China - Taihu Basin Flood Control Project

Document of The World Bank FOR OMCIAL USE ONLY 62Ak 2 (/J6 er c;/1fz R1pt No. P-5917-C MElORANDUMI ANID REC ATON OF THE PRESIDENT OF THE INTERNATIONAL BANlK FOR RECONSTRUCTION AND D LOPM ANRD THE N INTERNATIONAL DEVELOPMENT ASSOCIATION a TO| THE 0DzL EXECUTIVE DIRECTORS t ;i2 >L *cn ON A o nII o dJ PROPOSED LOAN OF $100 NMIL ION (n AND A N PROPOSED CREDIT OF SDR 72.8 MILLION L I) 2 TO L) n THE PEOPLE'S REPUBLIC OF CHINA u Cz FOR A -L ,J !: 4' 4 W TATI BASINX FLOOD COTL 1?RDJE L'Ll D> JANUARY 29 , 1993 '~ - .I This document has a restricted distribulion and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of September 1992) Currency Unit - Yuan (Y) Y 1.00 - $0.1818 $1.00 - Y 5.50 WEIGHTS AND MEASURES 1 meter (a) - 3.28 feet (ft) 1 kilometer (km) - 0.62 miles 1 hectare (ha) - 15 mu I ton (t) - 1,000 kg - 2,205 pounds 1 kilogram (kg) - 2.2 pounds ABBREVIATIONS AND ACRONYMS MlR Ministry of Water Resources TBA Taihu Basin Authority TBWRPC Tashu Basin Water Resource Protection Comdittee FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY CRINA TAIHU BASIN FLOOD CONTROL PROJECT Loan/Credit and Proiect Summary Borrower: People's Republic of China Beneficiary: Ministry of Water Resources Amount: Loan: $100 million Credit: SDR 72.8 million ($100 million equivalent) Terms: Loan: 20 years, including five years of grace, at the Bank's standard variable interest rate. Credit: IDA standard terms vith 35 years maturity. Financina Plan: Local Foreign Total -(-- $ million) -------- Government 297.2 0.1 297.3 IBRD/IDA 0.0 200.0 200.0 Total 297.2 200.1 497.3 Economic Rate of Return: 27 percent Staff Appraisal Report: Report No. 11308-CHA Mao: IBRD No. 23915, 23916 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEORANDUM AND RECO MMNDATION OF THE PRESIDENT OF THE INTERATIOTO BAL A FOR RECONSTRUCTION AND DEVELOPMT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF CHINA FOR A TAIII BASIN FLOOD CONTROL PROJECT 1. I submit for your approval the following memorandum and recommen- dation on a proposed loan of $100 million and a proposed credit of SDR 72.8 million ($100 million equivalent) to the People's Republic of China to help finance a Taihu Basin Flood Control Project. The loan would be at the Bank's standard variable interest rate, with a maturity of 20 years, including five years of grace. The credit would be on standard IDA terms with 35 years maturity. 2. Countrvl/Sector Backaround. The most critical water resources problem facing China is flood protection. About 800,000 km2 of the country, containing about 40 percent of total population and 60 percent of national industrial and agricultural output value, is frequently threatened by Zloods. Since 1950, major flood control works have been progressively constructed in six major river basins and one lake basin. These works protect some 32 mil- lion ha of farmland and 322 million people, industrial and agricultural pro- duction, and cities and townships along the major rivers. However, despite past successes, constraints and problems still exist. The safety margin of these flood control works is still low, especially in the Yellow end Yangtze River basins where the potential threat of flood is great due to elevated river beds and deterioration of the age-old flood protection embankments. Intensive use of floodplain, lake and flood detention basins by the expanding population has contributed to intensification of flood peaks and duration. Furthermore, some regional comprehensive flood control plans have not been implemented due to local conflicts and disagreements. 3. In the simmer of 1991, China was struck by severe monsoon floods, especially in the eastern provinces, in the Huai River and Tai Lake Basins. In all, 18 provinces and municipalities in east, north, ceantral, and southwest China were affected. This included some 21 million ha of farmland and 220 million people, about 2,300 of whom died. Total national economic losses were estimated at $13 billion. The Tai Lake Basing centered about 120 km wevst of Shanghai City, suffered extensive flooding, especially the industrial cities of Wuxi, Suzhou and Chsagzhou and the highly productive agricultural areas around Tai Lake. Total losses were estimated to be at least $2 billion, 80 percent in industry and township and village enterprises, 20 percent in agriculture. The Basin iS one of the most highly developed areas in China, with an annual gross output of more than $70 billion 4. Implementation of a comprehensive flood control plan drawn up in 1984 by the Ninistry of Water Resources (VWR) for the Taihu Basin had beon delayed due to provincial/city difforences and conflicts over engineering solutions and allocation of resources. Spurred by the huge 1991 flood losses  - 2 - and the rapid potential economic growth which depends on flood protection, the Jiangsu, Zhejiang and Shanghai governments, which share the basin of Tai Lake, have now agreed, with the intermediation of the Central Government, to imple- ment the flood control plan with utmost priority. The Central Government has requested assistance from the Bank Group in this effort. 