China - Medium-Sized Cities Development Project

]Document of The World Bank FOR OFFICIAL USE ONLY Report No. 18135 IMPLEMENTATION COMPLETION REPORT PEOPLE'S RtEPUBLIC OF CHINA MEDIUM-SIZED CITIES DEVELOPMENT PROJECT (Credit 2201-CHA / Loan 3286-CHA) June 29, 1998 Urban Development Sector Unit China Country Management Unit East Asia and Pacific Region 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.  CURRENCY EQUIVALENTS (as of May 1998) Currency = Renminbi Currency Unit = Yuan (Y) Y 1.00= 100 fen $1.00 =Y 8.3 Appraisal: US$1.00 = Y5.22 Completion: US$1.00-Y8.3 WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER January 1 - December 31 ABBREVIATIONS AND ACRONYMS EASUR - Urban Development Sector Unit, East Asia and Pacific Region EPB(s) - Environmental Protection Bureau(s) GIS - Geographic Information System ICR - Implementation Completion Report NEPA - National Environmental Protection Agency O&M - Operation and maintenance PMO - Project Management Office SAR - Staff Appraisal Report SDR - Special Drawing Rights TA(s) - Technical Assistance(s) UPMIC - Urban Planning and Management Information Centers Vice President Jean-Michel Severino Country Director Yukon Huang Sector Manager Keshav Varma Task Manager Edouard Henri Motte  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT CHINA MEDIUM-SIZED CITIES DEVELOPMENT PROJECT (Credit 2201-CHA / Loan 3286-CHA) Table of Contents PRE FA CE. ................................................... ii EVALUATION SUMMARY.iii PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJEICTIVES. B. ACHIEVEMENT OF PROJECT OBJEcIVES. 3 C. MAJOR FACTORS AFFECTING PROJECT IMPLEMENTATION. 8 D. PROJECT SUSTAINABILITY. 8 E. BANK PERFORMANCE. 9 F. BORROWER PERFORMANCE .10 G. ASSESSMENT OF OUTCOME .10 H. FUTURE OPERATION .11 I. KEY LESSONS LEARNED .11 PART If: STATISTICAL ANNEXES Statistical Tables TABLE 1. SUMMARY OF ASSESSMENT'S ......................................................... 13 TABLE 2. RELATED BANK LOANS AND IDA CREDITS ............................ ............................. 14 TABLE 3. PROJECT TIMETABLE ......................................................... 15 TABLE 4. CREDIT AND LOAN DISBURSEMENTS-CUMULATIVE ESTIMATED AND ACTUAL ............ 15 TABLE 5. KEY INDICATORS FOR PROJECT IMPLEMENTATION ......................................................... 16 TABLE 6. KEY INDICATORS FOR PROJECT OPERATION ......................................................... 17 TABLE 7. STUDIES INCLUDED IN PROJECT ......................................................... 18 TABLE 8A. PROJECT COST.. 19 TABLE 8B. PROJECT FINANCING.. 19 TABLE 9. ECONOMIC COSTS AND BEN4EFITS .20 TABLE 10. STATUS OF LEGAL COVENANTS .21 TABLE 1 1. COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS .22 TABLE 12. BANK RESOURCES-STAFF INPUTS .22 TABLE 13. BANK RESOURCES-MISSIONS .23 APPENDICES: A. MISSION'S AIDE-MEMOIRE .24 B. BORROWER'S CONTRIBUTION TO TlHE ICR .25 C. MAP.26 This document has a restricted distribuition 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.  ii IMPLEMENTATION COMPLETION REPORT CHINA MEDIUM-SIZED CIrIES DEVELOPMENT PROJECT (Credit 2201-CHA / Loan 3286-CHA) Preface This is the Implementation Completion Report (ICR) for the Medium-Sized Cities Development Project in China, for which Ln. 3286-CHA in the amount of US$79.4 million and Cr. 2201-CHA in the amount of SDR 62.2 million/US$79.4 million equivalents were approved on January 8, 1991 and made effective on April 29, 1991. The loan and credit were closed on June 30, 1997 as originally scheduled, at which times a balance of US$3.94 million of the loan funds allocated to the city of Shashi was canceled at the borrower's request. The final disbursement took place on September 11, 1997. The ICR was prepared by ]Messrs./Mmes. Edouard H. Motte, Songsu Choi, JoAnne S. Nickerson, and Edith Ortanez, Urban Development Sector Unit, East Asia and Pacific Region (EASUR) and Messrs. Leon H. Miller and Chreod Ltd. (consultants) and was reviewed by Messrs. Keshav Varma, Sector Manager, EASUR, and Yukon Huang, Country Director, China. Preparation of this ICR was begun during the Bank's supervision mission in April 1997 and is based on materials in the project file. The Borrowers contributed to this ICR by producing their own completion reports, in the project file and by providing detailed comments on the Bank's ICR., shown in Appendice B.  iii IMPLEMENTATION COMPLETION REPORT CHINA MEDIUM-SIZED CITIES DEVELOPMENT PROJECT (Credit 2201-CHA / Loan 3286-CHA) Evalujation Summary Introduction i. When preparation of this project began a period of rapid economic development and urban growth was well underway, and the Government of China was experimenting with approaches to support urban development while strengthening local government to which a large part of governmental decision authority and resources had been decentralized. The challenge for municipalities was how best to match the growing demand for public services with a program of efficient urban development investments and accompanying management, fiscal and policy reforms. The Government's approach was to set broad objectives and parameters, and encourage municipalities to experiment within that broad framework. ii. The Government considered medium size cities as appropriate test cases for such "comprehensive" development prograims encompassing a broad spectrum of economic and infrastructure management functions decentralized to the local level. Three medium- sized cities were chosen for this project: Changzhou in Jiangsu Province, with a population of 538,000; Luoyang in Henan Province with 1,020,000 people; and Shashi in Hubei Province with a population of 277,000. Project Objectives iii. The project objectives were to assist the project cities to: (a) improve overall city planning including across and within sectors; (b) increase efficiency in the utilization and management of existing facilities; (c) strengthen resource mobilization; (d) support expansion of economic activity; and (e) promote prudent management of environmental resources. These were to be achieved through the introduction of planning and management reforms and the preparation and implementation of specific infrastructure investments consistent with such reforms. iv. The objectives of the project were comprehensive and very ambitious, and reflected a desire of the Government to deal with most sectors under the responsibility of the municipalities, and the Bank's wish to support this aim by relating them to overall improvements to urban management practices and systems and focusing on policy issues common across sectors. Though this is laudable, it makes for a high degree of complexity in terms of the number of institutions involved, the range of types of components, and the scope of the institutional improvements required. The involvement of three cities in three dispersed provinces added to the conaplexity. This should be seen as a pilot project to  iv demonstrate the nature and feasibility of similar projects in other medium size cities in China. Implementation Experience and Results v. The achievements of the project were substantial and satisfactory. Most investment components were efficiently designed and implemented, contributing substantially to development of the cities. Most institutional development objectives were achieved through policy dialogues between the Bank team, consultants, and the municipalities not only during implementation but to a large extent during the project preparation. The resources available for the project permitted only a modest first step to pursue the reforms in each of eight sectors, and their further development depends on the capacity of the cities to continue ambitious programs of institutional improvement and staff training. The project sustainability would depend even more on the borrowers' own motivation and resources. Since the country's overall transition is moving essentially in the same direction as the approaches introduced during the project preparation and implementation, the sustainability of the project appears probable. vi. The objective to "improve overall city planning and management" was partially achieved. TAs were very successful in most sectoral agencies. But, except in Changzhou, implementation of the TAs to improve. overall planning capacity in the Planning Commissions and Finance Bureaus began too late in the process to be useful. This delay can be attributed largely to an inadequate understanding of the likely benefit of this component on the part of Luoyang and Shashi and the consequent reluctance to devote the necessary time. In the case of Changzhou, the work was focused on developing basic financial management models and systems, which