& A2. Training 4.0 Total 22.8 Package A Package B B1 support for PSP 2.4 NBF Operations B2 Update o f Assessment 3.3 QCSS Prior o f Water Resource Availability inWestern Chongqing& Development of Policies andProcedures for Management o f Water Resources B3 Independent 0.3 QBS or Prior Monitoringo f CQS Safeguards Implementation B4 Public Toilets Study 0.4 QSS or prior CQS Total Package 6.4 R 57 IPackage Training & StudyTours 2.4 N/A C Total PackagesA, B & C 31.6 Package Construction 35.9 QCBS Prior D Supervisionand ContractManagement Package DesignReviewand 7.2 QCBS Prior E Certification The allocationof subcomponentsbetweenthe two tenderingcompanies is as follows: ProcurementAgent Component ImplementingAgency CMClCITIC TongguanyiWater ChongqingWater ResourcesInvestmentGroup Supply Co. Ltd. SongjiWater ChongqingWater ResourcesInvestmentGroup Supply Co. Ltd. YongchuanWater YongchuanWater ResourceDevelopmentCo, Supply DianjiangWater DianjiangWater Supply Co. Supply TongnanWater TongnanWater Supply Co. Supply TongnanRoads TongnanRoadDevelopmentCo. YubeiRoads TongdaInfrastructureCo. NanchuanRiver NanchuanXincheng Construction& Embankment DevelopmentCo. Ltd. RongchangRiver RongchangWater ResourceDevelopmentCo. Embankment Ltd. CTIEC QianjiangRoads QianjiangRealEstateGroup ShizhuRoads ShizhuCommunicationConstructionCo. ShizhuRiver ShizhuUrbanConstructionComprehensive Embankment DevelopmentCo. ChongqingPublic ChongqingEnvironment& SanitationHolding Toilets GroupCo. Ltd. 58 Annex 9: EconomicandFinancialAnalysis CHINA: CHONGQINGSMALL CITIES INFRASTRUCTUREIMPROVEMENT PROJECT (A) EconomicAnalysis 1. The project will support urbaninfrastructure development o fthe small cities andtowns in Chongqing Municipality. Itprovides a comprehensive assistancepackage to the municipality by financing components inthree major areas: urbanroads, water supply, floodprotection (embankments andbundroads). Together, these components will enhance these small cities' overall economic developmentpotential through abettertransportation network, healthier environment, strengthened flood protection, and improved livability. CentralAssumptions a Shadow pricingandconversionfactors(e.g., of foreign exchange, wages) have notbeen applied as marketprices inChongqing Municipalityfor the mainelements o f cost are not at variance fromtheir economic values. a The discountratehasbeentaken to bethe cost ofcapital inChinafor mediumrisk investments, currently assumedto be 10percent per annum. costs 2. Component costs include capital costs, as well as operations andmaintenance (O&M) costs. Capital costs cover the cost o f land, civil works and equipment, and the costs o f any associated resettlement; capital costs have been phasedover the constructionperiod. O&M costs havebeen identified for the projectperiod following commissioning. Bothcapital and O&M costs have been adjusted to remove the effects o f inflation, duties andtaxes. A. RoadComponent 3. Objective. The primary objective o fthe roadcomponent i s to improve transportationbetween and withinthe participatingsmallcities, byupgradingandconstructingurbanandaccessroads infour districtslcounties. The component will also stimulate economic growth andincrease the livability o f these cities. 4. Alternatives considered.The pros and cons o f different alternatives were carellly examined duringpreparationofeachsubcomponent. InYubei, for example, four altemative alignments were considered and an altemative terminationpoint o froadwas examined. The final option was selected on basis o f cost effectiveness andresettlementlenvironmentalimpact. InTongan, the alignment o fthe 4 km inthe middleoftheproposedroadwas consideredbyexamining four alternatives, andthe original scheme was revised significantly. InShizhu, since an expressway i s planned inparallel to the proposed road, the length o f the roadwas scaled down from 55 kmto 5 km, and the road widthwas reducedas well. 5 . Benefits. The expected incrementalbenefit o fthe roadsubcomponents includesbothdirect and indirect benefits. Direct benefits are traffic-related, such as reducedvehicle operating costs (VOC), and reducedtravel time for passengerand freight traffic. Traffic benefits also includereducedcost o f accidents andreduced damage to transported goods, for which the data are difficult to obtain. Indirect benefits are many, e.g., enhancedproductivity and improved livability o fthe cities involved. The cost- 59 Roads EIRR Sensitivity 10% reductionin 10% increaseintraffic traffic Yubei: Tongjing- 11.9% 10.5% 10.8% CaopingRoad Tongnan: Tian- 17.7% 16.3% 16.0% TangbaRoad Shizu: Nanbin- 16.8% 15.49% 15-4% BayangtongRoad Qianjiang: 12.5% 10.4% 10.1% ZhyengyangAvenue B. FloodProtectionComponent 6. Objective. The primaryobjective o f the floodprotectioncomponent i s to reduce future flood damage through constructiono f embankments along with bundroads. Itwill also improve the environment andincrease the livability ofthe cities involved, 7. Alternatives considered. The advantages and disadvantages o f alternative phasing options, bridge locations andflood protection levels were carefully reviewed inassociation with construction costs. The different technical designs, such as embankment side slope protection@e., grassing vs. hardrevetment), configurationo f drainage channels, standards for roaddesign, bundroad width (i.e., two lanes [8m, 12m] vs. four lanes [22,5m, 26m], and configurationo f sidewalks, parking, andaccess and egress, were all carefully reviewed. The review ledto, for example, reductioninlength o fbundroad inRongchang and connectingwith the alternative localroadnetwork inNanchuan. Adjustments were also made to minimize the environmentalimpact inShizhu. 8. BeneJts. The expected incrementalbenefits o fthe flood protection subcomponents are quite substantial. Since most of the riverside cities inChongqing have no flood-protection embankments along the river, they are vulnerable to flood damages. There are, therefore, two major benefits under the project. First, the reducedcost o fthe flood damagesduringflood years, such as those causedto personal property, enterprises andpublic facilities. These benefitswould also increase over time as the area becomes more developed inthe "with" project case. Data on flood frequency and flood loss for each section o fthe riverbank were used inthe calculations. Second, indirect benefits, which account for the saved flood costs to adjacent areas, andto subsequentperiods due to delayedor lack o fprovision o fraw HDMis amodeloranalyzing economicjustification ofroadprojects whosebenefitsresult directly fromthe traffic flows, which is this component's case. 60 material andsemi-products from the flood affected areas. Inthe national appraisal methods stated in National Code (SL206-98)7, Chinese authorities allow a 20 percent additionto the savings indirect losses to cover this benefit. To be onthe conservative side, 15 percent hasbeen adopted here. Flood Protection EIRR Sensitivity Embankment 10% reductioninflood 10% increase of controlbenefits investment Nanchuan River 11.1% 10.4% 10.0% Embankment and BundRoad RongchangRiver 12.4% 11.1% 11.4% Embankment and BundRoad ShizuRiver 13-3% 11-9% 12.2% Embankment and I BundRoad I I I I C. Water Supply Component 10. Objectives. The primary objective of the water supplycomponent i s to support the development of the western expansion areaby improving water supplyinsix districtslcounties o f that area. 11. Alternatives considered. The pros andcons o f several alternatives were carellly examined. For example, alternative sources of water were investigatedinTongguanyi, including the alternative o f abstracting water from Jialing River. Other alternatives examined include different groundwater supplies, different transmissionldistribution networks, different phasing options, and the potential expansion o f the scheme to include additional towns inSongji. 