Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 27996-CHA PROJECTAPPRAISALDOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OFUS$172MILLION TO THE PEOPLE'SREPUBLIC OFCHINA FOR A HUNANURBANDEVELOPMENT PROJECT August 16,2004 UrbanDevelopment SectorUnit ChinaCountryUnit East Asia andPacificRegion This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (ExchangeRate Effective August 16,2004) Currency Unit = Renminbi Yuan (RMB Y) RMB Y 1 = US$0.12 US$l.OO = Y 8.28 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CDS City DevelopmentStrategy CMDC ChangshaMunicipal DrainageCo. Ltd CUDIC ChangshaUrbanDevelopmentInvestment Co. Ltd CZT Region Changsha-Zhuzhou-XiangtanRegion EA Environmental Assessment E10 Economic IntegrationOffice EIRR Economic InternalRateof Return EMP Environmental ManagementPlan FS Feasibility Study Report Government Government of China HPFB Hunan Provincial FinanceBureau HPDRC Hunan Provincial Development and ReformCommission Hunan HunanProvince HUDP HunanUrban DevelopmentProject Hzccc HunanZhuxi CleanCoal Co. Ltd MLG Municipal Leading Group MOF Ministry of Finance MPMO Municipal Project ManagementOffice MWRB Municipal Water ResourcesBureau NDRC National Development andReformCommission PIU Project Implementation Unit PLG ProvincialLeading Group PPMO ProvincialProject Managementoffice RAP ResettlementAction Plan RCDS Regional City Development Strategy RMB RenminbiYuan (Chinesecurrency) RPF ResettlementPolicy Framework SEPA State EnvironmentalProtection Administration so2 Sulphur Dioxide WRB Water ResourcesBureau WWTP Wastewater treatment plant XUDIC Xiangtan UrbanDevelopment Investment Co. Ltd ZTTDC ZhaoshanTourism and Trade Development Co. ZUDIC Zhuzhou UrbanDevelopment Investment Co. Ltd Vice President: Jemal-ud-din Kassum Country Director: DavidDollar Sector Director: Keshav Varma Task Team Leader: Raja IyerIMaraWarwick FOROFFICIALUSEONLY CHINA HunanUrbanDevelopmentProject CONTENTS Page A . STRATEGICCONTEXT ANDRATIONALE .................................................................. 4 1. Country and sector issues.................................................................................................... 4 2. Rationale for Bank involvement ......................................................................................... 5 3. Higher level objectives to which the project contributes .................................................... 5 B . PROJECTDESCRIPTION ................................................................................................. 5 1. Lendinginstrument ............................................................................................................. 5 2. Project development objective and key indicators.............................................................. 5 3. Project components............................................................................................................. 5 4. Lessons learnedand reflected inthe project design............................................................ 6 5. Alternatives considered andreasonsfor rejection.,............................................................. 7 C . IMPLEMENTATION ........................... ............................................................................... 7 1. Partnershiparrangements.................................................................................................... 7 2. Institutionaland implementation arrangements .................................................................. 7 3. Monitoring andevaluation of outcomeshesults .................................................................. 8 4. Sustainability ....................................................................................................................... 8 5. Criticalrisks andpossible controversial aspects ................................................................. 9 6. Loadcredit conditions and covenants............................................................................... 10 D . APPRAISALSUMMARY .................................................................................................. 10 1. Economic and financial analyses ...................................................................................... 10 2. Technical ........................................................................................................................... 11 3. Fiduciary ............: ............................................................................................................... 11 4. Social................................................................................................................................. 11 5. Environment...................................................................................................................... 12 6. Safeguardpolicies ............................................................................................................. 13 7. Policy Exceptions and Readiness...................................................................................... 14 This document has a restricted distribution and may be used by the performance of their official duties Its contents may not be otherwise disclosed . without World Bank authorization . Annex 1:Country and Sector or ProgramBackground ......................................................... 16 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies .................20 Annex 3: Results Framework and Monitoring ......................................................................... 21 Annex 4: Detailed Project Description ...................................................................................... 23 Annex 5: Project Costs................................................................................................................ 26 Annex 6: Implementation Arrangements ................................................................................. 27 Annex 7: FinancialManagementand DisbursementArrangements ..................................... 29 Annex 8: Procurement ................................................................................................................ 34 Annex 9: Economic and FinancialAnalysis ............................................................................. -41 Annex 10: SafeguardPolicy Issues ............................................................................................ 48 Annex 11:Project Preparationand Supervision ...................................................................... 55 Annex 12: Documentsinthe Project File .................................................................................. 58 Annex 13: Statementof Loans and Credits .............................................................................. 61 Annex 14: Country at a Glance .................................................................................................. 65 Map: IBRD33573 CHINA Hunan UrbanDevelopment Project PROJECT APPRAISAL DOCUMENT East Asia andPacific Region EASUR Date: August 16, 2004 Team Leader: Raja Iyer/Mara Warwick Country Director: DavidDollar Sectors: General water, sanitation and flood Sector Director: Keshav Varma protection sector (62%), Roads and highways Project ID: PO75730 (33%), General energy sector (5%) LendingInstrument: Specific InvestmentLoan Themes: Other urban development (P), ( S W Pollutionmanagementandenvironmental health (P) I Environmental screening category: A Safeguardscreening category: S2 Project FinancingData: [XI Loan [ICredit [IGrant [IGuarantee []Other: Source Local Foreign Total Borrower 199.21 14.95 214.16 m m 45.20 126.80 172.00 Total 244.41 141.75 I 386.16 FY 05 06 07 08 09 10 11 Annual 7 12 34 34 34 34 17 Cumulative 7 19 53 87 121 155 172 Expectedclosing date: 12/31/10 Does the project depart from the CAS incontent or other significant respect? I No 1 RefPADA.3 Does the project require any exceptions from Bank policies?Ref. PAD 0.7 No Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risk rated "substantial" or "high"? Yes Ref. PAD C. 5 Does the project meet the Regional criteria for readinessfor implementation? Yes Ref. PAD D.7 Project development objective: Ref PAD B.2, TechnicalAnnex 3 The objective of the project i s to foster greater integration inthe Changsha -Zhuzhou - Xiangtan (CZT) Region of Hunan Province through support for a carefully selectedset of priority investments to addressspecific regional needsina sustainablemanner. Project description [one sentencesummary of each component] Ref. PAD B.3.a, Technical Annex 4 The project comprises five components: Corridor component, to strengthenflood protection and develop a recreational (scenic) road along the embankment, infour sections of the three municipalities. ChangshaWastewater component, to increasethe percentageof sewage collected andtreated inthe municipality, andto develop the ChangshaMunicipalDrainage Company into an autonomouspublic utility operating on commercial principles. Zhuzhou Clean Coal component, to reduce air pollution inthe CZT Region through the production and sale of low sulphur coal. Zhaoshan Scenic Area component, to improve livability in the CZT Region through the sustainableredevelopment of the Zhaoshan Scenic Area. Technical Assistance for Implementation and InstitutionalDevelopment component, to assist inproject implementation, andto buildcapacity inthe CZTEconomicIntegration Office (CZT EIO) and other project agencies. Which safeguardpolicies are triggered, if any?Ref. PAD D.6, TechnicalAnnex 10 0 Environmental Assessment InvoluntaryResettlement 0 CulturalProperty Significant, non-standardconditions, if any, for: Ref. PAD C.7 Boardpresentation: None Loan effectiveness: (i) Signing of Project Agreement betweenHunanand IBRD. (ii) Signingof subsidiary loan agreements acceptable to IBRDbetween the municipalities and the project companies implementingthe Corridor component. (iii) Signing of the consulting contract for Project Implementation Assistance. 2 Covenants applicable to project implementation: b. Disbursement conditions (i) Xiangtan urban section of Corridor component - Completed EMP and RAP acceptableto the Bank for the Shaoyaogangto Xiang Gang section. (ii) ChangshaWastewater component - Signing of the consulting contract for Changsha MunicipalDrainage Company (CMDC) InstitutionalDevelopment. (iii) Zhuzhou Clean Coal component -A waste disposal plan acceptableto the Bank for solid wastes to be generatedby the new facilities. (iv) Zhaoshan Scenic Area component -Official approval by relevant bureaus for works to be carried out on sites listedon historical registers. c. Implementation covenant (i) B y December 31,2007: Hunanand ChangshaMunicipal Government will raise wastewater tariffs sufficiently to ensure coverage of operation andmaintenance (O&M) plus the greater of debt service or depreciation for all CMDC's sewerage operations; and, Changshawill either make an annual budgetary allocation towards the O&M costs and debt service of the drainage portion of the project or authorize CMDC to increaseits wastewater tariffs by an additional amount to ensure coverage of O&M and debt service for the drainage portion of the project. (ii) B y October 1,2008, each Municipal Government will furnish to the Bank an acceptable operation and maintenanceplan (including financing) for the assets constructed under the Corridor component. 3 A. STRATEGICCONTEXT AND RATIONALE 1. Countryandsector issues Urbanization and urban development are central themes inChina's overall development strategy. The Tenth Five-YearPlan (2001-2006) emphasizesthe importance of sustainabledevelopment and improvements inlivability duringthe transition from a rural to an urban economy. During this periodthe Government will emphasizethe provisionof environmental infrastructure to ensure the sustainability of the rapidindustrialization and urbanization process. The Government i s promotingregional cluster development as one urbanization model, with a view to benefiting from the efficiencies that can be gained through economic integration of multiple urban areas. Nationaland local governments will play an important role incluster development by creating and supporting the necessarypolicy and planning framework for the cluster, providing infrastructure to assist physical integration, and supporting improvements to livability. These actions will increasethe overall competitiveness of the region and thereby attract investments andfacilitate economic growth. Regional integration andcluster development are relatively new concepts in China, and the administrative structure and legal system i s changing very slowly to reflect the benefits of regional cooperation. Moreover, as i s the case inmany countries, Chinahas experienced difficulty inestablishing strong organizations to leadregional development across traditional boundaries of administrative authority. Both the national and HunanProvincialgovernments attach highpriority to the economic development of the Changsha-Zhuzhou -Xiangtan (CZT) Region inHunanProvince as one of the examples of cluster basedurban development inChina. (Hunan, in south-central China, i s at the median of Chinese provinces in most economic criteria with GDPper capita ranking seventeenth, 22% below national average.) Development of the CZT Region i s intendedto be the basis upon which Hunan will transform from a largely agricultural province into a more balancedeconomy, with growth intertiary sectors and hightechnology. The CZT Region has a total population of 12.1 million (of whom 3 million live in the core urban areas of the three cities), and i s the only significant urban agglomeration inthe province. Changsha, Zhuzhou and Xiangtan are physically linkedby the Xiang River, an important tributary of the Yangtze River. Considerable work has been done inthe CZT Region on defining the concept of regional integration andcluster development, and there i s strong support for economic integration amongst the officials of the three municipalities and the province, which will enable the cities to develop complementary economic roles, with each city buildingon its advantages. Hunanhas providedleadership on CZT integration through the formation of a Provincial LeadingGroup (PLG), headedby the Governor, with highlevelmembership that includes the Mayors of the three municipalities. Inaddition, a CZT Economic Integration Office (CZT EIO) hasbeen establishedwithin the HunanProvincialDevelopment and Reform Commission (HPDRC) to lead policy andplanningactivities on behalf of the region. Key foci of CZT integration have been the development of the Xiang River corridor as an economic andrecreational resource, minimization of the flood risk posedby river, andprovision of environmental andtransportation infrastructure to support regional development. Further, the environmental infrastructure sector inHunan suffers from many of the same institutional, technical and financial deficiencies as in other areas of China; capacities needto be strengthened 4 to improve efficiency and sustainability, inter alia through corporatization, full-cost recovery, and limitedprivate participation. 2. Rationale for Bankinvolvement Hunanparticipated inthe East Asia Region's first cohort of City Development Strategies (CDS). Itpersuadedthe Bank andthe Cities Alliance to support the preparationof aRegional CDS (RCDS) for the CZT Region instead of a single city CDS. The province subsequently requested Bank support for this project. Inaddition to providingfinancial support for the investment program, the Bank can provide international experience and support inthe crucial capacity buildingof CZT EIO, so that it becomes an important andinfluential organization able to coordinate strategic regional development. The Bank will also provide Hunan the benefit of its extensive global and Chinaexperience in urban development, flood protection, water pollutioncontrol, cultural heritage, air quality improvement, institutional development, and financial management. Even though Hunanhas worked with the Bank inother sectors, this is the first project inthe urban sector; the province has benefited from the analytical rigor of Bank project preparation and appraisal to achieve optimal project design. Value-added during implementation would include cost savings through procurement under Bank guidelines, and improvedproject management and construction quality. 3. Higher level objectives to which the project contributes This project supports two prominent objectives inthe Tenth Five-YearPlan andCAS: urban development and sustainability through the provision of environmental infrastructure. In particular, it addresses the CAS themes of Facilitatingan EnvironmentallySustainable Development Process (through water resources management, flood protection and improving air quality), and Addressingthe Needs of the Poorer andDisadvantaged People and Regions (Hunan Province's per capita GDP i s well below the national average). It i s also consistent with the Bank's urban strategy of improvedlivability and the water sector strategy of sustainable and affordable provisionof sanitation services. B. PROJECTDESCRIPTION 1. Lendinginstrument Thelendinginstrumentis Specific Investment Loan. 2. Project development objective and key indicators The objective of the project is to foster greaterintegration inthe Changsha-Zhuzhou - Xiangtan (CZT) Region of HunanProvince through support for a carefully selected set of priority investments to address specific regional needs ina sustainablemanner. Key indicators are activities associatedwith economic and physical integration of the CZT Region, and implementation of selectedpriority investments. 3. Project components The project comprisesfive components: 0 Corridor component, to strengthen flood protection and develop a recreational (scenic) roadalong the embankment, in four sections of the three municipalities. 5 ChangshaWastewater component, to increasethe percentageof sewage collected and treated inthe municipality, andto develop the ChangshaMunicipalDrainageCompany into an autonomous public utility operating on commercial principles. Zhuzhou Clean Coal component,to reduce air pollution inthe CZT Region through the production and sale of low sulphur coal. Zhaoshan Scenic Area component,to improve livability inthe CZT Regionthrough the sustainableredevelopment of the Zhaoshan Scenic Area. Technical Assistance for Implementation and Institutional Development component, to assist in project implementation, and to buildcapacity inthe CZT E10 and other project agencies. 