proved very satisfactory and were disseminated to other cities by the provincial authorities. vii. The objective to "increase efficiency in the utilization and management of existing facilities" was substantially achieved. The aim was incorporated through revision of proposed infrastructure investment components. Reforms affecting utilization of hospitals and schools were fully implemented and monitoring has shown that they had the intended effect. Land use-transportation studies were completed and traffic management measures put in place. viii. Achievement of the objective "strengthen resource mobilization" varied by sector. Water companies made substantial progress, and housing units were constructed and sold as planned, or in the case where subsidies were continued, at much reduced subsidies. On the other hand, bus companies have seen their financial situation deteriorate. Subloans for industrial renovation or expansion and for pollution control improved on the old practice of grants or heavy subsidies by the government. Their repayment has been a problem, with 20 percent to 40 percent of respective subloans in arrears, though this is better than the country's banking sector overall where about 40 percent of loans are widely estimated to be non-performing. ix. The objective to "support expansion of economic activity" was substantially achieved. Road and water supply projects and 26 industrial efficiency sub-projects were completed and being fully utilized as planned.  v x. The objective to "promote prudent management of environmental resources" was partially achieved. This component was strongly supported by the Environmental Protection Bureaus (EPBs), and 12 pollution control loans to industrial enterprises were made. Most projects were technically successful, but a few were not and there were some repayment difficulties. Environmental impact assessments were carried out for all industrial projects. xi. Project Cost and Financing. The SAR estimated project costs at $218.9 million, plus $58.3 million in contingencies for a total of $277.2 million. Actual total costs were $250.2 million, with local costs of $145.2 million and foreign costs of $105 million. Bank Group financing provided totaled $162.1 million, $2.7 million more than estimated at appraisal in US$ equivalent, due to the change in exchange rate between the US$ and SDR. A balance of US$4.25 allocated to the city of Shashi was canceled at the borrower's request. The project closed on June 30, 1997 as originally scheduled. xii. Major Factors Affecting Project Implementation: All factors important to project success were subject to central government or more importantly, local government control. Among the factors subject to the central government control, devaluation of the yuan, price decontrol and rapid escalation of costs of construction materials impacted some contracts, but problems were adequately handled. One of the cities merged with a neighboring municipality during the project, causing considerable administrative confusion. Public transportation policies and standards of the central government negatively impacted on achievement of the financial objectives for bus companies. Failures in areas that were subject mainly to local government and implementing agencies' control included: (a) significant delays in implementing the TA to strengthen planning and management capacity in the Planning Commissions and Finance Bureaus; (b) weaknesses in financial planning that were never entirely remedied; and (c) serious delays in putting in place mechanisms for collection of loans made to enterprises. xiii. Bank Performance: Bank performance during preparation and supervision was broadly satisfactory but there were some notable deficiencies related to the circumstances of the project. Project components were generally well defined, and missions included teams with all necessary fields of expertise which provided municipal governments' timely advice addressing key developmental issues. However, the lack of the experience in comprehensive urban development projects in China resulted in a few significant shortcomings such as the project scope that was too ambitious in relation to the resources available and difficulties the cities would have in sustaining the improvements introduced. During the supervision, the Bank, pressed to expand its urban operation in response to strong demand, failed to maintain early continuity in the project team or to provide consistently high levels of supervision input that were required and planned for this complex project. It did however draw on the experiences and understandings gained during preparation of this project as a reference for identifying and designing other operations. xiv. Borrower Performance: Borrower performance was overall satisfactory particularly given the complexity of the project and relative inexperience of the municipalities with the Bank. The performance was uneven among cities: Changzhou's performance was excellent, Luoyang's adequate overall, and Shashi's less than satisfactory. These ratings reflect the relative strengths of the local institutions. There  vi were some significant problems experienced by all three due to their relative inexperience in managing the Bank loan as well as the novel nature of some elements of the project. Some TAs were delayed to the point that they made negligiblecontribution to project success so far, financial reporting was generally weak, and management of loans to enterprises was inconsistent and somewhat lax. xv. Project Outcome: In the context of the complex and fast transition that China was undergoing and the Bank's new entry to the sector in the country, the project's achievements should be considered satisfactory overall with some inevitable deficiencies that did not significantly detract from the overall long term benefit. The project achieved most but not all of its stated objectives, and sustainability is probable as most of the reforms introduced under the project are consistent with the transition of the overall country's economic management system. Summary of Findings, Future Operations, and Key Lessons Learned xvi. This project made a useful initial contribution to the planning and management of complex, large-scale urban investments across multiple sectors in Chinese cities undergoing a rapid transition from planned to market-based systems. The project achievements are likely to be sustained mainly as: the new or improved approaches introduced under the project are consistent with the country's overall transition; the assets created under the project are valuable to the economies; and responsibilities for operation and maintenance of the assets are clear and the organizations responsible have the necessary financial and institutional capacities. xvii. Future Operation: The project also provided an invaluable learning opportunity for the borrower and the Bank. The experience gained has been useful for identification and formulation of similar projects now under implementation. The experience is likely to remain useful or become even more useful for future operations as the Bank is trying to shift its sector assistance emphasis away from narrow sectoral assistance in large cities toward broader urban management assistance in less developed regions and cities. xviii. Key Lessons Learned: Multi-sectoral projects in urban areas are both needed and, under the right circumstances, feasible. Further, these projects could provide a better platform for significant improvement of the broad urban management systems and sectoral policies, compared with projects focusing on narrow sectoral agenda which often cannot be reformed within the sector itself. However, they pose significant institutional and operational difficulties and risks. They require investment of substantial borrower and Bank resources through the project cycle. An even more critical factor is the borrowers commitment and capacity. The risks are inevitable but should be minimized as much as possible in future projects by ensuring that policy and institutional development goals are clearly defined within a feasible range, and that project cities share a common set of problems that they are willing to implement and maintainthrough a specific set of actions.  