5. Lessons Learned fro Previous Bank Ogerations. The Bank has assisted in financing 13 agricultural projects in China with major water resources components since 1982. Many of the projects, although not directly aimed at flood control, include major surface drainage components which help significantly to reduce flood damage by draining away surplus water. Among these is the Chaohu component of the recently completed Pishihang-Chaohu Area Development Project (Loan 2579/Credit 1606-CHA) which had a major impact in reducing damage during the 1991 flood. Lessons learned from these projects, including the importance of assuring effective project management, collabora- tion of project staff at all levels, enthusiastic participation by project beneficiaries at all levels, and sound engineering designs snd practices, have been reflected in the design of the proposed project. 6. Rationale for Bank Involvement. This project represents the Bank's first major flood control project in China and would support the Gov- ernment's priority plan to control flood in a major basin with highly devel- oped industries and agriculture. By being involved in the project, the Bank's expertise and experience in flood control would contribute significantly to the design, construction, operation and management of the proposed project. The project would introduce better technology in flood control and forecast- ing, and basin-wide water management through the use of modern telemetric, commuwnication and computing equipment to monitor real-time hydrological events in the Basin and to transmit data for analyses and decision-making by manage- ment. The technical competence and capabilities of the Taihu Basin Authority (TBA) would also be upgraded through staff training and technical assistance to be provided to assist TBA in carrying out various technical studies. 7. Prolect Obiectives. The project's main objective is to prevent recurring severe flooding to China's most industrialized and highly productive agricultural area through engineering measures to control floods and improve land drainage. The project would also improve the quantity and quality of raw water used for the Shanghai City water supply, and expand and improve inland waterway transportation. 8. Prolect Descrigtion. The project would provide protection against floods of magnitude 1 in 50 years return period for the Taihu Basin and improve land drainage to about 86,000 ha of existing agricultural land. It would also improve raw water, both in quantity and quality, to Shanghai City water supply, and improve inland navigation. The project components are as follows: (a) construction of facilities to evacuate flood water from Tai Lake to the Yangtze River and Hangzhou Bay through two major enlarged river chan- nels (Taipu-Huangpu River System and the Wangyu River) and the Hang-Jia lu South Pumped Drainage Scheme; (b) completion and strengthening of some 270 km of the perimeter dike around Tai Lake for more effective regulation of flood- water; (c) installation of a flood forecasting and operation system covering the whole Basin with the use of modern telemetric and communication equipment; and (d) institutional development and strengthening of TBA through technical  - 3 - assistance, staff training, equipment and facilities to improve operation and management, including vater-related environmental managsement. 9. Pro1ect Implementation. The rroposed project would be carried out by the Taihu Basin Authority (TBA) of the Ministry of Water Resources. The prolect coet is estimated at $497.3 million equivalent, with a foreign exchange component of $200.1 million equivalent (40.2 percent), excluding taxes and duties. The total financing required is $497.3 million, of which the Bank Group would provide a loan of $100 million and a crsdit of $100 mil- lion equivalent to cover almost 100 percent of the foreign exchange or 40 per- cent of the total cost. Retroactive financing, estimated at a total of $20 million equivalent, is recommended to finance urgent flood mitigation works carried out from March 1, 1992 to the date of signing of the Loan/Credit Agreements. