China - Rural Water Supply Project

Document of The World Bank FOR OFFICIAL USE ONLY ReportNo. 11251 PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (CREDIT 1578-CHA) SEPTEMBER 30, 1992 Environment, Human Resources and Urban Development Operations Division Country Department II (China and Mongolia) East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY AND EQUIVALENT UNITS Renminbi (RMB) Yuan (Y) 1.00 = 100 fen At Appraisal At Closing US$1.00 = Y 2.50 Y 5.40 US$1.00 = SDR 1.03 SDR 1.36 WEIGHTS AND MEASURES lpcd = liters per capita per day cubic meter (m3) or ton of water = 284 US gallons ABBREVIATIONS AND ACRONYMS CPO - County Project Office ICB - International Competitive Bidding LCB - Local Competitive Bidding MOF - Ministry of Finance MOPH - Ministry of Public Health NPHCC - National Patriotic Health Campaign Committee NPHCCO - Executive Office of the NPHCC NPO - National Project Office PPO - Provincial Project Office WFP - World Food Program FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation September 30, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on China Rural Water Supply Project (Credit 1578-CHA) Attached, for information, is a copy of a report entitled "Project Completion Report on China - Rural Water Supply Project (Credit 1578-CHA)" prepared by the East Asia and Pacific Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by recipients only in the perormance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) TABLE OF CONTENTS Page No. Preface . .............................................................. i Evaluation Summary .................................................... ii PART I. PROJECT REVIEW FROM IDA'S PERSPECTIVE ........................ 1 A. Project Identity ................................................. 1 B. Project Background ............................................... 1 C. Project Objectives and Description ............................... 2 D. Project Design and Organization .................................. 2 E. Project Implementation ........................................... 3 F. Project Results .................................................. 4 G. Project Sustainability ........................................... 9 H. IDA Performance .................................................. 10 I. Borrower Performance ............................................. 10 J. Project Relationship ............................................. 10 K. Lessons Learned .................................................. 10 L. Project Documentation and Data ................................... 12 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .................. 13 A. Comments on Part I ............................................... 13 B. Adequacy and Accuracy of Factual Information in Part III ... ...... 15 C. Evaluation of IDA's Performance .................................. 15 D. Evaluation of Borrower's Own Performance ......................... 16 E. Project Relationship ............................................. 16 F. Evaluation of Co-financiers' Performance ......................... 16 G. Lessons Learned .................................................. 16 PART III. STATISTICAL INFORMATION .................................... 18 A. Related IDA Credit ............................................... 18 B. Project Timetable ................................................. 18 C. Credit Disbursements ............................................. 19 D. Project Implementation ........................................... 19 E. Project Costs and Financing ...................................... 20 F. Project Results .................................................. 22 G. Status of Covenants .............................................. 23 H. Use of IDA Resources ............................................. 24 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTENTS Cont. ANNEXES 1. Physical Project Results ......................................... 26 2. Staffing of Project Offices ...................................... 27 3. ICB and LCB Procurement Goods and Civil Works .................... 28 4. Review and Approval of Sub-project Design Reports .... ............ 31 5. Project Coverage ................................................. 32 6. Training Program and Results ..................................... 33 7. Financial Statements of Number Two Waterworks, Cixi, Zhejiang .... 34  PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) PREFACE This is the Project Completion Report (PCR) for the Rural Water Supply Project in China, for which Credit 1578-CHA in the amount of SDR 82.1 million was approved on April 11, 1985. The credit was closed on December 31, 1991, one year behind schedule. It was fully disbursed and the last disbursement was on April 23, 1992. The PCR was jointly prepared by the Environment, Human Resources and Urban Development Operations Division, China and Mongolia Department of the East Asia and Pacific Regional Office (Preface, Evaluation Summary, Parts I and III), and the Borrower (Part II). Preparation of the PCR was started during the Association's final supervision mission of the project in March, 1992, and is based, inter alia, on the Staff Appraisal Report; the Development Credit and Project Agreements; supervision reports; correspondence between the Association and the Borrower; and internal IDA memoranda.   ii PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) EVALUATION SUMMARY Obiectives 1. The physical objective of the project was to provide safe and adequate water supply to some six million people who were drinking sub-standard water or had inadequate supply. The institutional objectives of the project were to develop national and provincial planning capabilities, improve the cost- effectiveness of and financial arrangements for projects, and ensure adequate operation and maintenance of completed systems. Implementation Experience 2. The most critical variances between planned and actual project implementation include project coverage, costs and timetable. The performance of the implementing agency at the national level (NPO) also had notable effects on project implementation. The actual numbers of beneficiary were about 5,730 villages or 7.4 million persons, 24% and 27% higher than those estimated at appraisal respectively. Increase in per capita construction and operation costs of sub-projects, particularly those constructed after 1987, constituted another variance. A one year delay in physical construction was experienced. As a result, IDA agreed to extend the project closing date by one year to December 31, 1991. (Paras. 