I IMPLEMENTATION COMPLETION REPORT CHINA MEDIUM-SIZED CITIE'S DEVELOPMENT PROJECT (Credit 2201-CH[A / Loan 3286-CHA) PART I. PROJECT IMPLEMENTATION ASSESSMENT A. Statement/Evaluation of Objectives 1. Background. When this project began, a period of rapid economic development and urban growth in China was well underway, and the Government was experimenting with approaches to strengthening municipal administrations. The challenge for municipalities was how best to match the growing demand for public services with a program of urban development investments and accompanying management, fiscal and policy measures. The Government's approach was to set broad objectives and parameters, and encourage municipalities to experiment within that broad framework. Medium size cities were particularly appropriate test cases since the systems to be changed were simpler than those in China's large urban areas. Further, the Government had just established a regulatory framework for environmental protection and created the National Environmental Protection Agency (NEPA), and was looking for effective ways to elaborate and implement environmental policies and regulations. 2. Issues in the urban sector had been defined in the 1987 sector study "Zhejiang: Challenges of Rapid Urbanization". These issues were: (a) overall planning and management at the local level by core agencies; (b) planning and management practices of line agencies; (c) efficient use and management of existing municipal assets; (d) resource mobilization to reduce subsidies; and (e) the control of negative externalities that accompany rapid economic growth, particularly environmental impacts. 3. Three medium-sized cities were chosen for this project: Changzhou in Jiangsu Province, with a population of 538,000:, Luoyang in Henan Province with 1,020,000 people; and Shashi in Hubei Province with a population of 277,000. 4. Project Objectives. The project olbjectives were to assist the project cities to: (a) improve overall city planning, including across and within sectors; (b) increase efficiency in the utilization and management of existing facilities; (c) strengthen resource mobilization; (d) support expansion of economic activity; and (e) promote prudent management of environmental resources. These were to be achieved through the introduction of planning and management reforms and the implementation of specific infrastructure investments consistent with such reforms. 5. Operational objectives in each of the sectors were as follows: (a) Education: expand access to basic education, strengthen teacher training, increase skilled manpower, and improve educational quality; (b) Health: improve the quality and availability of health services; (c) Transport: improve the flow of traffic, public transport services, and financial management and cost recovery in public transit; (d) Water Supply: increase  2 capacity and improve financial management and cost recovery; (e) Housing: provide incentives to shift from subsidized rental stock to units purchased on commercial terms; (f) Industry: assist industrial enterprises to improve efficiency, thus helping to expand the economy; and (g) Environmental Protection: assist industries to meet water quality discharge standards. 6. Project Components. The principal components of the project were: (a) urban planning and management reforms, including in each city technical assistance toward better capital improvement planning in the Planning Commission and Finance Bureau and the establishment of an urban planning and management center with GIS capabilities; (b) construction and equipping of schools and teacher training; (c) construction and equipping of health facilities and training for health officials; (d) road construction, improvements to public transport, and completion of land use-transport studies; (e) construction and equipping of water supply facilities; (f) construction of about 6,900 housing units for sale to households; (g) financing of specific technological restructuring projects by municipal industrial enterprises; and (h) financing of pollution control projects of municipal industrial enterprises and provision of pollution control equipment for municipal Environmental Protection Bureaus (EPBs). 7. Evaluation of Objectives. The objectives of the project were comprehensive and very ambitious, and constituted an attempt to address the cross-sectoral nature of urban issues by including many sectors and relating them to overall improvements to urban management practices and systems. Though this is laudable, it makes for a high degree of complexity in terms of the number of institutions involved, the range of types of components, and the scope of the institutional improvements required. The involvement of three cities in markedly different provinces (at the insistence of the Borrower) added to the complexity. 8. The Bank's initial effort to narrow down the project scope was unsuccessful in the face of the Government's decision to have the project cover all three major spheres that it considered were the municipality's responsibility: infrastructure, social services, and industries. Given this scope and in view of the weak horizontal coordination of public institutions in Chinese cities, the attempt to link sectoral interventions to an overall management improvement plan was inevitable and appropriate. Further, the choice of medium size cities was appropriate. The governments of medium size Chinese cities are potentially open to improving horizontal integration, whereas in larger cities the sheer size of the institutions involved renders the problem much more difficult. The project was, in many respects, a pilot to test the nature and feasibility of similar projects in other medium size cities in China. 9. However, the scope of the project was clearly too broad for the Bank to have full and adequate involvement in all components and objectives. This meant that the project would provide only a modest initial step in each sector, and that progress would be dependent on own efforts of the three cities and the broad policy direction of the country as a whole. Given that this direction has in some respects not yet consistently flowed down to and across the municipal level in China, the efforts of the cities themselves were, and continue to be, central to the sustainability of key components of the project.  3 10. The Staff Appraisal Report (SAR) correctly identified the major risks as being related to the scope of the objectives and components, and the capacity of the three municipalities to carry through such an amrbitious undertaking. 11. Covenants. The loan covenants were generally too broad and ambiguous. In particular, precise covenants on the housing component and the Technical Assistance (TA) for Planning Commission and Finance Bureau should have been included. The financial covenants for full cost recovery by the bus companies proved to be unattainable in light of economic and structural constraints, and lack of support from municipal officials. B. Achievement of Project Objectives 12. In the context of the complex nature of the project and its ambitious objectives, the achievements of the project were satisfactory overall, though a few components were barely so. To a large extent the objectives were defined during preparation through policy dialogue to modify the proposed project components or the governing sector management framework. This phase of thle policy dialogue was generally successful and resulted in appropriate project component designs and policy reform actions taken during or shortly after project preparation. In the following the attention is focused mainly on the additional actions during implementation. Objective A: Improve overall city planning, including across and within sectors 13. There were two principal interventions designed to assist the cities in achieving this objective: a) the TA to improve planning and management control practices of the Planning Commission and the Finance Bureau through the introduction of management information systems and tools for annual budgeting and medium-term investment programming; and b) establishment of Urban Planning and Management Information Centers (UPMIC) in each city, developrment of GIS, and development of specialized subsystems. In addition, TAs in the education, health, transport, and water and sewerage sectors were planned. 14. This objective was partially achieved. Despite the inherent difficulties of institutional development, many of the targets were substantially achieved and there was a measurable improvement in the delivery of urban services. 15. There was a high level of success in establishment of UPMIC and development of information systems including GIS in each city. Upon project completion these institutions were functioning effectively and were expected to continue to do so. The TAs in education, health, transport, and water supply were carried out successfully despite some delays. 