12. Benefits. The severe domestic andindustrialwater shortageshave beenidentified as a major constraint for western Chongqing's economic and social development, and consequently the urbanization process inChongqingMunicipality. The water supply components will make available more raw water, more pipeline networks andpotable water. The economic benefits o f the water supply component range from the incrementalcitizen satisfaction to increased industrialproduction value (or increased GDP). The economic benefit was estimated for industrialproduction increasebrought about bythe additional water supply under the project. The calculationisbasedonthe assumption that the water tariffto be charged willbe affordableto the final water consumers, either bythemselves or throughthe subsidyfromlocal governments. The conventionalmethodfor calculatingwater supply benefit byusingwater tariff as a proxy for willingness to pay is not employed inthis analysis, as under some o f the water supply '"Economic Benefit Analysis Calculation and Evaluation of ExistingFloodControl Projects,"l998. 61 Water Supply EIRR Sensitivity 10% reductionin 10% increaseof water benefits investment Yongchuan: Zhangjia, 12.6% 10.6% 11.3% Linjiang and Jinlong Water Supply Tongnan Water 15.6% 13.7% 14.1% Supply TongguanyiRegional 12.7% 10.3% 11.9% Water Supply SongjiRegionalWater 19.6% 17.6% 18.4% Supply (A detaileddocument onthe economic analysis, preparedbythe CPMO's Consultants, is includedinthe Project File.) (B) FinancialAnalysis 13. A financial analysis was carriedout for eachparticipatingcity/districtlcounty (i.e. local government) and implementingagency. Analyses o fthe historicalreceipts and expenditures statements show that the participatinglocalgovernments are ina deficit situationinthat their localtax receiptsare not able to cover their statutory expenditures. Accordingly, they rely ontransfers from higher authority, i.e. ChongqingMunicipality, andlor the central government. All capital expenditures have traditionally been funded from suchtransfers. As it is the CMG's policy to focus on secondary cities andperi-urban areas, ithas given assurances to the Bank that it will take allmeasuresto cover any shortfalls in(a) counterpart funds, (b) operations and maintenance costs, and(c) debt repayment, resultingfromthe project investments. 14. Upto the endof2004, local govemments separatedtheir sources offunds intotwo accounts: on- budget funds andoff-budget funds. On-budget funds include receipts from statutory taxes andlevies, such as the urbanconstructionand maintenance fund. Off-budget funds include non-tax receipts such as some types o f user charges collectedby administrative departments, e.g. longterm leases o f land. Commencing on January 1,2005, on and off-budget funds have been combined into one account, which i s simply calledthe "budget". 15. The fiscal impact o fthe project has been analyzed against 2001-2003 on-budget local tax collections, the data for which were providedby the ChongqingFinance Bureau (CFB). Inall cases, the average annual counterpart fundingrequirements are less thanthe projected annual growthrates o f locally generatedtaxes, suggestingthat the local governments can fund all their requirementsfrom these sources. Moreover, counterpart fundingrequirements will be met from various sources, includingdomestic bank loans, state bonds, internally generated funds, as well as from their local finance bureaus (see Table 1 below). Therefore, the actual demand for funds from localtaxes will likely be only the amounts indicated inTable 1,undertheheadingof"Finance Bureau". 62 Table 1:CSCP EstimatedAmounts of CounterpartFundsRequired(Y million) 1Environmental Sanitation PublicToilets 0 0 0 10.8 72.4 83.2 Totals 29.5 0 100.5 310.3 1,544.8 1,9851 Local Government PreliminaryDebtAnalysis 16. Analysis o f data providedby CFB on the debt situation o f participatinglocal govemments indicates that the level of debt per capita varies greatly among the eight participatinglocal governments. The average indebtedness level (Y600 per capita) shouldnot be a cause for concem as compared to the GDP per capita amongthe eight local governments (average about Y5,OOO). However, three out o fthe eight participatinglocalgovernments have a total debt to total revenue ratio that exceeds 70 percent, with Yongchuanbeingthe highest (320%), followed byRongchang(104%) andDianjiang (102%). MunicipalFinances 17. Table 2 below summarizes actual andprojectedreceipts and expenditure data from 2002 to 2010 for Chongqing Municipality. The table shows that project expenditures and counterpart funding requirements represent a fraction (less than one percent inany given year) o f CM's total receipts. Should participatinglocal governments notbe able to raise all their counterpart fundingrequirements, or provide funds for operationandmaintenance anddebt service, CMwouldhaveno difficulty inproviding the neededsupport. Table2: ChongqingMunicipalFinances Nbillion.currentterms) I ProiectExpenditures I I I 1 1 0.11 I 0.36 I 0.57 I 0.79 I 0.32 I 0.22 1 63 Project Exp. as % of 0.16 0.47 0.64 0.77 0.27 0.16 Receipts CounterpartFunds 0.11 0.32 0.43 0.52 0.19 0.11 as % o fReceipts Utility FinancialAnalysis 18. Water SupplyComponent. Financialprojections have beenprepared for eachcompany onan annual basis over the period 2004 -2021. The projections arebased onthe requirement o f eachcompany to comply with the key financial covenantsthat the companies shouldproduce total revenues to: (a) cover operatingcosts (including depreciation), andthe amount by which debt service exceedsthe provisionfor depreciation; and(b) maintain a debt service coverage ratio o f not less than 1.3 times. Projectedfinancial statements and detailed operational andfinancial monitoring indicators for each company are includedin Project Files. The actual and projectedaveragetariffs over the implementation period o f the project are given inTable 3, 19. The DianjiangWater Supply Company (DWSC) isa state-owned (byDianjiangCounty) company that was initially established in 1964, andre-established inits present legal form in 1998. Ithas a staff o f 252 which i s projectedto increaseto 280 by the end o fthe project. DWSC currently serves an urbanpopulation ofabout 94,700 inGuixitown. Projectinvestments aimto (a) reducethe current water shortage, (b) improve water quality, and(c) allow for service area expansion, including anew industrial parkwhich will be a significant consumer o f services, particularly potablewater. 20. OnJanuary 1,2005, DWSC increased its water tariffs to Y1.8O/m3 for domestic andY2.0/m3for non-domestic consumers. The projectionsshow that DWSC can meet its financial covenants withthe recently introducedtariffs. Inaddition, DWSCcollects a wastewater tariff o f Y0.40/m3 andY0.80/m3 from their domestic andnon-domestic consumers, respectively, representing an increase o f about 29 percent for domestic, andabout 5.3 percent for non-domestic consumers. With the addition of the new industrial parkto its customer base, the projections show that DWSC can meet its financial covenants withthe recently-approvedtariff level. 21. The TongnanWater Supply Company (TWSC) isa state-owned (byTongnanCounty) company that was initially established in 1964, andre-established inits present legal form in2004. Ithas a staff o f 121which is projectedto increase to about 188 by the end o fthe project. TWSC currently serves an urbanpopulationof about 90,000 inZitong town. Project investments aim to (a) reduce the current water shortage, (b) improve water quality, and (c) improve water supply facilities intwo towns, Sitong (Tongxi) and Shuangjiang. TWSC will take over the existingutilityoperation inthe latter town. 22. TWSC hasreportedlosses each year from 2001 though 2004. Ithas faced difficulties covering its operationand maintenance expensesas tariffs have not been adjusted since December 2003, and it faced increasesinfixed costs in2002 and2003. TWSC shouldbenefit from the institutional and financial strengthening beingproposed under the project, 23. The current average water supply tariff i s Y1.47/m3 for domestic consumers and about Y2.00/m3 for non-domestic consumers. Inaddition, TWSC collects a wastewater tariffo f Y0.25/m3 from domestic andnon-domestic consumers. This isprojectedto rise to Y0.4O/m3in2006. Projectionsindicate that it willneeda 30 percent increase indomestic tariffs, anda 60 percent increase innon-domestic tariffs in 2006, followed by a 10percent increase in2009. 