4. Lessonslearned and reflectedinthe project design China has the largest portfolio inthe Bank, and its quality i s among the best performing. OED andQAG assessments have confirmedsatisfactory project implementation, outcomes andproject management. Experience from a full range of projects financedby the Bank inthe urban sector points to the importance of borrower ownership, appropriateness andefficiency of design of capital investments, as well as financing and institutionalarrangements for proper operations and maintenance. The project will incorporate these lessons as it makes efficiency and sustainability a main project objective. Bank involvement would also facilitate wastewater utility reform. A key lessonfrom previous Bank projects has beenthe tendency to over-design wastewater treatment plants andto invest inadequately incollection systems, resultinginthe underutilization of the installed treatment capacity. Inthis project, the ChangshaWastewater component has been designed as acomplete system: the project would finance the primary network collection system inthe entire catchment area such that the full dry weather flow will be delivered to the plant upon commissioning. The current institutionalarrangements for the operation and maintenance of the dyke flood control systemare highly fragmented and the divisions of responsibility are unclear. Older urban projects in China have demonstratedthat such a fragmented approach affects long-term sustainability. Therefore, in the design of the Corridor component, responsibilities for ownership, and operation and maintenance of the assets have been clarified and legalizedby the municipalandprovincial governments. Previous projects have highlightedthe necessity of formulating project components and their designon the basis of suitable master plans. The overall project design i s basedon a series of plans commissionedby the CZT E10 for the development of areas along the Xiang River, and on the municipalmasterplans of Changsha, Xiangtan and Zhuzhou. Cost estimates have been a problemon many past and recent Bank urban projects inChina. Adherence to traditional cost estimation methods (which are basedon "norms" rather than on market prices) have frequently resultedinthe overall project cost estimates beingtoo high. In this project, international consultants have conductedarigorous independent check of cost estimatesto ensure that the costs reported inthe final feasibility study for all components are as close to marketrates as possible. 6 5. Alternatives consideredand reasonsfor rejection The RCDS for the CZT Region recommends a range of activities to support the project objective of fostering greater integration inthe CZT Region. Through extensive discussions with the province, the strategic choice was made to move forward ina phasedmanner, starting with the highestpriority needs under this project. Inthis context, a number of investments proposedin the RCDS are not included inthis project; e.g., (a) Yuelu University town, which Hunan financed on its own; (b) solid waste management, for which other donor support was obtained; and (c) the Xiangtan Number 4 Bridgeand the CZT Logistics Center, both of which were proposedbut subsequently withdrawn. Further activities proposedinthe RCDS which will be carried out later include: upgradingthe embankments and developing recreational spaces on the opposite bank of the Xiang River; and, addressing the wastewater needs of Xiangtan and Zhuzhou. For each proposedcomponent the "with" and "without" project options were analyzed, and for the four investment components inthe project, the "with" project option provedto be the most beneficial. Inthe case of the originally proposed Xiangtan Number 4 Bridge component, this analysis showed that there was insufficienttraffic demand for the bridgeuntil 2015, well beyond the life of this project, and for this reason, Hunan withdrew the component from the project. In the case of the CZT LogisticsCenter, after analysis of various managementmodels for the center, agreement could not be reachedon the optimal method and Hunanwithdrew the component. Extensive analysis of alternatives was conductedfor each proposedproject component. Details are available inthe project files, and are summarized in the economic analysis inAnnex 9. C. IMPLEMENTATION 1. Partnership arrangements Theproject is free-standing, anddoes not have any other co-financiers. However, Hunanis seekingparallelgrant financingfor some technical assistance activities: (a) twinning arrangement with a city regioncluster inEurope; and, (b) water quality modeling and optimization of pollution controlinvestments inthe CZT Region. 2. Institutionaland implementationarrangements Hunan has nominatedthe CZT-E10 as the ExecutingAgency for the project, to co-ordinate the efforts of the provincial andmunicipal government agencies and the project implementingunits (PIUs) inoverall project managementandto managethe maintechnical assistancecontracts. CZT-E10 has set up a task force for the project, the Provincial Project Management Office (PPMO), for day to day activities relatingto its project related functions. CZT-E10 will put in place operating procedures, including procedures for: procurement and contract management, accounting and financial management, environmental monitoring, resettlement planning andbudgeting, and periodic reporting. CZT-EIO, through the PPMO, will be the agency interacting with the Bank on all project matters. Arrangements at the provincial level are mirrored at the municipal level. The Changsha, Zhuzhou andXiangtan Municipal Governments have established Municipal Leading Groups (MLG)to direct economic integration activities on behalfof eachmunicipalgovernment, and a 7 Municipal CZT-E10 within the respective Municipal Development andReformCommission to act as the Secretariat of the MLGand the MunicipalProject Management Office (MPMO) for the project. Agencies responsible for implementing individualcomponents are: Corridor component: ChangshaUrbanDevelopment Investment Co. Ltd.; Xiangtan Urban Development Investment Co. Ltd.; Zhuzhou Urban Development Investment Co. Ltd.; andZhaoshanTourism andTrade Development Co. 0 Changsha Wastewatercomponent: ChangshaMunicipal Drainage Co. Ltd. Zhuzhou Clean Coal component: HunanZhuxi Clean Coal Co. Ltd. 0 Zhaoshan ScenicArea component: ZhaoshanTourism and Trade Development Co. A PTUhasbeennominated ineach agency implementing acomponent. The PTUwill work closely with the MPMOs and the PPMO on the preparation of detailed designs andbidding documents, and will have primary responsibility for procurement, construction supervision and management. 3. Monitoringand evaluation of outcomes/results Annex 3 lists the main outcome indicators for the project, as well as the principal results indicators for each component. Additional indicators are listed in the various documents inthe project files (e.g., the Environmental Management Plan [EMP]). The PPMO, MPMOs, and PIUs will regularly collect the data required for monitoringand evaluation of outcomes/results. Hunan and the PPMO will review the results on the basis of various progress reports, andtake appropriate corrective action where needed. 4. Sustainability Hunan i s strongly committedto integration in the CZT Region. The Vice-Governor of Hunan, the Director of HPDRC, the Mayors of the three municipalities, and other senior provincial and city officials have actively participatedindiscussions with Bank missions duringpreparation and appraisal. The PPMOhas adheredto the deadlines of the Project Preparation Plan. Timely preparation of the feasibility studies, Environmental Assessment (EA), EMP, Resettlement Policy Framework (RPF), andthe Resettlement Action Plans (RAPS),as well as their internalreviews, further demonstrates Government commitment to the project. The NationalDevelopment and Reform Commission (NDRC) and the StateEnvironmentalProtection Administration (SEPA)have approved the project. Hunanhas indicated a strong desire to commence project implementation incalendar2004through advancecontracting andretroactive financing. Bank appraisal from institutional, technical, financial, economic, social and environmental perspectivesconfirms that the project would be sustainable if it i s implemented as designed. 8 5. Criticalrisksand possiblecontroversial aspects Major risks for the investment componentsinclude: (a) significant delays inimplementation of the Corridor component; (b) substantial changes to the components described inthe feasibility study; and (c) major cost escalation. Inparticular, as the flood protection works inthe Corridor component will largely strengthenand raise an existing embankment, the discovery of unanticipatedconditions inthe existing assets couldcause delays or cost variation. The major risks for the technical assistancecomponent are: (a) PPMO, MPMO and PIUs not adhering to critical consultant recommendationsh-eports;and (b) delayed consultant mobilization and poor quality work by consultants. Appropriate riskmitigation measureshave been built into the project design and in supervision arrangements. Potential reputational risks include significant deviations from the RAPRPF. These risks would be managedthrough close supervision of fiduciary and safeguardaspectsthrough effective use of Bank staff basedinBeijing. RiskRating Risks RiskMitigationMeasures with Mitigation To project development objectives Project level governance Close supervision of fiduciary and safeguard M issues issues Implementation of the Careful review of designs. MJS Corridor component Timely construction supervision by national and international consultants. Progress monitoringthrough regular missions. Institutionalreformof CMDC Provisionof institutionaldevelopment technical M assistanceto CMDC. Financialcovenant on cost recovery Disposal of wastes from clean Making the furnishingof an acceptable waste M coal production disposal plan a condition of disbursement for the clean coal component Satisfactory institutionaland Technical assistancefor capacity building. S financial arrangements for Covenant requiringthe future owners of the operating andmaintainingthe assets (Municipal WRBs) to furnish an corridor component operation and maintenance plan (including financing) acceptable to the Bank one year prior to the endof construction. Institutionaldevelopment of Selection of qualified consultant and staff. M ProvincialandMunicipal On-going dialogue with HunanProvince. CZT EIOs (Planned) Donor supported twinning arrangement with a European city region cluster Overall risk rating Modest/Substantial risk M / S 9 6. Loadcredit conditions andcovenants a. Loan effectiveness: (i) Signingof Project AgreementbetweenHunanandIBRD. (ii) Signing of subsidiary loan agreements acceptable to IBRDbetween the municipalities and the project companiesimplementingthe Corridor component. (iii) Signing of the consulting contract for Project Implementation Assistance. Covenants applicable to project implementation: b. Disbursement conditions (i) Xiangtan urban section of Corridor component -Completed EMFand RAP acceptable to the Bank for the Shaoyaogangto Xiang Gang section. (ii) Changsha Wastewater component - Signingof the consulting contract for Changsha MunicipalDrainage Company [CMDC] InstitutionalDevelopment. (iii) Zhuzhou Clean Coal component - A waste disposal plan acceptable to the Bank for solid wastes to be generatedby the new facilities. (iv) Zhaoshan Scenic Area component - Official approval by relevant bureaus for works to be carried out on sites listedon historicalregisters. c. Implementation covenant (v) B y December 31,2007: Hunanand ChangshaMunicipal Government will raise wastewater tariffs sufficientlyto ensure coverage of operation andmaintenance (O&M) plusthe greater of debt service or depreciation for all CMDC's sewerage operations; and, Changshawill either make an annual budgetary allocation towards the O&M costs and debt service of the drainage portion of the project or authorize CMDC to increaseits wastewater tariffs by an additional amount to ensure coverage of O&M and debt service for the drainage portion of the project. (vi) B y October 1,2008, eachMunicipalGovernment will furnish to the Bank an acceptable operation and maintenanceplan (including financing) for the assets constructedunder the Corridor component. D. APPRAISAL SUMMARY 1. Economicandfinancial analyses Economic Analysis. Alternatives were examined, including different technical specifications, locations, and difference inthe scale of the components, to ensure that the best alternative was chosento achieve component objectives. Scenarios "with" and "without" component were also examined to derive the incremental costs andbenefits of each component. Cost-benefit analysis was conducted for eachcomponent. Economic costs for each component were identifiedas the basecost plusphysical contingencies, i.e., without inflation andtaxes. Benefit proxies were identifiedfor each component, e.g., reduction inflood damage costs for the Corridor component, property value increase for the ChangshaWastewater component, air pollutionreduction for the Zhuzhou Clean Coal component, and willingness to pay for the 10 ZhaoshanScenic Area component. The estimated economic internal rate of return (EIRR) for the four components are all inthe range of 15 to 20%. Sensitivity analysesconducted to test the impact of switchingvalues of critical variables confirm that the estimated EIRRs are robust. Financial Analysis. Financial analysis confirms that the requiredcounterpart funds (from national bonds, commercial debt, municipal contributions, etc.) will be available to implement eachof the components. Financial forecasts of project implementing agencies show that the project agencies would be able to operate and maintain the assets as well as cover debt service from their expectedrevenue stream. Financial covenantsrequire: (a) CMDC to achieve full cost recovery by 2008; and (b) the municipal governments to furnish an annual operation and maintenanceplan (including financing) for the Corridor component assets intheir respective municipalities. Annex 9 provides more details on economic and financial analysis of the project. 2. Technical The proposedcomponents were studied anddesignedby highquality Chinese design institutes and reviewed by international consultants. Project designs are tec,hnicallysound, represent the least cost alternative, and are basedon good engineering practice. An extensive analysis of conceptual and designalternatives has beenconducted, as described inAnnex 9. The detailed project description is contained inAnnex 4. 3. Fiduciary The financial managementassessment concluded that the project meets minimumBank financial managementrequirements, as stipulated inBP/OP 10.02. The project will have inplace an adequateproject financial managementsystem that can provide, with reasonable assurance, accurate and timely information on the status of the project inthe reportingformat agreedwith the project and as required by the Bank. The FinancialManagement System assessment i s inthe project files. For further details on financial management,please see Annex 7. The procurement capacity assessment concluded that there is a need to further enhance procurement capacity of the PPMO, the MPMOs, and the PIUs through training, advisory support from the Bank office inBeijing, and guidance from supervision missions. Annex 8 provides further details on procurement. The Procurement Capacity Assessment i s inthe project files. The PPMO has selectedthe ChinaMin-Metal International Tendering Company for ICB contracts. The company i s an experienced and competent procurement agent, familiar with the Bank's international competitive biddingprocess. For processing national biddingand national shopping packages, the PPMO will select a suitable tendering company. 4. Social Significant social benefits will accrue from the project, including: improvedflood protection for residentsin the Xiang River floodplain, better access for residents along the dyke and increased opportunity for the CZT population to enjoy the river from the Corridor component; environmental andhealth benefits from the ChangshaWastewater component; improved air 11 quality, and consequent health benefits to CZT residents as a result of the Zhuzhou Clean Coal component; and, recreational and cultural benefits from the Zhaoshan Scenic Area component. Negative social impacts will primarily result from involuntaryresettlement. However, special care has been taken inthis regard by using "minimization of resettlement" as one of the key criteria inevaluating alternative project designs. Inparticular, this approach has significantly reducedthe expectedresettlement requiredfor the Corridor andthe Zhaoshan Scenic Area components. Resettlement that i s requiredwill be implemented in accordancewith the approved RPFandRAPs. Linkages. A total of fifteen main access and egress roads have been identifiedfor the scenic road under the Corridor component; nine of these are existing roads, while five others have been included inthe project. The remaining one has been identified as "linked" to the project, and the RPFwill apply when this roadis constructed using government funds outside the project. EthnicMinorities. The census surveyundertakenduringthe preparation of the resettlement plans and the review of residency registration of persons living inproject affected areas confirm that no ethnic minority individuals live in the project affected areas. Poverty Impact. Twenty five poor households(95 persons) have been identifiedinthe Changshasection of the Corridor component as adversely affected by the project. They will receive a subsidy to buildnew houses and additional assistanceinrehabilitation. A rehabilitation program will be put inplace to restore incomes of people who will lose employment as a result of the project. Affordability of wastewater tariffs. Water and wastewater charges are together estimated to be about 2% of the threshold poverty income level in Changsha and are considered affordable. Further,Changshamunicipal policy stipulatesthat families below the povertylevelwill be provided water for basic needs free of charge. Gender. Women were well representedinthe householdinterviews and inconsultation meetingsfor resettlement planning. Special attention will be paidto the re-employment of women affected by land acquisition. See Annex 10for more details on social issues. Reports on the studies on gender, poverty and on ethnic minorities, as well as the RPFand the RAPs, are available inthe project files. 5. Environment Project investments will bringabout positive environmental impacts. This project i s meeting a "backlog" need for flood protection and environmental infrastructure andi s not expectedto induceadverseextensive growth or secondary impacts. The present environmental problems are serious and the provision of this environmental infrastructure i s necessaryto addresscurrent needs and mitigate current problems. Futureproblems without the project would becomeeven more critical. Potential construction phase impacts are relatively minor and easily mitigated. Details of mitigationmeasures, the monitoringrequired to ensure that mitigation measures are effectively implemented, andresponsibilities for these activities are described inthe EA and the EMP. The 12 PPMO will have an ongoing responsibility to track and report the monitoring work of all the PIUS,in addition to its own direct monitoring activities. Potential operational phase impacts are also relatively minor and many of the concerns have been addressedinthe course of the design of the facilities. Furnishingan acceptable disposal plan for the waste from the Zhuzhou Clean Coal component i s a condition of disbursement for that component. See Annex 10 for more details on social and environmental issues. The EA and the EMPare available inthe project files. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [ I NaturalHabitats (OP/BP 4.04) [ I [XI PestManagement (OP 4.09) [ I [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [XI [ I Involuntary Resettlement (OP/BP 4.12) [XI [ I Indigenous Peoples (OD 4.20, beingrevised as OP 4.10) [I [XI Forests (OP/BP 4.36) [ I [XI Safety of Dams (OP/BP 4.37) [ I [XI Projects inDisputedAreas (OP/BP/GP 7.60) [ I [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI a. What i s the safeguardscreeningcategory of the project? (Sl, S2, S3, SF) S2 b. What is the environmental screeningcategory of the project? (A, B, C,FI) A c. If applicable, what are the key safeguardpolicy issuesraised by the project? Environment, resettlement, and cultural property. See Annex 10for more details. d. Ifapplicable, what are the mainresults of any safeguardpolicy relatedstudies, andhow have they been incorporated into the project? Sections D.4 andD.5 above summarize the impacts and mitigatory measuresincorporated into the project designon social andenvironmental issues. Construction contracts will include a clause on "chance finds" to protect culturalproperty, especially under the Zhaoshan Scenic Area component. e. What i s the borrower's capacity to implement the safeguardpolicies recommendations, and, if the capacity is insufficient, how will this capacity be brought to the required level? The PPMOwill coordinate resettlement implementation with the PIUS.The PIUs are generally not experienced inthis work and trainingcourses for environment andresettlement will be organized duringthe implementation stageto augment capacity. f. What type of consultations havebeenconductedrelatedto safeguardissues? How didthese consultations influence project design? 