16. The TA addressed to the Planning Commission and Finance Bureau was a major problem. Only one city, Changzhou, carrlied out this TA in sufficient time to have a real impact on the project; models developed in Changzhou were subsequently disseminated to other cities in Jiangsu by provincial authorities. Efforts in Luoyang and Shashi were plagued by delays on the part of i:he municipalities, reflecting an inadequate understanding of the importance of this component. The lack of attention paid to this TA  4 in two of the cities has implications for the sustainability of some of the project's accomplishments. 17. Financial planning and management by all participants were generally weak. The Project Management Offices (PMOs) were frequently unable to adequately monitor and report on the financial status of their projects. The utilities needed considerable assistance in being able to produce meaningful accounting reports. Finally, a number of loans to enterprises were based on improper financial planning, in some cases resulting in inability to repay the loan. Objective B: Increase efficiency in the utilization and management of existing facilities 18. This objective was to be achieved through actions in the health, education and transport sectors. Hospital beds owned and operated by enterprises and other institutions not directly affiliated with the municipal government were to be opened to the public; more frequent use of pre-admission diagnosis to reduce average length of hospital stays instituted; experimentation with home-based care carried out; and existing health facilities rehabilitated or reconstructed with improved designs. In education, budgets for maintenance were to be increased; new facilities built based on actual needs and calculated utilization rates; and student-teacher ratios increased through revised standards and higher teaching loads. In the transport sector, greater emphasis was to be placed on public transit and traffic management measures designed to maximize use of the existing roadway system. 19. This objective was substantially achieved. Most targets set in the SAR were met or exceeded. Non-municipally owned hospital beds were made available to the public; average length of stay in all types of hospitals and in all -three cities decreased by an average of 21 percent; childhood immunization rates increased dramatically except in Changzhou where they were already high; infant mortality rates decreased by 21-34 percent. Indicators of hospital occupancy rates were more mixed. In city hospitals they decreased, but in other types of hospitals they generally rose. Apparently the opening of non-municipal hospitals to the general public caused a decrease in demand for beds in city hospitals. 20. Utilization rates for classrooms and labs increased dramatically and student- teacher ratios increased at all levels, in most cases meeting targets set in the SAR. Maintenance budgets for school buildings increased to levels at or above the targets, and expenses for new equipment rose. 21. In transport, each city completed a land use-transport study and prepared a traffic plan in an effort to make better use of existing transport infrastructure and to tailor road construction to actual levels of demand. In Luoyang and Shashi, these studies were expanded to develop action plans to address the deteriorating financial situations of the bus companies.  S Objective C: Strengthen resource mobilization 22. Activities in the transport, water, housing, and pollution control sectors were designed to help achieve this objective. Bus and water companies were required to make tariff adjustments and cut costs so that revenue generation would cover operations, depreciation, bonus and welfare funds, and taxes and charges. Housing built under the project was to be sold at prices to cover full investment costs, with owners responsible for all maintenance. Resources were to be mobilized for pollution control through creation of a revolving fund that financed pollution abatement measures by industrial enterprises using the Bank loan as well as a part of pollution levy revenues that used to be given to polluters as grants. 23. Achievement of this objective varied by sector. It was substantially achieved in respect of water companies. By project completion, water tariffs in most cases exceeded targets set in the SAR and the water companies were on a solid financial footing. 24. The objective was partially achEieved in the housing sector. Housing completion targets were met, and a high proportion was sold at market prices. However, others were sold to work units that proceeded to subsidize the cost, and at project completion the Shashi Housing Company was having trouble selling its units in a depressed housing market and was experiencing financial difficulties. 25. Bus companies were faced with constraints imposed by national and provincial policies and rising costs, and were unable to develop the necessary managerial responses. Though fares were raised, costs increased and the financial situation of the bus companies deteriorated. Thus this objectlive was not achieved in the public transit sector. 26. In regard to the industrial pollution control revolving fund, the objective was partially achieved. In all cases, the program was enthusiastically received by the EPB. However, efficiency was compromised by a late start, unfamiliarity with mechanisms for loan recovery, and a lack of planning and financial expertise on the part of enterprises. However, a number of industrial pollution abatement projects were carried out successfully, and the concept of a revolving fund was introduced. Objective D: Support expansion of economic activity 27. This objective was to be achieved through: transport initiatives in order to reduce transport bottlenecks; construction of water treatment plants and associated pipelines to meet industrial water demand shortfalls; and a line of credit to finance industrial efficiency improvements. 28. This objective was substantially achieved. Five road construction/widening components (total 13 kilometers) were completed. Additional buses, new terminals and depots, and extension of the trolley bus system in Luoyang were included. All planned projects were realized with minor moclifications. As with other civil works during the period, price increases for building materials approaching 100 percent caused some delays and necessitated revisions to some contracts.  6 29. In water supply, investments in Changzhou were designed to increase water supply capacity by 200,000 m3 per day and in Shashi by 150,000 m3 per day. In Luoyang, projects included a waterworks transformer station and associated transmission network. All aspects of this component were substantially carried out. Volumes of water sold increased in Changzhou by 23 percent and in Shashi by 25 percent, figures that are slightly below the targets set in the SAR. 30. Disbursements on industrial efficiency sub-projects were on target. There were 12 projects in Changzhou, 10 in Luoyang, and 4 in Shashi. Most were successfully commissioned, though there were in some cases significant delays. One major sub- project, the Silk Factory in Shashi, was still non-operational at project completion. With the exception of Changzhou, there were difficulties in ensuring repayment of loans (70 percent in Luoyang; 60 percent in Shashi; and 95 percent in Changzhou) made to industrial enterprises. However, efforts to strengthen this aspect of the program were undertaken in 1997 whereby Shashi made arrangements with the Industry and Commerce Bank of China and Luoyang with the Finance Bureau to assist in collection of loans. Objective E: Promote prudent management of environmental resources 31. Implemented in two of the three cities, this component provided a line of credit to finance pollution control projects by industrial enterprises and established a revolving loan fund to be managed by the EPB and Finance Bureau. The EPB contributed 30 percent of the fund from its collection of fines and fees for over standard discharges as agreed. 32. This objective was partially achieved. Twelve pollution control loans to industrial enterprises were made (6 in Changzhou and 6 in Shashi). Most sub-projects were technically successful. However, implementation of the revolving loan fund was late starting up, and, as with the industrial efficiency loans, there were significant problems in collection. Although loan agreements were signed with benefiting enterprises at the approval of the sub-loan, the EPBs never followed on closely with the enterprises to confirm the repayment schedule and assess their financial capacity to do so at physical completion of the sub-project. Loan repayment rates (about 60 percent) were comparable to those known for commercial banks. Nevertheless, the concept was adopted successfully in the two cities. 