China - Zhejiang Urban Environment Project

Updated Project Information Document (PID) Report No: AB449 Project Name CHINA - Zhejiang Urban Environment Project Region East Asia and Pacific Region Sector Sewerage (35%); Roads and highways (25%); Other social services (25%); Solid waste management (10%); Water supply (5%) Theme Municipal governance and institution building (P); Pollution management and environmental health (P); Access to urban services for the poor (P); Infrastructure services for private sector development (S); Other urban development (S) Project P066955 Borrower(s) PEOPLE'S REPUBLIC OF CHINA Implementing Agency(ies) ZHEJIANG PROVINCIAL GOVERNMENT Zhejiang Urban Development Project Office (ZUDPO) Address: F9, 138 Tianmushan Road, Hangzhou, Zhejiang, PRC Contact Person: Mr. Zhou Weiqun, Director Tel: 0571 87053002 Fax: 0571 88390232 Email: zudpo@mail.hz.zj.cn Ningbo PMO Address: F25, 208 South Jiefang Road, Ningbo, Zhejiang, PRC 315010 Contact Person: Mr. Zhu Guoping, Director Tel: 0574 87191087 Fax: 0574 87197348 Email: qianqib@mail.nbptt.zj.cn Shaoxing PMO Address: 248 West Renmin Road, Shaoxing, Zhejiang,PRC 312000 Contact Person: Mr. Wang Xiaojun, Director Tel: 0575 5129105 Fax: 0575 5143812 Email: sxcjj@mail.sxptt.zj.cn Hangzhou PMO Address: 252 Tiyuchng Road, Hangzhou, Zhejiang, PRC 310003 Contact Person: Mr. Chen Wei Tel: 0571 85172754 Fax: 0571 85102638 Email: hwxmb@163.com Environment Category A (Full Assessment) Date PID Prepared November 6, 2003 Auth Appr/Negs Date August 18, 2003 Bank Approval Date January 29, 2004 1. Country and Sector Background The Zhejiang project cities, like so many other cities in China, have undergone rapid growth and transformation over the last two decades, economically and physically. As rapid urban economic growth is expected to continue well into the future, the pressure for further expansion of infrastructure would continue. The government has taken a more forceful position for environmental protection, economic revitalization of the old city centers and heritage conservation, which helped direct extensive resources devoted to environmental services such as waste collection and disposal and housing renovation through inner-city renewal. This effort brings to the fore the issue of efficiency in infrastructure investment and utilization. The government recognizes that technical, institutional, and financial capacities need to be strengthened to  2 PID improve the efficiency and sustainability of infrastructure. To that end, it has been promoting corporatization, full-cost recovery, and limited private participation in infrastructure. Chinese cities have undergone breathtaking growth and transformation over the last two decades, economically and physically. Radical decentralization of fiscal and administrative authority in the early 1 980s unleashed sustained heavy investments going into infrastructure and housing, which had deteriorated badly during the preceding two decades but now can be considered at least adequate for most cities of China. As rapid urban economic growth is expected to continue well into the future, the pressure for further expansion of infrastructure would also continue. On the other hand, the singular focus on expansion is yielding to broader and more qualitative issues of sustainability, efficiency, and equity. Rapid industrial and urban growth is also increasing the concern over environmental sustainability. The government has taken a more forceful position regarding environmental protection since the late 1980s, compared with many other matters largely delegated to local governments. This helped direct extensive resources devoted to environmental protection and industrial renovation, and as a result, the growth of industrial pollution has slowed and, in many large cities, has been reversed. Nevertheless, water pollution remains serious and is growing, due mainly to increasing wastewater from domestic and semi-nural sources. The government has made the clean-up of the Hangzhou Bay, on which all three project cities are located, a priority program; embarked on a program to increase water conservation and mandated all municipalities in the country to treat 50% of wastewater, and the larger ones to treat 70%, by 2010. While much remains done, especially for environmental protection, the extensive urban reconstruction over the last two decades has reduced most glaring infrastructure deficiencies while increasing the resource requirements to operate and maintain the enlarged stock of infrastructure. At the same time, the on-going reduction of the state sector is constraining the fiscal and quasi-fiscal resources. This brings to the fore the issue of efficiency in infrastructure investment and utilization. An example of inefficiency includes idle wastewater treatment plants due to overdesign or lack of operating funds. The government recognizes that technical, institutional, and financial capacities need to be strengthened to improve the efficiency and sustainability of infrastructure. To that end, it has been promoting corporatization, full-cost recovery, and limited private participation in