13 Details of the proposed project were widely introduced through the local media. A website specifically for CZT RegionalDevelopment has beenestablished, i s updated frequently, and many comments have beenreceived. Questionnaires were distributed for the sample survey during the preparation of the EA and RAP. Meetings were heldwith the primary andsecondary stakeholders, and their comments andrecommendations were included inthe project designs. Consultation was also carried out with civil society organizations, includinglocal professional societies, neighborhoodvillagecommittees, well-known enterprises, the localWomen's Federation and an environmental protection non-governmental organization. Spot interviews were conducted of individuals and groups of project affectedpeople for resettlement compensation and selection of relocation sites. Extensive consultation was carried out inLeidashi Township during the preparation of the Corridor component. This consultation led to an examination of additional alignment alternatives for this section of the dyke and ultimately a choice of alignment that was the most socially acceptable. g. When were the safeguardstudies made available at the InfoShop? The draft RAPs and RPF were made available inthe InfoShopon February 12,2004. The draft EA,EA Summary andEMFwere madeavailable inthe InfoShopon February 20,2004. h.When andwhere were safeguardstudies made available inthe cooperating country? The Englishand Chinese versions of the draft EIA, draft RAPs and draft RPFwere disclosedin the MPMO offices inChangsha, Xiangtan and Zhuzhou. Notification of disclosure was given in the mass media on December 16,2003 inthe Zhuzhou Daily, on December 18,2003 inthe Xiangtan Daily, and on January 1,2004 inthe ChangshaDaily. 7. Policy ExceptionsandReadiness a. Does the project require any exceptions from Bank policies? If so, what are they and how are they justified? No exceptions are required. b. Havethese beenapproved by Bank management? Not applicable. c. I s approval for any policy exception sought from the Board? No. d. Does the project meet the Regional criteria for readinessfor implementation? Ifnot, inwhat way(s)? ReadinessCriteria: 1. Fiduciary (financial managementandprocurement) arrangementsinplace -Yes 2. Project staff and consultants mobilized-The PPMO, MPMOs, and the PIUs are already in place, andtheir staff will be augmentedon an as neededbasis. Signingof the implementation assistanceconsultant contract i s a condition for loan effectiveness. 14 3. Counterpart funds budgetedreleased -Hunan ProvincialGovernment has approved the budget for the PPMO operating costs for 2004, and implementing agencies have budgeted counterpart funds for project implementation in2004. 4. Tender documents for first year procurement havebeenprepared. TORSfor the consultant selection referred to in2 above have beenreviewed. 5. Disclosure requirements met - Yes 6. Results assessment arrangements completed: monitoring and evaluation (M&E) institutional obligations spelled out; M&Ecapacity inplace; indicators specified; baseline data collected - Yes. 7. Co-financing agreementssigned-Not applicable. 8. Land acquisition plans ready - Yes. 15 Annex 1: Country and Sector or ProgramBackground CHINA: Hunan UrbanDevelopment Project 1. Hunan, insouth-central China, i s at the median of Chinese provinces inmost economic criteria with GDP percapita ranking seventeenthamong Chinese provinces, and 22% below national average. The Changsha-Zhuzhou -Xiangtan (CZT) Region, which has a total population of 12.1 million (of whom 3 million live inthe three core city areas) i s the only significant urban agglomeration inHunan. The three cities are within 60 kmof each other and are physically linkedby the Xiang River, an important tributary of the Yangtze River. Together with Wuhan and Chongqing, the CZT urban agglomeration i s one of the gateways between eastern and western China. While the GDP of the CZT Regioni s at the same level as Wuhan, the per capita GDPis only about 60% of Wuhan's GDP, andis comparable to Chongqing's GDP. Urban Cluster Development and CZT Integration 2. Urbandevelopment inChina i s not homogeneous; various development models are being followed in different areas of the country, including: regional cluster, metropolitan, and small satellite cities and towns. Benefits of cluster development lie inthe efficiencies that can be gainedthrough economic integration of multipleurban areas. Government plays an important role incluster development by creating and supporting the necessarypolicy and planning framework for the region, andby providinginfrastructure to assist physical integration. In addition, government supports improvements to the livability of the region, such that it can attract highquality labor and firms, thus increasing the overall competitiveness of the economic region. 3. The CZT Regional City Development Strategy (CZT RCDS) of 2002 identified the potential comparative advantage of the CZT Region in developing clusters inthe following areas: (a) transportation equipment and services; (b) education and culture; (c) food products and pharmaceuticals; and, (d) informationtechnology equipment and services. Moreover, the CZT RCDS reported that current limitations inlinkages with external markets, and the deteriorating environmental conditions inthe regioncould limit the potential for development, and therefore were key priorities to be addressedby Hunanbefore cluster development could be successful. 4. Both the national and provincial governments attach highpriority to the economic development of the CZT Region as one of the examples of cluster basedurban development. The Tenth Five-YearPlanof Hunan Province emphasizes the importance of the CZT Region's contribution towards the transformation of Hunanfrom a largely agricultural province into a more balanced economy with growth intertiary sectors and hightechnology. Considerable work has beendone on defining the concept of regional integration, and there is strong support amongst the officials of the three municipalities for economic integration, which will enable the cities to develop complementary economic roles, with eachcity buildingon its advantages. A numberof priorityinvestments to support integration have beenidentified, and some (e.g., the University City in Changsha) have already been completed. Muchplanningandpre-investment work has been done inthe development of the Xiang River corridor. 16 5. Hunanhas provided leadership on CZT integration through the formation of a Provincial LeadingGroup (headed by the Governor, with highlevel membership, including the Mayors of the three municipalities), and the establishment of the ProvincialCZT Economic Integration Office in HPDRC. 6. Stakeholder consultations, conducted as part of the RCDS exercise, revealed a clear consensus that integration: (a) Would make the regionstronger economically; (b) Would strengthenurbaninfrastructure through coordination and avoidance of duplication; and (c) Should include environmental and heritage protection -especially of the Xiang River corridor. However, the stakeholdersalso felt that the three cities should retain their individual characters after integration. 7. The principalgoals of CZT integration include: Improvingthe competitiveness of the three cities; Providingemployment for people affected by state owned enterprise reforms andfor migrants from suburban andrural areas; Buildingon the culture of the provinceh-egion; Significantly improvingthe urban environment; and Ensuringfinancial sustainability. 8. Key strategies for achieving these goals through regional cooperation and coordination include: developing transport infrastructure and a transport hub, increasing opportunities for higher education, improvingthe environment, promoting food and pharmaceutical industries, andfindingniches ininformation technology equipment and services development. EnvironmentalIssuesinHunan 9. Flooding. The Xiang River i s a main south-north flowing tributary of the Yangtze River, beginning inGuangxi Province and entering into HunanProvince at Dong'an. It ultimately flows into Dongting Lake, which i s a convergence point for several rivers and an overflow for the Yangtze duringthe flooding season. The XiangRiver connects the CZT Regionfrom south to north forming a "C" shape. Floods occur frequently from April to September, with the flood peak rising quickly, threatening embankment security. 10. Over the last fifty years, a series of embankments have been constructed to prevent flooding. However, these provideinadequate protection for the current populationand level of development inthe CZT Region. Within the urbanareas of Changsha, Xiangtan and Zhuzhou, the existing flood embankments generally provideprotection against 1in20 to 1in30 year floods, and in the peri-urban areas outside the cities, the protection inmany areas i s less than 1in 5 years. According to the planningobjectives of the CZT Region, a minimumof 1in 100year 17 flood protection should be providedto urban areas and 1in50 year protectionto peri-urban areas. Thus, significant improvement inthe flood protection embankment i s required. 11. Surface waterpollution. Increasingdischarges of domestic sewage pollute surface water inthe CZT Region, particularly the river sections inurban areas. Industrial discharges have beenbetter controlled inrecent years but they continue to cause local water quality problems. In2000, the discharge of chemical oxygen demand (COD) from domestic sewage in the region became higher than the dischargeof COD from industrial wastewater. 12. InChangsha,becauseof rapidindustrialdevelopment andincreasing population inrecent years, wastewater has increasedto about 850,000 m3/d.At present the total treatment capacity of the No. 1and the No. 2 Municipal WastewaterTreatment Plants (WWTPs), is only 320,000 m3/d.This is far short of the requirement of "The Policy of UrbanWastewater Treatment and Prevention and Control of Pollution" in which "the wastewater treatment rate in key cities should beno less than 70%." A largeamount of untreatedwastewater is directly discharged into the Xiang andLiuyangRivers, which are both severely polluted. The ChangshaWastewater component will increase the wastewater treatment rate inChangshaby about 14percent and will reduce the impact of wastewater uponthe receiving waters. 13. Airpollution. Hunanhas abundant coal resources and is heavily reliant on coal for power generation and industrialoutput. The annual production of raw coal i s 22 million tonnes, of which 50% has high sulphur and ash content. This has resulted inpollution of the atmosphere andthe CZT Regioni s at the center of central China's main acidrain zone. Acid rain was especially acute inthe 199Os, when the CZT Region ranked number one inChina with an acid rainfrequency of over 95% of days per year. Even with some improvements, according to the monitoring statistics in2000, the acid-rain frequency was 49 - 62%, and the average annual pH value was 4.8 - 4.9. There i s an urgent need for the supply of clean coal products. 14. Recreation. Tourism and recreationalfacilities are lackinginthe CZT Regionandthey have beenidentifiedby Hunanas priority investments for improving the livability of the area. The ZhaoshanScenic Area is an existingrecreationlocationinCZT, however, through lack of maintenanceand development inrecent years, it has fallen into disrepair. Redevelopment of this area will greatly increaseits benefits to the local community. Moreover, the Xiang River holds major potential to become a key recreational resource in the CZT Region. Already inthe downtown areas of Changsha, Xiangtan and Zhuzhou, some riverside redevelopment has taken place to provide parks, squares and promenades for the localresidents. However, the potential to provide recreational opportunities alongside the river inother urban sections and inthe peri- urban areas connecting the cities has not yet been realized. Institutionalissuesinneedof reform 15. Flood control. The structure of ownership, operation, maintenance and managementof the dyke systeminCZT i s complex. Before project preparation there existed no formal ownership documentation, but duringproject preparation the municipal governments confirmed that ownership and technical managementresponsibility will be with the Municipal Water ResourceBureaus (WRBs). Currently, the primary operation and maintenance (O&M) function i s servedby town, district or municipal dyke management institutes, depending on which section of the dyke is considered. The dyke managementinstitutes are institutionally weak and their equipmentis old. The financial structure of the dyke ownership, O&M and technical 18 managementi s complex with funds collected through various levies andtaxes andfunding for operation, maintenance andnew assets disbursedfrom different levels of government. Moreover, the collected funds are not adequateto cover the required expenditure, so inaddition to the funds collected for flood protection, each level of government provides a subsidy for specific or general expenditure. There i s an urgent need to reform the current system inorder to increase efficiency and quality. 16. Wastewater: The enterprisecompany model is now recognized by Government as being the most appropriate management model for the provision of most utility services and Government has urged localities to adopt this model in all appropriate circumstances. Changsha MunicipalDrainage Company Ltd (CMDC) was established inOctober 1999 with a relatively limited service scope. However, as Government advocates single companies to manageboth the sewerage systems and WWTPs, it i s proposed that the responsibilities of CMDC will be enlarged to include ownership, operation and maintenanceof all wastewater and drainage facilities, including the stormwater pumpingstations. 17. Setting wastewater charges on a full cost recovery basis i s Government policy as set out inCircular (1999) 1192,jointly issuedinSeptember 1999by the Ministry of Construction, State Development andReform Commission and the StateEnvironmentalProtection Administration. Itis apolicy that has beenreinforcedinsubsequentcirculars, although the practical difficulties of implementation have also beenreferred to. There i s current1 no separate wastewater tariff in Changsha. However, a wastewatercomponent of RMB 0.40/m (implemented on June 1,2004) Y i s includedin the water supply tariff. ChangshaWater Supply Company passes this element to the ChangshaFinance Bureau. The wastewater tariff i s not shown on the bills as a separate charge. 18. The current wastewater charge inChangshai s still at the lower end of the range of wastewater tariffs leviedinmajor cities of China. Urban wastewater tariffs inthe range RMB 0.40 to 0.80/m3 have already beensuccessfully implemented. Hunanhas already required the ProvincialPriceBureau, ProvincialEnvironment Protection Bureau andProvincial Construction Bureauto develop a programfor further tariff reform. The key components inthe program are: 0 The wastewater tariff will be increasedto RMB 0.80/m3at a date to be determined. The wastewater tariff level will vary depending on customer type. Details of tariff levels for each class of customer (domestic, industrial) etc., are beingdeveloped. 19 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CHINA: Hunan UrbanDevelopment Project Latest Supervision (PSR) Sector Issue Project Rating (Bank-financed rojects only) Implementation Development Progress (IP) Objective BankFinanced Urban environment, air and water Second Beijing Urban S S pollution, waste management Environment (Ln. 4561), (6/20/2000) Urban environment, including Hebei UrbanEnvironment S S wastewater, solid waste, and industrial (Ln.4569), (05/10/2000) pollution control Access to urban servicesfor the poor, Tianjin UrbanDevelopment and S HS environmental health, water resource Environment (Cr. 2387) management, municipal governance (05/22/1992) and (ICR No. and institutionbuilding, wastewater, 22217) (06/20/2001) solid waste, industrial pollution Wastewater management inariver HuaiRiver Pollution Control S S basin: upgrade water quality inthe (Ln.4597), (03/22/2001) HuaiRiver, improved collection and treatment of wastewater inselected municipalities of two provinces. Marketaccess for Hunan inland areas, Third InlandWaterways (Ln. S S generatingpower inremote areas 4621) (05/24//2001) Restorationof social and economic Yangtze FloodEmergency S S infrastructure damagedby flood Rehabilitation (Ln.4438, Cr. 3169 12/31/1998and ICR No. 24876 (12/31/2002) Irrigation, drainage, flood prevention, Yangtze Dike Strengthening S S protection of the river bank against (Ln45700) (05/31/2001) erosion, improve critical sectionsof existing main dykes in Hunan and HubeiProvinces,and support institutional reforms. Other DevelopmentAgencies Water supply, municipal and industrial Japanese Bank for International Implementation performance wastewater treatment, air pollution Cooperation reported satisfactory. Assistance management (severalprojects) focused exclusively on investment. Urban services, environment, water Asian Development Bank Performancereported resources (severalprojects) satisfactory. IIPDO Ratings:HS (HighlySatisfactory); S atisfactory); U(Unsatisfactory); HU ighly Unsatisfactory) 20 Annex 3: ResultsFrameworkandMonitoring CHINA: HunanUrbanDevelopmentProject ResultsFramework Use of OutcomeInformation Foster greater economic integration Supporting integrateddevelopment inthe CZT Region Group for Economic Integrationon in the Changsha, Zhuzhou and . . . - project progress Xiangtan urban cluster Corridor: Corridor: Corridor: Strengthenflood protection infour Length of embankmentstrengthened Upgrading flood protection inCZT sections within CZT Region and to required standard Region create a recreationalroad along the Length of scenic roadconstructed Developmentof recreationalspaces embankment ChangshaWastewater: ChangshaWastewater: ChangshaWastewater: Increasepercentageof sewage Length of collection network inthe Monitoringprogressinimproving collected and treated inChangsha catchment water quality inXiang andLiuyang Percentageof sewagetreated Zivers Zhuzhou Clean Coal: Zhuzhou Clean Coal: Zhuzhou Clean Coal: Reduction of air pollutioninthe Sale of cleancoal products Increaseduse of cleancoal inCZT CZT Region Region Reduction of sulphur dioxide (SOz) Monitoring and enforcement of emissionsinCZT Region environmental regulations and monitoring of coal quality ZhaoshanScenicArea: ZhaoshanScenicArea: Zhaoshan ScenicArea: Improved livability inthe CZT Numberof visitors to Zhaoshan Monitoring use of recreational Region Scenic Area resourcesinCZT Region Institutional Strengtheningand Institutional Strengtheningand InstitutionalStrengtheningand ImplementationAssistance: Implementation Assistance: ImplementationAssistance: Project management Contract awards Efficient project implementation. Institutional developmentof CZT- Implementationof key Monitoring CZT-EIO's integration E10andproject agencies recommendations activities and developmentof project agencies 21 0 8a 0 2 E " 8 0 3 8 " 8 0 3 i? 2 8 z 0 2 8 8 d z gm zm " x9 0 0 z 0 .. Ox8 0 0 8 m P o m 0 0 CI I- m 8 Annex 4: Detailed Project Description CHINA: HunanUrbanDevelopment Project 1. The development objective of the HunanUrbanDevelopment Project (HUDP) i s to foster greater integration inthe Changsha - Zhuzhou - Xiangtan (CZT) Region of HunanProvince through support for a carefully selected set of priority investments to address specific regional needs ina sustainable manner. The project comprises five components: 0 Corridor component,to strengthenflood protection and develop a recreational (scenic) roadalong the embankment, infour sections of the three municipalities. 