China - National Rural Water Supply Project

Document of The World Bank Report No: 30031-CN IMPLEMENTATION COMPLETION REPORT (IF-N0270 TF-29625) ON A CREDIT IN THE AMOUNT OF SDR 51.4 MILLION (US$70 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A NATIONAL RURAL WATER SUPPLY PROJECT March 30, 2005 Urban Development Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective September 2004) Currency Unit = Renminbi (RMB) Yuan (CNY) CNY 1.0 = US$ 0.12 US$ 1.0 = 8.3 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS - Country Assistance Strategy CPO - Count Project Office GOC - Government of China DfID - Department for International Development (of the United Kingdom) ICB - International Competitive Bidding KAP - Knowledge, Attitudes and Practices M&E - Monitoring and Evaluation MOH - Ministry of Health MTR - Mid-Term Review NPHCC - National Patriotic Health Campaign Committee NPO - National Project Office NPV - Net Present Value NRWS - National Rural Water Supply Project O&M - Operations and Maintenance PPIAF - Public Private Infrastructure Advisory Facility PPO - Provincial Project Office PVC - Poly-vinylchloride (pipes) RWSS - Rural Water Supply and Sanitation SARS - Severe Acute Respiratory Syndrome UNICEF - United Nations Children's Fund WTP - Water Treatment Plant Vice President: Mr. Jemal-ud-din Kassum, EAPVP Country Director: Mr. David Dollar, EACCF Sector Director: Mr. Keshav Varma, EASUR Task Team Leader: Mr. Thomas L. Zearley, EASUR  PEOPLE'S REPUBLIC OF CHINA NATIONAL RURAL WATER SUPPLY PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 9 6. Sustainability 10 7. Bank and Borrower Performance 12 8. Lessons Learned 16 9. Partner Comments 17 10. Additional Information 18 Annex 1. Key Performance Indicators/Log Frame Matrix 20 Annex 2. Project Costs and Financing 22 Annex 3. Economic Costs and Benefits 24 Annex 4. Bank Inputs 25 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30 Map IBRD 28662R  Project ID: P003637 Project Name: NATIONAL RURAL WATER SUPPLY PROJECT Team Leader: Thomas L. Zearley TL Unit: EASUR ICR Type: Core ICR Report Date: March 30, 2005 1. Project Data Name: NATIONAL RURAL WATER SUPPLY L/C/TF Number: IF-N0270; TF-29625 PROJECT Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Water supply (91%); Sanitation (3%); Health (3%); Primary education (3%) Theme: Rural services and infrastructure (P); Other human development (S) KEY DATES Original Revised/Actual PCD: 09/09/1996 Effective: 11/12/1997 11/12/1997 Appraisal: 03/28/1997 MTR: 03/15/2001 03/15/2001 Approval: 06/23/1997 Closing: 06/30/2003 12/31/2005 Borrower/Implementing Agency: People's Republic of China/National Patriotic Health Campaign Committee Other Partners: Provinces of Gansu, Hebei, Hubei, Jiangxi, Yunnan and the Inner-Mongolia Autonomous Region STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Jean-Michel Severino Country Director: David Dollar Yukon Huang Sector Manager/Director: Keshav Varma Nicholas C. Hope Team Leader at ICR: Thomas L. Zearley Lee Travers ICR Primary Author: Osmo K. Tammela; Param Iyer; Eddie Hum 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Background. In the mid to late 1990s, rural Chinese were living longer, healthier lives thanks to better nutrition, higher immunization rates and substantial improvements in rural water supply. However, despite progress in improving access to safe water, over 300 million rural inhabitants still lacked access to safe, adequate water supply. Poor sanitary conditions and unhygienic practices exacerbated health problems created by a lack of clean water. National level health campaigns were set up to encourage hygienic behavior, but change came slowly. In the 15 years preceding this project's appraisal in March 1997, rural water supply was a prominent development priority for China, with investment increasing steadily from 1986 to 1995. At first, development efforts focused on potable water for urban areas and for more easily served and wealthier rural areas. The Ninth Five-Year Plan (1996-2000), shifted focus toward more remote areas, calling for 65% access to safe water in China's poorest rural areas by 2000. To help meet this goal which entailed serving an additional 88 million people, the Government of China (GOC) targeted investments to the most water-scarce areas. In addition, sector planners were aiming for 50% coverage of piped water supply by 2000. In the sanitation sector, the National Patriotic Health Campaign Committee (NPHCC) had been working since the 1950s to expand the use of latrines in rural areas. In December 1996, a "Resolution on sanitation reform and development" was issued, emphasizing: (a) having health and sanitation expenditures keep pace with overall economic growth; (b) strengthening the management capacities of responsible organizations; and (c) cooperative funding and management for latrines. NPHCC sanitation goals for 2000 ranged from 35% sanitary latrine coverage in the poorest areas to 80% in the wealthiest. In terms of health education, since 1996, NPHCC had been cooperating with various agencies to promote a "national health education campaign for 900 million farmers". The campaign emphasized the healthful use of clean water and sanitation facilities, and called for more training of village-level health officials and the establishment of health education institutes. Its goal was to have 50% of the rural population practicing safe hygienic habits by 2000. In order to help meet these ambitious goals, GOC requested IDA assistance for the National Rural Water Supply Project, approved on June 23, 1997. The project's primary objectives were: (a) to provide access to safe, conveniently located water to rural people in 40 counties and five provinces; (b) to improve water-related health and sanitation practices; (c) to provide water at the lowest possible cost; and (d) to ensure sustainability through good maintenance and accounting practices. 3.2 Revised Objective: The objectives of the main project components did not change. However, after the Severe Acute Respiratory Syndrome (SARS) outbreak in the winter of 2003, the Ministry of Health (MoH) requested a reallocation of SDR 571,429 from this IDA Credit for a SARS prevention program. Upon IDA's approval, a fourth component, SARS Prevention, was added and Schedule 2 was amended to include the following objective: "...to assist the Borrower in carrying out a program to control and manage the incidence and spread of SARS and infectious diseases." This component is ongoing and will be covered under the ICR for the Basic Health Services Project. 3.3 Original Components: - 2 -  The project had three main components: (a) Water Supply ($116.4 million). This component provided safe water, sustainably financed, to poor communities currently lacking such supplies. Project design maximized community participation in selecting service alternatives. Full cost recovery from water users was expected. Support for the water system operator and accounting training to ensure low-cost operation and sustainability were also available. (b) Sanitation and Health Education ($11.5 million). This component provided assistance to ongoing village sanitation and health education efforts by working with primary school teachers, village doctors, Women's Federation representatives, and public health systems in their efforts to improve water use and sanitation practices in project villages. It supported demonstration programs to increase the use of composting latrines; the preparation of health education messages aimed at expanding the adaptation of improved sanitation and hygiene practices among the target beneficiaries, primarily housewives, school-aged children and decision makers in households; and training of health education specialists in the delivery of those messages. (c) Project Management ($6.1 million). This component increased project office capacity to provide services to beneficiary villages. It included surveys and research on effective strategies to expand adoption of improved sanitation and to convey health messages, as well as training in project management skills such as procurement, water supply technologies, water quality protection, and health message delivery. These three components were to be implemented in the five provinces of Yunnan, Hebei, Hubei, Inner Mongolia (Nei-Mongol) and Jiangxi, which were all among the nationally or provincially designated poor counties, selected according to their: (a) rural poverty, where the poorest were given first rights to participate; (b) percentage of rural people without access to improved piped water supply; (c) number of people exposed to unsafe water; (d) existing provincial plans targeting priority areas of rural water improvement; (e) demonstrated ability to provide the needed counterpart funds; and (f) willingness to form and staff a county project office to agreed standards. Annex 1 summarizes by province the amount of project investments, number of counties served, number of beneficiaries, number of villages, and the target percentage of the rural population with access to improved water supply at completion. 