infrastructure. While the on-going downsizing of government is spurring these structural transitions, it is weakening the regulatory and planning capacities that need to be strengthened for healthy market-based infrastructure provision. The Government is determined not to sacrifice the protection of its cultural heritage in the push for rapid urbanization, high density development, and expanding population. It has been gradually realized that historic conservation and cultural activities contribute to economic development by maintaining the distinctive character of the communities and their environment. The preservation of cultural heritage is, however, facing many challenges and China has expressed its keen interest to learn from other countries that have faced this in the past. The project aims at assisting the governments to improve their urban environments through appropriate conservation of the historic inner-cities in Shaoxing and Cicheng and develop a clear strategy for the development of tourism to promote long-term sustainability and economic growth (see Annex 12). 2. Objectives The objective of the Zhejiang Urban Environment Project (ZUEP) is to enhance the efficiency and equity of waste management in Ningbo and Hangzhou municipalities and the redevelopment of the historic inner city in Shaoxing and Cicheng, and thereby facilitating the sustainable development of these cities and establishing a model for conservation of cultural heritage in other Chinese cities.  3 PID The project will support measures to increase the utilization of waste treatment facilities, increase sewerage services in underserved areas including the fast-growing suburban areas and satellite towns in Ningbo; and to improve waste management institutions and finances through implementation of utility reform measures. Redevelopment of the historic inner-city and conservation of build heritage in Shaoxing and Cicheng is a top priority of the municipal governments and the project will contribute to improving the quality of life of their citizens, sustain their cultural and historic nature through tourism development, upgrade their housing stock and safeguard environmental conditions. 3. Rationale for Bank's Involvement The proposed project is a mixture of expanding basic urban infrastructure services, including needed utility reform which have been successfully achieved in many similar projects in China, and integrated urban renewal of old city-centers with a strong cultural heritage conservation component. The scope of large scale inner city redevelopment in Shaoxing and Cicheng is quite ambitious in terms of innovations attempted but is justified since both Shaoxing and Ningbo municipal governments have demonstrated will and competence to carry out innovations in infrastructure and environmental sectors. Under the recently completed Zhejiang Multicities Development Project (1993-2001) they have successfully implemented a broad variety of difficult infrastructure components at high quality and unprecedented pace. Bank involvement has substantially enhanced the environmental impact of the project by identifying complementary measures to ensure that the environmental objectives, particularly water quality improvement in canals rivers and lakes, will be achieved. These measures are supported by the project through technical assistance but the implementation will be funded by the responsible governments and their agencies and consist of: (a) catchment management plan for Dongqian Lake in Ningbo; (b) wastewater treatment plant sludge management plan in Ningbo; (c) additional secondary and tertiary sewerage in Shaoxing and Ningbo; and (d) industrial pollution control in Ningbo. In addition, detailed water quality modelling studies of Dongqian Lake demonstrated that the proposed dredging of the lake, which would have significant negative environmental impact, would hardly improve the water quality in the lake and the proposal was replaced by a catchment management plan dealing amongst others with non-point pollution from agriculture (see Chapter E - Summary Project Analysis). Cultural heritage preservation is gradually becoming an integral part of city development activity. China has indicated that it wants to learn from other countries and international institutions such as UNESCO. The Bank has built up considerable expertise in this area, in China and worldwide, as has contributed, through various projects in Ningbo, Lijiang, Chongqing, Shenyang, etc., to raising awareness about the importance of urban heritage conservation, making international expertise and experience available to local experts in this field, stressing the importance of economic sustainability of historic sites, and providing seed funding for conservation when it was most urgently needed. Assisting with integrated historic city/town redevelopment and conservation is an important next step in safeguarding China's unprecedented cultural treasures while promoting economic development and environmental enhancement. Tourism development is largely a municipal function through the established Tourism Bureaus. They are promoting many projects, ranging