0 ChangshaWastewater component, to increasethe percentageof sewage collected and treated inthe municipality, and to develop the ChangshaMunicipal Drainage Company (CMDC) into an autonomouspublic utility operating on commercial principles. 0 Zhuzhou Clean Coal component, to reduce air pollution in the CZT Regionthrough the production and sale of low sulphur coal products. 0 Zhaoshan Scenic Area component, to support improved livability in the CZT Region through the sustainableredevelopment of the Zhaoshan Scenic Area. 0 Technical Assistance for Implementation and Institutional Development component, to assist inproject implementation, and to buildcapacity inthe CZT Economic Integration Office and other project agencies. Corridor component US$253.8 million - 2. Inorder to improvefloodprotection on the Xiang Riverflood plain, the Corridor component will raise and strengthen selectedlengths of the existingembankment along the Xiang River inthe CZT Region. Inaddition, a scenic roadwill be built along the embankment crest to provide access and further protection, and also to provide a recreational resource. This component, with atotal length of about 72 km, will have four sections: 0 The Changshasection, on the easternside of Xiang River, with a total length of about 22 km,from the HouzishiBridgeonthe southernendof Changshaurban area, through Jiefangyuan and Nantuoyuan, ending at State Highway 107 near Zhaoshan Mountain. 0 TheZhaoshan section, on the eastern side of Xiang River with atotal lengthof about 6 km,starting at Yijiawan township onthe south side of ZhaoshanMountain, ending at the Tan-Shao Expressway. 0 The Xiangtan urban section, on the eastern side of XiangRiver, with total lengthof about 11km,contiguous with the Zhaoshan section, startingat Tan-Shao Expressway, and endingat XiangGang, approximately 5 kmupstream of the Xiangtan No.1Bridge. 0 The Zhuzhou section, on the western side of the Xiang River, about 33 kmlong, starting at Xiang Yun Road, passing through the Zhuzhou urban area and Leidashi township, before ending at Kongzhoudao Navigation Complex. 23 3. The flood protection works to be carried out under the project will include: raising the dyke embankment crest level andconstructing a wave wall to ensure flood protection and wave action freeboard commensuratewith the design flood standards specified in CZT regional planning (1in 50 year inperi-urban/rural areas and 1in 100 year inthe urban areas); increasing the width of the dyke andrationalizing the cross-sectionalprofile to conform with Chinese design standards; providingseepage control where necessary using either a grout curtain or earth blankets; providing slope stability through turfing andlandscaping; improving drainage through the embankment by upgrading sluices andpumping stations; andestablishing a safety easement on the land side of the embankmentin accordancewith Chinese regulations. 4. The scenic roadworks to be carried out will include: the construction of a low-speed recreational roadon top of the embankment with design speedof 40 - 50 km/hrinthe peri- urban/rural sections and 50 km/hr inthe urban sections; junctions at major access and egress points on the road; minor bridges and culverts where necessary; non-motorized vehicle lanes and pedestrian lanes where appropriate; lay-bys andparking areas at major points of public interest; and roadlighting and other road facilities. Changsha Wastewater component US$101.6 million - 5. This component will serve the estimated2010 population of 220,000 inthe Changshanyuandrainage zone of Changshacity and will reduce water pollutionin the Liuyang River, an urban tributary of the Xiang River, by providing (a) amodembiological technology wastewater treatment plant (WWTP) with acapacity of 120,000 m3/dfor the Changshanyuan catchment; (b) a collectionnetwork for storm- and wastewater inthat catchment (1,889 ha), comprising about 40 kmof large-diameter combined drainage and sewer pipes and culverts, about 6 kmof sewer interceptors, and about 2.2 kmof sewer pumping main; and, (c) three low- liftpumpingstations for stormwater overflows. Zhuzhou Clean Coal component US$15.3 million - 6. This component will support construction of coal water mixture andbriquette manufacturing plants, and renovate a coal washing andblendingplant inZhuzhouto provide clean coal products, which will replace the use of raw coal and fuel oil. The plants constructed and renovated under the project will have the following total productioncapacity: 250,000 tonnedyear of coal water mixture (CWM); 250,000 tonnedyear of coal briquette; and 1,000,000 tonnedyear of blendedwashed coal. Zhaoshan ScenicArea component US$8.5 million - 7. This component will bringabout improvedlivability to the CZT Regionthrough the redevelopment of one of its mainrecreational assets, the Zhaoshan Scenic Area. The component will include: (a) rehabilitation and afforestation of natural grounds, including eight natural scenic spots within the park; (b) provision of supporting infrastructure and utilities; and (c) interpretation of sights for educational purposes. 24 Technical Assistance for Implementationand Institutional Development component- US6.9 million 8. Implementationtechnical assistancewill be providedto all components for training in World Bank procedures, review of detailedengineeringdesigns andbiddocuments, assistance with the procurement process, construction supervision and quality control, and construction management. 9. For the Corridor component, capacity buildingwill be providedto the future owners and operators to integrate the assets with Hunan's existing flood warning, monitoringand control system, and to increasethe capacity of the organizations responsible for operation and maintenance. 10. For the ChangshaWastewater component, technical assistance will be providedto support upgrading of the ChangshaMunicipal Drainage Company into a well functioning, self- financing public utility corporation. 11. For the Zhuzhou Clean Coal component, technical assistancewill be providedto strengthenthe capacity for environmental enforcement and monitoring and to develop incentive regulations for sulphur control, thereby enhancing the creation of a new market for clean coal products inthe CZT Region. 12. Technical assistance and capacity buildingwill be providedto the Provincial and Municipal CZT-EIOs to support their further development inthe following skill areas: macro- economic planning; large-scale integratedproject management; definition of optimal integration methods; project management; publiclstakeholder consultation; and, financial and administrative managementof World Bank projects. 25 Annex 5: Project Costs CHINA: HunanUrbanDevelopment Project 1. The estimatedcost of the project is US$386.16 million, including physical andprice contingencies, taxes and duties and front-end fee. Cost estimates are basedon feasibility studies with unit prices at mid2004. Physical contingencies are estimated at 10% for civil works and equipment. Price escalation i s basedon a projected national and international inflation rates. Summary cost estimates are infollowing table. Local Foreign Total Project Cost B y Component us us us $million $million $million Corridor component 154.00 63.60 217.60 ChangshaWastewater component 50.10 37.00 87.10 Zhuzhou Clean Coal component 6.30 6.80 13.10 Zhaoshan Scenic Area component 4.80 2.50 7.30 Technical Assistance 0.36 5.59 5.95 Total Baseline Cost 215.56 115.49 331.05 Physical contingencies 21.56 11.55 33.11 Price contingencies 7.29 1.35 8.64 Total Project Costs' 244.41 128.39 372.80 Interest duringconstruction 0.00 12.50 12.50 Front-endFee 0.00 0.86 0.86 ~ Total Financing Required 244.41 141.75 386.16 'Identifiable taxes and duties are US$ 18.0 million, andthe total project cost, net of taxes, i s US$368.2 million. The share of project cost net of taxes i s 95%. 26 Annex 6: ImplementationArrangements CHINA: HunanUrbanDevelopmentProject 1. A ProvincialLeadingGroup (PLG) overseesthe economic integration of the CZT Region on behalf of the HunanProvincialGovernment. The Governor i s director and four vice governors are deputy directors of the PLG. Members include the Mayors of the three Municipalities of Changsha, Zhuzhou and Xiangtan, andthe Directors of the main provincial government bureaus and commissions, includingthe ProvincialDevelopment andReform Commission, ProvincialFinance Bureau, ProvincialConstruction Bureau and the Provincial Environment Protection Bureau . 2. The HunanProvincialGovernment has establishedthe CZT Economic Integration Office (CZT-EIO) within HPDRC to carry out the economic integration work. The CZT-E10 acts jointly as a division of HPDRC with an administrative staff allocation assignedby the Provincial PersonnelDepartment, and as the Secretariatfor the PLG. 3. The Provincial Government has nominatedthe CZT-E10 as the ExecutingAgency for the project, to co-ordinate the efforts of the provincial andmunicipal government agencies andthe Project ImplementingUnits (PTus) inoverall project management and to managethe main technical assistancecontracts. CZT-E10 has set up a task force for the project to be the ProvincialProject Management Office (PPMO) for day to day activities relatingto its project relatedfunctions. 4. CZT-E10 will put inplace operating procedures, includingprocedures for: procurement and contract management; accounting and financial management; environmental monitoring; resettlement planning, budgeting, and implementation; and periodic reporting. CZT-EIO, through the PPMO, will be the local agency interacting with the Bankon all procurement matters. 5. PPMO will engage an appropriate number of staff for the implementation stage of the project, and will be organized into functional divisions for: project management, environment, resettlement, finance, and, administration. Training for PPMO staff i s included inthe project. The PPMO will have adequate office space, furnitureandequipment includingcomputers, printers, copiers and scanners, telephone lines, vehicles andoffice support such as drivers. 6. Arrangements at the provincial level are mirrored at the municipal level. Each municipal government has established a MunicipalLeadingGroup (MLG) to direct economic integration activities on behalf of the municipal government, and aMunicipal CZT-E10 within the Municipal Development and Reform Commission to act as the Secretariat of the MLG and the MPMO for the project. 7. Currently, eachMunicipal CZT-E10 has allocated two to three staff to its MPMO. Staff of the MPMOs will be increasedprior to the start of project implementation, and the offices will be organized into functional divisions for environment, resettlement, project management, finance, andadministration. 27 8. A PIUhas beennominatedineach agency implementing a component. The PIUwill work closely with the MPMOs and the PPMO on the preparation of detailed designs and preparation of biddingdocuments, and will have primary responsibility for procurement, construction supervision and management. 9. Corridor component. ChangshaUrban Development Investment Co. Ltd.(CUDIC), Xiangtan Urban Development Investment Co. Ltd. (XUDIC), Zhuzhou UrbanDevelopment Investment Co. Ltd. (ZUDIC), and Zhaoshan Tourism and Trade Development Co. (ZTTDC) havebeen nominated as PIUsand will be responsible for repayment of the loan. Each PIUwill establish a project managementoffice for the project. Uponcompletion of construction, the respective municipal governments will transfer formal ownership of the flood protection assets and the scenic roadto the three municipalwater resource bureaus. The MWRBs will managethe operation and maintenance of these assets. 10. ChangshaWastewater component. The ChangshaMunicipalDrainage Co.Ltd. (CMDC) will be the PIUand will be responsible for the construction, future operation and maintenance of the WWTP and network, with responsibility for repayment of the loan. 11. Zhuzhou Clean Coal component. The HunanZhuxi Clean Coal Co. Ltd. (HZCCC) will bethe PIUandwill be responsible for implementing the component, inaddition to asset ownership, operation and maintenance, andrepayment of the loan. 12. Zhaoshan Scenic Area component. The ZhaoshanTourism andTrade Development Co. (ZTTDC) will be the PIUfor this component, and will be responsible for implementing the component, inaddition to asset ownership, operation and maintenance, andrepayment of the loan. 28 Annex 7: FinancialManagementand DisbursementArrangements CHINA: HunanUrbanDevelopmentProject 1. An assessment of the adequacyof the project financial managementsystem (carried out basedon guidelines issued by the Financial Management Sector Boardon October 15,2003) concluded that the project meets minimumBank financial managementrequirements, as stipulated inBP/OP 10.02. The project will have inplace an adequate project financial managementsystem that can provide, with reasonable assurance, accurate andtimely information on the status of the project inthe reporting format agreed with the project agencies as required by the Bank. No outstanding audits or audit issuesexist with any of the implementing agencies involvedinthe proposed project. 2. The project will be financed by the Bank loan andcounterpart funds. The Bank loan to the People's Republic of China will be on-lent first to.Hunan Province, and then either directly to the project company (inthe case of the HunanZhuxi Clean Coal Co.) or to the Municipal Governments of Changsha, Xiangtan and Zhuzhou, andfinally to the project companies (inall other cases). Counterpart funds include loans from China Development Bank, appropriation from the municipal governments, and commercial debt. Audit Arrangements 3. Inlinewith other Bankfinanced projects inChina, the project will be auditedin accordance with ISA and the Government Auditing Standards of the People's Republic of China (1997 edition). The HunanProvincialAudit Office has beenidentifiedas auditors for the project. Annual audit reports of consolidated project financial statements will be furnishedto the Bank within six months of the end of eachcalendar year. 4. Inaddition, annual audit reports on the financialpositionandthe operational results of the following implementing entities will be furnished to the Bank within six months of the end of each calendar year: ChangshaUrbanDevelopment Investment Co. Ltd.;ChangshaMunicipal Drainage Co. Ltd.; Zhuzhou Urban Development Investment Co. Ltd.; HunanZhuxi Clean Coal Co. Etd.; Xiangtan UrbanDevelopment Investment Co. Ltd.; and Zhaoshan Tourism andTrade Development Co. The financial statements of these entities are not fiduciary requirements, but will serve to assess sustainability of project components. As such, the requirements for these audited financial statements will not be includedas part of the loan covenant but will insteadbe includedin Schedule 2 of the Project Agreement. DisbursementArrangements 5. Inaccordancewith the agreement betweenthe Bank andMOF, the project will use traditional disbursementtechniques and will not usePMR-based disbursements. 29 ALLOCATION OFLOAN PROCEEDS 6. Proceeds of the Loan would be disbursedagainst expenditure categories as shown inthe table below. I I IBRDLoan Expenditure Category Amount inUS$ Percentage Million 1.Works for Corridorcomponent ChangshaUrbanDevelopmentInvestmentCo. Ltd. 32.38 XiangtanUrbanDevelopmentInvestmentCo. Ltd. 18.68 8 p l Zhuzhou UrbanDevelopmentInvestmentCo. Ltd. 43.19 69% ZhaoshanTourismandTrade DevelopmentCo. 10.98 69% 2. Works for other components ChangshaMunicipal Drainage Co. Ltd. 26.97 42% ZhaoshanTourismandTrade DeveloDment Co. 3.18 48% 3. Goods 100% of foreignexpenditures, ChangshaUrbanDevelopmentInvestmentCo. Ltd. 2.75 100%of localexpenditures ChangshaMunicipal DrainageCo. Ltd. 19.30 (ex-factory cost), and65% of HunanZhuxi CleanCoalCO.Ltd. 7.76 local expendituresfor other items procuredlocally. 4. Services CZT-E10 4.89 HunanProvincialWater ResourcesBureau 0.61 ChangshaMunicipal DrainageCo. Ltd. 0.30 HunanProvincialEnvironmentalProtectionBureau 0.15 CivilWorks, Goods andServicesTotal 171.14 5. Front-end-fee 0.86 Total Amount of the Loan 172.00 Use of Statement of Expenditures (SOEs) 7. Some of the proceedsof the Loan may be disbursedon the basis of SOEs as indicated in the table below. Expenditures Category Contracts less than US$ Equivalent Civil works 3,000,000 Goods 500.000 Consulting firms 100,000 Individualconsultants 50,000 8. Expenditures exceeding the above limits will be made in accordance with respective procurement guidelines and provisions inthe Loan Agreement against submission of full documentation and signed contracts. 30 Special Account (SA) 9. One special account (SA) will be establishedinHunanProvincialFinance Bureau (HPFB)with an authorized allocation of $9 million. Bank funds would be disbursedto the SA managedby HPFB,to the relevant municipalfinance bureaus in Changsha, Xiangtan and Zhuzhou, to PIUs and finally to suppliers and contractors. 10. HPFBwill be directlyresponsiblefor the management,monitoring, maintenance, and reconciliation of the SA. The Hunan Zhuxi Clean Coal Co. will prepare and submit all supporting documents requiredfor Bank disbursements directly to the HPFB for final verification and consolidation before sending to the Bank for further disbursement processing. For all other components, the respective PIUs will prepare and submit the required documentation through Changsha, Zhuzhou and Xiangtan finance bureaus to HPFB. The flow of withdrawal applications will be as follows: Approve Approve Approve Approve World PIUS by by by by Bank MPMOs MFBs PPMO HPFB (For Zhuzhou Clean Coal component only) FINANCIAL MANAGEMENTAND REPORTINGARRANGEMENTS 11. Implementing Entity. The CZT-E10 has been established under the HPDRC, and i s nominated as the executing agency for the project. Ithas set up a task force to act as the PPMO. Municipal CZT-EIOs (also to act as MPMOs for the project) have been established inthe three municipalities. PIUshave also been set up ineach implementingagency for the managementof the respectivecomponents. The organization chart is given below: 0 CZT-E10 (PPMO) n11 1 ChangshaMPMO v Changsha Xiangtan Zhaoshan Zhuzhou HunanZhuxi Municipal Urban Tourism and CleanCoal Development Drainage Development Trade Development Co. Ltd. Investment Co. Ltd Investment Development Investment Co. Ltd. Co. Ltd. co. Co. Ltd. 31 12. FundsFlow. The chart below shows the flow of Bank funds through the SA. The flow of counterpart funds will follow appropriate domestic procedures, depending on the source of funding. The World SA managed Changsha, PIUS Suppliers and Bank _+ byHPFB Zhuzhou or contractors Xiangtanfinance bureau (For ZhuzhouCleanCoal componentonly) 13. Accounting Organization and Staffing. The requirednumber of qualifiedproject accounting staff will be inplace at all levels where accounting and financial management work will be performed. The PPMO will provide a well-designed and focused training programin project financial management to all financial and accounting staff prior to loan effectiveness. The program will cover, inter alia: the Bank's financial managementpolicy and disbursement procedures; fund, asset, andcontract management; the format and content of project financial statements; and audit requirements. 