3.4 Revised Components: During the Mid-Term Review (MTR) in 2001, it was found that Jiangxi Province could not fully commit its allocation, so Gansu Province was admitted to the project. After this addition, the project included 46 counties in six provinces. As noted in paragraph 3.2, a SARS Prevention component was added. 3.5 Quality at Entry: Quality at entry is rated satisfactory for the following reasons. Alignment with GOC Policy. The project's objectives were directly aligned with GOC's strategy for the rural water and sanitation sector. The project supported GOC's Ninth Five-Year Plan's goal of assisting the poorest, most remote and most water-scarce counties (classified as "national poverty counties") by increasing rural water supply, improving sanitary habits, and educating the poor about the importance of proper hygiene. The criteria for choosing the participating provinces and counties - 3 -  were clearly applied. Alignment with IDA's Country Assistance Strategy (CAS). At the same time, the project was fully aligned with IDA's CAS of March 1997. The CAS highlighted "human development" as one of the five major themes for Bank Group support. Within that theme, poverty reduction played a major role. The poverty reduction program sought to increase the resources controlled by the poor by generating income, contributing to productivity, or protecting physical well-being. Improving rural water and sanitation contributed to poverty reduction by releasing labor for purposes other than fetching water and by improving beneficiary health. Quality of Design. The project's design satisfactorily incorporated water supply, sanitation and health education, in keeping with internationally accepted standards of integrating these three areas in order to maximize the project's impact in terms of health and economic benefits. The project management component helped build capacity in terms of procurement, water supply technologies, water quality protection, targeting health message delivery, cost recovery, measuring and monitoring performance indicators, and incorporating beneficiary participation. Key indicators for measuring financial sustainability were weak and indicators for providing water at the lowest possible cost were not provided. Application of Bank Safeguard Policies. The project fully complied with Bank safeguard policies as described below. a) Environment. This project was correctly assigned category "B" for its potential adverse impacts from construction or failure to protect water supply sources. The project had a sufficiently detailed environmental mitigation plan (SAR, annex 6) and Chinese design manuals contained adequate guidelines for proper water system construction practices. b) Land acquisition/resettlement. Land acquisition was known only from year to year, but was identified as 11.7 ha for the first year. Resettlement was expected to be minimal, so the agreed Resettlement Policy Framework (SAR, annex 11) was appropriate. c) Indigenous peoples. IDA's social experts agreed that the project's participatory design allowed any potential adverse impact on minority groups to be mitigated. The project's design left to potential project villages the choice of whether or not to participate. If they decided to participate, they had approval power over project designs. This process ensured that the investments would be socially and culturally compatible with the development needs of the beneficiary minority populations. Risk Assessment. Most major issues and risks were identified at appraisal including: (a) inadequate counterpart financing from provincial and local governments; (b) lack of efficient financial and physical operation of the water plants; (c) possible resistance to implementing the required tariff structure; and (d) failure of the health education and sanitation program to induce significant behavioral changes. The project design incorporated measures to mitigate these risks such as structuring the disbursement profile to reflect possibly delays in counterpart funding, bolstering training to improve operations and maintenance (O&M) efficiency, providing for redirecting investments in case counties did not accept the agreed tariff approach, and providing for a "Knowledge, Attitudes and Practices" (KAP) study to modify the health education and sanitation work where necessary. Lessons learned from the two previous IDA-financed rural water projects focused on (a) over-design - 4 -  of water treatment plants; (b) provision of water at the lowest possible cost; and (c) focus on operations, maintenance and solid accounting practices to ensure sustainability. All of these were incorporated during appraisal, but the over-design issue could have been examined in greater detail. Assumptions about rural demand for water supply were somewhat optimistic. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project's outcome is satisfactory, as it substantially achieved its objectives. Despite slow progress in the first 18 months, the physical investments for the water supply systems were implemented on time and with good quality construction and supervision. Most of the sanitation, health and hygiene programs have resulted in better hygienic practices. More importantly, participating communities are making steady progress in improving the sustainability of assets through effective O&M of the water supply systems and improved accounting practices. The project provided a great deal of training, both classroom and on-the-job, in demand management and business development. Some local governments also developed strong incentives for the water treatment plants (WTPs) to become financially self-sustaining by informing their management that the counties would no longer continue to subsidize plant operations beyond the initial start-up period. Objective (a): Providing safe, conveniently located water to rural people in 40 counties and five provinces Achievement of this objective is rated satisfactory. As shown in Annex 1, the project financed the construction of piped water systems, deep-well hand pumps, and rainwater collectors to improve access to safe water. It also provided for construction of household and public/school latrines. The piped water systems usually provide water directly to the tap located at the beneficiary's home or courtyard, thereby substantially reducing the daily time spent fetching water. Project reach. The appraisal estimated the number of beneficiaries at 4.6 million in five provinces. During the MTR, it was noted that Jiangxi could not commit its entire allocation, so Gansu Province was added. Gansu's addition brought an estimated 323,400 beneficiaries, while Jiangxi's estimated beneficiaries were reduced somewhat, making the number of beneficiaries about 4.85 million at MTR. At completion, the total estimated number of beneficiaries is about 5.2 million. Therefore, the project exceeded its number of targeted beneficiaries by 600,000. Time savings. A comparison of the results on time savings for fetching water between the National Project Office's baseline survey and follow-up survey of 11,313 beneficiary households in five participating provinces in 2001, shows that before the project, each household spent 20 to 60 minutes per day fetching water, and that time increased in the dry season (lasting three to five months). After gaining access to piped water supply, households saved some 183 hours per year, assuming an average of 30 minutes spent per day fetching water before the project. These time savings are now spent more productively on activities such as children's education, cultivation, and improved house maintenance. Increased village prosperity. The increased productivity made possible from safe, convenient water supply has been linked to increases in overall village prosperity. For example, in 2002, the annual average per capita