from golf courses to attracting investments but does so largely in isolation from other major agencies. The Bureaus often lack a cohesive tourism plan that states an overall tourism vision and sets out priorities, with the danger that some developments may be inconsistent with cultural heritage theme on which future tourism to the area depends. The project will assist the project cities of Shaoxing and Ningbo to develop all inclusive tourist development strategies, assist with human resource development within Tourism Bureaus as well as in the tourist service communities, and provide technical assistance for skills development an awareness-building about the service industry and heritage  4 PID resource management. As part of the ZUEP preparation, broad social assessments were carried out for all the project components to assess the affected communities' attitudes towards and participation in project design and implementation, opportunities for voluntary resettlement and participation in tourism development. A more detailed follow-up survey was carried out in Shaoxing's Jishan historic precinct, proposed as a pilot project for integrated urban upgrading. While supporting the project objectives and proposals, the respondents lacked adequate information to fully understand the implications of the project while expressing the desire for more participation in the economic activities associated with tourism development. Sufficient number of residents have expressed a desire to move to newer and better accommodation outside the historic city centers which would enable the authorities to carry out most of the resettlement in a voluntarily manner. Technical assistance has been included in the project design to further community consultation and participation (see Chapter E - Summary Project Analysis and Annex 2). 4. Description The project in the three municipalities of Ningbo, Shaoxing and Hangzhou consists of a mixture of environmental infrastructure services, urban redevelopment and cultural heritage conservation components, along with associated technical assistance. Ningbo (a) South Jiangdong Sewerage and Treatment Plant (b) Zhenhai Sewerage and Treatment Plant (c) Cicheng Infrastructure Development (d) Dongqian Lake Development (e) Shaoxing Historic City-Center (f) Hangzhou Landfill Expansion (g) Services, training and Implementation Support 5. Financing Source (Total ( US$m)) BORROWER ($202.40) IBRD ($133.00) Total Project Cost: $335.40 6. Implementation The Zhejiang Provincial Construction Bureau (ZPCB) is responsible for the overall coordination of the project. The Zhejiang Urban Development Project Office (ZUDPO), which has been established within the ZCB, will directly implement this coordination function. ZPCB and ZUDPO will report to, and by guided by, the Project Leading Group (PLG) which consists of heads of relevant commissions and bureaus. The PLG and ZUDPO already exist, having been originally established for the successfully implemented Bank-financed Zhejiang Multicities Development Project (ZMCDP) that was completed in 2001. Therefore, appropriate functions, staffing and have already been arranged and are in place. Each of the three project cities has established a project management office to oversee the implementation of its components. In Ningbo, this will be the existing Ningbo Urban Infrastructure Development Office (NUIDO), which was established for ZMCDP, while new PMOs have been created in Shaoxing and Hangzhou. These new offices have accessed staff from the previous PMOs responsible for ZMCDP to ensure continuity of experience with Bank procedures. The companies that will operate the project assets upon completion will hold direct implementation  5 PID responsibility for each component. The Ningbo Wastewater Company Ltd. (NWWC), which is currently in the process of being established, will implement all wastewater components in Ningbo (Jiangdong, Cicheng, Zhenhai and Dongqian Lake). NUIDO will implement the non-wastewater components in Cicheng. The newly established Dongqian Lake Investment and Development Company (DLIDC) will be responsible for the implementation of the non-wastewater works within the Dongqian Lake project component. The Hangzhou Solid Waste Company Ltd. (HSWC), which is currently in the process of being established, will implement the Hangzhou component. Experienced staff from the existing Municipal Engineering and Appearance Administration Bureau (MEAAB), which is presently responsible for providing solid waste services in the city, will be transferred into HSWC. Additionally, the Hangzhou PMO, which has been established specifically for the project, will be transferred into the HSWC. As noted above, the Shaoxing project components will be executed by the Shaoxing Project Management Office (SPMO), which was established in April 2002 within the Municipal Construction Bureau. SPMO will closely coordinate with the Historic Precincts Conservation Management Office (HPCMO), an agency of the municipal govemment that is responsible for the implementation and management of heritage conservation and housing redevelopment in the historic city