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disburse- ment schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in China are given in Schedules C and D, respectively. Project maps IBRD No. 23915-16 are also attached. The Staff Appraisal Report, No. 11308-CHA dated January 22, 1993, is being dis- tributed separately. 10. Prolect Sustainabilitv. The proposed project would be sustain- able. Due to the Basin's high current and potential economic growth, the Government is fully committed to invest in the capital works and to operate and maintain them after their completion. The completed flood control works would induce further economic growth at an even higher rate and the Government can ill afford to suffer damages and losses from frequent flooding, especially in industrial areas. The integrated functions and responsibilities for opera- tion and maintenance of flood control facilities, worked out under the project between the central and local governments, would ensure proper performance of the project works on a sustainable basis. 11. Agreed Actions. The main assurances obtained from the Government are: (a) formulation of a set of operational procedures for basin-wide flood and drought management, overall water resource management, and management of catastrophic floods; (b) establishment and maintenance of the Taihu Basin Water Resources Protection Committee to control and manage water quality in the Basin; (c) preparation and implementation of a long-term basin-wide envi- ronmental management plan; (d) collection and levy of charges to meet at least the full annual operation and maintenance expenditures; and (e) an increase in TBA's authority commensurate with its expanded responsibilities, as agreed with the Bank/IDA. 12. Environmental Aspects. A full Environmental Assessment has been prepared by the Government. The EA concludes that the project would provide significant benefits in alleviation of extensive and severe floods, improve- ments of water quality and quantity for municipal and urban water supply, and inland w&terway navigation. Water logging and drainage would also be improved to enhance the production environments for urban and rural industries, and agriculture. 13. The negative impact would be the acquisition of land for permanent (19865 ha) and temporary (3,155 ha) use, including demolition of about  - 4 - 800,000 a? of buildings (residential houses, stores, sheds, brick kilns, etc.) for construction of project works. The Government has prepared a plan for land acquisition, relocation and compensation which, together with the follow- up measures and actions agreed during negotiations, complies with Bank guide- lines on involuntary resettlement. Equitable compensation is being paid in accordance with the State Council and local regulations. Economic losses and social dislocation for the 33,100 persons affected would be small, as most of the farmers affected derive their incomes mainly from town and village enter- prises and sideline earnings, and most of them will be relocated in the same township. The socioeconomic well-being of the aEfected people will be moni- tor4d regularly by an independent institution, and any deficiency will be addressed in a timely fashion. Other potential adverse impacts include those associated with construction activities. A plan of mitigation measures to minimize the adverse impacts has been prepared for implementation during con- struction. 14. The Taihu Basin Water Resources Protection Committee (TBWRPC) would be established to define and coordinate an institutional approach to comprehensive basin-wide water management and water quality management, including water quality studies, monitoring, and upgrading of environmental management capability. Under the direction of the TBWRPC, a long-term basin- wide environmental management plan will be prepared and implemented by the related bureaus and agencies. 15. Program Oblective Cateaories. The project will confer significant environmental benefits on the Taihu Basin by reducing the frequency of normal flooding and the depth and duration of severe flooding, enhancing vater qual- ity, improving agricultural land drainage, and providing drought protection for the region. The technical competence of TBA staff in flood and water management will be enhanced through the provision of better and expanded net- works of flood monitoring and communication systems, computing facilities, training and technical assistance. 