33. Completion of water treatment facilities and reduction in water losses at production can also be viewed as contributions to the prudent management of environmental resources. Economic Rate of Return 34. No overall rate of return was calculated in the SAR due to the large number of components for which benefits cannot be accurately quantified. However, three sub- components under transport were analyzed, and economic internal rates of return were estimated at 21.6-33.5 percent, taking into account vehicle operating costs, lower accident rates, and time savings.  7 35. Calculation of internal rates of return was not attempted in this ICR as the implementing agencies were unable to provide any data on time for such calculations. However, major quantitative and qualitative benefits include: (a) better quality and more efficient educational and health facilities and services; (b) removal of traffic bottlenecks impeding economic growth, as well as additions to the bus and trolley fleets; (c) significant increases to water volumes available to industry; (d) improved efficiency at some 25 industrial enterprises; (e) more effective pollution abatement at 12 industrial enterprises; and (f) greatly improved data bases and information systems available to municipal officials for planning and management. Evaluation of Program Objective Categories 36. This project touched many sector objectives in the areas of environmental improvement, health, education, transport, housing and land management, and industry. Some but not all performance criteria were quantified at appraisal. Since the project was closing in 1997, it was considered not worthwhile to identify and monitor performance indicators during the time that other projects were being retrofitted with such indicators. 37. Financial objectives: TAs for financial planning and management were instituted in many parts of the municipal organization with mixed success. The change from traditional accounting methods to commercially acceptable methods proved to be difficult. The PMOs generally succeeded, though with significant delays. Finally, financial expertise in many of the enterprises receiving loans was weak, necessitating extra effort by Bank staff and consultants (paras. 17, 30 and 32). Repayment problems with industrial and pollution control sutbloans have been significant (paras. 30 and 31), though overall performance was better than in the banking sector of the country as a whole. 38. Institutional development: Institutional strengthening was a major focus of the project. Though institutional development projects in sectoral agencies were generally very successful, overall success was diminished by the failure of two cities to give sufficient attention to management improvement in core agencies (Planning Commission and Finance Bureau) and the problems with financial planning mentioned above (paras. 13-17). 39. Physical objectives: The physical components of the project (water supply and distribution facilities, transport facilities and equipment, schools and hospitals) were achieved with success. Virtually all elernents were completed as planned (paras. 18-21). 40. Poverty reduction: Though this project was not a targeted poverty intervention, some of its components will clearly have an impact on low-income populations. Health components have facilitated access to health care for the entire population, and measurements of childhiood immunization rates and infant mortality rates have already shown marked improvement. Higher quality and more efficiently managed educational facilities should work to improve the economic opportunities open to low- income children (paras. 18-20).  8 41. Resettlement: A reported 912 households were affected by three projects in Changzhou-Hongmei West Village housing, Beizhi Street housing, and Guanhe West road widening. Resettlement was carried out successfully. 42. Environmental objectives: Environmental impact assessments were carried out for all industrial projects, and loans to enterprises contributed to better pollution control, though admittedly at a small sample of the total industrial base of the three cities. Finally, the EPBs were strengthened through provision of monitoring equipment and experience in managing an industrial pollution control program (paras. 31-33). C. Major Factors Affecting Project Implementation 43. Factors not generally subject to government control: All factors important to project success were subject to either government or implementing agency control. 44. Factors generally subject to government control: Investment components of the project were greatly affected by devaluation of the yuan, price decontrol, and rapid price escalation. Coping with these unexpected changes, which was done successfully, was a valuable learning experience for the cities. Government controls on bus company fares and other public transit policies negatively affected efforts to make the bus companies financially self-sufficient. Finally, midway through the project the City of Shashi merged with the neighboring municipality of Jingzhou. This absorbed much of the municipality's energy and caused officials to become less focused on the project. 45. Factors subject to local government and implementing agency control: Many impacts on project implementation were the result of actions by the local government and implementing agencies. A key component of the project was to be the improvement of the planning and management capacities of the Planning Commissions and Finance Bureaus. With the exception of Changzhou, implementation of the TA projects designed for this purpose was very slow. Work was finally completed, but it was much too late to benefit the project, and the opportunity to test and assess the planning tools introduced during the project was lost. Likewise, the mechanism for assuring repayment of industrial pollution abatement loans was put in place later than anticipated and resulted in only a moderate repayment rate. Finally, institutional strengthening of the bus companies did not succeed, due to both the policies of higher-level governments mentioned above and the inability of the companies to rise to the management challenge. There were some delays in the availability of counterpart funding, but these were successfully overcome. PMOs were slow in putting in place proper systems for reporting and project monitoring, but with Bank assistance these systems were implemented and proved to be successful. D. Project Sustainability 46. Project sustainability is considered probable. Much depends on whether the cities will be able to maintain the momentum of the planning and management reforms introduced. To the extent that the project's objectives are consistent with the country's overall reform directions, the sustainability is considered probable within the constraints of institutional capacity. The reforms in health and education are on a solid footing and the physical facilities are operating efficiently. Planned future tariff increases for water  9 and public transport, the construction of additional commercial housing, and further development of planning and management skills cannot be guaranteed but appear likely. Continuation of the reforms could be constrained by lack of institutional capacity, lack of support from higher levels of government, insufficient resources, or changing priorities. All these risks, however, appear limited in the context of continuing fast economic growth and institutional reforms. E. Bank Performance 47. Bank identification of the project was satisfactory on a strategic level. The Bank responded to the Government's request for a very broad urban development project for the Bank's first such operation in C(hina, and used the opportunity to address the cross- sectoral issues of resource mobilization, investment efficiency, and the poor horizontal integration of Chinese municipa,l management which were identified as major weaknesses of the municipalities by earlier sector work. As such it fit well with the urban sector strategies of both the Bank and the borrower. Nevertheless, the Bank might have been more effective if it were able to narrow the scope of the project; the Bank was successful in dropping only a few major and difficult components in each city, such as coal gasification and telecommunications. The broad scope of the objectives and components was probably useful in addressing some cross-sectoral issues, but too ambitious for the resources available to make in-depth improvements. 48. Bank personnel were helpful in assisting the cities to prepare the project. There were three missions prior to appraisal by a highly interdisciplinary Bank team including specialists in urban economics, housing, transport, municipal engineering, financial analysis, health, education, operations, and industry. 