24. RegionalRaw Water Supply Schemes (Songji andTongguanyi). The ChongqingMunicipal Water ResourcesInvestment Group Co. Ltd(CWRC), which will implement the two regional schemes, i s 64 a state-owned (by ChongqingMunicipality) company that was established under the Company Act in November 2003, Its mandate is water resource development, andit i s responsible for the constructiono f a number o freservoirs andwater andwastewater facilities. CWRC now operatesa few water supply plants. Inthe longer term, CWRC's mandate includes operation ofmany more facilities, inaddition to the two regional water supply schemes. Itwill ultimately be responsible for managingwater and wastewater facilities for a large land area serving a large populationbase, CWRC has beendesignated to be responsible for the construction, implementation and operation andmaintenance o f the proposed regional schemes. CWRChas agreedto establish separatecommercial accounts and financial statements for each o fthe two schemes. 25. Untiltheprojectinvestmentsarecompleted (expectedinabout 2008), CWRCwillnotearnany revenue. On full production, the raw water sales price i s projectedto be an average o fY4.33/m3 and Y1.36/m3between2011and2015 for the SongjiandTongguanyi schemes, respectively. The price for raw water will be relatively highgiven the costs o fpumpingand transmission over longdistances, and i s far greater than the currently leviedraw water resource or extraction fee o fY0.40/m3. While the assumed demand for water for the developingareas i s high, the areas are ina water-scarce region; hence the company i s assuredo f sales. 26. The two regional raw water supply schemes are seen as part of a broader strategy o f CMGto support the economic growth and urbanizationo f the region, andwould require a different approach to cost recovery. While accepting the principle that consumers will have to pay the full costs of the service, CMGconsiders itunlikelythat water supply services wouldbe affordableto the consumers ofthe participating small towns duringthe periodthey are developingto enter the mainstream, Fullcost recovery would be achieved over a reasonableperiod, say 10years, when the current sellingprice o fraw water would be raisedto achieve full cost recovery. Assurances were received duringnegotiationsthat ChongqingMunicipalitywill take allnecessarymeasuresto enable CWRC to meet total revenues equivalentto not lessthan the sum o f total operating expenses, andthe amount by which debt service requirements exceedthe provision for depreciation, for supplies ofraw water to small towns under the Songji andTongguanyi schemes, for a periodnot exceeding 10years following commissioningo f the schemes; 27. Allocation o f water resources and exploring new sources, andraw water pricingpolicy for high unitcost regional supplies, etc. arelinkedto the overall objectiveofsupportingthe urbanization strategy for the western expansion area. CMGwill carry out a comprehensive water resources management to address water resource issues, including water rightsandallocation among various users, water balance, policy onwater resourcesutilization, pricingo fraw water, treated water tariffs, andphased subsidies, which may be necessaryinthe initialyears o f operation, and an update o f all water resources inthe water- scarce areas. This study will be financedunder the project, for which anallocation has been made inthe technical assistancecomponent. 28. YongchuanWater Supply Scheme.The YongchuanWater ResourcesDevelopment Co. Ltd (YWDC) is a state-owned (byYongchuan city) company established underthe Company Act inMay 2003 with a mandate for water resource development. YWDC hasbeendesignated to be responsible for the construction, implementation, and operationandmaintenance o f the proposedscheme to deliver treated water to three townships inthe Yongchuan city area. YWDC has agreed to establish separate commercial accounts andfinancial statements for its scheme, which will be confirmed during negotiations. 29. Untiltheprojectinvestments are completed(expected inabout2008), YWDC willnot earnany revenue. On full production, the treated potable water sales price i s projected to be an average o f Y3.55/m3 for domestic consumers and Y4.621m3for non-domestic consumers. 65 Tariffs. 30. The table below indicates the actual andprojectedaverage tariffs over the implementation period. Table 3: Average ActualandProjectedTariffs (y/m3,current prices) Dianjiang/l- Actual Projected 2004 2005 2006 2007 2008 2009 2010 2011 Water Supply-Domestic 1.55 1.80 1.80 1.80 1.80 1.80 1.80 1.80 Non-domestic 1.75 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Wastewater -Domestic 0.25 0.40 0.40 0.40 0.40 0.40 0.40 0.40 Non-domestic 0.40 0.80 0.80 0.80 0.80 0.80I 0.80 0.80 2\Water - 1\Water supply andwastewater tariffs adjustedJanuary 1,2005. - supply and wastewater tariffs last adjustedDecember 1,2003. 31. Affordability of Tarijjfs. Table 4 below summarizes the analysis comparing projectedtariff increasesto average monthly income, withparticular reference to low-income households. The tariffs result inwater charges inDianjiangandTongnanwhich are below the accepted benchmark for affordability o f utility charges for the lower income groups, i.e., about 5 percent o fhousehold income. However, low income households inYongchuan may require some subsidies initially. Table4: Affordabilityof Tariffs 2007 2008 2009 2010 2011 Low IncomeHousehold (Yuanlmonth) 1198 1299 1434 1612 1842 Domestic Water Tariff (Y/m3) 2.70 2.70 2.97 2.97 2.97 Domestic Wastewater tariff(Y/m3) 0.40 0.40 0.40 0.40 0.40 Average water/wastewater billfmonth 33.96 34.63 38.44 39.23 40.01 HouseholdIncomeRatio (%) 2.84 2.67 2.68 2.43 2.17 66 Flood Protection andRoads Components 32. These two components will be implemented by already established state-owned commercial enterprises, withresponsibility for management, operation and maintenance o fthe completed embankments, as set out inAnnex 6. The Project Agreement includes a covenant requiring the enterprises,' local governments to prepare in2007, an operations and maintenance plan(including financing) for the assets created under these two components, satisfactory to the Bank, for subsequent implementation. FiscalImpact of Flood Protection and Road Components 33. A financial analysis ofthe projected charges (i.e. debt service andmaintenance cost) was prepared for the flood protection androads components comparing the projected annual charges as a percentage ofthe local tax receipts for each localbody(see Table 5 below). The table indicates that the project-related debt service and maintenance costs range from a low o f 0.3 percent (Yubei District) to a high4.8 percent (Rongchang County). The districtdcounties have the potential to absorbthese costs from their own sources Cy million) Nanchuan City Flood 2006 2007 2008 2009 2010 2011 Protection Debt Service 1.3 3.1 4.5 5.2 4.9 4.4 Maintenance Costs 1.o 1.o Percentage o f local tax 0.6 1.3 1.6 1.7 1.7 1.4 receipts RongchangCounty Flood Protection Debt Service 1.9 3.9 7.1 7.9 7.3 6.5 Maintenance Costs 3.9 3.9 4.0 Percentage of local tax 1.o 1.9 3.1 4.8 4.1 3.5 receipts Shizhu County Flood Protection Debt Service 1.2 3.3 5.9 6.8 7.4 6.5 Maintenance Costs 0.8 0.8 Percentage of local tax 1.o 2.3 3.4 3.2 3.2 2.4 receipts QianjiangDistrict Roads Debt Service 1.o 3.9 6.6 8.6 11.4 11.3 67 MaintenanceCosts 4.6 4.6 Percentageoflocal tax 0.4 1.3 1.9 2.1 3.2 3.O receipts ShizhuCountyRoads DebtService 0.3 1.3 2.6 2.6 3.5 3.5 MaintenanceCosts 1.9 2.0 2,l 2.1 Percentageof localtax 0.3 0.9 2.6 2.2 2.2 1.8 receipts TongnanCountyRoads Debt Service 2.6 5.0 6.3 6.1 7.3 5.5 MaintenanceCosts 1.4 1.6 1.6 1.6 Percentageof local tax 1.6 3.O 4.4 4.2 4.6 3.5 receipts YubeiDistrictRoads DebtService 2.2 4.6 7.9 10.0 11.7 10.4 MaintenanceCosts 2.7 2.8 2.8 Percentageoflocaltax 0.3 0.5 0.7 0.9 0.9 0.7 receipts 68 Annex 10: Safeguard Policy Issues CHINA: CHONGQINGSMALLCITIESINFRASTRUCTUREIMPROVEMENTPROJECT 1. The project i s classifiedas category A andthe following safeguard policies are triggered: (i) environmental assessment; (ii) safety, and (iii) dam resettlement. ENVIRONMENT 2. The project will improve urban environmental conditions and infrastructureinsecondary cities to foster sustainable growth, improve livingconditions for its citizens, and facilitate urbanemployment creationthroughpromoting the function andeconomic growtho f urbanareas throughout Chongqing Municipality. 