14. To strengthenfinancial managementcapacity and achieve consistent quality of accounting work, HPFB will prepare a project financial managementmanual (Manual), with detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management, and withdrawal application procedures. The Manual will befinalized and distributed to all financial staff before project effectiveness. 15. Accounting Procedures. The administration, accounting and reportingof the project will be set up in accordance with the MOF Circular#13: "Accounting Regulations for World Bank FinancedProjects'' issued inJanuary 2000. The circular provides in-depthinstructions on accounting treatment of project activities and covers the following: chart of account; detailed accounting instructions for eachproject account; standard set of project financial statements; and instructions on the preparation of project financial statements. 16. The standard set of project financial statementsmentioned above has been agreedto between the Bank andMOF and applies to all Bank projects appraised after July 1, 1998 and includes the following: balance sheet; statement of sources and uses of funds; statement of implementation of credidloan agreement; and statementof special account. 17. Each PIUwill manage, monitor andmaintainrespective project accounting records. Original supporting documents for project activities will be retained by the originating PIU. EachPIUwill prepareits own project financial statements, which will then be submitted to the PPMO. The PPMO will approve these financial statements, prepare consolidated project financial statements, and furnish them to the Bank on aregular basis. Inline with the newly issuedFinancial MonitoringReport (FMR) guidelines, the following un-audited project consolidatedfinancial statements will be furnished to the Bank as part of FMRon a semi-annual basis (prior to August 15 andFebruary 15 of each year): balance sheet; summary of sources and 32 uses of funds by project component; statementof implementation of loan agreement; and statement of special account. 18. Internal Audit. There is no formal independentinternal audit envisaged for this project. However, this will not have an impact on the project's financial management as PPMO managementand monitoring and yearly external audits will serve as the mechanismto ensure that financial managementcontrols are functioning appropriately. 19. Information System. There is no uniform accounting software beingusedby the PIUS, although all the agencies involveduse accounting software for their current activities. The task team will review the adequacyof the financial accounting and reporting system of implementing agencies prior to project effectiveness. 20. FinancialManagement Action Plan.The following time-bound actions will be carried out: Action Responsible person Completion Date 1.Financialmanagement training to all relevant HPFBand PPMO By effectiveness project staff. 2. Financial management manual finalized and HPFBand PPMO By effectiveness issued to relatedfinancial staff. 3. Recruitment of financial staff inPPMO, PMO, MPMOs and CUDIC By effectiveness MPMOs andCUDIC. 4. The FMS will review the adequacy of project The World Bank By effectiveness financial accounting and reporting system. 21. SupervisionPlan. A detailed financial supervision planfor this project will be included as part of the China Audit Strategy document which i s currently being prepared, and will take into consideration the size of project andthe risks identified. 33 Annex 8: Procurement CHINA: HunanUrbanDevelopmentProject ProcurementCapacityAssessment 1. The Operational Procurement Review of China (OPR) was issued inMarch 2003. A separateprocurement capacity assessment of the implementingagencies, carried out during project preparation, rated the procurement risk as "average". The Procurement Capacity Assessment Report i s available inthe project files. The report finds that there i s a need to further enhanceprocurement capacity through the following actions: (a) Procurement agents. Procurement agents will provide assistanceinprocurement implementation; PPMO will arrange for selection of agents duringpreliminary design. (b) Procurement manual. HPFB will preparethe procurement manual, which will be a guide for procurement implementation. (c) Training. The PPMO will organize training for PIUs anddesign institutes on preparation of biddingdocuments andbiddingprocedures. (d) Procurement Planning. The PPMO will ensurethat detailed procurement plans are completed and annually updated. (e) TechnicalAssistance. International procurement specialists inthe consultant team will support the PMOsPIUs on project management. (f) StafJing. All PIUsshould appoint procurement trained staff. ProcurementMethods 2. Procurement procedures and arrangements satisfactory to the World Bank were agreed with all the PMOsPIUs. All works and goods financed under the Loan would be procured in accordance with World Bank Guidelines for Procurement under IBRDLoans and IDA Credits, datedJanuary 1995, and revised January and August 1996, September 1997, andJanuary 1999 (the Procurement Guidelines). Consultants would be engagedin accordancewith the World Bank Guidelines for Selection andEmploymentof Consultants by World Bank Borrowersdated January 1997, revised September 1997, January 1999, andMay 2002. 3. During negotiations, the Bank Team informedHunan that they hadthe option to either follow the Procurement Guidelines listed above, which hadbeen ineffect at appraisal, or adopt the new May 2004 Procurement Guidelines. Hunanindicated that it wished to proceed with the Procurement Guidelines listedinparagraph 2 above. 4. NationalCompetitive Bidding(NCB) and International CompetitiveBidding(ICB) contracts would be basedon the Chinese Model BiddingDocuments (MBD)agreedbetween the World Bank and the Government. The Bank's standard biddingdocuments (SBD) and bid evaluation forms will be usedfor all procurement categories for which a corresponding MBDis not available. Table "A" provides summary information agreedwith HunanProvince on the 34 project elements, their estimated costs, and methods of procurement for contracts financed by the Bank Loan and other sources. Hunanwill comply with Bank procurement procedures and policies for the Bank-financedcontracts. Incase of any discrepanciesbetween the Chinese policies andBank requirements, Bank policies and guidelineswould prevail. 5. For carryingout international bidding, the PPMO has selectedthe China Min-Metal International Tendering Company. The company i s an experienced and competent procurement agent, familiar with the Bank's international competitive biddingprocedures. For processing national biddingand national shopping packages,the PPMO will select a suitable tendering company. Both tendering companies will be contracted by the respective PIUs for preparation of commercial parts of biddingdocuments, for processing international and national bidding, and for bidevaluation. 6. The GeneralProcurement Notice (GPN)for the project was publishedindgmarket on- line on October 10,2003, and the UNDevelopment Business, No. 617 dated October 31,2003. Civil works contracts with estimated value equal to or greater than $15 million equivalent, contracts for goods with estimated value equal to or greater than $500,000 equivalent, as well as consulting services with estimated value equal to or greater than $200,000 would be advertised as Specific Procurement Notices inUNDevelopment Business and dgmarket on-line, well known technical magazines, and at least one newspaperof national circulation in China. Other contracts would be advertised inat least one Chinese newspaper with national circulation. Procurement Arrangements 7. A total value of $262.4 million equivalent of Bank-financed works, goods, and services will be procured inthis project. The PPMO andPIUs, with assistancefrom the project managementconsultants, would manage all procurement using procedures outlined below. 8. Civil Works ($223.5 million, of which $135.4 million Bank-financed) would be divided into 29 contracts procuredusingNCB procedures. Interested foreign bidders may also bidfor these contracts. 9. Goods ($32.3 million, of which $29.8 million Bank-financed) would be divided into 13 contracts. ICB procedures will be usedfor procurement of communication equipment, WWTP equipment, andclean coal equipment, grouped in6 contracts with estimated value equal to or greater than $500,000 equivalent. Specialized trucks for cleaning of sewers, vehicles, office equipment, laboratory equipment, flood monitoring and pre-warning equipment estimated to cost less than $500,000 equivalent per contract, would be procured through NCB procedures. 10. Consulting Services ($6.5 million, of which $6.0 million Bank-financed). Consulting firms would be selectedfor project management and construction supervision, capacity building for O&M of dykes and associatedstructures, flood warning, institutionaldevelopment of CMDC, enforcement of environmental regulations, and institutionaldevelopment of key agencies and project management. These consultants would be selectedon the basis of quality andcost (QCBS). Standard Request for Proposals (RFP-July 1997, revised inApril 1998, July 1999, and March 2002) would be used for selecting consultants. Inaddition to QCBS, two other methods for the procurement of consulting services, Consultants Qualification(CQ) and 35 IndividualConsultants (IC) would be available for this project. Procurement arrangements for consultants' selection are shown inTable Al. 11. Non-Bank-financed. Contracts which are entirely financed from counter part funds for construction of the Shaoyaogangto Xiang Gang section of the Corridor component, civil works and minor equipment contracts of the clean coal component, provision of utilities and power connections, land acquisition andresettlement,preparation of detailed design andbidding documents, local construction supervision, environmental and resettlement monitoring, annual auditing of project accounts and project companies, would be contracted directly or through local procedures. Prior Review Threshold 12. The Bank prior review thresholds would be as follows: (a) all civil works contracts estimated to cost $3.0 million or more each; (b) all equipment and materials contracts (including supply and installation contracts) estimatedto cost $500,000 or more each; and (c) all consultant services contracts estimated to cost more than $100,000, andthe first two contracts estimated to cost less than $100,000 for firms, and the first contract (irrespective of cost), as well as all contracts estimated to cost more than $50,000 for individuals. The total value of contracts subject to prior review i s estimated to be $248.5 million, about 95% of the estimated value of all project contracts. 13. Inthe case of consulting contracts abovethe threshold, Bank review would include the proposed RFF (including the shortlist and terms of reference), technical and financial evaluations, and the result of negotiations with draft contract. For contracts below the threshold, the PPMO would retain all documentation with respect to eachcontract upto two years after the closing date for examination by the Bank or by independent auditors. The thresholds for Bank reviews are summarized inTable "B". Contract Packaging and Procurement Plan 14. Table "C" shows the summary of contract packaging for civil works, goods and services. Thepackaging hasbeenprepared on the basis of experience with similar projects inChina. A detailed project procurement plan i s available inthe Project Files. Domestic Preference 15. For goods contracts procured under ICB procedures, qualifieddomestic bidderswill be eligible for apreference equal to 15 percent of the cost, insurance, andfreight (CIF) priceor the sumof the custom duties andimport tax payableby anon-exempt importer, whichever is less. Advance Contracting and Retroactive Financing 16. Advance contracting would be applied for expenditures incurred after April 15,2004 for civil works contracts and employment of consulting firms. Procurement of contractors and consulting services, includingrequired advertisements, will be carried out inaccordance with Bank guidelines. Proposed advancedcontracting andretroactive financing i s summarized inthe table below. 36 Contract Estimated Estimated Financing value of retroactive percentage advanced financing contracting US$ million Services Project Implementation Assistance 2.57 0.6 91% Corridor ChangshaNantuoyuan dyke 9.23 2.77 68% Changsha Construction of drains 4.00 1.68 42% Wastewater Services CMDC Institutional Development 0.34 0.30 91% Total 5.35 Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method' Expenditure Category ICB NCB Other2 N.B.F3. Total Cost 1.Works 0.00 223.53 0.00 12.19 235.72 (0.00) (135.38) (0.00) (0.00) (135.38) 2. Goods 30.06 2.25 0.00 0.00 32.31 (27.81) (2.00) (0.00) (0.00) (29.81) 3. Services 0.00 0.00 6.54 27.23 33.77 (0.00) (0.00) (5.95) (0.00) (5.95) 4. Landacquisition 0.00 0.00 0.00 71.OO 71.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 30.06 225.78 6.54 110.42 372.80 (27.81) (137.38) (5.95) (0.0) (171.14) 'Figures inparentheses are the amountsto be financedby the Loan. All costs include contingencies. 'Includes consulting services. 31ncludespublic utility connections. 37 Table A1: Consultant Selection Arrangements (US$ million equivalent) Selection Method' Expenditurecategory QCBS QBS SFB LCS CQ Other N.B.F. Total Consultant Services A. Firms 6.54 0.00 0.00 0.00 0.00 0.00 0.00 6.54 (5.95) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (5.95) B.Individuals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 6.54 0.00 0.00 0.00 0.00 0.00 0.00 6.54 (5.95) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (5.95) 'Including Contingencies. Figures inparenthesisare amountsto be financed by the Loan. QCBS = Quality-Cost BasedSelectionMethod. QBS = Quality-Based Selection Method. CQ = Consultants QualificationSelectionMethod. SFB = SelectionUnder aFixedBudget. LCS =Least-CostSelection Method. Other includes individual consultants. N.B.F.= Not BankFinanced. Table B: Thresholds for Procurement Methods andPrior Review 1 Contract Value Contracts Subject to ~ Expenditure Category Threshold Procurement Method Prior Review (US$ thousands) (US$ thousands) 1.Works >=15,000 ICB All ($0) I ~15,000 NCB >=3,000 ($211,900) 2. Goods >=500 ICB All ($30,060) I 4 0 0 NCB None ($0) 3. Services (i)Firms >=loo QCBS All ($6,540) <loo CQ Firsttwo contracts ($0) (ii)Individuals >50 I C First contract irrespective of value, and all contracts at or above $50 ($0) Total value of contracts subject to prior review: $248,500 Overall Procurement Risk Assessment: Average 38 Table C: ProposedProcurementPackaging(includes contingencies andtaxes) # Component Proc.Method Total Costs Total Costs RMBmillion US$ million A. CivilWorks Corridor ChangshaUDIC (4) NCB 396.61 47.90 XiangtanUDIC (3) NCB 224.22 27.08 ZhuzhouUDIC (7) NCB 515.93 62.31 ZhaoshanTTDC (3) NCB 131.90 15.93 ChangshaWastewater (9) NCB 527.10 63.66 ZhaoshanScenic Area (3) NCB 55.06 6.65 CivilWorks Total (29) NCB 1850.83 223.53 B. Goods Corridor(ChangshaUDIC) (1)ICB 11.01 1.33 (4) NCB 11.77 1.42 ChangshaWastewater (2) ICB 157.32 19.00 (2) NCB 3.81 0.46 ZhuzhouCleanCoal (3) ICB 80.56 9.73 (1)NCB 3.06 0.37 Goods Sub-Total (6) ICB 248.90 30.06 (7).NCB 18.64 2.25 Goods Total 267.54 32.31 C. Services 1.1 ProjectImplementationAssis. QCBS 23.40 2.83 1.2 Training QCBS 14.30 1.73 2 CMDC InstitutionalDev. QCBS 2.73 0.33 3 Enforcementof Env. Regs. QCBS 1.37 0.17 4 Dyke O&M training QCBS 5.56 0.67 6 CZT RegionalIntegration QCBS 6.82 0.82 Services Total 54.18 6.54 ProcurementPackagesTotal 2,172.54 262.38 Non-BankFinanced Landacquisitionandresettlement 587.88 71.00 Des. Institutes, Proc.Agents 117.58 14.20 Constructionsupervisioninstitutes 57.13 6.90 MonitoringEMP 1.90 0.23 MonitoringRAP 1.32 0.16 Auditing of PIUcompanies 1.49 0.18 Soil conservation, water protection 32.62 3.94 WWTP impactmonitoring 0.17 0.02 Utility andpowerconnections 13.25 1.60 Corridor-Shaoyaogangto Xiang Gang 80.32 9.70 ZhuzhouClean Coal-civilworks 20.62 2.49 Interest duringconstruction 103.50 12.50 Non-BankFinancedTotal 1,017.78 122.92 Total Costof the Project 3,190.32 385.30 (excluding front-end fee of $860,000) 39 17. Frequency of procurement supervisionmissionsproposedand post-review: One every four months for the first 18 months. The ration will be one inthree contracts. The prior review thresholds andfrequency of procurement supervision (including special procurement supervision for post-review/audits) will be further defined when the procurement plan is updatedand reviewed following the first 18 months. 40 Annex 9: Economic and FinancialAnalysis CHINA: Hunan Urban Development Project 1. The project will support the economic andenvironmental development of the CZT Region inHunan by financing five components: the Corridor component (dykekcenic road); the ChangshaWastewater component; the Zhuzhou Clean Coal component; the Zhaoshan Scenic Area component; and the Technical Assistancecomponent. Together, these components will enhancethe region's overall economic development potential through strengthenedflood protection, healthier environment, better infrastructure, and improved livability. Economic Analysis The following central assumptionswere usedinthe analysis: 0 Shadow pricingand conversionfactors (e.g. foreign exchange, wages) have not been applied as market prices inthe CZT Regionfor the mainelements of cost are not at variance from their economic values. 0 The discountrate has been taken to be the cost of capital in China for mediumrisk investments, currently assumedto be 12percent per annum. costs 2. Component costs include capital costs as well as operations and maintenance (O&M) costs. Capital costs cover the cost of land, civil works and equipment, as well as the costs of any associatedresettlement; capital costs have beenphasedover the construction period. O&M costs have been identifiedfor the project periodfollowing commissioning. Both capital and O&M costs have been adjusted to remove the effects of inflation, duties and taxes. Corridor component 3. The primary objectives of the component are to: (a) reduce future flood damage along the Xiang River floodplain inthe CZT Regionby strengthening and raisingthe dyke; and, (b) to stimulate economic growth inthe region and increase the livability of the cities by building a scenic road along the dyke. 4. Alternatives Considered. The first level of analysis evaluated raising and strengthening of the existing embankment to provide adequate flood protection, versus alternatives, which include: (a) returning potentially flooded land to agricultural landby removing settlements; and (b) loweringflood levels inthe river through river remediation works. The embankment option was chosenbecauseit maximizes the benefit of the existing dyke assets. Inaddition, it would be uneconomic to remove settlements andsacrifice potentiallyflooded landbecausethis land i s primarily urban area within the three CZT cities andthere is very little potentialto further reduce flood levels through river works as most of the possible river mediation strategies (including widening of constrictions) have already been completed. 