income in Linxia County was 1,162 RMB, while the income in the participating village of Yinwang in Linxia County was 1.36 times the county average. It would seem that after gaining access to clean, reliable water supply, the village is enjoying higher living standards. - 5 -  Furthermore, these higher incomes bode well for maintaining the water treatment plants (WTP) built under the project, servicing debt and recovering costs. Water safety. Water quality testing is performed on a monthly basis at the WTPs by the local health bureaus. The most common tests are pH value, turbidity, and residual chlorine, and in specific locations, concentrations of fluoride and other parameters are also tested. These tests show that national drinking water standards are being met. Objective (b): Improving water-related health and sanitation practices This objective was satisfactorily met. Although the project provinces did not systematically collect data on this issue, the project appears to have reduced the impact of various water-borne diseases on rural populations. Supervision missions visited 20 to 30 households to discuss and observe their hygiene practices, and found households practicing the improved health practices promoted by the project. The missions also interviewed medical practitioners from various project villages, who confirmed that the incidence of water-borne diseases has been declining, in some cases dramatically. The example below is taken from the Beiyuan Water Plant (Linxia County, Gansu Province) where the number cases of water-borne disease declined substantially. Anecdotal evidence from other participating counties shows similar results. Cases, Hepatitis A Cases, Stomach illness Cases, Diarrhea 800 700 600 500 400 300 200 100 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Objective (c): Provide water at the lowest possible cost The achievement of this objective is moderately satisfactory. The National Project Office (NPO) set engineering design standards which aimed at capping the per household connection cost at RMB 200. Most water plants had connection costs which came close to the NPO target, but because the household demand for piped water supply did not always meet design expectations, the capacity utilization of some water plants was lower than planned. In such cases, the cost of providing water was higher than expected. On-site interviews with project beneficiaries, however, confirmed their willingness to pay higher tariffs. Objective (d): Ensure sustainability through good maintenance and accounting practices - 6 -  The achievement of this objective is satisfactory. In the early stages of the project, water supply companies generally did not have good record-keeping practices at commissioning. However, the record-keeping practices did improve gradually during implementation. Late in implementation, more and more WTPs had adequately trained personnel in charge of operations, and had strong support from their local governments. Nevertheless, the capacity of adequately trained personnel in charge of operations and support from their local governments vary greatly among provinces and counties. Achievement of Thematic Objectives. Poverty alleviation. This project was part of the program of targeted interventions for China, and it satisfactorily met its objective of alleviating poverty. The project was implemented in the targeted poor counties with little leakage to wealthier counties (see Additional Information Section 10). While the project's poverty alleviation impact would benefit from a rigorous impact analysis, household level interviews by IDA missions confirmed that the project had significant social, economic and health benefits. As noted above, beneficiaries have indicated their willingness and ability to pay higher water supply tariffs, which would indicate their increased appreciation for the benefits of clean water and appropriate sanitation. Gender. In most households, women and children are responsible for fetching water to meet daily needs. NRWSS has effectively reduced the burden of fetching water on them, allowing them to pursue other more economic or educational activities that contribute to improving their quality of life. Environment. This environment category "B" project was correctly identified as such. The adverse impacts during construction were minimal, and although the project's key performance indicators did not include environmental improvement indicators, there is anecdotal evidence of the project's net positive impact on the environment. 4.2 Outputs by components: Outputs by component are rated satisfactory. Details are provided below. (See Annex 1 also.) (a) Water supply. Approximately 1,610 rainwater collector systems and 1,394 piped water systems (single and multi-village) were constructed and are now providing safe water to some 5.2 million beneficiaries. The appraisal targets were 11,525 rainwater collector systems and 1,223 piped water systems. The number of rainwater collector systems was drastically reduced because beneficiaries opted for the higher level of service possible through piped water systems, where the project exceeded appraisal targets by 171 systems. Even though the number of rainwater collector systems built was much smaller than estimated, the number of beneficiaries was exceeded. Annex 7 presents a few "before and after" images. (b) Sanitation and health education. Targets for the construction of latrines were exceeded with 15,439 latrines built, compared to 14,180 estimated at appraisal. Three different technologies were used to improve latrines: three-compartment, bio-gas, and pour-flush. Water-related health and sanitation practices also improved through targeted health education campaigns as evidenced through monitoring reports and field observations. Centrally designed communication materials were disseminated to the participating provinces, counties, townships and villages. As witnessed during supervision, project village families, especially women and children, have improved their hygiene practices by using sanitary latrines, increasing hand-washing at critical moments and by generally adopting the personal and household hygiene practices promoted by the project. - 7 -  In the health education component the provincial project offices (PPO) carried out 729 training courses, distributed booklets, posters and other information worth $916,000 to the beneficiary villages. In addition, thousands of television spots were broadcasted, and numerous sets of video and audio training materials were produced and distributed to the villages. The reduced incidence of water-borne diseases mentioned in para. 4.1 is testament to the success of this component. (c) Project management responsibilities were shared among the central government, project provinces, project counties, project township towns and water plants. During implementation, the NPO and PPOs together arranged 2,097 training courses with 95,142 participants from various provincial and county level offices and units. In addition, the PPOs organized six overseas study tours benefitting 49 people. The study tours lasted about two weeks, with their main objective being to gain first hand knowledge of how piped water supply systems were operated and managed in Australia, Canada, Malaysia, Philippines, Singapore, Thailand, and the United States. 4.3 Net Present Value/Economic rate of return: As stated in the Staff Appraisal Report, "Ideally, participating villages would have been chosen by evaluating net present value (NPV) generated by water investments, including any public health and social welfare externalities, and choosing the set of investments maximizing NPV across all villages". However, generating such information during appraisal would have been extremely difficult so such analysis was not prepared nor monitoring program implemented that would have allowed an ex-post evaluation of the program assumptions. Although an economic evaluation of the project was not possible, a great majority of the beneficiaries who connected to the improved water supply systems have unanimously expressed their appreciation for these systems, which save them time and labor, and have improved their health and well-being. 4.4 Financial rate of return: Not applicable. 