3, The water supply subcomponents will provide secured cleanwater to more than 900,000 people in6 countiesldistrictswho suffer seriouswater shortageandpoor water quality. The riverembankment subcomponents will improve the flood control capacity up to 1/20year level infour countiesldistricts, which will significantly reduce the natural disasters andhumadproperty loss, and also improve sanitation condition, urban infrastructure, traffic, landscaping, investment environment etc. The road subcomponents will improve the local roadnetwork, andprovide convenient access to the local public. The public toilets rehabilitation subcomponent will significantly improve the urban sanitation services andthe environment. 4. IndividualEIAreports were preparedby local EA institutes under the general guidance o f international consultants, who prepared a summary EIA, a consolidatedEnvironmentalManagement Plan (EMP), andaconsolidatedEIAfor the water supply, flood control, roads andenvironmentalsanitation components. The dam safety-related improvementmeasuresfor the reservoir have been incorporatedinto the EMP. Key environmental issuesandmitigation measuresare as follows. KeyEnvironmentalIssuesandMitigationMeasures 5. The potential environmentalimpacts were addressedindetail andnecessarymitigation measures were developed inall the individual EAreports and summarized inthe ConsolidatedEIA. 6. Water Supply. The impactofthe extractionofwater fromthe YangtzeRiver onthe Three Gorges reservoir, downstream hydrology, ecology and other water users were carefully assessed. The Songji andTongguanyi subcomponents will extract about 6 m3lsecond o f water from the Yangtze River. This amount i s less than 0.08% of average flow, i s minor comparedto the average dry season flow o fthe river, andwould have a negligible impact onthe hydrological and ecological situation o fthe Yangtze. The Tongnan subcomponent will extract 0.58 m3fs and 0,058m3ls o f the dry season flow from the Fujiangand Yunhe (a tributary o fFujiang) Rivers, and accounts for only 0.12% and0.11%,respectively. The Qianjiang subcomponent will use water from Hongqireservoir and Yunwuzuireservoir, which are drinkingwater dedicatedreservoirs. Yongchuanwill usewater fromWeixinghu, Lianglukou, and Renminreservoirs and Jiulonghe River, which accounts for about 8% o f water flows o f these sources. Water balance calculations and analysis o f downstreamenvironmental and social demands concluded that, after consideringdownstream consumption (hydro, irrigation, water intake for downstream townships); the surplus water i s enough to meet the water demand from the proposed projects without creatingenvironmentaland socialproblems. 7. The water supply component will have the indirect impact o f increased wastewater inthe water served. Wastewater treatment plants (WWTP) are plannedoverall for Chongqing Municipality, and 69 WWTPs for the project areas arelwillbe constructed andputinto operationby about 2008. Withthe gradual increase insewage connections andtreatment capacity, the surface water environment in Chongqing area will be improved. 8. Sludge from water treatment plants is nothazardous, andwill be used infarmlands as soil improvement additive. 9. DamSafety. A damsafety review was carriedout for the Hongqi, Yunwuzui, Lianglukou, and Renminreservoirs. The Majiagoureservoir is still not operational, as it was recently completed, and is being filled this year @e., 2005). The dam safety review was based onthe recent dam inspectionreports from the respective government agencies, and site visits conducted by a dam specialist o fthe task team. The reviewconcluded that overall, the dams are safe. The inspectionrevealed, however, that that some minor remedial measureswere required. These defects were identified, andcosts estimates were developed. The CMGhas concurred with the findings o fthe report, andhas agreed to provide funds to cany out the remedial measuresannually under its maintenanceprogram, and complete the works by 2007. The Municipality incorporated the above inthe revisedEMP. 10 FloodProtection. The flood protection component will have a significant positive impactby reductionof flooding, improvemento fthe landscape, makingavailable additional land for development, collection o f sewage, andbetter management o f solid waste along the river banks. The environmental issues o f the river embanhent sub-components are mainly constructionrelated, including impact o f construction activities on surface water environment, air quality, noise, solid waste and spoil management, labor health, safety, landacquisition andresettlement. These impacts are relatively minor and can be easily mitigated with knowntechnology and constructionpractice. 11. Dredgingwill be conducted for the Nanchuan sub-component. Leachate tests carriedout in December 2004 indicate that heavy metal concentrationi s much lower than the threshold for hazardous waste. Dredging o f silt willbe monitored, andthe silt will be reused for green space application in Nanchuan (as it complies with standards for agricultural use as well), 12. Roads. The roads sub-components arerelatively short localroads, providingconnections betweentownships androadnetworks. These roads do not passthrough any ecological or culturally sensitive areas. The mainimpacts would be construction-related which canbe minimized by known mitigationmeasures, outlined inthe EMP. These include: minimizinglandacquisition, balanced design o f excavationandbackfilling, timely slope protection andreclamatiodre-vegetation o ftemporarily occupied land, proper design o f spoil disposal sites withproper drainage andre-vegetation plan, rehabilitation plan for quarries, proper management o f sewage and waste from camp sites, and adequate tree plantingplanalong the roads. 13. Traffic noisewill be a major issue duringthe operation stage. Noise modelinghasbeen conducted to predict the impact scope. For the sensitive sites identifiedto be impacted, proper mitigation measureshave been developed, including installation o fnoisebarrier andtree planting. 14. The Yubei roadrehabilitation subcomponent (8.5 hexisting out of 14h) bypassesthe Tongjing Scenic Area o f Yubei Districtwhich is mostly onthe other side o f a river. The nearest point betweenthe road andthe scenic spot i s more than 100meters. The roadhas beendesigned to avoid damage to the scenic area interms o f environment andlandscaping. 15. Public Toilets. About 233 public toilets will be upgradedor rehabilitatedunder the project, and 94% o f the existingseptic tanks will be removed. Special vehicles will be usedto transport the human waste excavated from septic tanks and from the temporary toilets established duringrehabilitation, to 70 dedicated humanwaste disposal sites for secure disposal or to existingwaste water treatment plants. Construction spoil will be transported to the municipal landfill. 16. Inthe caseofthe 14toiletswhichcannotbeconnectedtothe sewernetwork, foamingbiological treatment unitswill be installed so that the treated effluent can meet the Grade Idischarge standard. With appropriate designs to prevent seepage from the toilets, the potential impact on soil and groundwater can be minimized. 17. Odor i s a major nuisance to public duringthe operation stage. Good designs o f ventilation, flushingandplumbingsystemswouldbeprovided, andmanagementandmaintenance (e.g. cleaning, adoption of chemical deodorants) wouldbe strengthenedto minimize the potentialnuisance. 