16. Prolect Benefits. The main benefit is prevention of flood damages and losses. The cost of cumulative flood damages incurred from 1949 to 1991 in the Basin has been estimated at $7.6 billion (present value), rtiving a long-term average annual flood damage of about $182 million. Annual flood protection benefits to be derived from the project have been estimated at about $78 million. The improved drainage on 86,000 ha of existing agricul- tural land would provide annual incremental production of 43,000 tons of grain and rape seed valued at $4.5 million. The economic rate of return (ERR) based on flood protection and drainage improvement benefits is estimated at 27 per- cent. Other benefits, not readily quantifiable, include (a) enhanced quantity and quality of raw water for Shanghai City's polluted water supply; and (b) improved and expanded inland waterway transportation, due to construction of new channels and widening and deepening of existing ones and provision of numerous ship locks of expanded capacity. 17. Risks. The project faces no significant technical risks. The engineering concept is sound and the solutions have been derived after years of studies and planning. The effects of any unprecedented flood exceeding the project design (a 1-in-SO-years return period) would be substantially reduced by the project works and through the flood forecasting system and contingency  - 5 - plans to be provided under the project. TBA's lack of experience in imple- menting Bank-assisted projects will be compensated through training of TEA staff in project implementation, management, procurement and disbursement before the start of the project. The risk of shortage of local funds would be minimized, as central and local governments have formally committed to the project on a priority basis vith a firm allocation of resources. 18. Recommendation. T am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and the Association and recommend that the Executive Directors approve the proposed loan and credit. Lewis T. Preston President Attachments Washington, D.C. January 29, 1993  - 6 - Schedule A CHINA TAIHU BASIN FLOOD CONTROL PROJECT Estimated Costs and Financing Plan ($ million) Local Foreign Total Estimated Project Co2n /a Land acquisition 32.0 0.0 32.0 Compensation 21.4 0.0 21.4 Earthworks 82.1 49.3 131.4 Civil works 69.6 69.6 139.2 Machinery & equipment 3.6 33.0 36.6 Buildings 1.6 1.0 2.6 Other enginee,.ing 12.4 5.3 17.7 Training & tech. assistance 0.1 1.7 1.8 Design, supervision & mgmt 8.6 2.5 11.1 Base Cost 231.4 162.4 393.8 Physical contingencies 23.1 16.3 39.4 Price contingencies 42.7 21.4 64.1 Total Project Cost 297.2 200.1 497.3 Financina Plan Goverment 297.2 0.1 297.3 IBRDIIDA 0.0 200.0 200.0 Total 297.2 200.1 497.3 Ia Project is exempt from taxes and duties.  -7- ScheduW B Peg. 1 TAIBU BASIN PLOQD C0NTROL PROJECT Su_mary of Proposed Procuremont Arransements ($ million) Procurement Method Total Project Element ICB LCB Other IRB Casts la Lb 1. Land acquisition and compensation 0.0 0.0 0.0 64.6 64.6 (0.0) (0.0) (0.0) (0.0) (0.0) 2. Civil works 71.4 211.8 75.0 0.0 358.2 (35.7) (79.5) (26.3) (0.0) (141.5) 3. Buildings 0.0 3.3 0.0 0.0 3.3 (0.0) (1.3) (0.0) (0.0) (1.3) 4. Goods 50.9 2.3 1.5 0.0 54.7 (50.9) (2.3) (1.5) (0.0) (54.7) 5. Training and technical 0.0 0.0 2.5 0.0 2.5 assistance (0.0) (0.0) (2.5) (0.0) (2.5) 6. Design, supervision & 0.0 0.0 0.0 14.0 14.0 management (0.0) (0.0) (0.0) (0.0) (0.0) Total 122.3 217.4 79.0 78.6 497.3 (86.6) (83.1) (30.3) (0.0) (200.0) /a Other includes force account work, shopping, direct purchases, consul- tant service., technical assistance and training. 1b NBB denotes non-Bank Group financing. Notes Figures in parentheses indicate Bank Group financing.  - 8- Schedulo B Page 2 Disbursement. Category Amount of S of expenditures loanlcredit to be disbursed ($ million) I. Works 140.8 42X of expenditures II. Goods 54.7 100l of foreign expendi- tures, 1001 of local expen- ditures (ex-factory) or 752 of local expenditures for goods procured locally. III. Consultants' services and training 2.0 1002 of expenditures IV. Unallocated 2.5 - Total 200.0 Estimated Disbursement Bank/IDA PY 1993 1994 1995 1996 1297 1998 -(----------------- ($ million) -------