4.5 Institutional development impact: The institutional development impact of the project is considered substantial. At policy level the project demonstrated that its user-financed model works well and can work for government-financed programs as well. The project also significantly developed the capacity of governments at all levels to design and implement rural water supply and sanitation (RWSS) programs. In terms of sanitation and health education, the provincial and local authorities, in particular, strengthened their knowledge base and will use their project experience to more effectively implement government-funded health and hygiene education programs in the future. The project's full institutional development impact can be viewed from different levels as described below. National Level. The NPO, within the MoH, strengthened its capacity to provide technical guidance to the provinces as well as its capacity to monitor, coordinate and troubleshoot. NPO increased its full-time staff and its internal training program has enhanced its project management knowledge remarkably. The improved capacity of key personnel will serve the MoH well for both ongoing and future GOC-financed RWSS programs. Provincial. As a result of project implementation, the PPOs have improved coordination with the NPO and their counties. They have also improved their planning and budgeting capabilities through interactions with different government agencies at the provincial level such as finance and planning. - 8 -  Hands-on exposure to PPO staff has improved their capacity to monitor and facilitate at the county and township levels. The increased capacity at provincial level will serve the Bureaus of Health/Water Resources well for future RWSS programs. County. The project made two major improvements at county level: (a) a better understanding and appreciation among key administrative and party officials of the importance and benefits as well as the challenges of implementing RWSS programs; and (b) the county provincial office (CPO) staff have developed skills and techniques to manage, coordinate and supervise such programs. Township Town and WTPs. At this critical level, there has been a very significant institutional impact. Plant managers have learned, sometimes the hard way, to function as independent, financially self-sufficient entities and, in the process, have been forced to improve management, O&M, and accounting practices. The township governments understand that subsidizing plant operations is a losing game and are now insisting on accountability from plant management in terms of greater efficiency and full cost recovery from users. The result is that many townships and plants are experimenting with new management models, including involving the local private sector and community groups, to maximize returns on investments (see para 6.2). Village. Village leadership has also been strengthened. The consultative process adopted prior to village selection enabled communities to debate their existing water situation and decide whether to participate in the project and adopt its cost recovery policy. As members of management committees of most WTPs, village heads typically also had a say in the selection of plant staff. The result is that village heads have a better appreciation for the challenges and rewards of operating a water supply system. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Increase in plastic unit prices. The sudden, sharp increase in oil prices in 1999 resulted in a dramatic price increase of polyvinylchloride (PVC) pipes. The plastic unit price rose from RMB 7500/ton to 10,500/ton within a few months. This price spike, exacerbated by a somewhat slow flow of information between certain PPOs and the NPO, resulted in a situation where the awarded supplier was not able to deliver the pipes procured. In ICB3, this resulted in the supplier being unable to deliver PVC pipes on time, causing delays in completing a number of WTPs, particularly between 1999-2001. The SARS outbreak during the Spring and Summer of 2003 resulted in implementation delays of three to five months. SARS mostly adversely affected construction in the northern provinces (Gansu, Inner Mongolia, Hebei) where weather conditions permit construction only in warm weather. 5.2 Factors generally subject to government control: Slow disbursements. The NPO, PPOs and CPOs had competent staff and adequate operating budgets, and effectively coordinated and supported project implementation. However, PPOs and CPOs experienced difficulties in obtaining prompt disbursements from the IDA Credit, for which withdrawal applications were subject to clearance from the NPO and the Finance Bureau. Insufficient clarity regarding disbursement procedures and eligibility requirements caused significant disbursements delays. - 9 -  Counterpart funding contributions from various county governments could have been made in a more timely manner in some cases. Late and insufficient counterpart funding caused implementation delays. Reorganizations. Government reorganizations at provincial and county level took place across the country during implementation, and presented additional challenges to maintaining momentum and continuity. For quite some time insufficient and unstable staffing at PPO and CPO levels (due to government reforms) caused implementation bottlenecks. Lack of staff experienced in project planning and management at CPO level in particular also contributed to slow implementation in the early years. Later, mainly due to intensive supervision and training courses organized by the NPO, the situation improved, and PPOs and CPOs were able to operate more efficiently. 5.3 Factors generally subject to implementing agency control: Performance of the implementing agencies. The CPOs' acceptance of innovative ideas and new knowledge to improve the effectiveness of O&M of the project's physical assets, and their continued efforts to ensure financial and institutional sustainability of the water schemes are commendable. However, three aspects could have received more attention. First, more emphasis could have been placed on full community participation. Not properly assessing demand for improved piped water supply services resulted in water plants which were over-designed and under-utilized. Second, water plant financial management and accounting need continual strengthening, which is vital to preparing water audits and monthly financial statements which cover O&M of the plants plus debt service repayments through the water tariff. Third, centralized procurement led to implementation delays. There is a need to procure goods more efficiently to avoid delays in delivering construction material and avoiding the procurement of unsuitable goods. 5.4 Costs and financing: The cost changes of the project were negligible, with a US$2 million decrease. The only change was a reallocation of funds among provinces, which resulted in an increase of funds for civil works and training, and a decrease of funds for goods. The Credit Closing Date was extended to December 31, 2005 mainly for the SARS prevention component. Even without this component, the closing date would have been extended at least six months to allow additional time to complete water supply systems delayed by SARS and by the PVC pipe delivery issue described above. 6. Sustainability 6.1 Rationale for sustainability rating: The overall sustainability rating is likely. There is a strong probability of maintaining the project's achievements, in particular with regard to the water supply investments. The project's sustainability in financial, institutional and technical terms is presented below. (a) Financial (i) The financial sustainability of the water plants constructed under the project is likely. The - 10 -  provincial and county governments are committed to cost recovery through tariff collection. Tariffs are periodically raised after their approval by the County Price Bureaus. Vetting tariffs by the County Price Bureaus serves as a good regulatory system, protecting the rights of rural consumers. Water supply plant financial and accounting systems have also shown noteworthy improvement. (ii) The tariffs imposed by the vast majority of the water plants are regarded as generally affordable by the users, and many households are willing and able to pay more, sometimes significantly more, than current tariffs. Users generally pay in a timely manner and water bill collections are good. As seen in paragraph 4.1 above, households in participating villages have seen increased incomes, which will enhance their ability to pay for piped water in the future. In addition, demand for piped water is likely