18. Public consultation heldinMarchandAugust-October 2004 through public meetings and questionnaire surveys (witha total about 800 people participating), producedbroad support for the component. Mainconcerns expressedincludeproper design andwell-managed construction, to minimize adverse environmental impact and social disturbance. Appropriate mitigation measureshave been developed inthe EMP, andhave been communicated to the public. Analysis of Alternatives 19. Alternatives were carefully analyzed inall individual EMS.For roads sub-components, alternative alignments were assessed, including two altematives for Shizhu, four altematives for Tongjing, two alternatives for Tongnan, andone bridge alternative for Zhenyang. For water supply sub- components, alternatives assessedinclude water resources (two for Tongnan, two for Dianjiang, four for Yongchuan, two for Tongguanyi and Songji respectively, location o f water treatment plants (two for Dianjiang, four for Yongchuan) and water transmission lines (two for Tongguanyi andtwo for Songji). 20. Comprehensive comparisons betweenthese options were carried, integratingconsideration of technical, environmental, social and economic aspects. The final selections were basedon a series o f criteria, e.g. avoidance o f environmentally sensitive areas andcultural properties, minimal social interference andlandoccupation. EnvironmentalManagement Plan 21, For all environmentalissues addressed, mitigationmeasures are proposedanddeveloped inthe EMP. The EMPaddressesindetailthe environmentalmanagement andsupervision organizations and responsibilities, mitigationmeasures, monitoring andreportingprograms, budget estimates andcapacity buildingrequirements. 22. The EMPincludes provisionsto integrate mitigation measuresinto biddingdocuments and contracts. Necessarybudget provisions have been allocated withinthe project investments to ensure sound implementation. Monitoringreportswill be compiled andfurnished to the Bank every six months, summarizingthe findingso f the monitoring. PublicConsultation andInformationDisclosure 23. Public consultation was conducted throughout the EIAprocess, includingsocio-economic surveys, interviews withlocal authorities, environmental questionnaire surveys andpublic meetings. Draft EIAreports were locally disclosed inaccordance with the Bank's requirements. Details o f consultations carriedout are providedinthe table below. 71 Subcomponents Consultation Particip Date of Placeof disclosure date ants disclosure A. WATER SUPPLY Dianjiang: Water Supply for Apr.-Jun. 161 Jun.-JUl. DianjiangCountygovernment Guixi Town 2004 2004 Songji: RegionalRawWater Apr.-Jul. 256 Jun.-JUl. Receptionoffices of Supplyfor Yongchuan 2004 2004 YongchuanandShuangzhu town Tongguanyi: RegionalRaw Apr.-Jul. 233 Jun.-JUl. Receptionoffices in Water Supply(16 towns) 2004 2004 Jiulongpo, Shapingbaand Bishancountygovernments Tongnan: Improvementof Apr.-Jun. 123 July 2004 Receptionoffice of TownWater SupplyNetwork 2004 Shuangjiangtown government Yongchuan: Water Supplyto 3 Apr.-Jun. 184 June-Jul. Receptionoffices inthree towns 2004 2004 towns governments - inNanchuanCity city Rongchang: Embankment and Jul. 2004 81 Aug. 2004 Reception office of LocalRoads along Laixiand Rongchangcounty ChishuiRiver Shizhu: Extensionof Jul. 2004 128 Aug. 2004 Reception office of Shizhu Embankment& Footwayalong county LongheRiver C. ROADS Qianjiang: ZhengyangAvenue 127 Oct. 2004 QianjiangEPB, CivilAffairs Zhoubaitowns Shizhu: Nanbinto Expressway May 2004 136 Sept. 2004 ShizhuTransport Bureau, Link JinweiHotel Tongnan: Access Roadto Jul. 2004 70 Jun. 2004 TongnanTransport Bureau TongbaTown Yubei: Caoping-TongjingRoad Aug. 2004 80 Aug. 2004 MeetingroomofProject Officemugang Company D. ENVIRONMENTALSANITATION PublicToilet Rehabilitationin Aug.-Sept. 874 Mar.-Apr. ChongqingSanitation ChongqingUrbanArea 2004 2004 Company, JinguanyinSquare ImplementationandInstitutionalCapacity 24. ChongqingMunicipalityi s a repeat borrower andhas gained much experience through the implementation o fthe Bank-funded CUEP. Though Chongqing PMO's capacity was restrained bythe limitednumber o f staff, it showed efficiency inmanagingand coordinatingthe preparationo f various subcomponents. CMGwill expandandstrengthen the CPMO for better project preparationand implementation. The project includes support for training and capacity buildingfor the project management staff, contractors and supervisionengineers. 25. To fixther strengthen safeguardsimplementation effectiveness, the CPMOplans to establish a participatory monitoring system for CSCP. A highlyinnovative participatory monitoring system was introducedinCUEP, through which local community organizationsparticipated inidentifying and remedying implementation issues. The CPMO maintains that this approach to monitoring, which supplemented normal internal and independent resettlement monitoring, successfully promotedearly 72 identification o fproblems and community engagementinfindingequitable solutions, resultinginfewer safeguards-related implementation delays and controversies. LANDACQUISTIONAND WSETTLEnNT Projectimpacts 26. The project impacts o f landacquisition and house demolition would be scattered inabout 89 villages in39 rural andurbantownships o f 19 counties (cities or districts). 27. About 13,744 personsin3,290 households are likely to be affected by landacquisitionand house demolition, o f which 1,841 persons in480 households will be affectedbyboth. 28. Total permanent landacquisitionunder the project will be about 4,050.2 mu, o f which 3,916 mu i s collectively-owned land (including 2,580 muo f farm land and 123.5 muo fhouse sites), 74.4 mui s state-owned landand46.2 muo f land usedby enterprises. Total temporary landuse will be about 3,468 mu,ofwhich, 2,561 muis farmland. Thepermanent acquisitionoflandwill affect 8,366 personsin 2,226 households andthe temporary occupationo f landwill affect 3,287 people in887 households, 29. Interms ofstructure demolition, the projectwillaffect 603 ruralhouseholds, 25 urban households, 27 enterprises and institutions, and 19 shops. A total o f 129,031 m2o f structures will be demolished, and 3,802 personswill be affected. This includes 90,063 mzo fruralresidences, 1,525 m' o f urbanresidences, 35,655 m2o f enterprise or institutional premises, 1,212 m2o f shops, 421 m2o f overdue temporary and illegalbuildings,and 155 m2o f other buildings. 30. The project would also affect 58 types o f ground attachments andpublic facilities. ResettlementPoliciesandLegalFramework 31, The RAPwas preparedinline with relevant Chinese laws, regulationsandWorldBankOP 4.12 on Involuntary Resettlement. The following basic principles were adoptedfor resettlement planning: e Compensation willbe paidat replacement cost, without depreciation e Landcompensationwillbepaidbefore acquisition e Housecompensation will be paidbefore constructiono f the new house e Compensation rates will be finalized through consultation e Lack o f legal title will not bar an affectedpersonfrom his or her resettlement entitlements e Resettlement will enable the affectedpersons to improve or at least restore their livingstandards ManagementOrganization 32. A multi-level organizationhasbeen established for the implementationo fthe RAPS.The CPMO will be strengthening withadditional staffto monitoring safeguard implementation. Details o f staffing and their responsibilities areprovidedinthe RAPS. PublicConsultationandParticipation 33. Public consultation andparticipationplayed a key role informulating the RAPs, including affectedresidents, businesspeople anddistrict governments participatedinthe census, inventory and formulation of the livelihood rehabilitation strategy, measures andrelocation sites. Their feedback has beenincorporated inthe RAPS.The RAPs containa list o fthe major consultation sessions. 