5. On a design level, many alternatives were considered including: (a) seepage control (Le., seepage blanket vs. grout curtain); (b) wave action freeboard (Le., constructing a wave action 41 wall vs. providing freeboard through further raising the heightof the embankment); (c) embankment side slope protection (Le., grassing vs. hardrevetment); (d) configuration of drainage channels; (e) standards for road design (Le., maintaining constant roaddesign standard vs. varying speed, vertical and horizontal alignment requirements to maximize the use of the existing configurationof the dyke); (f) road width (i.e., two lanes [8m, 12m] vs. four lanes [22.5m, 26ml); and (g) configuration of sidewalks, parking, lay bys, access andegress. 6. With respectto the alignment of the embankment and scenic road, six areas of particular concern were analyzed in detail. These include: (a) the northern end of the Changsha section in which the alternative to follow the existing railway configuration was rejectedbecauseof the higher cost andloss of flood protection to an industrial complex; (b)the connection betweenthe Jiefangyuan and Nantuoyuan sections in Changsha, where the alternative to close the drainage channel and construct a largepumpingstation was rejected for economic and institutional reasonsinfavor of an option in which the drainage channel remains open and embankments are raised along the channel; (c) the endpoint of the Changsha section and around Zhaoshan mountain inwhich the option to buildan elevatedbridge around Zhaoshan along the river was rejected on economic andenvironmental grounds infavor of an option to divert the scenic road inlandto Highway 107 around ZhaoshanMountain; (d) the chemical industry area inXiangtan, inwhich the optionto buildanew dyke onthe river side of the area was rejected on economic grounds in favor of the alternative to use existing roads and divert the scenic roadaroundthe inland side of the industrialarea; and (e) the section through Leidashitown inZhuzhou Municipality, where community consultation resulted intwo alternatives beingrejected because of the negative impact they would have on the livability of the town. 7. Benefits. The expectedincremental benefit of the Corridor component is substantial. Between 1950 and 1998, there were 15 flood disaster years. A major benefit of this component would therefore be the reduction of flood damage such as those causedto personal property, enterprises andpublic facilities duringflood years. Benefits would also increase over time as the area becomes more developed inthe "with" project case. Detaileddata on flood frequency and flood loss for each section of the dyke were usedin the calculations. Indirectbenefits, which account for the saved flood costs to other regions and to subsequentperiods as a result of, for example, delayed or lack of provision of raw material and semi-products, have beencomputed conservatively at 10percent of the savings from direct losses. (The Chinese National Code (SL206-98)' allows a 20 percent addition to the savings indirect losses to cover this benefit. This 20 percent estimate was usedinthe economic analysis of the Bank's Yangtze Dyke Strengthening Project.) 8. Furtherbenefits would accrue from the scenic road, includingfrom (a) the convenience (time and vehicle operating cost savings) of utilizing the roadinthe two urban sections, and (b) consumer surplus from enjoyment of the scenery along the scenic road. Finally, at the macro level, the Corridor component would also generate additional benefits by serving as the entry "Economic Benefit Analysis Calculation andEvaluation of Existing Flood Control Projects," 1998. 42 point for the desired economic integration of the CZT Region, which would allow the individual cities along the corridor to take advantage of the economies of scale at the regional level.2 9. EIRRandSensitivity Analysis. The estimatedeconomic internal rate of return(EIRR) i s 19.5%. Sensitivity analysis to test the impact of switching values confirms that the EIRR i s robust, e.g., civil works costs would needto increaseby 114% for the ERR to drop to 12%. Alternatively, even if the benefits do not accrue for two years, the EIRR would still be 15.3%. Changsha Wastewater component 10. The objectives of this component are to: (a) improve the quality of the urban environment inChangshabyincreasing sewage collection andtreatment; and(b) support institutionalreform inthe wastewater sector. 11. Alternatives Considered. The pros and cons of a combined system versus separate sewerage system were analyzed. The separate sewer system alternative was rejected becauseof its significantly higher investment cost for a lower environmental benefit. The alternative of combiningthe ChangshanyuanWWTP with another plannedWWTP was considered and rejectedbecause of highercosts, and the different implementation schedules of these two plants within the city master plan. Site selection alternatives for the Changshanyuan WWTP were considered and the originally identified site was rejected as Changsha's newly updated master plan shows it to be within azoned residential area, whereas the chosen site i s zoned as industrial. Technical design for wastewater treatment was selectedas the least-cost solution through comparing the adoptedbatch method (A20) and the oxidation ditch technology. Comparison of technical alternatives was also usedinlocating overflow structures and flood pumpingstations, and inthe sizing of the rising main andthe river crossing. 12. Benefits. This component will generatea wide range of environmental andpublic health benefits. The safe collection, treatment and disposal of wastewater will eliminate or reduce odors and replace some of the physical vectors which convey waterborne and water-related diseases. Surveys from other cities with similar projects (e.g., from Shanghai) suggest that these immediate benefits would lead to land andproperty value increases inthe areas served; this was confirmedby the Changshacity authorities as applicable inChangshaas well. Guidance from the municipal authorities administering property sales indicates that a premium of 5 percent i s payable for infrastructure improvements that open an area up for development. As this premium reflects several infrastructure items, anddrainage and sewerageconstitute a major part, 4 percent was adopted inthe calculations. Other benefits - not reflectedby the land value increase - would come inthe downstream areas as a result of a less pollutedXiang River, including cost savings for water treatment, andincreasedagricultural output, as well as the output of fishponds. A further benefit i s the demonstration effect of wastewater sector reforminthe CZT Region. * A possible alternative estimation of the flood control benefits would be through increasesinthe value of property inthe protected area. The quality of the available datarequired to performsuchestimatesis sketchy, so this approachhas not beenused. Reliance is placed, therefore, on the direct costs approach. I t would of coursebe double-counting to includeboth the direct benefits and the incremental property value increases. However, rough estimates of benefits usingthe property value approachhave beenmade(but not used) andthese are found to be broadly similar to (andhencesupport) the estimates from the direct costs approach. 43 13. EIRRandSensitivity Analysis. TheestimatedEIRRis 15.5%. Sensitivity analysis to test the impact of switching values confirms the robustness of the EIRR: either construction costs would need to increaseby 53% or benefits needto decrease by 21% for the EIRR to fall to 12%. Zhuzhou Clean Coalcomponent 14. The Zhuzhou Clean Coal component will establish a new productionfacility in Zhuzhou to produce three clean coal products - coal water mixture, briquette, and cleaned (washed) coal - whose use will helpreduce the severe pollutioncausedby the use of high sulphur coal inthe CZT Region. Acid rain pollution inthe CZT Region is among the most severe inthe country - the frequency of acid rain reached95% inthe worst year; over 60% of the region's SO2 emission (the key reasonfor acidrain) i s from coal-combustion. This component would also helpto create a new clean coal market through its demonstration effect. 15. Alternatives Considered. Several alternatives were analyzed for the reduction of SO2 in the CZT Region. The production of clean coal products was the best alternative compared with the two rejected alternatives, i.e., flue gas desulfurization at power plants, and conversion from coal to natural gas for householduse. Although it i s common practice to construct coal washing facilities at the mine mouth, this alternative was rejected as coal washing i s only part of the processthat is to be carried out under this component; equally important i s the blendingof more than thirty types of coal importedfrom outside the CZT Region to ensure a consistent quality product. Therefore, the most appropriate site for coal washing and blendingi s in Zhuzhou city, which i s a transportation hub. Within Zhuzhou, two sites were compared, the chosenone, which i s at an existing coal plant, and the other at anew facility. 16. Benefits. Benefits of this component fall into two categories: private benefits to the users of the coal products, and public benefits to the environment inthe form of reduced air pollution. Interms of the private benefits, consumerswill have some reduction incosts through the use of consistent quality of clean coal products with reduced ash and sulfur content, which will improve availability, reliability and efficiency of boilers. The public benefits of reduced air pollution include those that accrue locally/regionally due to reduced emissions of S02.3 According to researchconducted by the Institute of Energy under the NDRC Academy of Macro E ~ o n o m y , ~ the economic loss per tonne of SO2 emission i s RMB 3,900 to 8,000 for South China (where Hunan Province i s located); the mid-point value of RMB 5,950 was adopted inthe calculations. 17. EIRRandSensitivity Analysis. The estimatedEIRRfor this component is 15.4%. Sensitivity analysis to test the impact of switching values confirms that the EIRR i s robust; e.g., equipment costs would need to increaseby 34% for the EIRR to fall to 12%. Alternatively, even if the benefitsdo not accruefor two years, the ERR would still be 12.3%. Potential benefitsfrom the reduction of emissionsof other pollutants such as NOx, particulates and COz under the component havenot been included becausethe expectedreduction inquantities is uncertain. ZhouFengqi and Zhou Dadi, et al. 1999. China Long- and Mid-Term Energy Strategy, China Planning Press. 44 Zhaoshan Scenic Area component 18. The objective of this component i s to increase and improve the recreational amenities in the Zhaoshan Scenic Area. It will improve the livability of the CZT Region and bring direct cultural andeconomic benefits such as conservation of a scenic area and employment generation. 19. Alternatives Considered An analysis was conductedto determine whether an alternative recreational site should be developedinpreference to Zhaoshan. However, Zhaoshan was selectedon the basis that it has better accessibility than alternative recreational sites inthe CZT Region, it has significant natural vistas, it i s well-known and i s already well-utilized by the local population, and it integrates well with the Corridor component. Alternative development models were analyzed, including developing the area as a nature park, as a theme park, or as a hybrid, protecting natural vistas while allowing limited development of facilities. The nature parkwas rejected on the basis that it wouldbetoo restrictive andnot allow sufficient utilization of the area; the theme park was rejected on the basis that it would not tie inwith the natural beauty of the area or its historical significance. The hybridmodel was chosen. 20. The needs of the current residentsof the area were also considered. The option to resettle all of them outside the park area was rejected on the basis of the significant disruption it would cause. The option to leave all residents intheir current locations scatteredaround the park was not feasible, as it would severely restrict the development of the site. The chosen option, which i s basedon the results of extensive consultation with the residents, will consolidate the residents within the park, and will offer employment opportunities to them at the park or nearby. 21, Benefits. Benefits may be grouped into two parts: (a) recreational benefits, relating to the use of the scenic area for recreational andcultural purposes; and (b) wider social and environmental benefits associatedwith improvedconservation of the cultural facilities and artifacts. Benefits have beencomputed basedon an estimated number of visitors each year, and an entry fee of RMB 20 per person. Benefits from conservation of the scenic area have not been quantified. 22. EIRRandSensitivity Analysis. The estimatedERRis 19.6%, andthe sensitivity analysis confirms its robustness: e.g., capital costs would need to increase by 216% for the EIRR to fall to 12%. Financial Analvsis 26. Financial analysis has been carried out for each component and implementing agency, basedon a financial model developed for the project. The results of the analysis indicate that the PrUs will have the ability to provide the necessarycounterpart funds for project implementation, and will be able to service the debt -boththe Bank loan and other debt from national bonds, localbanks, etc., - that will be incurredto implement the project. Corridor component 27. This component will be implementedthrough four PIUs - CUDIC, XUDIC, ZUDIC and ZTTDC - who will also be responsible for debt servicing. Financialforecasts for the four PIUs confirm that they will be able to service the debt. 45 28. The municipalities will contribute the funds required for operation and maintenance of the assets created; an implementation covenantrequires the municipalities to furnish, one year prior to completion of the Corridor Component inthe municipality, an acceptable operation and maintenanceplan (including financing) for the assets constructed. These municipal contributions are a relatively small portion of the annual recurrent budgets of the respective municipalities, and will therefore not be a fiscal burdenon them. 28. Asset ownership will be transferred to the CZT municipal water resourcebureaus (MWRBs)on completion of works. Technical assistanceto the municipalwater resources bureaus is includedin the loan to ensure that they can carry out their O&M responsibilities satisfactorily. 29. Progress indicators for this component would be: (a) progress of technical assistanceto buildcapacity for O&M; (b) progress of implementation of the construction program; and (c) fundingfor O&M through the annualO&M plan. ChangshaWastewatercomponent 30. CMDC will be responsible for implementingthe project and for operating the assets. CMDC's financial objective underthe project i s to generate, by fiscal year 2008, sufficient revenueto: (a) meet operating costs of the wastewater assets, both existing and project created; (b) service debts relatingto the creation of wastewater assets; (c) meet operating costs of the drainage assets, both existing andproject created; and (d) service debts relatingto the creation of drainage assets. The project agreementincludes a financial covenant requiringCMDC to raise its wastewater tariff to be sufficient at least to meet (a) and (b) above. In addition, CMDC i s required under the covenant to generate additional revenues to meet (c) and (d) above, either through further tariff increases,or through budgetary allocations from Changsha. 31. Technical assistance will be providedto enable CMDC to develop into an autonomous public utility, operating on commercial lines. Signingof the consulting contract for CMDC institutionaldevelopment i s a disbursement condition for this component. 32. Progress indicators for this component would be: (a) timely implementation of institutionalreform of CMDC; (b) progress inimplementation of the construction program; and (c) achieving financial breakeven infiscal year 2008. ZhuzhouCleanCoalcomponent 33. The PIU, HunanZhuxi Clean Coal Co. Ltd.,will be the future asset owner andwill be responsible for operation and maintenanceof the assets. Financialprojections inthe feasibility study confirm that a market exists for the clean coal products to be produced at a financially viable price. The company will operate on commercial principles, and will service the debt from operating revenues. 34. Progress indicators for this component would be: (a) timely implementation of the investment program; and (b) production and sale of clean coal products, as per plan and at prices adequateto ensure financial viability. 46 Zhaoshan Scenic Area component 35. This component will be implemented by ZTTDC, which will also beresponsible for one of the sections of the Corridor component. Financial projections indicate that ZTTDC would be able to meet operating costs and service the debt. 36. Progress indicators for this component would be: (a) the timely execution of the investment program; and (b) generation of operating revenue from visitors, as per forecasts, and to meet operating costs and debt service costs. 47 Annex 10: Safeguard Policy Issues CHINA: HunanUrbanDevelopmentProject 1. The project will result insignificant environmental and social benefits for the residents of the CZT Region, including: improvedfloodprotection inChangsha, Zhuzhou andXiangtan; surface water quality improvement through wastewater treatment inChangsha; air quality improvement through the production and sale of clean coal; and development of recreational areas along the Xiang River corridor, and at Zhaoshan Scenic Area. 2. Environmental andsocial impacts, particularly duringconstruction, will be mitigated as described inthe project EA, EMF,RAPs and RPF, and as summarized in this annex. SOCIAL 3. Inaccordance with locallaws andIBRDrequirements, besidesRAPs,the following documents were prepared by HunanProvince, with assistancefrom their national and international consultants: (a) Resettlement PolicyFramework; (b) Study on Minority Nationalities; (c) Study on Gender Development; and, (d) Study on Poverty Status. These documents are available inthe project files. Land Acquisition and Resettlement 4. The adverseimpact incurredby landacquisition andrelocation will be minimizedby compensation andrehabilitation of project affected persons through the following RAPs: (a) Corridor component - Five RAPs were prepared for this component for the Changsha section, the Zhaoshan section inXiangtan, the Xiangtan urban section, the Zhuzhou section, and a Summary RAPfor the entire component. (b) ChangshaWastewater component. (c) Zhaoshan Scenic Area component. (d) A Consolidated RAPfor the entire project. As the Zhuzhou Clean Coal component will be implemented within the existingpremisesof the enterprise, no landacquisition or resettlement i s required, and henceno RAPi s required for this component. The eight RAPs are available in the project files. I5. The table below summarizes the impacts of landacquisition andresettlement. Component I Land House Relocated IResettLnent Acauisition I Demolition 1 Households (mu) "1 (RMB mil.) Corridor ,4375 423,3 14 1,818 432.72 ChangshaWastewater 162 38,252 41 60.53 Zhaoshan Scenic Area 310 14,300 47 9.67 Total 5,047 475,866 1,906 502.92 48 6. Resettlement Policies. Key considerations and activities inthe design of the project and preparation of the RAPs included: Conduct of a socio-economic survey to determine baseline conditions, especially of project affected persons. Optimization of project design, with due regardto protecting cultivated land and minimizing the extent of land acquisition andresettlement. Determiningcompensation for houses or other properties at replacement value, and providing the option of compensation either in cash or kind. Compensating all project affectedpersons, includingthose who lack household registration or other documents, such as business documents and legal documents. Providingbasic infrastructure and service facilities inthe areas where the project affected persons will be resettled. Special consideration to vulnerable groups, especially in selecting the homes andfor the move. Employment arrangements for those affected by landacquisition andrelocation, to enable them to maintain their income and living standards. Establishing mechanismsto address complaints andgrievances of the PAPS,including discussions, negotiations, arbitration, and legal proceedings. Reportingsignificant changes (including adjustments of compensation standards, change of locationand scope of land acquisition andresettlement, changes in components, etc.) to the Bank, and if required,either amendingthe RAP or preparing an additional RAP. 7. Rehabilitation Program. A total of 4,197 farmers will be affected due to acquisition of their farmland, of whom 2,866 will be rehabilitatedby landredistribution and agricultural development, while the remaining 1,33 1will continue their non-agricultural activities or convert to urban residency. 