to remain at least constant because villagers appreciate the value of piped water in maintaining good health and hygiene. (iii) The continued implementation of the project's cost recovery policies is likely due to the built-in incentive mechanism at all levels in the project's user-finance model. This mechanism employs a "cascade of accountability" whereby pressure from the central government on the provinces to service the IDA Credit flows downwards to counties, townships and end-users in terms of cost recovery through improved tariff collections. This flow of accountability will ensure timely repayment of the Credit. (b) Institutional (i) Most of the national, provincial and county/townships project offices remain in place as part of regular GOC-funded RWSS programs, so project management will continue uninterrupted. NPO is still coordinating the ongoing Fourth Rural Water Supply and Sanitation Project (RWSS4, Ln. 4485/Cr. 3233) currently scheduled to close on December 31, 2005. (ii) Counties continue to hold primary responsibility for overseeing plant management and debt servicing and are increasingly selecting plant managers and other staff on a competitive basis and assessing their performance based on delivery of agreed outputs. Later supervision missions found several cases where the plant manager had been selected on a competitive basis, and his performance was being evaluated annually. (iii) At the township/plant level, many plants are becoming independent entities, with the mandate of becoming fully self-sufficient. Different management models are being tested to determine the optimal institutional arrangements to carry out operations over an extended period of time. Some WTPs have arranged competitive bidding for the operation of the plant and network, while others have rented out their plants and networks to township or county water supply companies. Nevertheless, most project WTPs are still utilizing the traditional local government-nominated plant manager principle, but the trend is currently changing and more efficient and competitive management methods are likely to be seen in the future for existing plants. (c) Technical (i) Two of the major criteria for construction of a water supply system were the quality and reliability of an adequate water source, whose sustainability was studied and implemented with great care. Upon project completion, it was found that none of the water sources was in any danger of depletion, so the sustainability of water quality and supply is considered highly likely. - 11 -  (ii) Although some water schemes were somewhat over-designed, there were few complaints about the quality of construction, which was generally done to a high standard. In that sense, technical sustainability is highly likely in terms of the systems functioning effectively over the design period. A set of technical guidelines developed and updated during implementation have contributed remarkably to the operational sustainability of the WTPs. Overall sustainability is likely. Water tariffs are being regularly collected for the most part by water plant management which is also financing O&M. Accounting practices have generally improved as plant staff obtain classroom and on-the-job training. O&M practices are steadily improving and greater efficiencies are being made as pressure on plant managers increases to deliver water more efficiently. All of these issues have been monitored closely and lessons learned have been incorporated into the ongoing RWSS4. 6.2 Transition arrangement to regular operations: In addition to the basic operational model within the county/township administrations, various new innovative approaches are being applied. At the township and plant levels, innovative variations of the standard management model are being experimented with. For example, one water plant had a semi-independent plant manager operating the water plant under the supervision of a committee headed by the Regional Village Representative. The plant operator has been hired on a competitive basis and his performance is being assessed on delivery of agreed outputs. At another water plant, the township leader has invited the private sector to collect bills in the assigned system catchment areas. Many township governments are also considering either leasing out O&M to a third party. It is suggested that the NPO develop frameworks for different management model options and assist provinces in testing them in different locations. For this purpose, IDA received a grant from the Public Private Infrastructure Advisory Facility (PPIAF) to assist two provinces in developing new management models in RWSS and disseminate and pilot the appropriate models in one county under NRWS and two counties under RWSS4. The pilot study has just concluded, and the lessons and experiences were shared at a national workshop held March 14-16, 2005 with participation from high level officials from the central ministries of Finance, Health, and Water Resources, more than 50 representatives from 21 provinces, representatives from China's Women's Federation, and international agencies including the Bank, the United Kingdom's Department for International Development (DfID), United Nations Children's Fund (UNICEF) and the Asian Development Bank. A provincial rural water and sanitation project is being considered for joint funding by the Bank and DfID. Although the project is just being identified, it would likely test implementation of the study's results. 7. Bank and Borrower Performance Bank 7.1 Lending: IDA's performance during project identification, preparation assistance and appraisal is rated satisfactory. Project identification was consistent with the CAS and GOC priorities to alleviate poverty in rural villages through improved water supply, sanitation and health education. The project was well prepared in terms of technical specifications, particularly for the "three-in-one" (safe water, sanitation and health education) approach and capacity building components. The project preparation process was highly participatory and the borrower led the process. IDA's inputs in terms of staffing and skill mix were - 12 -  appropriate. Between identification and appraisal, four missions were fielded. The multi-disciplinary missions were composed of experts in financial and economic analysis, sociology, project operations, and water and sanitation. IDA's performance at appraisal was also satisfactory. IDA's team comprised seven members, covering the key skills required. The mission appraised all aspects of project design, government commitment at central, provincial and county levels (including counterpart funding) and the implementing agencies' capacity in terms of financial management, project risks and mitigation measures, the incentives for stakeholders to sustain the project, and safeguard issues (environment, land acquisition and resettlement). Special attention was also paid to poverty alleviation, gender and indigenous peoples aspects. As reported in the quality at entry section above, the risk assessment was reasonably on target. Lessons from two previous rural water projects were incorporated adequately into the design, in particular as it adopted a linked approach, combining water supply, sanitation and health education to maximize the health and productivity benefits gained from improved water supply. Regarding the project's key performance indicators, these were generally adequate although it was difficult to get reliable figures for the second water supply indicator of measuring financial sustainability by matching water plant revenues with expenditures after the second year of operation. The objective of providing water at the lowest possible cost, however, had no specific indicator. The key indicators for sanitation and hygiene objectives were more easily measurable and were monitored through both a baseline and follow-up surveys. 