center. [Zheiang Provincial Govenment Project Leading Group ZUDPO IHSw I | Ningbo PMO Shaoxing PMO Tianziling (NUIDO) Upgrading 5 Landfill Roads, sewers, bridges, historic precincts ringroad, moat in Cich ng NWCL DLIDC Wastewater in Roads and South Jiangdong, sewerage in Zhenhai, Dongqian Lake convcyancc from area Cichcng and Dongqian Lake  6 PID 7. Sustainability The proposed project will contribute to the sustainability of the project cities' overall development by helping to improve collection and safe disposal of sewage and solid waste, improve water quality in rivers, lake and canals, improve living conditions within the historic city-centers, conserve important cultural heritage sites, and increase economic development through enhanced tourism development. Institutional reform and cost recovery have now become established government policy in China to improve efficiency and sustainability in the provision of basic urban services. The proposed project contributes to this policy by strengthening technical, institutional and financial capacities and capabilities through corporatization of municipal utility agencies, financial self-sufficiency and autonomy, training and technical assistance. Cultural heritage conservation and associated tourism development are recognized as a powerful tool for sustainable economic development and social well-being while maintaining the need for modernization to built competitive cities. The proposed project contributes to this urbanization process by providing the needed expertise for conservation, tourism development and urban planning as well as financing the supporting infrastructure while securing the sustainability of operation and maintenance through institution building. Enhanced community consultation and participation in the urban upgrading process and tourism development will enable substantial resettlement under the project to be largely voluntary and create more economically sustainable communities 8. Lessons learned from past operations in the country/sector Experience from a full range of projects financed by the Bank in the urban sector points to the importance of borrower ownership, high quality, appropriateness and efficiency of design of capital investments, financing and institutional arrangements for proper maintenance and operation. The project will incorporate these lessons as it makes efficiency and sustainability as a main project objective, and its components are based on the priorities outlined in the cities' official urban and environmental master plans. Furthermore, Bank involvement would facilitate more meaningful utility reform, financial sustainability of basic urban services and, where possible, private sector participation. Furthermore, the Bank can contribute its wealth of experience with heritage conservation in urban redevelopment from both within China and outside. The project design relied mainly on lessons from the recent similar Bank operations in China, and a few recent Bank studies, mainly on pollution control management and wastewater treatment performance in China. A key lesson from these is the tendency to over-design treatment plants, inadequate investments in collection systems resulting in underutilization of the installed treatment capacity, and insufficient technical and financial capacity to operate and maintain the facilities properly. The project preparation team is carefully reviewing the appropriate capacity and standards for the case of the proposed South Jiangdong WWTP as well as the adequacy of the collection systems. The current drive for secondary treatment in China will substantially increase the volume of sludge, which will require additional methods and facilities for treatment and disposal. While water quality improvement is the main objective for building environmental infrastructure, this objective can only be achieved in full when pollution sources, often outside the immediate project area, are being dealt with. This is particularly true for pollution control of industries upstream of the project areas, and the project includes action plans to address these problems. The current institutional arrangements for the implementation of the Dongqian Lake development, Cicheng  7 PID town revitalization and Shaoxing inner-city renovation are based on construction implementation units with unclear responsibilities for operation and maintenance of the facilities. Older urban projects in China have demonstrated the risks of such an approach for long-term sustainability and assurances are sought on adequate representation of operating agencies/utilities within these project development units during design and construction implementation. 