73 34, Public consultation andparticipationwould continue duringRAPimplementation. Information would be provided to the affectedpeople throughTV, radio broadcasts, newspapers, bulletins andposters. The RAPwould be summarized into a resettlement informationbooklet (RIB) and distributedto every affected household. Grievance Redress Mechanism 35. A mechanismhasbeendesignedfor grievance redressalundereachofthe projectcomponents. Grievances maybe filed either inwritingor orally. The redressal channel lies within the project management and govemment systems. Recordingrequirements andtimeframe have beenestablished for grievance resolution. This mechanism will be disclosed as part o fthe RIB. Resettlement Implementation Monitoring 36. Internal and external monitoringhasbeen designed as part o fproject resettlement management. Projectresettlement offices will cany out internal monitoringo fthe resettlement implementation. The monitoringprocedures, content, staffing, responsibility, timeframe andreporting havebeendetailed inthe RAPS.An externalmonitor willbe selectedfor independent monitoringo fRAPimplementation. Independent monitoring will cover physicalprogress o fRAPimplementation, including compensation payment, allocation o fresidential sites, farm land allocation, andrestorationo f infrastructure. The independent monitor will also review the public consultationprocess, operation o f the resettlementproject offices, grievance redressal mechanisms, andrestoration o f livelihood o f the affected farmers. Independent monitoring will be conducted twice a year duringthe first two years o f implementation, and once a year thereafter. Compensation andResettlement Budget 37. The RAPScontain compensation rates for various impacts. Compensationrates for land include landcompensation andresettlement subsidy. Compensation rates for structures are calculatedbasedon replacement costs. The affectedinfrastructurewill be compensated for reconstruction, andthe compensation budgethasbeen finalized through negotiations with the project owners, 38. The RAPScontains detailedresettlement budgets that covers all basic resettlement costs, management costs, contingencies, survey, design andmonitoring cost. The basicresettlement cost includescompensation for land, house, other structures, standing crops andtrees, business profit loss, reconstructiono f affectedinfrastructure andrelocationsubsidies. The total resettlement budget is estimated at Y263 million. MajiagouReservoirResettlement Linkage Issue 39. TheMajiagouReservoir, which is akey source ofwater supply to the Baishiyiarea ofwestern Chongqing, will be used also for storing and transferringwater under the Tongguanyi RegionalWater Supply subcomponent. The reservoir i s not partof the project, Constructiono fthis reservoir started in 2000 and is scheduled for completion inApril 2005. The reservoir requiredthe acquisition o f 1,236 mu o f land (including 928 m2 o f cultivatedlandand 308 muo fnon-cultivatedland) and the demolition o f 19,784 m2 o fhousesin7 areas inShiban Township o fJiulongpo District. About 1,036 persons were affectedbyland acquisition and 171households (5 13 persons) by housingdemolition. Itwas determined that BankOP 4.12 does not apply to the reservoir, becauseresettlement was completed inMay 2002, about two andhalfyears before the Bank's identification mission for CSCP, and the reservoir was constructed as part of Chongqing's water resources master planto serve multiplepurposes, including irrigation, flood control andwater storage. 74 40. Nevertheless, the Bank camed out a due diligence review onthe completed resettlement activities, The review concludedthat affected people were satisfied withthe compensation they received, their new living conditions and resettlement arrangements. Additionally, the incomes and living standards ofdisplacedpersonshave beenimproved or at least restored. A copy o f the due diligence report i s includedinthe ProjectFiles. 75 Annex 11:ProjectPreparationandSupervision CHINA: CHONGQINGSMALL CITIES INFRASTRUCTUREIMPROVEMENT PROJECT Planned Actual PCNreview 0910812003 0911112003 InitialPIDto PIC 1013112003 0412612004 InitialISDS to PIC 0212012004 0211612004 Appraisal 0612712005 0112412005 Negotiations 1211212005 0411812005 BoardlRVPapproval 0610712005 0612112005 Planned date of effectiveness 1210112005 Planned date of mid-term review 1210112007 Planned closing date 0613012012 K e y institutions responsible for preparation of the project: ChongqingMunicipality, together with participating cities, districts andcounties. Bank staff andconsultants who worked on the project included: Name Title Unit T o mZearley Task Team Leader EASUR Andres Liebenthal Safeguards Sector Coordinator EASES DanGibson SociallResettlement Advisor EASES LixinGu Environmental Specialist EASUR Margaret Png Legal Specialist LEGEA Xiaofeng Li Program Assistant EACCF Peishen Wang Environmental Specialist EASES ChaogangWang Resettlement Specialist EASES M e i Wang Economist EASPR Zhentu Liu Procurement Specialist EAPCO David I FinancialManagement Specialist EAPCO Chandra Godavitarne Municipal Engineer Consultant Dahong Li Safeguard Specialist Consultant PatrickMcCarthy FinancialAnalyst Consultant RodStickland Transport Specialist Consultant Xuemei Guo Team Assistant EACCF 76 Annex 12: Documentsinthe ProjectFile CHINA: CHONGQINGSMALLCITIES INFRASTRUCTUREIMPROVEMENT PROJECT 1. CSCP Strategic report, Territorial Development and Population Forecasts by Groupe Huit & SOGREAH for Chongqing Municipal Government.July, 2004. 2. CSCP Summary - Justification- StrategicReport: Re-Appraisal Report No.1.by Groupe Huit& SOGREAH for ChongqingMunicipalGovemment. October, 2004, 3. CSCP Water Supply: Appraisal Adjustment Report No.2. by Groupe Huit & SOGREAH for Chongqing Municipal Government.January, 2005. 4. CSCP River Embankment:Appraisal ReportNo.3. by GroupeHuit & SOGREAH for Chongqing Municipal Government.January, 2005. 5. CSCP Road Component: Appraisal Report No.4. by Groupe Huit & SOGREAH for Chongqing Municipal Government.January, 2005. 6. CSCP EA1- Summary: Appraisal Report No.5.1. by Groupe Huit & SOGREAH for Chongqing Municipal Government.December, 2004. 7. CSCP EA1- EMP: Appraisal Report No.5.2. by Groupe Huit & SOGREAH for Chongqing Municipal Government.December, 2004. 8. CSCP EAI - Water Supply: Appraisal Report No.5.3. by Groupe Huit & SOGREAH for Chongqing Municipal Government.December, 2004. 9. CSCP EAI - River Embankment: Appraisal Report No.5.4. by Groupe Huit & SOGREAH for Chongqing Municipal Government.December, 2004. 10. CSCP EAI Road: Appraisal Report No.5.5. by Groupe Huit & SOGREAH for Chongqing - Municipal Govemment. December, 2004. 11, CSCP Resettlement Action Plan: Appraisal Report Noh. by Groupe Huit & SOGREAH for ChongqingMunicipal Govemment.January, 2005, 12, CSCP Costs -Implementation: Appraisal Report No.7. by Groupe Huit & SOGREAH for Chongqing Municipal Government.January, 2005. 13. CSCP Economic - Financial: Appraisal Report N0.8. by Groupe Huit & SOGREAH for ChongqingMunicipal Government. January, 2005, 14. CSCP Summary - Procurement - Institutional - Financial: Appraisal Adjustment Report by Groupe Huit& SOGREAH for Chongqing MunicipalGovernment.February, 2005. 15, World Bank Task Team report on "Findings of Dam Safety Review" for CSCP by Prof. Zhang Zezhen, February22,2005. 16. World 3ank Task Team report on "Due Diligence Review o f Resettlement at Majiagou Reservoir" by GongHeping, March3,2005. 77 17, Resettlement Action Plan 18. Environmental ImpactAssessments 19. Environmental Management Plan 20. ProjectDetailedFinancialAnalysis (Appraisal document) 21, Project DetailedTechnical Aspects (Appraisal document 22. ProjectDetailedProcurement Arrangements (Appraisal document) 78 Annex 13: StatementofLoansaudCredits CHINA: CHONGQINGSMALL CITIESINFRASTRUCTUREIMPROVEMENTPROJECT Differencebetween expectedand actual Original Amount in US$Millions disbursements ProiectID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd ~~ ~ PO73002 2004 CN-Basic Education in Westem Areas 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 PO65035 2004 CN-Gansu& Xinjiang Pastoral 66.27 0.00 0.00 0.00 0.00 66.27 1.95 0.00 Development PO67337 2003 CN-2ndGEF EnergyConservation 0.00 0.00 0.00 26.00 0.00 26.00 13.65 0.00 PO68058 2003 CN-Yixing PumpedStorageProject 145.00 0.00 0.00 0.00 0.00 145.00 2.00 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT APLl 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 PO70441 2003 CN-Hubei Xiaogm Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 189.78 -9.22 0.00 PO58847 2003 CNJrd Xinjiang HwyProject 150.00 0.00 0.00 0.00 0.00 112.52 1.27 0.00 PO40599 2003 CN-TIANJIN URBDEV I1 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00 PO76714 2003 CN-Anhui Hwy2 250.00 0.00 0.00 0.00 0.00 250.00 5.75 0.00 PO58846 2002 CN-Natl Railway Project 160.00 0.00 0.00 0.00 0.00 45.03 -6.22 0.00 PO60029 2002 CN-Sustain. ForestryDev(Natura1 0.00 0.00 0.00 