7.2 Supervision: IDA's performance in supervision is rated satisfactory. The supervision missions averaged four to five persons per mission and comprised a mix of international and Chinese national professionals, who were competent in the project's technical, institutional, and social aspects, and who provided assistance and quality advice to the project offices at all levels. The core supervision team was based in the field for the duration of the project. Team continuity was high and excellent team spirit was maintained with borrower counterparts at all levels. The supervision missions helped to motivate staff from the different project offices and to build institutional capacity at various levels. The supervision missions were effective in accelerating implementation which had experienced very slow progress early in implementation. At different stages, the team provided high quality technical, project management and business development advice which was well received by the project offices and plant management. The team demonstrated water auditing at newly operated plants, and addressed operational and maintenance problems on the spot. The team's institutional/management specialist illustrated the usefulness and importance of friendly and simple bookkeeping and accounting statements for improving operation, and showed how to convert water losses or unaccounted-for water to monetary value loss; it helped develop more commercially focused operations for water plant management. The MTR mission, originally scheduled for March 2000, was held a year later in April 2001 due to implementation start-up delays. The mission was composed of six members with a wide range of specialties and made extensive field visits covering the provinces of Hebei, Yunnan, Jiangxi and Hubei (see Annex 4 for mission specialties and timing). The MTR was useful in that it gave IDA and the participating provinces the opportunity to examine commitments by province. Jiangxi and Hebei both - 13 -  requested reduced obligations under the project, so NPO proposed adding Gansu to enable the project to reach its targets. Through these substitutions, the project was able to increase the number of beneficiaries substantially. The MTR investigated the status of meeting some key performance indicators, but NPO weakness in progress reporting at the time prevented the mission from presenting a systematic review of the attainment of key performance indicators in the MTR report. Safeguard Supervision. Resettlement issues were identified and discussed regularly. IDA's team resettlement specialist visited at least two sample counties in all six project provinces while resettlement was ongoing. In total 1,371 mu of land were expropriated and 873 farmers were affected by a loss of cultivatable land. No one was relocated under the project. Since the land taken for a single water scheme ranged from 1.5 mu to 15 mu, adverse impacts on farmers were minor and were mitigated by redistributing farmland or conducting non-agricultural activities from which their livelihood and income were restored and improved in the shortest possible time. No Resettlement Actions Plan (RAP) was necessary since no county ever expected to have more than 150 people affected in a given year. Hence a simple inventory table showing the size of the land taken and the cost of land acquisition and resettlement in the Annual Work Plan and the Project Progress Report was prepared. Adequate efforts were made to improve resettlement reporting systems for hundreds of water schemes in the remote mountainous areas in the 45 counties in the six project provinces. Women were the main project beneficiaries. During supervision, a greater proportion of women was interviewed in the field for all components. No particular issues or risks were discovered. A specific study was done on the Hui people in Gansu Province, and ethnic minorities were interviewed in Yunnan and Inner Mongolia. IDA found no differences in resettlement implementation among the various ethnic groups. QAG Review. The QAG reviewed project implementation in 1999 and found supervision satisfactory. QAG complimented the supervision team on its staff continuity and "very judicious skill mix". The QAG reported noted that task team leadership and other key staff were in the Beijing office for the duration of the project, allowing optimal mission frequency and duration, and easy contact between missions. Aides-memoire and Project Status Reports were judged clear and concise. Supervision frequency and reporting were rated highly satisfactory. 7.3 Overall Bank performance: Overall, IDA's performance is rated satisfactory due to good quality and innovative preparation and effective supervision. Borrower 7.4 Preparation: The borrower's performance in preparation is rated satisfactory. The borrower identified appropriate beneficiary counties and played a key role in developing sustainable village-level project financing mechanisms. The project design was based on high levels of beneficiary financial commitment. All project counties prepared feasibility studies and preliminary project designs appropriate to their conditions. The NPO and PPOs took the lead in reviewing and approving the works. In a few cases, the borrower failed to recognize that beneficiaries would continue using their existing water sources for bathing, cleaning, and water animals, which resulted in under-utilization of the newly constructed water systems. Thus, demand management and full community participation in the preparation stage of the sub-projects are very important to ensuring project sustainability. 7.5 Government implementation performance: - 14 -  The central government's performance in implementation was satisfactory. Government sector policies and the project's development objective were fully aligned, and the project's importance was recognized by all levels of government. The NPO lacked suitable capacity early in implementation, but it improved following heavy emphasis on project management and better communications with IDA, as well as continuous in-house training. NPO's performance in project management improved significantly during the last year of implementation. The NPO was responsible for (a) organization, coordination, training, supervision, monitoring and control of the overall project implementation; (b) baseline surveys; (c) ICB procurement of project goods and materials; (d) appraisal and approval of designs of water supply works with an investment over US$350,000 and examination and acceptance of their quality and completion; and (e) consolidation of project reports, annual work plan, accounting and auditing reports. It performed these roles satisfactorily and continues to function well under the ongoing RWSS4. 7.6 Implementing Agency: In general, the performance of the implementing agencies was satisfactory. At the provincial level, the respective Provincial Project Offices (PPOs), which work under the guidance of provincial-level Leading Groups, were established for project implementation. The PPOs were drawn from provincial bureaus, in particular the public health bureau, water resources bureaus, NPHCC offices, etc. The PPOs were responsible for (a) organization, coordination, training, supervision, monitoring and control of the project implementation of their own provinces; (b) appraisal and approval of designs of all water supply works with an investment above US$60,000 but not exceeding US$350,000, and examination and acceptance of their quality and completion; (c) management of civil works procurement of water supply works with an investment budget exceeding US$100,000; and (d) consolidation of project reports, annual work plan, accounting and auditing reports. They fulfilled their roles satisfactorily, with definite improvements visible as the project progressed. At the county level, respective County Project Offices (CPOs) which work under the guidance of county-level Leading Groups were established for project implementation. The CPOs were drawn from county bureaus, in particular the public health bureau, water resources bureaus, patriotic health campaign committee offices, etc. The CPOs are responsible for (a) organization, coordination, training, supervision, monitoring and control of the project implementation of their own counties; (b) appraisal and approval of the designs of all water supply works with an investment less than US$60,000, and examination and acceptance of their quality and completion; (c) management of civil works procurement of water supply works with an investment budget less than US$100,000; (d) consolidation of project reports, annual work plan, accounting and auditing reports; and (e) support of operation and management of water supply systems. During the final stages of implementation, the project offices at all levels were adequately staffed and working effectively. The staffing, management and institutional capacity of the project offices at PPO and CPO levels were progressively strengthened through the support and technical assistance from NPO, and through interactions with supervision missions. Several PPOs and CPOs displayed an eagerness to learn and accepted new concepts and knowledge related to the design, operation, and management of water schemes. Their enthusiasm for gaining knowledge and translating it into action related to the sustainability of the water schemes increased noticeably through the end of the project. This was also reflected by some township towns, who already have established autonomous, self-sufficient water companies to operate and manage water schemes, as well as having become flexible in water tariff collection through private participation. All provinces performed satisfactorily - 15 -  in water treatment, latrine construction and health and education, except Hubei and Inner Mongolia which displayed highly satisfactory performances in the health education component. In terms of the quality of monitoring of project management, training, environmental protection and resettlement, Bank supervision missions reviewed the performance of the NPO and provincial agencies and this was generally found to be satisfactory. 