8. Forty-one enterprisesemploying 1,316 workers will close down; some of these enterprises are already bankrupt, while others would not be able to continue production, e.g., enterprises excavating sandalong the Xiang River. Workers in these enterprises will be rehabilitated invarious ways, including: social insurance from the compensation fund for retired workers; monthly subsistencepayments (Le., minimumliving allowances) for workers who had already lost theirjobs due to the bankruptcy of their enterprises; most of the others will be employed in local markets, inthe communities where they live, or under the project; and about 10%will be registeredat the Employment Center, receive training, and will be provided employment basedonjob opportunities. 9. Institutional Responsibilities. The PPMO will coordinate implementation of the RAPs with the PIUs inthe three project cities. The PIUs will be responsible for resettlement planning and implementation for their components, and will establish resettlement offices, with 49 appropriate number of staff (typically one to eight). Resettlement staff will be providedtraining to buildtheir capacity. 10. Consultation and Participation. Project-affected persons and organizations have been informedabout the project andits impact through more than 30 formal meetings with primary and secondary stakeholdersduringthe preparationof the RAPs. Additional consultations were heldduringthe preparation of component feasibility studies. Comments and recommendations received from these meetings have been incorporated as appropriate inthe feasibility studies and RAPs. 11. Monitoring. The PIUs will be responsible for internal monitoringand will provide semi- annual internal monitoring reports to the PPMOand the Bank. The ChangshaXinghuan HydropowerEngineering Technology Development Co. Ltd.has been engaged as the independent monitoring and evaluation agency for resettlement, and will report on progress and problems, as well as offer suggestions to the PWs, the PPMO, and the Bank. 12. Resettlement Budget and Implementation Schedule. Resettlement i s estimated to cost RMB 502.92 million ($62.9 million), about 17% of project cost. Resettlement work will be undertaken at least three months before the start of construction of the respective componenthub-componentlcontractpackage, and landacquisition will be completed before the start of construction. The dates of the inventory survey andregistration of affected properties will serve as the cut-off dates to be eligible for compensation. There will be public announcementsof the cut-off dates for eachproject component. 13. Supervision. Implementation of the RAPs will be supervised every six months. 14. Resettlement Policy Framework. An RPFwas prepared and adopted for the project. This will be applied during the construction of roads identifiedas "linked" to the Corridor component (see below). Inaddition, once the designhas beenfinalized, a RAP will be prepared, adopted and implemented by Xiangtan for the non-Bank financed Shaoyaogangto Xiang Gang section of the Corridor component in accordance with the agreedRPF. Linkages 14. A total of 15 mainaccess andegress roads have beenidentifiedfor the scenic roadunder the Corridor Component -three in the Changshasection, three each inthe Xiangtan Zhaoshan and Xiangtan urban sections, and six inthe Zhuzhou section. Nine of these are existingroads, while five others have been includedinthe project description and will be constructed as part of the Corridor Component. The remainingone in the Xiangtan urban section hasbeen identified as "linked" to the project, andthe agreedResettlement Policy Framework (RPF) will apply duringthe construction of this roadoutside the project usinggovernment funds. Ethnic Minorities 15. Changshahas an ethnic minority populationof 48,600, Zhuzhou 16,562, andXiangtan 12,400. It has been established that no ethnic minority individuals live inthe project affected areas through: (a) the census survey undertaken during the preparation of the resettlement plans, 50 when all households affected by land acquisition andrelocation were interviewed; and (b) review of residency registration (hukou) of personsliving inproject affected areas. PovertyImpact 16. The census survey revealed that 25 poor households (95 persons) in the Changshasection of the Corridor component would be adversely affected by the project. These poor persons will be given special consideration, including a subsidy to buildnew houses and additional assistance inrehabilitation. Basedonthe findings of the Poverty Study, intensiveconsultations were undertaken to develop a strong rehabilitation program for farmers who will lose farmland and workers who will losejobs as a result of closure of enterprises. 17. Affordability of water and wastewatertariffs. The combined water and wastewater charges during the project periodare estimated to be less than 2% of income at the poverty level, which i s below the acceptablerange of 2-5% of the income of the poor. Inaddition, Changsha has a municipal policy which stipulates that families below the poverty level will receive 4 m3/person/monthof water free of charge. Inview of this, affordability of water and wastewater tariffs for the poor i s not an issue. Gender 18. Women were well representedinthe householdinterviews and inconsultation meetings for resettlement planning. Special attention will be paidto the reemployment of women affected by land acquisition. ENVIRONMENT 19. HunanEnvironmental Protection ResearchInstitute, with support and guidance from international consultants, carried out the consolidatedEnvironmentalAssessment (EA) for the project in accordance with China's national policies and procedures as well as Bank requirements. The terms of reference and draft versions of the EA were reviewedby the Bank and discussedindetail with Hunanagencies duringproject preparation. EAs have been completed for each of the four investment components of the project. They cover, inter alia, baselineenvironmental conditions (natural environment, socio-economic conditions, water resourcesand water quality, and air quality. They also describe alternatives considered during the preparationof the feasibility studies for each component. 20. The draft Englishversion EA documents were providedto the Bank in midFebruary 2004 andreviewed by the Bank before and duringthe appraisal missioninMarch 2004. The revisedEA report and EA Summary were furnishedon March 26,2004 and are considered satisfactory. The final version of the EMFwas furnished on 5 July, 2004, and i s considered satisfactory. 21. Local people were consulted at least twice duringEA preparation, andtheir opinions have beenreflected inthe project design andenvironmental mitigation measures as appropriate. Public announcementswere made about the project and the EA report on local radio and television broadcasts, as well as in newspapers. These announcementsinformedthe public of the 51 locations (generally the MPMO offices ineach city) where the EA and the RAPscouldbe inspected and commented on, as well as contact telephone numbers. Posterssummarizing the EA and the RAPswere displayedinvillage centers andpublic meetings were held. 22. EA documentation was disclosed inthe three project cities inmidDecember 2003. The EA documentation was sent to the Bank's Infoshop inWashington andinBeijingonFebruary 15, 2004. Details of public consultation and information disclosure for each component are available inthe project files. 23. The final draft EA report was reviewedby China's StateEnvironmental Protection Administration (SEPA) from March 10-11,2004 inHunanand formal clearancefrom SEPA was obtained in April 2004. EnvironmentalBenefits, ImpactsLRisks,and MitigationMeasures 24. EnvironmentalBenefits. Project investments will bringabout positive environmental impacts by meeting the "backlog" needfor flood protection and environmental infrastructure. The presentenvironmental problems are serious andthe provision of this environmental infrastructure is necessaryfor current needs andto mitigatecurrent problems. Future problems without the project would become even more critical. The project i s not expected to induce adverse growth or have extensive secondary impacts. 25. Construction phase. The project will potentiallycause a variety of short-term impacts duringconstruction, e.g., dust,noise, traffic congestion, and soil erosion. These impacts are relativelyminor and a series of mitigation measures have been plannedto reduce the impacts to acceptable levels. Details of mitigation measures, and the monitoringprogram to ensure their effective implementation, as well as responsibilities, are provided inthe EA and the EMP. The PPMO will have an ongoing responsibility to track and report on the monitoringwork of all the PIUS,in addition to its own direct monitoring activities. "Mitigation monitoring" procedures have been established and the organizations to be responsible for this monitoringhave been designated. 26. Operationalphase. Potential negative environmental impacts duringthe operational phase include sludge generatedfrom WWTP and rejects from the clean coal component. Sludge from the WWTP will be digested, dewatered andtransported to a recently opened state-of-the-art sanitary landfill with leachatetreatment facilities. The landfill, located about 40 kmaway from the city center, has an estimated life-span of over 40 years. CMDC has securedan agreement with the landfill operator to accept the digested sludge, and has confirmed the sludge hauling route. WWTP sludge will be testedfor hazardous materials, even though Changshai s not an industrial city, with industrialwastewater accounting only for about 16% of total wastewater discharge. 27. The Zhuzhou Clean Coal Co. Ltd.intends to sell the rejects from the clean coal production to enterprises inZhuzhou that will burnthem inan environmentally acceptable manner. The company will formalize these arrangements, and furnish an acceptable solid waste disposal plan for the rejects from clean coal production, in order to meet the disbursement condition for the Zhuzhou Clean Coal component. 52 EnvironmentalManagementPlan(EMP) 28. Details of mitigation measures, their location, time frame and the responsible agencies for their implementation and supervision havebeenprovided inthe EMP. The EMPcovers such areas as surface and ground water management, air quality control, noise management, construction site waste, removal of soil by layer and separate stockpiling, covering piles to limit wind erosion, construction of runoff channels and water storage, and correct orientation of roads and paths. EMPannexescontain a series of `Guidelines' on site clearance, construction methodology, and debris disposal. 29. An environment "cell" will be establishedinthe PPMO to implement the EMP,and will be staffed with at least one professional. An environmental specialist from the supervision consultant team will ensurethat construction i s done in an environmentally sound manner. 30. Hunan's strong commitment to the EA was demonstratedby the careful adherenceto advice providedby the consultants and Bank missions duringthe preparation of the EA andits approval. The environmental managementstructure i s shown below. HUDl EnvironmentalManagemen Units Agency RESPONSIBILITIES Remarks Monitoring implementationof An environmentalspecialist PPMO the EMPduringthe will be responsiblefor this task constructionperiod Executionandmanagementof An environmentalspecialist PIUS environmentalprotection will assist environmental measures duringthe experts of the project office constructionperiod Municipal Environmental Environmentalmonitoring Staff of Municipal MonitoringDepartments duringconstructionand EnvironmentalMonitoring ooeration Departments 31. Supervision. Bank missions will superviseenvironmental aspectsof the project twice a year. Quarterly project progressreports furnished by the PPMOwill include environmental monitoring reports, as per the formats in the EMPannexes. Names Responsibilities 1.Supervisionof implementationof environmentallaws, regulations and management, etc. HunanProvincialEPB 2. Coordinationof environmentalmanagementbetweenvarious departments. 3. Review andapprovalof environmentalmonitoring report. 4. Finalenvironmentalacceotance of comoletedworks. CZT Municipal EPBs 1.AssistingProvincialEPB insupervision. 2. Review andamroval of environmentalmonitoring reDort. 53 32. Equipment and Training. Capital budgetsof all project components include construction of laboratories (where necessary) and purchase of laboratory equipment at the WWTP. Inaddition, the project managementbudgetincludes the costs of testing and environmental monitoring. Inorder to implement the EMPeffectively, PPMO staff and others will be providedtraining inthe following topics: environmental laws and regulations; environmental standards; project-related environmental science; public consultation; monitoring, progress reportingandcontrol measuresetc. 33. Fundingfor EMP. A budget and 5-year implementation schedule are a part of the EMP. The costs of mitigatingconstruction impacts are included inthe costs of facilities. The PPMO will engage local consultants for environmental monitoring (air quality, water quality, noise, worker health, site safetyhygiene) usingcounterpart funds. 34. Referencesto the Mitigation Plansinthe Project LegalAgreement. As the negative environmental impacts during construction are manageable,no special legal covenants or conditionalities are envisaged, except for the standardconditionality on implementingthe EMP. CULTURAL PROPERTY 35. The Zhaoshan Scenic Area includes a few historicalheritagesites and buildings, such as the Tang Dynasty ZhaoshanTemple, Song's Altar Area (both listedwith the Xiangtan Municipal Cultural Relics Bureau), and the Qing Dynasty Stone Steps (not currently listed). Besidesthe construction of new visitor amenities, attractions and supporting infrastructure, the Zhaoshan Scenic Area component includes refurbishment and conservation of the Zhaoshan Temple, and the Qing Dynasty Stone Steps, and the construction of a look-out tower on the highest peak of Zhaoshan. 36. The component hasbeenpreparedwith dueregard to OPN 11.03,CulturalProperty. The legal documents include a disbursement condition for this component, which requires approval by the relevant bureaus for works to be carried out on historical listed sites. Song's Altar Area will be clearly marked, and no new works will be carried out within the 70 meter protection zone. Inaddition, all works contracts under this component will include a clause on "chance finds" to protect cultural property. Bank supervision missions will include an appropriately qualifiedpersonin planningand heritage matters. 54 Annex 11:Project Preparationand Supervision CHINA: Hunan UrbanDevelopment Project Planned Actual PCNreview 12/12/2002 03/03/2003 InitialPID to PIC 11/20/2003 InitialISDS to PIC Appraisal 03/08/2004 03/08/2004 Negotiations 04/26/2004 08/06/2004 BoardRVP approval 09/16/2004 Planned date of effectiveness 02/28/2005 Planneddate of mid-termreview 12/31/2007 Plannedclosingdate 12/31/2010 1. Hunanhas establisheda ProvincialLeadingGroup and a provincial project management office (PPMO) for implementation of the project. Each implementingmunicipality has established a Municipal PMO and each implementing agency has a project implementation unit (PIU). The list of key membersof the PLG, PPMO, MPMOs andPIUs are shown inthe following table A. Table A. Government and Other Officials 55 Table A continued. GovernmentandOther Officials CMDCPIU HuangYuansheng I GeneralManager of CMDC Director of PlU ZTTDC PIU ChenZhiyong I GeneralManager of ZTTDC Director of PIU HZCCCPIU LinLin I GeneralManager of HZCCC Director of PIU The list of staff and consultants involved inthe project preparation and respective reviewers i s shown inTable B. 56 Name BankUnit Title Bank Task Team RajaIyer EASUR Task TeamLeader, Lead Management Specialist MaraWarwick EASUR Co-Task TeamLeader, EnvironmentalEngineer Yi Dong EAPCO FinancialManagement Specialist Mingyuan Fan EASUR Municipal Engineer Anne Harrison EASUR ProgramAssistant Shunong Hu EASUR UrbanEnvironmental Specialist David I EAPCO Senior Financial Management Specialist Xiaofeng Li EACCF ProgramAssistant Zhentu Liu EAPCO Procurement Specialist Shomik Mehndiratta EASTR Transport Specialist Robert O'Leary LOAG3 Senior Finance Officer Margaret Png LEGEA Senior Counsel Graham Smith EASTR Sector Leader, Transport Chongwu Sun EASEN Senior EnvironmentalSpecialist Masaki Takahashi EWDEN Senior Power Engineer ChaogangWang EASSD Social Development Specialist M e i Wang EASPR Senior Economist Youlan Zou EASSD Senior Social Development Specialist Gustaf de Monie EASUR Consultant, Trade Logistics JanFranck EASUR Consultant, Finance PeterHow-KimLai EASUR Consultant, Urban Planning Jaroslav Kozel EASUR Consultant, Sanitary Engineering Peer Reviewers David Hanrahan SASES LeadEnvironment Specialist KarinKemper SASES Senior Water Resources Management Specialist IRichard Scurfield ~TUDTR \SectorLeader, Transport 57 Annex 12: Documents inthe Project File CHINA: Hunan UrbanDevelopment Project A. General No Name of Document Date of the Preparedby Document 01 Country Assistance Strategyof the World November 21, The World Bank Group Bank Group for The People's Republic of 2002 China 02 China City Development Strategies. Final March 2002 Chreod Ltd. Report: Changsha-Zhuzhou-Xiangtan 03 China Air Pollutionand Acid Rain Control: October 2003 Energy SectorManagement The Case of Shijiazhuang City and the AssistanceProgram, the World ChangshaTriangle Area Bank. 04 Implementation Plan for ControllingAcid February 2003 HunanEnvironmental Protection Rainand Sulphur DioxideinHunan Bureau Province I I B. Studies andDesigns 01 I ConsolidatedResettlementAction No NameofDocument I 11Date of the Document Prepared by Feb.2004 (final). Matt MacDonaldLtd. March2004 (final) 1III andHPDRC HunanWater and Resettlement Action Plan Hydropower Reconnaissanceand Design Institute ("1) 03 Corridor Component(Changsha March 2004 (final) HWHRDI Section) ResettlementAction Plan 04 Corridor Component (Xiangtan Urban March 2004 (final) HWHRDI Section) ResettlementAction Plan 05 Corridor Component(Zhaoshan March 2004 (final) HWHRDI Section) ResettlementAction Plan 06 Corridor Component(Zhuzhou March 2004 (final) HWHRDI Section) ResettlementAction Plan 07 Changsha Wastewater Component March 2004 (final) HWHRDI ResettlementAction Plan 08 CZT Logistics Center Resettlement Feb. 2004 (final) HWHRDI Action Plan 09 ZhaoshanScenic Area Resettlement March 2004 (final) HWHRDI Action Plan 10 ConsolidatedEnvironmental March 2004 (final) Matt MacDonaldLtd. AssessmentReport and HPDRC 11 ConsolidatedEnvironmental March2004 (final) Matt MacDonaldLtd. AssessmentReport Summary and HPDRC 12 ConsolidatedEnvironmental July 2004 (final) Matt MacDonaldLtd. ManagementPlan andHPDRC 13 ProjectEnvironmental Assessment Jan. 2004 (final), . HunanEnvironmental ~~ (Volumes 1and 2) Protection Scientific ResearchInstitute 58 - 14 Corridor ComponentEnvironmental Jan. 2004 (final) HunanUniversity Design - Assessment Institute 15 ChangshaWastewater Component Jan. 2004 (final) HunanEnvironmental Environmental Assessment Protection Scientific - ResearchInstitute 16 Zhuzhou Clean Coal Component Jan. 2004 (final) HunanEnvironmental Environmental Assessment Protection Scientific - ResearchInstitute 17 CZT LogisticsCenter Component Jan. 2004 (final) HunanEnvironmental Environmental Assessment Protection Scientific - ResearchInstitute 18 Zhaoshan Scenic Area Component Jan. 2004 (final) HunanUniversity Design - Environmental Assessment Institute - 19 InceDtion Reuort Sep. 2003 Mott MacDonaldLtd. - 20 InterimReport Nov. 2003 Mott MacDonaldLtd. - 21 Renort on Feasibilitv Studies Nov. 2003 Mott MacDonaldLtd. 