49. Bank appraisal of the project was satisfactory. Though ver complex, components fit well into the framework, key TA projects were described and responsibilities established, and significant physical components were carefully chosen and designed. Risks resulting frorn the complexity of the project (many components, sectors and institutions) were correctly identified. However, difficulties the cities would likely have in adopting new concepts and procedures introduced were underestimated. Weakness in local financial expertise was also underestimated. The project processing had to be stopped due to a political incident in June 1989 and had to be ire-appraised almost two years after the original appraisal. 50. The quantity of Bank supervision-thirteen missions over the five year implementation period and total supervision costs of US$650,000-was appropriate considering that the project had been identified at appraisal as requiring considerable supervision. Bank supervision of the project focused very much on resolving implementation issues and ensuring prompt results in the use of loan proceeds, and in this regard was very satisfactory. When the time came to work with municipalities on studies and implementation of reforms suggested in the technical assistance inputs, composition of Bank missions and inputs could have been more specific to the issues on hand, to more closely align the TA with interests and appreciation of city and sector officials. In hindsight both staff and management could have been more strongly focused on the promotion of objectives set at appraisal on urban planning and city governance. Therefore Bank supervision is overall rated as satisfactory.  10 F. Borrower Performance 51. Borrower Performance was overall satisfactory though variable across cities. Changzhou promptly carried out the physical implementation and institutional development components (the latter to which it had strongly objected at appraisal) and successfully went on to apply the conclusions of studies. Luoyang, which is more conservative in its decision-making and planning process, had greater difficulty in applying integrated planning and sectoral initiatives-largely due to a difficulty of understanding the need for various reforms-but eventually managed Bank loan activities satisfactorily and in a timely fashion. In Shashi, once knowledgeable decision makers had been promoted out of the project leading group, municipal officials gave insufficient attention to project objectives and failed to address overall project management issues and decisions in a timely manner. The time consuming merger of Shashi and Jinzhou, and the arrival of a new group of decisionmakers left the project management team in a vacuum for major policy orientation and at best seeking guidelines on minor decisions. Most project components got completed through protracted negotiations of budgetary agreements. The TA for Planning Commission and Finance Bureaus-which was to provide coordination/management capacity for all project components-was carried out inadequately in the latter two cities. 52. In regard to project preparation, with the help of local consultants and the Bank all components were properly identified and described. 53. In project implementation, there were some shortcomings in monitoring and progress reporting, and financial statements of utilities were in some cases inadequate. However, the cities generally responded well to the Bank's suggestions for changes and performance improved as the project progressed. The management of loans to enterprises was inadequate. A workable system was late in being implemented, and insufficient use was made of the capacities of the China Investment Bank and the People's Construction Bank of China in this task. 54. Covenant Compliance: Eleven covenants were complied with and two others partially complied with. G. Assessment of Outcome 55. Project outcome is assessed as satisfactory. The project achieved most of its objectives and helped the three cities begin a process that should lead to better urban management and improved services to the population in a number of sectors. Physical investments were realized in a highly efficient manner, institutional and management reforms with more difficulty. Sustainability is considered probable as the overall reform in various sectors in China is consistent with the reforms supported under the project, and the project cities are among the forerunners. 56. Responsibilities for operation and maintenance (O&M) of most physical assets created by the project appear to be clear. The financial and institutional capacities of the organizations responsible for roads, water supply, hospitals and schools appear secure. However, the bus companies are in poor financial condition, and adequate O&M will depend on continuing subsidies from the municipal government. Finally, some of the  I1 industries receiving efficiency and pollution control loans may fail to maintain the improvements financed through the project due to limited financial planning and budgeting expertise. 57. Continued monitoring by the cities' relevant departments on indicators in the education, health, water supply and transport sectors would be highly desirable in order to trace the long-term impacts of this project. Il. Future Operation 58. The project also provided an invaluable learning opportunity for the borrower and the Bank. The experience gained has been useful for identification and formulation of similar projects now under implementation. The experience is likely to remain useful or become even more useful for future operations as the Bank is trying to shift. its sector assistance emphasis away from narrow sectoral assistance in large cities toward broader urban management assistance in less developed regions and cities. I. Key Lessons Learned 59. Key lessons learned from the implementation of this project include: (a) Multi-sectoral projects in Chinese cities are needed to address the complexity of urban issues, and can be successful if the subject cities have well prepared programs, adequately staffed agencies, and if adequate assistance (both financial and technical) is provided by the Bank Group. Though they are riskier than single sector projects, they could be more effective in broad policy advances (paras. 7-8). (b) Such projects should either include a single city, or choose cities that are in close proximity to reduce transaction costs. Further, the cities should share a common set of problems that the project will address through a specific set of actions, and should have the fiscal capacity to support loan repayments in a timely manner. Opportunities to leverage Bank investments should be thoroughly researched during project preparation. (c) The most difficult component of multi-sectoral projects is equipping the core agencies of the municipal governments to plan and manage complex initiatives and to play their proper coordinative and control role. TAs to address this aspect should be planned during preparation and be underway as the first stage of implementation (para. 16). (d) Training and skills transfer in financial planning and management is important to project success, and should be a significant element of future similar projects. Municipal governments and enterprises in China are gradually converting from traditional financial management to one more appropriate to a market economy, but the transition is only partially complete. Bank projects cannot assume that local financial expertise will be equal to the task (para, 17).  12 (e) Difficulties in collecting loans made to enterprises still exist in some Chinese cities. Mechanisms to assure high rates of repayment should be in place prior to the implementation of an enterprise loan program (paras. 30 and 32).  13 IMPLEMENTATION COMPLETION REPORT CHINA MEDIUM-SIZED CITIES DEVELOPMENT PROJECT (Credit 2201-CHA / Loan 3286-CHA) PART II. STATISTICAL ANNEXES STATISTICAL TABLES Table 1. Summary of Assessments A. Achievement of objectives Substantial Partial Negligible Not applicable Macroeconomic policies El E [l X Sector policies X O E E Financial objectives O X [1 E Institutional development El X El 0 Physical objectives X O E O Poverty reduction [1 E E X Gender concerns U O E X Other social objectives/I Unlikely E E E Environmental objectives l X E E Public sector management O X El E Private sector development El E:1 E X Economic benefits O El E E B. Project Sustainability Likely Unlikely Uncertain x El El C. Bank Performance Highly Satisfactory Satisfactory Deficient Identification n x o Preparation assistance E X O Appraisal l X El Supervision E X O D. Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation l X E Implementation E X O Covenant compliance O X O Operation (if applicable) E X O E. Assessment of Outcome Highly Satisfactcry Satisfactory Deficient El x El / I Resettlement.  14 Table 2. Related Bank Loans and IDA Credits Year of Loan/credit title Purpose Approval Status Cr. 2219-CHA, Liaoning (a) Improve water supply conditions and 1991 Closed on March 31, Urban Infrastructure Project strengthen institutions, regulations 1997; see ICR Report management, financial and pricing policies; No. 17550 of March (b) Improve traffic and public transport 30, 1998 conditions in Shenyang; and (c) Improve measures for water pollution abatement through TA and enforcement of measures for water pollution control. Cr. 2387-CHA, Tianjin (a) Reform infrastructure planning and 1992 Under implementation Urban Development & management systems of the municipal Environment Project government; (b) Correct deficiencies in environmental sanitation and urban transportation systems. Cr. 2457-CHA, Changchun (a) Improve water supply in Changchun to 1993 Under implementation Water Supply & meet domestic needs; (b) Reduce industrial Environment Project and domestic water pollution; and (c) Create a demonstration project to share lessons with other municipalities Ln. 3582-CHA, Southern (a) Improve the formulation, monitoring and 1993 Under implementation Jiangsu Environmental enforcement of environmental policies and Project regulations; (b) Enhance industrial point source pollution control; (c) Improve municipal wastewater management; (d) Initiate toxic/hazard material and waste management; and (e) Strengthen environmental planning and management capabilities of environmental protection entities in the region. Cr. 2475-CHA, Zhejiang To assist the Zhejiang Province and four of 1993 Under implementation Multi-Cities the largest municipalities to strengthen planning & delivery of urban services and to support environmental policies and programs. Ln. 3773-CHA, Cr. 2642- To help four municipalities implement an 1994 Under implementation CHA, Enterprise Housing & experimental reform strategy aimed at (a) Social Security Reform freeing enterprises of district responsibilities Project for housing and social security provision; (b) initiating development of a market-based housing system; (c) enhancing scope and management of basic social security net; and (d) facilitating enterprise system reform.  15 Table 3. Project Timetable Date actual/latest Steps in project cycle Date planned estimate Identification June 3, 1987 Preparation January 1988 April 1988 Appraisal July 1988 November 30, 1988 Post-Appraisal August 22, 1990 Negotiations October 1988 May 8, 1989 Board presentation January 1989 January 8, 1991 Signing February 1989 January 30, 1991 Effectiveness March 1989 April 29, 1991 Project completion December 3, 1996 March 31, 1997* Loan closing June 30, 1997 June 30, 1997 * Changzhou components were completed by Dec. 31,1995. Table 4. Credit and Loan Disbursements--Cumulative Estimated and Actual (US$ million) Financial Appraisal Estimate Actual Actual as % of Year US$ US$ Estimate 1991 3.4 3.8 112 1992 21.9 15.9 73 1993 57.2 35.9 63 1994 40.4 51.1 127 1995 27.0 32.6 121 1996 16.3 19.2 118 1997 2.2 3.6 164 Total 168.4 162.1  16 Table 5. Key Indicators for Project Implementation Indicator Targeted Achieved Planning/Management Reforms establishment of UPMIC in 3 cities in 3 cities development of GIS in 3 cities in 3 cities TA Planning Commission & in 3 cities in I city Finance Bureau Health Sector management reforms in 3 cities in 3 cities civil works $9.18 million new equipment $3.33 million TA & training Education Sector management reforms in 3 cities in 3 cities civil works $17.63 million new equipment $5.89 million TA & training Transport Sector management reforms in 3 cities in 3 cities land use-transport study in 3 cities in 3 cities traffic management schemes in 3 cities in 3 cities road projects public transit projects TA & training in 3 cities in 3 cities Water Sector management reforms in 3 cities in 3 cities Changzhou 200,000 m3 capacity Luoyang transformer station & transmission lines Shashi 150,000 m3 capacity TA and training in 3 cities in 3 cities Housing Sector management reforms in 3 cities in 3 cities Changzhou 4200 units Luoyang 1100 units Shashi 1600 units TA & training Industry Sector line of credit in 3 cities in 3 cities Changzhou enterprise loans $27.5 million Luoyang enterprise loans $20.5 million Shashi enterprise loans $18.1 million TA & training Pollution Control Sector Changzhou revolving fund $4.39 million Shashi revolving fund $4.05 million TA& training in 2 cities in 2 cities  17 Table 6. Key Indicators for Project Operation Changzhou Luoyang Shashi Base Appraisal Base Appraisal Base Appraisal Performance Indicators Year 1987 Estimate Actusil Year 1987 Estimate Actual Year 1987 Estimate Actual Education Classroom Utilization (%) 60 80 84 60 75 80 60 80 75 Lab (%) 30 75 76 30 70 75 30 60 50 Student Teacher Ratios Primary 1:19 1:25 1:25 1:19 1:26 1:27 1:21 1:25 1:24 Lower Secondary 1:13 1:21 1:21 1:15 1:20 1:20 1:11 1:20 1:18 Senior 1:11 1:15 1:14.4 1:15 1:20 1:20 1:11 1:20 1:18 Vocational Schools 1:8 1:15 1:14.6 1:8 1:10 1:15 1:11 1:20 1:19 Teaching Institutions 1:10 1:99 1:6 1:10 1:10 1:60 1:10 1:80 Maintenance Budget Increase Existing Buildings & Equip. 1.5% 2.250/ 2. 5% 1.5% 2.25% 5.0% 1.5% 2.25% 2.7% New Buildings 1.5% 3.0% 3.0% 1.5% 3.0% 3.0% 1.5% 3.0% 3.0%/o New Equipment 1.5% 10.0% 10.0% 1.5% 10.0% 7.0% 1 .5% 10.0% 10.0% Decrease: Unqualified Teachers Primary Schools 30 10 6.9 30 10 19 30 15 15 Lower Secondary 30 10 8.' 30 10 10 30 10 10 Teachers Training: Dual 0 2 6 0 10 6 0 10 10 Subes Health Policy Reform Length of Stay County Hospital 12.7 -20% 11.5 14.7 -20% 11.3 _ District Hospital 20.7 -20% 16.6 12.2 -20% 10.5 _ Enterprise Hospital 41.7 -20% 31.1 19.7 -20% 14.5 11.1 -25% 9.6 City Hospital 18.4 -30% 15.0 18.2 -30% 11.3 17.6 -30% 12.8 Occupancy Rate County Hospital 98.9 98.9 93 79.1 +20% 93.7 -- -- -- District Hospital 82.9 +10% 87 70.2 +20% 90.5 -- -- -- Enterprise Hospital 77.7 +20% 85 67.7 +40% 92.7 41.1 +40% 57.1 City Hospital 95.6 -5% 91 102.2 -10% 95.2 92.2 +5% 90.3 Determinants & Measure of Health Childhood Immunization Rate 97% 100% 99.2 55% +30% 88.9 -- +30% 98.7 % TB Patients under Rx -- +25% 100 -- +50% 100% +50% 89.6 % Children under 4 with anemia treatment +30% 97.8 +60% 80 _ +60% 96.9 % pregnant women receiving care before 16 weeks -- +20% 68 7 +40% 85 +40% 50.1 Health Outcome Infant Mortality Rate 18.1 -20% 14,2 30.3 -20% 20.0 16.3 -20% 12.0 Matemal Mortality Rate 3.2 -20% 10.6 -20% 7.3 4.7 -20% 0 Changzhou Luoyang Shashi Base Year Appraisal Base Appraisal Base Appraisal WATER SUPPLY 1991 Estimate Actual Year 1991 Estimate Actual Year 1991 Estimate Actual Financial Indicators (FenIm3) Ave. Tariff-Industrial 30 50 50 27 32 38 15 26 36 Ave. Tariff-Commercial -- -- -- 24 29 30 12 15 36 Ave. Tariff-Residential 12 15 15 9 12 38 10 15 36 Ave. Tariff-Institutional - - -- 20 24 30 -- - -- Physical Indicators Volume Water Sold 6,846 9,047 8,436 8,300 11,300 10,400 (10,000 tons)  18 Table 7. Studies Included in Project Study Purpose as defined at Appraisal Impact Urban Planning & strengthen Planning Commission & Planning high in Changzhou, Management TA Bureau low in others GIS training develop necessary expertise in GIS high Education TA develop capacity to design and improve high educational programs Health TA develop skills and support reforms high Transport TA introduce and apply modem transport planning high for roads, low techniques for public transit Land Use-Transport project demand using transport models medium Study __ Water TA upgrading of skills high Project assist PMOs and operating agencies with high Implementation TA implementation management  19 Table 8A. Project Cost Appraisal estimate (US$ million) Actuals Item Local Foreign Total Local Foreign Total Planning and Management 1.0 2.0 3.0 0.3 2.4 2.7 Education and 26.0 3.0 29.0 17.7 11.6 29.3 Health 11.5 5.1 16.6 14.2 13.0 27.2 Transportation 21.5 3.6 25.1 10.9 13.4 24.3 Housing 40.1 0.5 40.6 50.4 5.1 55.5 Water/Sewerage 21.5 8.7 30.2 22.5 14.2 36.7 Pollution Control 8.4 8.4 8.2 -- 7.2 Industries 66.0 66.0 21.0 45.3 66.3 Total 121.6 97.3 218.9 145.2 105.0 250.2 Physical Contingencies 10.4 16.1 26.5 Price Contingencies 10.6 21.2 31.8 Total Costs 142.6 134.6 277.2 - SAR estimates Annex 9 a,b,c ** Included approx. US$ 1.4 million for construction supervision in Luoyang. Table 8B. Project Financing Appraisal Estimate Actual/Latest Estimate Source Local Foreign Total Local Foreign Total Bank Group _ ._. Changzhou 68.3 68.3 67.3 67.3 Luoyang 52.6 52.6 52.0 52.0 Shashi 47.5 47.5 42.8 42.8 Domestic Contribution Changzhou 48.8 _ 34.5 34.5 Luoyang 32.9 22.2 22.2 Shashi 27.0 _ 23.5 ___ 23.5  20 Table 9. Economic Costs and Benefits Costs Benefits NPV ERR (%) Not applied for ICR due to lack of data  21 Table 10. Status of Legal Covenants *Only covenants not or partially met are mentioned in this draft. Loan Present Original Revised Agreement Covenant Status Fulfillment Fulfillment Agreement Section Type Date Date Description of Covenant Comm ents Credit 3.01(b) 03 C Borrower to make proceeds of credit and loan available to project cities and cause project cities to comply with the provisions in the project agreement Credit 4.01(b) 1 C 6/30/94 Borrower to submit audit reports to 3 cities submitted FY95 Bank not later than 6 months after end audit reports on time of each year Project Sched. 