7.7 Overall Borrower performance: The Borrower's overall performance is rated satisfactory for the high level of commitment and high quality of works at all levels, during preparation and most of the implementation period on physical investment of water treatment plants, latrines and health education components. 8. Lessons Learned The major lessons learned from the implementation of this project follow. First, water plant management practices need to be streamlined, with an emphasis on strengthening financial management and accounting practices. Standard accounting formats should be used in all WTPs with on-the-job training imparted to plant staff. Attempts to increase efficiency could also involve employing appropriate private sector management models. Second, demand management needs strengthening. More emphasis needs to be put on: (a) accurately forecasting demand for piped water supply to optimize plant size and production capacity; and (b) stimulating demand for safe water by conducting effective hygiene promotion campaigns as well as raising revenues to finance the cost of production. Third, procurement should be decentralized. Centralized procurement led to delays in project implementation. Decentralizing procurement responsibility to the provinces or even to the counties would speed up implementation and also make the local levels more accountable for timely implementation. In addition, the following issues are worth noting for future rural water supply and sanitation projects: (a) Institutional: - Different contexts need different management models; the present "one size fits all" approach should be modified to incorporate more flexibility including involvement of the local private sector. - The users, who are significantly contributing to both capital and operations/maintenance costs, need to be consulted more actively at the planning and design stage to increase future sustainability. - Ownership of the WTP assets is still unclear and needs to be clarified to render management more effective. (b) Financial: - Although the principle of significant user-financing has worked effectively, in some of the poorest villages, explicit subsidies for the very poor should be considered. - Tariff-setting is a cumbersome process and raising tariffs is particularly difficult. The whole County Price Bureau tariff approval process needs to be streamlined. (c) Technical: - The national water supply design norms need to be made more flexible to suit local conditions. - Water plant technical specifications need to be made more cost effective. - 16 -  (d) Sanitation and hygiene education: - Better coordination with ongoing national/provincial programs promoting sanitation and health would help reinforce project messages province-wide rather than in isolated target counties. - State of the art hygiene promotion programs using social marketing techniques would strengthen the sanitation and hygiene components and more effectively trigger behavior change. (e) Capacity building: -Training and capacity building should be made more user-oriented and decentralized for provincial and county staff. This could be tailored to suit local conditions and would be more cost effective. 9. Partner Comments (a) Borrower/implementing agency: We have read through the ICR report prepared by the Bank for the National Rural Water Supply project, and have the following comments: Generally speaking, the assessment of the project in the ICR precisely reflects the actual situation of the project and we appreciate very much the efforts made by all of the ICR mission members. The project has achieved its proposed objectives and brought satisfactory social, economic and health benefits to the rural residents at all levels- national, regional and local communities, and was in close accordance with the Chinese government's strategy of poverty alleviation. The integration of water supply, health education and sanitation in the project design stage has proved feasible, and better experimented the advantages of "3 in 1" design concept, which enables the rural residents to changes their health conceptions and behavior while enjoying the access to safe drinking water, and has created a sound condition for the development of rural China. The project management throughout the project implementation has been satisfactory. Multi-layer project training, supervision and management measures taken by the World Bank and Chinese counterparts have greatly facilitated the sustainability of the project. The excellent cooperation between the World Bank and the project executing agencies and staff is outstanding and critical to the successful implementation of the project. Meanwhile, the cooperation has also laid a solid foundation for the long-term collaboration between the Chinese Government and the Bank. In terms of some of the expressions in the report, we suggest they should be further modified so that the report will be more appropriate: Firstly, in section 3.1, "over 4 million rural inhabitants still" should be changed into " over 3 million rural inhabitants still". In the same section, we think this project has been implementing in the health departments and does not have very much to do with Ministry of Water Resources, thus we would like to convert "Ministry of Water Resources" into "the Government of China" as well. Secondly, with regards to the design of water plant capacity, we cannot agree on the word "overdesign". Some of the water plants really have not reached their design capacity at present, yet the designed terms for these water plants are 15 years, we should assess the design capacity based on the later water supply of design terms, not the current water services. We suggest that "overdesign" should be changed into " some of the water plants are not fully operating in line with their design capacities". (b) Cofinanciers: N.A. (c) Other partners (NGOs/private sector): N.A. - 17 -  10. Additional Information At appraisal, there were five participating provinces, with 40 participating counties or towns. At project completion, there were six participating provinces with 46 participating counties or towns. Like the original counties and towns, those added at the MTR were officially designated poor counties and towns. This allowed the project to maintain its poverty focus and prevented "leakage" of project benefits to wealthier counties. Province/County/City Listed in SAR Participated in actual implementation Yunnan Province Ludian County X X Yao'an County X X Yuanyang County X X Shiping County X X Huize County X X Yuanjiang County X X Luliang X Hebei Province Chicheng County X X Luanping County X X Pingshan County X X Yanshan County X X Lingshou County X X Qinglong Manchurian X X Autonomous County Yixian County X Wuqiang County X X Fengning Manchurian X X Autonomous County Shuangqiao X Weichang X Hubei Province Qichun County X X Tuanfeng County X X Jianli County X X Hanchuan City X X Zhijiang City X X Jiayu County X X Gucheng County X X Puqi City X Xiangyang County X X Yichang County X X Chibi X - 18 -  Province/County/City Listed in SAR Participated in actual implementation Nei Mongol Autonomous Region Wuchuan County X X Helingerl County X X Guyang County X X Kulun Banner X X Kalarqin Banner X X Wulateqian Banner X X Jiangxi Province Shangyou County X X Ningdu County X X Xingguo County X X Xiajiang County X X Yongfeng County X X