22 Feasibility Study Report onFlood Jan. 2004 (final) HunanWater and Embankment andScenic RoadProject Hydropower inChangsha. Reconnaissanceand Design Institute - 23 Feasibility Study Report onFlood Jan. 2004 (final) Embankment and Scenic RoadPro-ject - inXiangtan. 24 Feasibility Study Report onFlood Jan. 2004 (final) HWHRDI Embankment and Scenic RoadProject - in Zhuzhou. 25 Feasibility Study on Changshanyuan Jan. 2004 (final) NorthChinaMunicipal SewageTreatmentPlant Project in Engineering Design and Changsha ResearchInstitute:and ChangshaMunicipal Planning and Design and ResearchInstitute for - Water andHydropower 26 Feasibility Study Report for 1500kt/a Nov. 2003 (final) ChangshaDesignand Clean Coal Project inCZT Regionby ResearchInstitute - Zhuzhou Coal PreparationPlant 27 Feasibility Study for CZT Logistics Jan. 2004 (final) - Center 28 Feasibility Study for ZhaoshanScenic Mar. 2004 (final) Hunan University Design - Area andResearchInstitute - 29 Report onPreliminary Designs March 2004 Matt MacDonaldLtd. 30 Preliminary DesignReport on March 2004 (draft) HWHRDI - Corridor ComponentinChangsha 31 Preliminary DesignReport on March 2004 (draft) HWHRDI Corridor Component inXiangtan - Urban Section 32 Preliminary DesignReport on March 2004 (draft) HWHRDI - Corridor ComponentinZhaoshan 33 Preliminary DesignReport on March 2004 (draft) HWHRDI - Corridor ComponentinZhuzhou 59 No Nameof Document Date of the Document Prepared by 34 1I PreliminaryDesignReport on IIMarch2004 (draft) NorthChina Municipal Engineering Designand ResearchInstitute: and ChangshaMunicipal Planning and Designand Research Institute- 35 Planning Designfor Scenic and March2004 (draft) Hunan University Design Viewing Spots inZhaoshanScenic andResearchInstitute Area 36 Report on Wastewater Quality and Jan. 2004 Hunan ResearchInstitute Quantity Survey inChangshanyuan of Environment Science Catchment C.Bank Staff Assessments 60 Annex 13: Statementof Loansand Credits CHINA: HunanUrbanDevelopmentProject Difference between expectedandactual Original Amount inUS$ Millions disbursements Project ID Ey Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm.Rev'd PO65463 2004 CN - Jiangxi IntegratedAgric. Modem. 100.00 0.00 0.00 0.00 0.00 100.00 0.75 0.00 PO65035 2004 CN-Gansu& Xinjiang Pastoral 66.27 0.00 0.00 0.00 0.00 65.61 3.88 0.00 Development PO66955 2004 CN-ZhejiangUrbanEnvmt 133.00 0.00 0.00 0.00 0.00 133.00 0.00 0.00 PO73002 2004 CN-BasicEducationinWestem Areas 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 PO77615 2004 CN-GEF-Gansu& Xinjiang Pastoral 0.00 0.00 0.00 10.50 0.00 10.50 0.70 0.00 Develop PO67337 2003 CN-2ndGEF Energy Conservation 0.00 0.00 0.00 26.00 0.00 14.60 15.98 0.00 PO40599 2003 CN-TIANJIN URB DEV I1 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00 PO58847 2003 CN-3rd Xinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 106.13 6.55 0.00 PO68058 2003 CN-Yixing PumpedStorageProject 145.OO 0.00 0.00 0.00 0.00 140.95 1.47 0.00 PO76714 2003 CN-Anhui Hwy 2 250.00 0.00 0.00 0.00 0.00 250.00 13.42 0.00 PO70441 2003 CN-HubeiXiaogan Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 167.58 -14.09 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT APLl 200.00 0.00 0.00 0.00 0.00 198.OO -2.00 0.00 PO64729 2002 CN-SUSTAINABLEFORESTRYDEV 93.90 0.00 0.00 0.00 0.00 76.07 -0.76 0.00 PROJECT PO58846 2002 CN-NatlRailwayProject 160.00 0.00 0.00 0.00 0.00 37.04 -2.55 0.00 PO71147 2002 CN-Tuberculosis Control Project 104.00 0.00 0.00 0.00 0.00 92.67 -11.33 0.00 PO60029 2002 CN-Sustain.ForestryDev(Natura1 0.00 0.00 0.00 16.00 0.00 17.27 2.60 0.00 Forest) PO70459 2002 CN-Inner Mongolia Hwy Project 100.00 0.00 0.00 0.00 0.00 88.82 5.15 0.00 PO68049 2002 CN-HubeiHydropower Dev inPoor 105.00 0.00 0.00 0.00 0.00 87.68 10.51 0.00 Areas PO58845 2001 JiangxiI1Hwy 200.00 0.00 0.00 0.00 0.00 133.42 5.08 0.00 PO56199 2001 CN-3rd InlandWaterways 100.00 0.00 0.00 0.00 0.00 80.49 3.99 0.00 PO56516 2001 CN -WATER CONSERVATION 74.00 0.00 0.00 0.00 0.00 41.42 8.46 0.00 PO56596 2001 CN-ShijiazhuangUrbanTransport 100.00 0.00 0.00 0.00 0.00 88.58 53.81 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION 105S O 0.00 0.00 0.00 0.00 89.85 -15.65 0.00 CONTROL PO51859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 74.72 29.72 0.00 PO45915 2001 CN-Urumqi UrbanTransport 100.00 0.00 0.00 0.00 0.00 52.54 46.04 0.00 PO45910 2000 CN-HEBEIURBANENVIRONMENT 150.00 0.00 0.00 0.00 0.00 123.53 48.03 0.00 PO49436 2000 CN-CHONGQING URBANENVMT 200.00 0.00 0.00 0.00 3.70 161.67 64.70 0.00 PO56424 2000 TONGBAI PUMPEDSTORA 320.00 0.00 0.00 0.00 100.00 162.10 95.27 0.00 PO45264 2000 CN-SMALLHLDR CAlTLE DEV 93.50 0.00 0.00 0.00 0.00 13.92 7.64 0.00 PO42109 2000 CN-BEUING ENVIRONMENT I1 349.00 0.00 0.00 25.00 0.00 286.54 176.02 0.00 PO58844 2000 3rdHenanProv Hwy 150.00 0.00 0.00 0.00 0.00 61.19 23.52 0.00 PO58843 2000 Guangxi Highway 200.00 0.00 0.00 0.00 0.00 105.76 46.76 0.00 PO64924 2000 CH-GEF-BEUINGENVMT I1 0.00 0.00 0.00 25.00 0.00 26.49 18.43 2.20 PO64730 2000 CN Yangtze Dike Strengthening - 210.00 0.00 0.00 0.00 0.00 111.52 91.52 0.00 Project PO50036 1999 Anhui ProvincialHwy 200.00 0.00 0.00 0.00 9.60 43.79 40.39 0.00 PO51705 1999 Fujian I1Highway 200.00 0.00 0.00 0.00 0.00 65.86 62.53 0.00 61 PO51856 1999 ACCOUNTING REFORM& 27.40 5.60 0.00 0.00 0.00 17.89 17.82 0.00 DEVELOPMENT PO41268 1999 CN-Nat Hwy4/Hubei-Hunan 350.00 0.00 0.00 0.00 0.00 59.72 34.72 0.00 PO57352 1999 CN-RURALWATER I V 16.00 30.00 0.00 0.00 0.00 21.81 15.29 7.55 PO58308 1999 CN-PENSIONREFORMPJT 0.00 5.OO 0.00 0.00 0.00 1.77 1.75 0.00 PO56216 1999 CN - LOESS PLATEAUI1 100..00 50.00 0.00 0.00 0.00 27.20 29.33 0.00 PO60270 1999 CN-ENTERPRISE REFORMLN 0.00 5.OO 0.00 0.00 0.00 2.71 4.29 4.07 PO38121 1999 CN-GEF-RENEWABLE ENERGY 0.00 0.00 0.00 35.00 0.00 28.91 26.50 7.57 DEVELOPMENT PO51888 1999 CN - GUANZHONG IRRIGATION 80.00 20.00 0.00 0.00 0.00 32.26 24.67 0.00 PO49665 1999 CN-ANNING VALLEY AG.DEV 90.00 30.00 0.00 0.00 0.00 19.19 9.38 0.00 PO46051 1999 CN-HIGHER EDUC. REFORM 20.00 50.00 0.00 0.00 0.00 5.70 7.31 0.00 PO43933 1999 CN-SICHUANURBAN ENVMT 150.00 2.00 0.00 0.00 0.00 91.74 75.93 22.53 PO42299 1999 TEC COOPCREDIT IV 10.00 35.00 0.00 0.00 0.00 36.03 -11.40 0.00 PO41890 1999 CN-Liaoning UrbanTransport 150.00 0.00 0.00 0.00 0.00 36.96 36.96 0.00 PO36953 1999 CN-HEALTH IX 10.00 50.00 0.00 0.00 0.00 36.85 21.27 0.00 PO03653 1999 CN-Container Transport 71.00 0.00 0.00 0.00 18.61 3.62 22.19 0.66 PO46829 1999 RENEWABLEENERGY 100.00 0.00 0.00 0.00 0.00 12.87 99.87 6.07 DEVELOPMENT PO46564 1999 CN - Gansu& InnerMongolia Poverty 60.00 100.00 0.00 0.00 13.30 44.87 32.64 -9.08 Red. PO03614 1998 CN-GuangzhouCity Transport 200.00 0.00 0.00 0.00 20.00 100.31 120.31 100.31 PO03606 1998 ENERGY CONSERVATION 63.00 0.00 0.00 22.00 0.00 35.87 17.87 0.00 PO35698 1998 HUNANPOWERDEVELOP. 300.00 0.00 0.00 0.00 145.00 31.45 172.70 -22.46 PO49700 1998 CN - IAIL-2 300.00 0.00 0.00 0.00 0.00 4.52 4.52 0.60 PO37859 1998 CN-GEFEnergy Conservation 0.00 0.00 0.00 22.00 0.00 0.45 22.06 0.00 PO03619 1998 CN-2ndInlandWaterways 123.00 0.00 0.00 0.00 37.00 19.18 54.12 4.29 PO40185 1998 CN-SHANDONG ENVIRONMENT 95.00 0.00 0.00 0.00 1.40 20.07 21.47 -0.79 PO03566 1998 CN-BASIC HEALTH (HLTH8) 0.00 85.00 0.00 0.00 0.00 39.41 23.29 0.00 PO46563 1998 CN - TARIM BASIN I1 90.00 60.00 0.00 0.00 2.67 14.78 16.58 0.00 PO45788 1998 Tri-Provincial Hwy 230.00 0.00 0.00 0.00 0.00 19.81 15.98 0.00 PO03539 1998 CN - SUSTAINABLE COASTAL 100.00 0.00 0.00 0.00 2.06 47.54 45.44 33.72 RESOURCES DEV. PO51736 1998 E. CHINNJIANGSU PWR 250.00 0.00 0.00 0.00 86.00 50.31 136.31 10.72 PO46952 1998 CN - FOREST.DEV. POOR AR 100.00 100.00 0.00 0.00 0.00 29.62 -72.11 7.27 PO36949 1998 CN-Nat Hwy3-Hubei 250.00 0.00 0.00 0.00 0.00 21.15 21.15 0.00 PO36414 1998 CN-GUANGXI URBAN ENVMT 72.00 20.00 0.00 0.00 0.00 71.56 65.25 23.72 PO03637 1997 CN-NATLRURAL WATER 3 0.00 70.00 0.00 0.00 0.00 0.80 4.00 3.58 PO03590 1997 CN - QINBA MOUNTAINS 30.00 150.00 0.00 0.00 0.00 13.16 16.34 -3.28 POVERTY REDUCTION PO35693 1997 FUELEFFICIENT IND. 0.00 0.00 0.00 32.80 0.00 7.35 32.81 0.00 PO03654 1997 Nat Hwy2/Hunan-Guaagdong 400.00 0.00 0.00 0.00 0.00 48.52 48.52 16.70 PO03650 1997 TUOKETUO POWEWINNER 400.00 0.00 0.00 0.00 102.50 37.37 139.87 25.18 PO38988 1997 CN - HEILONGJIANG ADP 120.00 0.00 0.00 0.00 0.00 7.72 7.72 3.71 PO44485 1997 SHANGHAIWAIGAOQIAO 400.00 0.00 0.00 0.00 0.00 84.59 54.81 39.13 PO36405 1997 CN - WANJIAZHAI WATER TRA 400.00 0.00 0.00 0.00 75.00 22.58 97.58 5.OO PO03602 1996 CN-HUBEIURBAN ENVIRONMENT 125.00 25.00 0.00 0.00 28.32 39.72 70.08 29.74 PO03599 1996 CN-YUNNAN ENVMT 125.00 25.00 0.00 0.00 19.48 40.68 61.92 8.06 PO40513 1996 2nd HenanProv Hwy 210.00 0.00 0.00 0.00 19.00 16.69 35.69 22.69 PO03594 1996 CN - GANSUHEX1CORRIDOR 60.00 90.00 0.00 0.00 0.00 73.92 58.83 0.00 62 PO03589 1996 CN-DISEASE PREVENTION(HLTH7) 0.00 100.00 0.00 0.00 0.00 1.97 10.99 0.00 PO34618 1996 CN-LABOR MARKETDEV. 10.00 20.00 0.00 0.00 0.00 5.66 7.75 0.00 PO03648 1996 CN-SHANGHAISEWERAGE I1 250.00 0.00 0.00 0.00 0.00 39.94 39.94 -0.19 PO03571 1995 CN-7th Railways 400.00 0.00 0.00 0.00 119.00 13.10 132.10 23.10 PO03639 1995 CN-SOUTHWESTPOVERTY 47.50 200.00 0.00 0.00 0.01 1.21 25.36 25.36 REDUCTIONPROJECT PO03647 1995 China Economic Law Reform-LEGEA 0.00 10.00 0.00 0.00 0.00 0.50 0.83 0.00 PO03603 1995 CN-ENTHOUSING& SSR 275.00 75.00 0.00 0.00 57.46 38.95 94.26 1.23 PO03596 1995 CN-Yangtze BasinWater Resources 100.00 110.00 0.00 0.00 1.92 0.34 4.75 4.75 Project PO03540 1994 CN-LOESS PLATEAU 0.00 150.00 0.00 0.00 0.00 1.12 0.50 0.00 PO03632 1993 CN-ENVIRONMENTTECH ASS 0.00 50.00 0.00 0.00 0.00 1.11 1.73 1.41 Total 11,719.07 1,722.60 0.00 214.30 862.03 5,042.44 2,896.38 405.12 CHINA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2001 PeakPacific 0.00 0.00 25.00 0.00 0.00 0.00 0.00 0.00 0 Rabobank SHFC 0.45 0.00 0.00 0.45 0.45 0.00 0.00 0.45 2000 SSIF 0.00 6.00 0.00 0.00 0.00 0.89 0.00 0.00 1998 Shanghai Krupp 28.92 0.00 0.00 65.63 28.92 0.00 0.00 65.63 1999 ShanghaiMidway 0.00 16.02 0.00 0.00 0.00 16.02 0.00 0.00 1999 Shanxi 16.75 0.00 0.00 0.00 14.20 0.00 0.00 0.00 1993 ShenzhenPCCP 3.76 0.00 0.00 0.00 3.76 0.00 0.00 0.00 Sino Gold 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 2001 Sino-Forest 25.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 1995197 Suzhou PVC 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 WIT 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Wanjie Hospital 15.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 1996 Weihai Weidongri 1.03 0.00 0.00 0.00 1.03 0.00 0.00 0.00 2003 XACB 0.00 19.93 0.00 0.00 0.00 0.00 0.00 0.00 1993 Yantai Cement 6.33 1.95 0.00 0.00 6.33 1.95 0.00 0.00 0 Zhen Jing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 Zhengye-ADC 15.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2002/03 Advantage 0.00 0.50 0.00 0.00 0.00 0.50 0.00 0.00 2003 BCIB 0.00 0.00 11.60 0.00 0.00 0.00 0.00 0.00 1999100102 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 2002 CDH ChinaFund 0.00 16.36 0.00 0.00 0.00 2.38 0.00 0.00 1998100 CIGHoldingsPLC 0.00 3.OO 0.00 0.00 0.00 3.00 0.00 0.00 2003 CSMC 0.00 12.00 0.00 0.00 0.00 7.20 0.00 0.00 1998 ChengduHuarong 6.73 3.20 0.00 7.82 6.73 3.20 0.00 7.82 63 1998 Chengxin-IBCA 0.00 0.36 0.00 0.00 0.00 0.36 0.00 0.00 198719294 ChinaBicycles 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 ChinaWalden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 1994 ChinaWalden Ven 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994 Dalian Glass 0.00 2.40 0.00 0.00 0.00 2.40 0.00 0.00 1995 Dupont Suzhou 9.35 4.15 0.00 0.00 9.35 4.15 0.00 0.00 1994 Dynamic Fund 0.00 8.76 0.00 0.00 0.00 7.10 0.00 0.00 2003 Great Infotech 0.00 3.50 0.00 0.00 0.00 2.10 0.00 0.00 1999 Hansom 0.00 0.08 0.00 0.00 0.00 0.08 0.00 0.00 2002 HuarongAMC 23.74 3.00 0.00 0.00 14.74 0.01 0.00 0.00 2002 IEC 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 LeshanScana 5.36 1.35 0.00 0.00 3.76 1.35 0.00 0.00 2001 MaanshanCarbon 9.00 2.00 0.00 0.00 9.00 2.00 0.00 0.00 2001 MinshengBank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2001 NCCB 0.00 26.58 0.00 0.00 0.00 26.46 0.00 0.00 1996 Nanjing Kumho 3.89 3.81 0.00 11.07 3.89 3.81 0.00 11.07 2001 New China Life 0.00 30.70 0.00 0.00 0.00 23.32 0.00 0.00 1995 NewbridgeInv. 0.00 1.95 0.00 0.00 0.00 1.95 0.00 0.00 1997198 Orient Finance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2003 PSAM 0.00 1.93 0.00 0.00 0.00 0.00 0.00 0.00 1997100 PTPHoldings 0.00 0.03 0.00 0.00 0.00 0.03 0.00 0.00 Total portfilio: 195.31 217.74 36.60 84.97 139.16 158.44 0.00 84.97 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2002 ASIMCO 0.00 0.00 0.01 0.00 2003 Anjia 0.00 0.01 0.00 0.00 2004 CCB-MSNPL 0.03 0.00 0.00 0.00 2004 CUNA RCCI 0.00 0.01 0.00 0.00 2003 Cellon 0.00 0.01 0.00 0.00 2002 Darong 0.01 0.00 0.00 0.01 2002 HuarongAMC 0.02 0.00 0.00 0.00 2002 IEC 0.00 0.00 0.01 0.00 2002 WIT 0.00 0.00 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 2003 SAIC 0.01 0.00 0.00 0.00 2002 SML 0.00 0.00 0.00 0.00 2002 Sino Mining 0.01 0.00 0.00 0.01 2002 BongChen 0.03 0.00 0.00 0.03 Totalpendingcommittment: 0.11 0.04 0.02 0.05 64 Annex 14: Country at a Glance CHINA: Hunan UrbanDevelopment Project East Lower- POVERTY and SOCIAL Asia & mlddle- Chlna Paclflc Income Development dlamond' 2002 Population, mid-year (millions) 12810 1,838 2,411 Lifeexpectancy GNIper capita (Atlas method, US$) 950 950 1,390 GNI (Atlas method, US$ billions) 1ps.1 1,740 3,352 T Average annual growth, 1996-02 Population (%) 0.8 I O 1.0 Laborforce (%) 0.9 12 12 GNI Gross per primary Most recent estimate (latest year avallable, 1996-02) capita nrollment Poverty (%of populationbelownationalpovedyline) 5 Urbanpopulation(%oftotalpopulation) 38 38 49 Lifeexpectancyat birth (yean) 71 69 69 i Infant mortality(per (000 livebiiihs) 30 33 30 Childmalnutrition ("7of childrenunder5) x) 6 n Access to improved water source Access to an improvedwatersource (%ofpopulation) 75 76 81 Illiteracy(%ofpopulationage 54 14 t3 t3 Gross primaryenrollment (%ofschool-age population) 106 106 in --- China Male x)5 m5 111 Lowr-middle-income group Female x)8 x)6 1x) KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 GDP (US$ billlOns) Economlc ratios' 221.5 454.6 1,%7.1 1,232.7 Gross domestic investmentlGDP 332 362 38.5 41.0 Egorts of goods andserviceslGDP 8.9 195 25.5 295 Trade Gross domestic savingslGDP 34.8 37.7 40.9 44.0 Gross national savingslGDP 35.1 38.0 40.0 43.8 T Current account balance/GDP 2A 19 1.5 2.9 Domestic Interestpayments/GDP 02 0.6 0.5 05 savings 4 Investment Total debt/GDP 3.8 15.9 14.6 t? .6 Total debt sewicelegorts 8.0 8.6 7.7 6.1 1 Presentvalue of debt/GDP 14.1 Presentvalue of debt/eqorts 518 Indebtedness 1982-92 1992-02 2001 2002 2002-06 (average annualgrouulh) GDP 97 90 75 8.0 75 ----China GDP percapita 8.1 8.0 6.7 72 6.6 Lowr-middle-incomegroup STRUCTURE of the ECONOMY 1982 1992 2001 2002 Growth of Investment and GDP ( O h ) (%ofGDP) Agriculture 33.3 218 15.8 145 20 Industry 45.0 43.9 50.1 51.7 15 Manufacturing 37.3 33.1 342 44.5 10 Services 21.7 34.3 34.1 33.7 5 - 0 Private consumption 50.7 49.2 45.7 42.5 97 98 99 00 01 02 Generalgovernment consumption 14.5 t3.1 t3.4 735 Imports of goods andservices 7.3 18.0 23.1 265 --wm-GDI &GDP 1982-92 1992-02 2001 2002 (averageannualgrouulh) Agriculture 4.6 3.7 2.8 2.9 Industry 11.6 113 8.4 9.9 30 Manufacturing 112 m.4 9.0 8.1 20 Services 11.7 8.4 8.4 7.3 10 Private consumption 11.4 8.1 2.8 1.9 0 Generalgovernment consumption 9.9 8.4 m.5 7.0 Gross domestic investment 9.5 9.7 t3.9 14.9 Imports of goods andsewices 9.7 Q.8 m.0 27.5 -Exports -Inports 65 China PRICES and GOVERNM ENT FINANCE 1982 1992 2001 2002 Domestlc prlces Inflation (%) I (%change) Consumer prices 6.O 6.4 0.7 -0.8 ImplicitGDP deflator -02 7.9 12 -2.6 Government finance (%of GDP,includescurrent grants) Current revenue 22.9 14.7 7.1 17.9 Currentbudgetbalance 2.0 11 0.0 Overallsumlusldeficit -0.3 -10 -4.7 -3.0 TRADE 1982 1992 2001 2002 I (US$ millions) 1 Export and Import levels (US$ mill.) I Totalexports (fob) 22,321 84,940 266,t55 325,565 Food l400.000 2,908 8,309 P,780 14,623 Fuel 5,314 4,693 8,420 8,372 Manufactures P271 67,936 239,802 297,085 Total imports (cif) 19285 80,585 2 4 3 m 295903 Food 4201 3,146 4,980 5,237 Fueland energy 183 3,570 l7495 19985 Capitalgoods 3204 31312 x)7,040 07,030 Export price index(895=00) 41 85 83 78 98 97 9.9 99 00 01 import price index(895=WO) 71 95 91 86 oExports Imports Terms of trade (895=WO) 58 89 91 90 BALANCE of PAYMENTS 1982 1992 2001 2002 (US$millions) Current account balance to GDP (%) Exportsof goods andservices 24,906 94,198 299,409 365,395 Imports of goods and services 20,555 86,752 271,325 328,013 'T Resource balance 4,350 7,446 28,084 37,383 Net income 376 249 -19,l74 -14,945 Net currenttransfers 486 1155 8,492 P,984 Currentaccount balance 52P 8,850 17,401 35,422 Financingitems (net) -995 -x),952 30,046 40,085 Changes innet reserves -42l7 2,a2 -47447 -75,507 1 98 97 98 99 00 01 I Memo: O2 Reservesincludinggold (US$ millions) 24,842 220,051 297,721 Conversion rate (DEC, /ocal/US$) 2.4 5.9 8.3 8.3 EXTERNAL DEBT and RESOURCE FLOWS 1982 1992 2001 2002 (US$ millions) :omposition of 2002 debt (US$ mill. Total debt outstandinganddisbursed 0,350 72,428 l70,lx) 155,878 18RD 0 3,752 11,550 P.051 IDA 1 4287 8,654 8,729 A: 12,051 ,729 Total debt service 2,P5 8 6 8 24297 23,688 IBRD 0 460 1,550 1,631 6,987 IDA 0 30 151 175 Compositionof net resourceflows E 213E Official grants 47 327 240 Official creditors 657 2,343 2,156 -839 Privatecreditors -m 8,949 -4,OV -x3,593 Foreigndirect investment 430 1156 44941 49,308 Portfolio equity 0 1243 3,015 2266 World Bank program F:62,103 Commitments 330 1,865 782 563 \ IBRD E-Bilateral Disbursements - - - ~ 1 1331 1791 1,733 I IDA D Othr mltilateral F Privale Principalrepaynents 0 8 7 904 1,157 : - I M F 0-Short-tern 66
Группа Всемирного банка · Project Appraisal Document
China - Hunan Urban Development Project
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