9. Environment Aspects (including any public consultation) Issues : An extensive environmental assessment (EA) has been carried out for ZUEP. During its preparation and evaluation Chinese national procedures and those required by the Bank Group were diligently followed. Comprehensive EA documents comprising an Environmental Assessment Report and an Executive Summary have been prepared, incorporating Bank comments, reviewed and found satisfactory. An Environmental Management plan (EMP) is an integral part of the EA. A detailed annex covering environmental assessment and impact, together with mitigation measures, has been prepared (Annex 11). This summarizes the findings of the Chinese EAs on the various components and reflects the preparation and appraisal mission findings. Potential Impacts. The environmental impact of the project is on balance substantially positive and the benefits greatly outweigh the negative impacts. The Hangzhou solid wastes component will provide a long term sustainable waste disposal resource for the city and allow it to increase wastes management service coverage. The landfill site is designed and will be operated to international standards of sanitary landfill. The Ningbo components will greatly increase wastewater collection and treatment rates within the municipality area and will substantially improve water quality both in the main river reaches in the urban areas and particularly in the urban watercourses. In Shaoxing the infrastructure upgrading component allows the modemization of the city while at the same time conserving its important heritage and, together with the canal rehabilitation works, will significantly improve water quality in the urban canals. The principal potential impacts during construction include excavation, spoil disposal, noise and disruption of urban services. Operational phase impacts of wastewater treatment include the need to dispose safely of the increasing quantities of wastewater treatment plant sludge and poor water quality in the mixing zones of treated wastewater outfalls. The principal landfill impacts are the generation of leachate and landfill gas. Mitigation Measures. The EA specified the appropriate mitigation measures, environmental monitoring plans, institutional arrangements and training and equipment requirements together with cost estimates for implementation of the mitigation measures and monitoring plans. Major mitigation measures for the landfill component include provision of an impermeable site liner and leachate treatment and expanded use of the existing landfill gas collection and utilization scheme. The long-term requirements for sludge disposal have been addressed through the preparation of a specific sludge management plan for the Ningbo Municipality area as a whole. In the immediate term it is envisaged that disposal will be primarily by environmentally secure landfill. Outfall discharges will be equipped with carefully designed diffuser systems to maximize dispersion. Construction phase impacts will be minimized through controls on working practices and operational impacts through careful siting of facilities with appropriate buffer zones and controls on noise. Public Consultation and Feedback. Local people were consulted during the EA preparation. The approaches used for public consultation were: consultation meetings with local government representatives and questionnaire analysis of public opinion supplemented by interviews. Consultations were carried out at various stages in accordance with the requirements of OP 4.01. Details of these activities with dates, participants, public notifications and locations are provided in tabular form in Annex 11.  8 PID Information Disclosure. The final EA Report and Executive Summary were submitted to the Bank in July 2003, as were final Resettlement Action Plans (RAPs). Both reports were reviewed and found to be satisfactory. Draft copies of the reports were submitted to the Bank Group Information Center starting March 2003 and subsequently updated (Annex 8). Notice of availability of these reports was publicized in the project cities before appraisal (Appraisal completion date: August 23, 2003). Details of documents, disclosure dates and locations are provided in tabular form in Annex 1. 10. List of factual technical documents: (Including electronic files) A. Project Implementation Plan Project Feasibility Study by Mott MacDonald, July 2003 Project Implementation Plan, July 2003 Environmental Assessment Report, June 2003 Resettlement Action Plan and Resettlement Policy Framework, May 2003 Feasibility reports and design and tender docunentation for individual components, July 2003 Terms of References for Design Review Advisory and Construction Management, Institutional/Financial Utility Reform, Industrial Pollution Control Management, Tourism Development and Community Participation, Heritage Conservation and Environmental Management. Catchment Management Plan for Donqian Lake in Ningbo Industrial Pollution Control Action Plan for Ningbo Municipality B. Bank Staff Assessments FMS Assessment, August 2003 Procurement Capacity Assessment, July 2003 Financial Analysis of Project Utility Companies, Economic Analysis of the Project Component, Mission Aide Memoires, Implementation Completion report, Zhejiang Multicities Development Project 11. Contact Point: Task Manager Wiebe Moes The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 202 4580810 Fax: 202 5221787 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:/H www.worldbank.org/infoshop  9 PID Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.