1 05 CP Project cities to employ consultants Services of consultants were Section 11 limited by the cities. Project Sch 2 B. 1. 05 C Each city to appoint Leading Group to oversee project implementation Project Sch 2, Bll 05 C Each city to maintain project management office with competent staff Project Sch 2 B III 05 C Each to cany out training program Project Sch 2 B IV 09 C 9/1/1991 Each city to report to the Bank on project progress by March I and Sept I of each l__________ __________ ___________ ___________ year Project Sch 2 B V 04, 05 C 11/30/1991 Each city to submit action plan for the =_______ _________ _________ nextyearby 11/30 Project Sch. 2 02 CP Financial Covenant for Water and Bus Financial covenant for water Section C. I Companies companies were met. However those fror bus companies were never satisfied and were in hindsight unrealistic in Chinese context. (See para I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3 8 ) Project Sch 2 C II 13 C Each city to undertake land use All three cities completed I_________ _________ __________ =__l__l__l transportation study ________________so t in tu Project Sch 2 C IV 07 C Each city to carry out resettlement and rehabilitation plans acceptable to the Bank Project Sch 2 D I 11 C Each city to enter into agreement with (a) CIB for appraisal and supervision of industry loans Project Sch 2 D I 11 C Changzhou and Shashi to enter into (b) agreement with PCBC for appraisal and supervision of pollution control subloans Covenant Class: Status: I= Accounts/audits 8 = Indigenous people C - Covenant complied with 2. = Financial performance/revenue 9 = Monitoring, review and reporting CD = Complied with after delay 3. = Flow and utilization of project funds 10 = Project implementation not covered by categories 1-9 CP = complied with partially 4 Counterpart funding 11 = Sectoral or cross-sectoral budgetary or other resources allocation 5 Management aspects of the project or 12 = Sectoral or cross-sectoral policy/regulatory/institutional action executing agency 6 = Environmental covenants 13 = Other 7 = Involuntary resettlement  22 Table 11. Compliance with Operational Manual Statements There was no significant lack of compliance with an applicable Bank Operational Manual Statement (OD or OP/BP). Table 12. Bank Resources-Staff Inputs Actual Stage of Project Cycle Weeks ($'000) Identification 6.5 19.7 Pre-Appraisal 237.5 521.9 Appraisal & Negotiations 88.5 229.2 Supervision 215.7 652.4 Completion Report 10.8 33.3 Total 559.0 1,456.5  23 Table 13. Bank Resources-Missions Performnance rating Specialized staff Imple- Devel- Month/ No. of Days in skills represented mentation opment Type of Stage of project cycle year persons field /a status objectives problem Identification Oct. 1987 8 18 EU (2), HU, F, _____________ _T,C,I,O ___ Preparation Jan. 1988 8 30 EU,C (2), HU, ________ ___ _ _ME, T, H, E,I _ _ Pre-Appraisal Aug. 1988 5 27 E (2), T, H, E, I Appraisal Nov. 1988 8 22 EU, (1), ME, T, H, E, G, 1,O0 Post-Appraisal Aug. 1990 2 7 I, F Board Approval Jan. 1991 _ thru effectiveness Apr. 1991 _ _ = Supervision 1 Initial Summary 2 May 1991 7 12 EU (2), G, T, E, ______ ME, HU _ 3 Nov. 1991 5 18 EU, G, H, E, T I I TA&T 4 May 1992 2 10 EU,O 1 1 TA&T 5 Nov. 1992 5 15 EU, 0, ME, H, F 2 2 -TA&T 6 April 1993 3 14 EU, ME,O 2 3 TA&T 7 Sept. 1993 Update __ 8 Dec. 1993 3 ME, F, 2 2 TA&T 9 & Mid-terni review May 1994 7 EU (2), HU, E, F (2), H 10 Sept. 1994 Update II Apr. 1995 2 10 ME, F, HS S TA&T 12 April 1996 2 9 ME, F, S S F 13 April 1997 2 6 C, F, S S /a EU: Urban Economist F: Financial Analyst ME: Municipal Engineer T: Transport Specialist HU: Housing/Urban Planning C: Consultant H: Health E: Education 0: Operations G: GIS/EIS 1: Industry  24 Appendice A MISSION'S AIDE-MEMOIRE Date: April 3, 1998 Fax to: Mr. Dan Hanyun, Project Director, Shashi Project, Jingzhou, Hubei 86-716-844 5054 Mr. Tie Feng, Project Director, Luoyang Project, Henan 86-379-394 1772 Mr. Mo Zhaopeng, Unit Chief, Changzou Project Office, Jiangsu 86-519-660 4038 cc: Ms. Zong Yan, RMC, fax 588-1686 SUBJECT: CHINA: Medium-Sized Cities Project (Cr. 2201/Ln. 3286-CHA) Implementation Completion Report (ICR)-Status Dear Sir: This message is to convey my personal thanks for the hospitality extended to myself or for the meetings you held with me in the past six months in the process of updating the draft reports which you are submitting at the completion of the project implementation. Each city project office has agreed to provide a revised version of its earlier write-up, and we did receive the ones from Changzhou, Shashi and will be pleased to get that of Luoyang shortly. In early February, we asked each city PMO to include, as part of their ICR, a set of five tables which summarizes the list of investment characteristics per sector and other specific matters on Technical Assistance, industry subprojects and industrial pollution control subprojects. We have received the Shashi tables and would like to reiterate our earlier request to the Luoyang and Changzhou project offices with our anticipated thanks. We are attaching the Shashi tables for matter of comparison and in an an attempt of seeking identical information from the two other offices. For your information, I would like to inform you that on our side we are also putting a last hand to our own report and will seek your own views on our write-up within three weeks. This is part of the consultation process the Bank wishes to maintain with the implementing agencies of projects before the Bank ICR is submitted to our Board of Directors. Attached to our own report will be the last version of your city's ICR with the annexes you have or will submit(ted). It is important that we present this entire package by early June 1998. Sincerely Yours, Edouard Motte, Task Manager N:\emottekmsf\icr2.doc  25 Appendice B BORROWER'S CONTRIBUTION TO THE ICR Extn: 34481 EASUR Subject: China: Medium-Sized Cities Development Project (Credit No. 2201/Loan No. 3286) Implementation Completion Report-Comments from Cities Hereafter are comments from the Project Offices received on April 30, 1998. Recently, representatives of Changzhou, Shashi and Luoyang discussed the Implementation Completion Report for China Medium-Sized Cities Development Project (draft) dated April 11, 1998 by Mr. Motte, the World Bank project manager and made the comments as following: The Implementation Completion Report (draft) generally reflects the reality of the project: a. Three PMOs have no objection to presenting it to the executive board of the World Bank. b. Three PMOs consider that this project generally realized the expected objectives and obtained better results. It can be a good example to other cities on making use of international finance organization loan for city comprehensive development project. Therefore, the evaluation for the project achievement should be generally satisfactory. c. Three PMOs also think that technical assistance and training are the important aspect of the project and important assurance to realize the project objectives. Most of the technical assistance and training were completed well. Chinese consultants can work very well on TA & T for project implementation. Therefore, it should be important to play a role of Chinese consultants, which should suit Chinese conditions better to realize the project objectives. d. Three PMOs have the same ideas that during the project implementation, the work done by two project managers was effective. Changzhou, World Bank Financed Project MN4anagement Office Shashi, World Bank Financed Management Office Luoyang, World Bank Financed Management Office P.S. (from EASUR): The three city reports are available in the Project Files.  MAP SECTION  IBRD 21361 Rl io7 30' 90> 10 I1io 120 13i0 RUSSIAN FEDERATION 50, KAZAKHSTAN r_""-' ,2UZcEKISTAN / '1 M O N G O LIA Horbin A KYIRGYZ, 7 't r sUrumqi @Chorhun r REPUBLIC D -94,'- Hohhot