Shangrao County X Hengfeng County X X Qianshan County X X Nanchang County X Gansu Province Pingchuan County X Jingyuan County X Beidao County X Hezheng County X Linxia County X Appraisal source: Annex 1, List of Provinces and Counties - 19 -  Annex 1. Key Performance Indicators/Log Frame Matrix PROJECT OUTPUTS, projected at appraisal Province (# of Investment No. Piped Deep well hand Rainwater counties) amount (RMB Water Systems pump collectors Latrines M) Gansu n.a. n.a. n.a. n.a. n.a. Hebei (9) 267 not defined not defined not defined 4,373 Hubei (10) 284 171 400 3,081 Nei Mongol 167 743 80 3,348 (6) Jiangxi (9) 207 161 n.a. 2,026 Yunnan(6) 183 148 5 9,965 1,352 Total (40) 1,108 1,223 85 11,525 14,180 PROJECT OUTPUTS, actuals at completion Province (# of Investment No. Piped Deep well hand Rainwater counties) amount (RMB Water Systems pump collectors Total latrines M) Gansu (5) 53 11 n.a. n.a. 988 Hebei (11) 263 392 n.a. n.a. 5058 Hubei (10) 293 147 n.a. 400 3550 Nei Mongol 165 602 n.a. n.a. 3348 (6) Jiangxi (7) 158 98 n.a. n.a. 1304 Yunnan (7) 147 144 n.a. 1,210 1191 Total (46) 1,079 1,394 n.a. 1,610 15,439 BENEFICIARIES Appraisal targets at completion (* % of rural population in the project counties having access to improved water supply) No. of counties to be No. of beneficiaries No. of beneficiary % access to safe water Province served ('000) villages at end of project* Gansu n.a. n.a. n.a n.a. Hebei 9 963 533 66 Hubei 10 1,200 721 47 Nei Mongol 6 640 1,034 66 Jiangxi 9 1,100 441 60 Yunnan 6 637 324 63 Total 40 4,540 3,053 - 20 -  Actuals, End of project No. of counties No. of beneficiaries No. of beneficiary % access to safe water Province served ('000) villages at end of project* Gansu 5 386.6 156 79 Hebei 11 1,136.5 594 96 Hubei 10 1,404 666 92 Nei Mongol 6 641.5 518 89 Jiangxi 7 820.2 246 75 Yunnan 8 811.8 229 84 Total 47 5,200.6 2,409 - 21 -  Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million 1-A Works - Hebei 4.77 6.26 132 1-B Works - Hubei 7.76 7.39 96 1-C Works - Jiangxi 4.95 5.34 108 1-D Works - Inner Mongolia 5.04 4.65 93 1-F Works - Yunnan 4.63 4.47 97 1-F Works - Gansu 1.85 2.17 118 2 Goods 33.80 35.10 107.2 3 Consultancy services 0.40 1.90 473 4 Training/Study Tours 2.70 1.28 66 5 Incremental costs 0.30 0.15 50 6 Unallocated 3.80 0.00 7 SARS - Consultancy and training 0.80 Total Baseline Cost 70.00 69.51 Total Project Costs 70.00 69.51 Total Financing Required 70.00 69.51 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 17.40 60.00 0.00 77.40 (0.00) (7.00) (24.00) (0.00) (31.00) 2. Goods 44.00 0.00 0.50 0.00 44.50 (35.20) (0.00) (0.40) (0.00) (35.60) 3. Services 0.00 0.00 4.20 0.00 4.20 Consultancy (0.00) (0.00) (3.10) (0.00) (3.10) 4. Training/Study Tours 0.00 0.00 0.30 0.00 0.30 (0.00) (0.00) (0.30) (0.00) (0.30) 5. Incremental costs 0.00 0.00 0.00 2.70 2.70 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Unallocated 0.00 0.00 0.00 5.00 5.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 44.00 17.40 65.00 7.70 134.10 (35.20) (7.00) (27.80) (0.00) (70.00) - 22 -  Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 25.20 61.73 0.00 86.93 (0.00) (0.00) (30.28) (0.00) (30.28) 2. Goods 35.10 0.00 5.50 0.00 40.60 (35.10) (0.00) (0.00) (0.00) (35.10) 3. Services 0.00 0.00 1.89 0.00 1.89 Consultancy (0.00) (0.00) (1.89) (0.00) (1.89) 4. Training/Study Tours 0.00 0.00 2.82 0.00 2.82 (0.00) (0.00) (1.78) (0.00) (1.78) 5. Incremental costs 0.00 0.00 0.00 0.15 0.15 (0.00) (0.00) (0.00) (0.15) (0.15) 6. Unallocated 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 35.10 25.20 71.94 0.15 132.39 (35.10) (0.00) (33.95) (0.15) (69.20) 1/Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. 1- Works 29.00 23.40 31.62 30.28 21.45 35.20 104.4 91.7 111.3 2 - Goods 33.80 3.38 3.38 35.10 5.50 0.00 103.8 162.7 0.0 3 - Consultancy Services 0.40 0.00 0.00 1.89 0.00 0.00 472.5 0.0 0.0 4 - Training/Study Tours 2.70 1.08 0.00 1.78 0.00 0.00 65.9 0.0 0.0 5 - Incremental costs 0.30 0.00 0.00 0.15 0.00 0.00 50.0 0.0 0.0 6 - Unallocated 3.80 0.00 0.00 0.00 0.00 0.00 0.0 0.0 0.0 7 - SARS 0.00 0.00 0.00 0.80 0.00 0.00 0.0 0.0 0.0 - 23 -  Annex 3. Economic Costs and Benefits The majority of project benefits occurred within the project area, with some 5.2 million beneficiaries. The project areas are among the poorest in China, and the project raised average per capita net-incomes significantly for about one million rural households directly benefiting from the project. As no detailed study on this was undertaken, no exact figures are available. The project's major benefits occurred in the form of (a) reduced medical expenses for water-related deaths; (b) reduced time needed to fetch water; and (c) increased incomes made possible by having more time for productive work due to (a) and (b). Due to the lack of economic and financial information on actual benefits achieved, no economic cost or benefits analysis was done. Nevertheless, some estimates can be made about reduced medical expenses. In one of the project villages in Gansu province, the number of water-borne diseases declined by about 70% after introducing safe, piped water supply. This would annually represent about RMB 20 to 40 in saved medical costs per household, or about RMB 20 to 40 million annual savings at the national level. Time savings from not having to fetch water can be estimated at on average one hour per household per day. This would equal about 360 million man-hours annually, equal to 40 million man-days of labor work at the national level. Even at a daily wage of RMB 5, this would amount to about RMB 200 million of increased labor income. - 24 -  Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation Preparation, 6 SR. ENVIRONMENTAL October 1996 ECONOMIST (1); PR. OPERATIONS OFFICER/ECONOMIST (1); SOCIOLOGIST (1); FINANCIAL ANALYST(1); WATER & SANITATION EXPERT (1) Preparation, 5 SR. ENVIRONMENTAL December 1996 ECONOMIST (1); PR. OPERATIONS OFFICER/ECONOMIST (1); SOCIOLOGIST (1); FINANCIAL ANALYST(1); PROCUREMENT (1) Pre-appraisal, 7 SR. ENVIRONMENTAL Jan/Feb 1997 ECONOMIST (1); PR. OPERATIONS OFFICER/ECONOMIST (1); SOCIOLOGISTS (2); FINANCIAL ANALYST(1); PROJECT ASSISTANT (1); ADMINISTRATIVE ASSISTANT (1) Appraisal/Negotiation April 1997 7 SR. ENVIRONMENTAL ECONOMIST (1); PR. OPERATIONS OFFICER/ECONOMIST (1); SOCIOLOGISTS (2); FINANCIAL ANALYST(1); PROJECT ASSISTANT (1); TEAM ASSISTANT (1) May 1997 Negotiations were conducted via exchange of telexes, based on technical discussions held after conclusion of appraisal. Supervision 06/17/1999 6 ENGINEER (1); S S FINANCIAL ANALYST (1); URBAN PLANNER (1); SOCIOLOGIST (1); TEAM ASSISTANT (1); PROJECT ANALYST (1) 6 FINANCIAL ANALYST/TTL S - 25 -  01/27/2000 S (1); TEAM ASSISTANT (1); SECTOR COORDINATOR/ENGINEER (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT ANALYST (1); ENGINEER (1) 09/27/2000 4 ENGINEER (1); FINANCIAL S S ANALYST, TTL (1); PROCUREMENT SPECIALIST (1); URB ENVMT SPECIALIST (1) MTR - 04/8/2001 6 FINANCIAL ANALYST/TTL S S (1); DISBURSEMENTS/FINANCIA L MANAGEMENT (1); RESETTLEMENT (1); PROCUREMENT (1); ENGINEER (1); HEALTH EDUCATION (1) 10/17/2001 3 HEALTH EDUCATION & S S SANITATION (1); ENGINEER (1); PROJECT MANAGEMENT (1) 04/05/2002 7 TTL, SANITARY ENGINEER S S (1); TECHNICAL ASPECTS (1); PROJECT MANAGEMENT (1); HEALTH EDUCATION (1); DISBURSEMENT (1); RESETTLEMENT (1); MGMT & INT'L EXPERIENCE (1) 09/06/2002 2 SANITARY ENGINEER (1); S S PROJECT MANAGEMENT (1) 09/19/2003 3 SANITARY ENGINEER (1); S S MANAGEMENT SPECIALIST (1); RESETTLEMENT SPECIALIST (1) ICR No separate ICR mission S S was conducted, but data collection was done during the September 2003 mission. Additional visits and assessments were done as part of the supervision of the ongoing RWSS4. - 26 -  (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 69.6 253.5 Appraisal/Negotiation 16.8 41.3 Supervision 122.4 422.5 ICR 7.0 39.0 Total 215.8 756.3 Regional direct to full costs mark-up is 25% for fiscal years prior to FY00. - 27 -  Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 28 -  Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 29 -  Annex 7. List of Supporting Documents Aides-memoire of supervision missions Resettlement Assessment Paper Economic Analysis Working Paper Borrower's ICR Rural Water Supply and Sanitation in China: Scaling up Services for the Poor (February 2004) Pictures: Old well in Inner-Mongolia New piped water supply - 30 -  Health education during a mission to Jiangxi Province New WTP in Jiangxi - 31 -  - 32 -  IBRD 28662R 70