16.00 0.00 17.37 1.40 0.00 Forest) PO64729 2002 CN-SUSTAINABLEFORESTRY 93.90 0.00 0.00 0.00 0.00 88.46 4.60 0.00 DEV. PROJECT PO71147 2002 CN-Tuberculosis ControlProject 104.00 0.00 0.00 0.00 0.00 93.33 -10.67 0.00 PO70459 2002 CN-Inner Mongolia Hwy Project 100.00 0.00 0.00 0.00 0.00 94.82 3.82 0.00 PO68049 2002 CN-Hubei Hydropower Dev inPoor 105.00 0.00 0.00 0.00 0.00 93.83 7.33 0.00 Areas PO51859 2001 CN-LIAO RIVERBASIN 100.00 0.00 0.00 0.00 0.00 80.23 26.03 0.00 PO58845 2001 Jiangxi I1Hwy 200.00 0.00 0.00 0.00 0.00 144.66 0.66 0.00 PO56596 2001 CN-Shijiazhuang UrbanTransport 100.00 0.00 0.00 0.00 0.00 92.28 49.68 0.00 PO56199 2001 CN3rd InlandWaterways 100.00 0.00 0.00 0.00 0.00 86.65 3.65 0.00 PO45915 2001 CN-Urumqi UrbanTransport 100.00 0.00 0.00 0.00 0.00 57.21 45.51 0.00 PO56516 2001 CN - WATER CONSERVATION 74.00 0.00 0.00 0.00 0.00 45.58 6.48 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION 105.50 0.00 0.00 0.00 0.00 94.13 -11.37 0.00 CONTROL PO45264 2000 CN-SMALLHLDR CATTLE DEV 93.50 0.00 0.00 0.00 0.00 21.24 12.34 0.00 PO56424 2000 TONGBAI PUMPED STORA 320.00 0.00 0.00 0.00 0.00 279.50 85.80 0.00 PO45910 2000 CN-HEBEI URBANENVIRONMENT 150.00 0.00 0.00 0.00 0.00 131.29 45.79 0.00 PO64924 2000 CH-GEF-BEUMG ENVMT I1 0.00 0.00 0.00 25.00 0.00 25.40 16.76 1.54 PO64730 2000 CN Yangtze DikeStrengthening - 210,oo 0.00 0.00 0.00 0.00 119.88 83.88 0.00 Project PO49436 2000 CN-CHONGQINGURBANENVMT 200.00 0.00 0.00 0.00 0.00 167.69 48.49 0.00 PO42109 2000 CN-BEUMG ENVIRONMENT I1 349.00 0.00 0.00 25.00 0.00 305.84 173.23 0.00 PO58844 2000 3rd HenanProv Hwy 150.00 0.00 0.00 0.00 0.00 77.58 26.58 0.00 PO58843 2000 Guangxi Highway 200.00 0.00 0.00 0.00 0.00 118.02 47.02 0.00 PO51856 1999 ACCOUNTING REFORM & 27.40 5.60 0.00 0.00 0.00 19.24 19.08 0.00 DEVELOPMENT PO43933 1999 CN-SICHUAN URBANENVMT 150.00 2.00 0.00 0.00 0.00 94.61 68.16 18.96 PO49665 1999 CN-ANNMG VALLEY AG.DEV 90.00 30.00 0.00 0.00 0.00 23.08 7.47 0.00 PO50036 1999 Anhui ProvincialHwy 200.00 0.00 0.00 0.00 9.60 43.79 29.99 0.00 PO46829 1999 RENEWABLE ENERGY 100.00 0.00 0.00 0.00 0.00 12.87 99.87 3.90 DEVELOPMENT 79 PO46564 1999 CN - Gansu & InnerMongolia Poverty 60.00 100.00 0.00 0.00 13.30 51.95 33.07 -10.10 Red. PO51705 1999 Fujian I1Highway 200.00 0.00 0.00 0.00 0.00 72.68 66.68 0.00 PO46051 1999 CN-HIGHER EDUC. REFORM 20.00 50.00 0.00 0.00 0.00 8.34 9.97 0.00 PO57352 1999 CN-RURAL WATER lV 16.00 30.00 0.00 0.00 0.00 24.73 16.43 5.72 PO58308 1999 CN-PENSION REFORMPJT 0.00 5.00 0.00 0.00 0.00 1.88 1.95 0.00 PO03653 1999 CN-Container Transport 71.00 0.00 0.00 0.00 18.61 3.62 22.15 0.00 PO60270 1999 CN-ENTERPRISEREFORMLN 0.00 5.00 0.00 0.00 0.00 2.71 4.29 4.07 PO38121 1999 CN-GEF-RENEWABLE ENERGY 0.00 0.00 0.00 35.00 0.00 28.41 23.78 6.10 DEVELOPMENT PO41268 1999 CN-Nat Hwy4IHubei-Hunan 350.00 0.00 0.00 0.00 0.00 69.29 32.29 0.00 PO42299 1999 TEC COOP CREDIT Iv 10.00 35.00 0.00 0.00 0.00 36.46 -9.02 0.00 PO41890 1999 CN-Liaoning UrbanTransport 150.00 0.00 0.00 0.00 0.00 45.69 42.09 0.00 PO36953 1999 CN-HEALTH IX 10.00 50.00 0.00 0.00 0.00 36.61 19.04 0.00 PO56216 1999 CN LOESS PLATEAU I1 100.00 50.00 0.00 0.00 0.00 42.50 42.71 0.00 PO51888 1999 CN GUANZHONG IRRIGATION -- 80.00 20.00 0.00 0.00 0.00 38.97 26.25 0.00 PO37859 1998 CN-GEF EnergyConservation 0.00 0.00 0.00 22.00 0.00 2.53 22.06 0.00 PO40185 1998 CN-SHANDONG ENVIRONMENT 95.00 0.00 0.00 0.00 1.40 23.23 24.63 0.00 PO51736 1998 E. CHINAlJIANGSU PWR 250.00 0.00 0.00 0.00 86.00 52.92 138.92 6.33 PO49700 1998 CN- IAIL-2 300.00 0.00 0.00 0.00 0.00 6.13 6.13 0.00 PO36414 1998 CN-GUANGXI URBAN ENVMT 72.00 20.00 0.00 0.00 0.00 72.90 62.39 16.14 PO03566 1998 CN-BASIC HEALTH(HLTH8) 0.00 85.00 0.00 0.00 0.00 35.44 23.75 0.00 PO35698 1998 HUNANPOWERDEVELOP. 300.00 0.00 0.00 0.00 145.00 50.88 189.13 -15.03 PO03614 1998 CN-GuangzhouCityTmsport 200.00 0.00 0.00 0.00 20.00 102.11 122.11 79.58 PO03619 1998 CN-2ndInland Waterways 123.00 0.00 0.00 0.00 17.00 45.20 58.46 2.14 PO03539 1998 CN - SUSTAINABLECOASTAL 100.00 0.00 0.00 0.00 2.31 48.49 43.30 19.92 RESOURCESDEV. PO46952 1998 CN - FOREST. DEV. POORAR 100.00 100.00 0.00 0.00 0.00 45.76 -57.04 16.41 PO46563 1998 CN - TARM BASIN I1 90.00 60.00 0.00 0.00 2.67 24.13 23.43 0.00 PO45788 1998 Tn-ProvinCial Hwy 230.00 0.00 0.00 0.00 0.00 24.66 14.86 0.00 PO03606 1998 ENERGYCONSERVATION 63.00 0.00 0.00 22.00 0.00 37.55 15.79 0.00 PO36949 1998 CN-Nat Hwy3-Hubei 250.00 0.00 0.00 0.00 0.00 21.15 16.15 0.00 PO03643 1997 CN-2nd Xinjiang Hwy 300.00 0.00 0.00 0.00 60.00 2.13 62.13 2.13 PO03590 1997 CN - QINBA MOUNTAINS 30.00 150.00 0.00 0.00 0.00 25.95 30.04 -1.92 POVERTY REDUCTION PO03637 1997 CN-NATLRURAL WATER 3 0.00 70.00 0.00 0.00 0.00 0.00 3.20 2.78 PO38988 1997 CN - HEILONGJIANGADP 120.00 0.00 0.00 0.00 0.00 9.17 9.17 1.83 PO36405 1997 CN - WANJIAZHAI WATER TRA 400.00 0.00 0.00 0.00 75.00 22.70 97.70 22.70 PO35693 1997 FUEL EFFICIENT IND. 0.00 0.00 0.00 32.80 0.00 7.54 32.81 0.00 PO44485 1997 SHANGHAI WAIGAOQIAO 400.00 0.00 0.00 0.00 0.00 98.00 63.05 32.54 PO34081 1997 CN - XIAOLANGDI MULTI. I1 430.00 0.00 0.00 0.00 78.53 0.15 118.59 38.96 PO03654 1997 NatHwy2IHunan-Guangdong 400.00 0.00 0.00 0.00 0.00 48.52 48.52 0.80 PO03650 1997 TUOKETUO POWEWINNER 400.00 0.00 0.00 0.00 102.50 39.19 137.04 15.25 PO40513 1996 2nd HenanProv Hwy 210.00 0.00 0.00 0.00 0.00 35.69 35.69 18.69 PO03599 1996 CN-YUNNAN ENVMT 125.00 25.00 0.00 0.00 19.48 48.21 69.00 10.36 PO03602 1996 CN-HUBEIURBANENVIRONMENT 125.00 25.00 0.00 0.00 28.32 44.09 74.45 23.45 PO03648 1996 CN-SHANGHAISEWERAGE11 250.00 0.00 0.00 0.00 0.00 50.55 50.55 18.70 PO03649 1996 CN-SHANXI POVERTY ALLEV 0.00 100.00 0.00 0.00 0.00 1.64 10.81 0.00 PO03589 1996 CN-DISEASEPREVENTION 0.00 100.00 0.00 0.00 0.00 7.47 16.88 0.00 (HLTH7) PO34618 1996 CN-LABORMARKET DEV. 10.00 20.00 0.00 0.00 0.00 5.60 7.77 0.00 PO03594 1996 CN - GANSU HEX1CORRIDOR 60.00 90.00 0.00 0.00 0.00 73.92 56.33 0.00 PO03598 1995 CN-LIAONING ENVIRONMENT 110.00 0.00 0.00 0.00 8.80 0.00 8.80 0.00 PO03571 1995 CN-7th Railways 400.00 0.00 0.00 0.00 119.00 23.84 142.84 28.76 PO03596 1995 CN-Yangtze BasinWater Resources 100.00 110.00 0.00 0.00 1.92 0.34 4.75 4.75 Project PO36947 1995 CN-Sichuan PowerTransmission 270.00 0.00 0.00 0.00 95.00 11.79 106.79 9.79 Project PO03647 1995 ChinaEconomic Law Reform-LEGEA 0.00 10.00 0.00 0.00 0.00 1SO 1.86 0.00 PO03642 1995 CN-ZHUIANGPOWERDEVT 400.00 0.00 0.00 0.00 33.25 1.09 39.87 0.00 PO03639 1995 SOUTHWESTPOVERTY 47.50 200.00 0.00 0.00 0.01 1.21 25.36 25.36 REDUCTIONPROJECT PO03603 1995 CN-ENT HOUSING& SSR 275.00 75.00 0.00 0.00 57.46 44.31 99.81 24.77 PO03540 1994 CN-LOESS PLATEAU 0.00 150.00 0.00 0.00 0.00 1.12 0.50 0.00 PO03626 1994 CN-FUJIANPROV HWY 140.00 0.00 0.00 0.00 18.11 6.65 24.76 24.74 PO03644 1994 CN - XIAOLANGDI 0.00 110.00 0.00 0.00 0.00 0.04 -1.85 -1.82 RESETTLEMENT PO03632 1993 CN-ENVIRONMENT TECHASS 0.00 50.00 0.00 0.00 0.00 1.11 1.73 1.41 PO03592 1993 REF. INSTL.& P R E W 0.00 50.00 0.00 0.00 0.00 1.92 2.28 2.28 Total: 13,136.07 1,982.60 0.00 203.80 1,013.27 5,385.54 3,317.74 461.99 CHINA STATEMENTOF IFC's HeldandDisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002103 Advantage 0.00 0.50 0.00 0.00 0.00 0.50 0.00 0.00 2003 BCIB 0.00 0.00 11.60 0.00 0.00 0.00 0.00 0.00 1999100/02 BankofShanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 1996 Beijing Home1 1.79 0.50 0.00 0.55 1.79 0.50 0.00 0.55 2002 CDHChinaFund 0.00 19.74 0.00 0.00 0.00 4.69 0.00 0.00 1998100 CIG HoldingsPLC 0.00 3.00 0.00 0.00 0.00 3.00 0.00 0.00 1998 ChengduHuarong 6.73 3.20 0.00 7.82 6.73 3.20 0.00 7.82 1998 Chengxin-IBCA 0.00 0.36 0.00 0.00 0.00 0.36 0.00 0.00 1987192194 ChinaBicycles 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 ChinaWaldenMgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 1994 China Walden Ven 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 DalianGlass 0.00 2.40 0.00 0.00 0.00 2.40 0.00 0.00 1995 DupontSuzhou 9.35 4.15 0.00 0.00 9.35 4.15 0.00 0.00 1994 Dynamic Fund 0.00 8.76 0.00 0.00 0.00 7.10 0.00 0.00 2003 GreatInfotech 0.00 3.50 0.00 0.00 0.00 2.10 0.00 0.00 1999 Hansom 0.00 0.08 0.00 0.00 0.00 0.08 0.00 0.00 2002 HuarongAMC 31.50 3.00 0.00 0.00 22.50 0.01 0.00 0.00 2002 IEC 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 LeshanScana 5.36 1.35 0.00 0.00 3.76 1.35 0.00 0.00 2001 MaanshanCarbon 9.00 2.00 0.00 0.00 9.00 2.00 0.00 0.00 2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 81 2001 NCCB 0.00 26.58 0.00 0.00 0.00 26.46 0.00 0.00 0 NWS Holdings 0.00 2.54 0.00 0.00 0.00 2.54 0.00 0.00 1996 Nanjing Kumho 4.87 3.81 0.00 13.84 4.87 3.81 0.00 13.84 2001 NewChina Life 0.00 30.70 0.00 0.00 0.00 23.32 0.00 0.00 1995 NewbridgeInv. 0.00 1.95 0.00 0.00 0.00 1.95 0.00 0.00 1997198 OrientFinance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 PSAM 0.00 1.93 0.00 0.00 0.00 0.00 0.00 0.00 19971'00 PTP Holdings 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 2001 PeakPacific 0.00 0.00 25.00 0.00 0.00 0.00 0.00 0.00 0 RabobankSHFC 0.45 0.00 0.00 0.45 0.45 0.00 0.00 0.45 2000 SSIF 0.00 6.00 0.00 0.00 0.00 0.89 0.00 0.00 1998 Shanghai Krupp 28.92 0.00 0.00 65.63 28.92 0.00 0.00 65.63 1999 Shanghai Midway 0.00 16.02 0.00 0.00 0.00 16.02 0.00 0.00 1999 Shanxi 16.75 0.00 0.00 0.00 14.20 0.00 0.00 0.00 1993 ShenzhenPCCP 3.76 0.00 0.00 0.00 3.76 0.00 0.00 0.00 Sino Gold 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 2001 %no-Forest 25.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 1995197 Suzhou PVC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 WIT 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Wanjie Hospital 15.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 1996 Weihai Weidongi 1.28 0.00 0.00 0.00 1.28 0.00 0.00 0.00 2003 XACB 0.00 19.93 0.00 0.00 0.00 0.00 0.00 0.00 1993 Yantai Cement 6.33 1.95 0.00 0.00 6.33 1.95 0.00 0.00 0 Ben Jing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 Zhengye-ADC 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Totalportfolio: 206.09 212.16 36.60 88.29 147.94 156.59 0.00 88.29 Approvals PendingCommitment FYApproval Company Loan Equity Quasi Partic. 2002 ASlMCO 0.00 0.00 0.01 0.00 2003 Anjia 0.00 0.01 0.00 0.00 2004 CCB-MS NPL 0.03 0.00 0.00 0.00 2003 Cellon 0.00 0.01 0.00 0.00 2002 Darong 0.01 0.00 0.00 0.01 2002 HuarongAMC 0.02 0.00 0.00 0.00 2002 IEC 0.00 0.00 0.01 0.00 2002 KHIT 0.00 0.00 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 2003 SAIC 0.01 0.00 0.00 0.00 2002 SML 0.00 0.00 0.00 0.00 2002 Sino Mining 0.01 0.00 0.00 0.01 2003 Zhengye-ADC 0.00 0.00 0.00 0.01 2002 Bong Chen 0.03 0.00 0.00 0.03 Total pendingcommitments: 0.11 0.03 0.02 0.06 82 Annex 14: Country at a Glance CHINA : CHONGQING SMALL CITIESINFRASTRUCTUREIMPROVEMENT PROJECT East Lower- POVERTY and SOCIAL Asia & middle- China Pacific income Jevelopment diamond' 2002 Population,mid-year(millions) 12810 la38 2,411 GNIpercapita (A tlas method,US$) L%eexpectancy 950 950 l.390 GNI(Atlas method, US$ billions) 128.1 t740 3,352 Average annual growth, 1996.02 T Population(%J 0.8 10 10 Laborforce (%) 0.9 12 u 3NI Gross M o s t recent estimate (latest year available, 1986-02) ier primary :apita nrollment Poverty(% ofpopulationbelownationalpovertyline) 5 Urbanpopulation(%of totalpopulation) 38 38 49 Lifeexpectancyatbirth (years) 71 69 69 - infant mortallty(per lOOOlivebirlhs) 30 33 30 Childmalnutrition(%ofchildfen under5) 0 15 a Accessto improvedwater source Access to an improvedwatersource(%ofpopulation) 75 76 81 Uliteracy(%ofpopulafionage a+) B a Gross primaryenrollment (%of school-agapopulation) Q6 Q6 in -China Male 105 a 5 lll Female Lower-middleincomegroup 108 Q6 in ~ KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 GDP (US$ billions) Economic ratios' 2215 454.6 167.1 1232.7 ~ GrossdomesticinvestmentlGDP 332 362 38.5 410 Exports of goods and serviceslGDP 8.9 8.5 25.5 29.5 Trade GrossdomesticsavingslGDP 34.8 37.7 40.9 44.0 GrossnationalsavingsiGDP 35.1 38.0 40.0 43.8 CurrentaccountbalancelGDP 2.4 19 15 2.9 Interest p a wentslGDP 0 2 0.6 0.5 05 Total debtlGDP 3.8 15.9 14.6 Q.6 Total debtsewicelexports 8.0 8.6 7.7 6.1 Presentvalue of debtlGDP 14.1 Presentvalue of debtlexports 518 Indebtedness 1982-92 1992-02 2001 2002 2002-06 (averageannualgronth) GDP 9.7 9.0 7.5 8.0 7.5 -China GDP percapita 8.1 8.0 6.7 7.2 6.6 __Lower-middle-incomegroup STRUCTURE of the ECONOMY 1982 1992 2001 2002 (%of GDP) Agriculture 33.3 218 S.8 14.5 Industry 45.0 43.9 50.1 517 Manufacturing 37.3 33.1 34.2 44.5 Services 217 34.3 34.1 33.7 , Privateconsumption 50.7 492 45.7 425 97 Q8 09 00 01 02 Generalgovemmentconsumption l45 73.1 0.4 a5 Importsof goodsandservices 7.3 8.0 23.1 26.5 -Go1 d G D P 1982-92 1992-02 2001 2002 i Growth of (average annualgmnth) export8 and imports (%) I Agriculture 4.6 3.7 2.8 2.9 industry 116 113 8.4 9.9 Manufacturing 112 10.4 9.0 8.1 Services 117 8.4 8.4 7.3 I Privateconsumption ll4 8.1 2.8 19 Generalgovemmentconsumption 9.9 8.4 Q.5 7.O Grossdomesticinvestment 9.5 9.7 73.9 l4.9 Importsof goods andsewices 9.7 9.8 Q.8 27.5 t ~ l-Euportsg8 gg -lrrports O' M, O2 83 China PRICES and GOVERNMENT FINANCE 1982 1992 2001 2002 Domestic prices Inflation (X) (%change) 10 ~ Consumerprices 6.0 6.4 0.7 -0.8 ImplicitGDP deflator -02 7.9 12 -2.6 Government finance (%of GDP,includes currentgrants) Currentrevenue 22.9 14.7 V.1 n.9 Currentbudgetbalance 2a 11 0.0 Overallsurpiusldeficit a 3 -10 -4.7 -3.0 ----GDPd&iator -CFi TRADE 1982 I992 2001 2002 (US$ millions) Export and import levels (US$ mill,) Total exports (fob) 22,321 84,940 266,'65 325,565 Food 2.908 sgos P,760 ?4,623 400,000 1 Fuel 5,3# 4,693 8,420 8,372 Manufactures 9271 67,936 239802 297,085 Total imports(cif) 19285 80,585 243,610 295,203 Food 4201 3,146 4,980 5237 Fuelandenergy 8 3 3,570 np95 19285 *I Capitalgoods 3204 3139 Q7,040 07,030 Ewortpriceindex(S95=XrO) 41 85 83 78 1 96 97 ea 99 00 hport priceindex(S95=*70) 71 95 91 86 rbports nlmportsO1 Termsof trade (S95=MO) 58 89 91 90 I BALANCE of PAYMENTS 1982 1992 2001 2002 (US$ millons) Current account balance to GDP (%) Exportsof goodsandservices 24,906 94,198 299,409 365,395 Importsof goods andservices 20,555 86,752 27l325 328.00 5 T Resourcebalance 4.350 7,446 zap84 37,383 Net income 376 249 -19,774 -14,945 Net currenttransfers 486 1E5 ap92 P,984 Currentaccount balance 5212 8,850 VAOl 35,422 Financingitems(net) -995 -0,952 30,046 40,085 Changesinnetreserves -4217 2,a2 -47447 -75,507 ea 97 08 ga w 01 02 I Memo: Reserves includinggoid(US$ millions) 24842 220,051 297,721 Conversionrate(DEC,locaVUS$) 2.4 5.9 8.3 8.3 EXTERNAL DEBT and RESOURCE FLOWS 1982 1992 2001 2002 (US$ mi/lions) :ompositlon o f 2002 debt (US$ mill. Total debtoutstandinganddisbursed 8B58 72,428 no,10 55,678 IBRD 0 3,752 lt550 P,051 IDA 1 4287 8,654 8,729 A: P.051 e. Total debtservice 2 . m 6,68 24297 23,688 iBRD 0 460 t550 1631 IDA 0 30 '61 n5 Compositionof netresourcefiowi Officialgrants 47 327 240 Officialcreditors 657 2343 2,56 -839 Privatecreditors -P2 8.949 -4,on -0,593 Foreigndirectinvestment 430 1166 44241 49,308 Portfolioequity 0 1243 3,06 228s World Bankprogram F:62,103 Commitments 330 1865 782 563 - E- Bilateral Disbursements 4 IBRD 1 1331 1791 1733 3 - IDA D Mhermdtilaterd F Privae - - Principalrepayments 0 197 904 157 :-IMF G- Shrt-ten 84 MAP SECTION IBRD 33928 C H I N A M O N G O L I A L J I L I N CHONGQING SMALL CITIES O G N O INFRASTRUCTURE M LIAONING DEM. PEOPLE'S NE I REP. OF KOREA BEIJING IMPROVMENT PROJECT Beijing TAINJIN HEBEI REP. OF KOREA SUB-COMPONENT TYPES: SHANXI TOTAL INVESTMENT, (million RMB) SHANDONG Ye l l o w QINGHAI NINGXIA S e a REGIONAL WATER SUPPLY 410.00 274.00 GANSU SHAANXI HENAN JIANGSU 160.00 ANHUI ROAD 85.00 SHANGHAI 30.00 HUBEI SICHUAN E a s t FLOOD CONTROL CHONGQING ZHEJIANG C h i n a XIZANG S e a HIGHWAYS HUNAN JIANGXI WATER SUPPLY GUIZHOU FUJIAN COUNTY (XIAN) BOUNDARIES YUNNAN TAIWAN PUBLIC TOILETS PROVINCE BOUNDARIES GUANGDONG GUANGXI This map was produced by the Map Design Unit of The World Bank. HONG KONG MACAO 0 50 100 The boundaries, colors, denominations and any other information shown VIET NAM on this map do not imply, on the part of The World Bank Group, any ANMAR LAO South judgment on the legal status of any territory, or any endorsement or MY PEOPLE'S China Sea KILOMETERS acceptance of such boundaries. HAINAN THAILAND DEM. REP. PHILIPPINES 108
Groupe de la Banque mondiale · Project Appraisal Document
China - Chongqing Small Cities Infrastructure Improvement Project
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