1.10-1.14) Results 3. The project was largely successful in achieving its major objectives. Its coverage targets were exceeded. About 90% of beneficiaries received piped water of acceptable quality. The target for household connection has also been exceeded by about 15% to allow over 90% of piped water users enjoy maximum time savings and health benefits. At the end of full implementation, an additional 2.9 million persons is expected to be served with the use of provincial revolving funds established under the project. Quality of construction and water plant equipment installed appeared to be generally in accordance with the approved design reports. Most systems were designed for a 15-year horizon in contrast to the 10-year period stipulated in the Planning Manual. Periodic water quality testing and surveillance are generally being performed and are adequate. In most cases, waterworks are run independently, with user charges covering at least full recurrent costs and some depreciation and/or debt service. Billing and collection are generally effectively handled. Project construction accounts are in good order. These accounts were audited regularly. Consolidated accounts prepared by the PPOs and NPO were audited annually by the provincial and state  iii audit authorities. The quality and contents of operating accounts vary. (Paras. 1.15-1.16, 1.18-1.34). 4. The institutional objectives of the project were largely met with: (a) establishment of national, provincial and county level offices to oversee and provide general guidance; (b) introduction of systematic approach to selection of alternatives; (c) preparation and dissemination of manuals, guidelines and establishment of review, approval and supervision procedures; (d) introduction of provincial revolving funds as a new financing mechanism; (e) provision of technical assistance and training; and (f) completion of a sector survey as a first step to developing sector plans and strategies. (Para. 1.17). 5. Major project impact has several sources. From the institutional development perspective, technological and management skills in design, construction, operations and maintenance of waterworks and financial planning were enhanced. Experience with ICB and LCB procurement had also been gained. From the beneficiaries perspective, time savings are substantial in poorer and resource short regions where households did not have dug-wells, rainwater collectors and other relatively safer water sources prior to the project. Empirical evidence on health impact, where available, is strong. The project's major contribution was to the growth of town and village based enterprises and to the development of income-generating activities at the household level. For the poor families, the wage employment provided in civil works constituted an important motivation for participation in the project. The procurement of local materials through ICB and LCB was an added benefit of the project for the local economies. Sustainabilitv 6. The project is likely to maintain an acceptable level of net benefits throughout its economic life because of the following: (a) responsive organization at the county and township levels; (b) a majority of financially viable operations through effective collection of adequate water tariffs from users and profit generating side businesses; (c) the current process of establishing permanent county and township water supply management offices after completion of the project; and (d) formulation of guidelines and regulations on financial and technical aspects of operations and maintenance, and training. Findinas and Lessons Learned 7. Many valuable lessons can be drawn from the project. They are related to: integration of water supply with health education, sanitation and drainage; institutional development including ICB and LCB procurement, and financial management; closer IDA and central level supervision at early stages; inflation-adjusted thresholds for review and approval of sub-project design reports; maintenance of provincial and county offices on a more permanent basis; need to deal with unaccounted-for-water; need for an appropriate set of quality standards; watershed management; community involvement; and use of time saving for local economic development. (Para. 1.42).  PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) PART I: PROJECT REVIEW FROM IDA'S PERSPECTIVE A. Project Identity 1.1 Project Name: Rural Water Supply Project Credit Number: 1578-CHA RVP Unit: East Asia and Pacific Region Country: China Sector: Rural water supply B. Project Background 1.2 In 1983, when the project was first conceived, about 40 percent of China's 800 million rural population -- some 300 million people -- still had critical water supply needs. Traditionally, water has been obtained from community or household systems such as bucket wells, hand pump wells, rainwater collection tanks, or is fetched from rivers, springs or ponds. With rising income, many rural families have come to expect and are willing to pay for piped systems providing safe and convenient water, sometimes by public standpipes but more commonly connected to the house or courtyard. Improved water supply is also seen to be an important stimulant for development of township and rural industries and services. 1.3 Prior to China's endorsement of the United Nations Drinking Water and Sanitation Decade Program in 1980, rural water supply improvement was carried out through mobilizing the masses by local Patriotic Health Campaign Committees, but this work lacked integrated planning. In 1981, the State Council designated the National Patriotic Health Campaign Committee (NPHCC) as the organization responsible for the Decade activities. Sector issues identified at appraisal were: (a) the absence of a concrete national plan and a compilation of provincial plans; (b) little seed capital and no appropriate financing mechanisms; (c) weak institutional framework at local levels to plan, construct and maintain the more elaborate piped and pumped water systems; (d) wide variation of technical capabilities across regions with limited dissemination and guidance provided at the center; and (e) widespread pollution in some regions requiring specialized water treatment methods which are costly and controversial. 1.4 The strategic objectives of the project were to: (a) improve the organizational arrangements for preparing and implementing broad-scope projects; (b) introduce economic and affordability considerations in project planning; (c) improve design and equipment technology and improve construction quality; (d) introduce revolving funds as new financing mechanisms; (e) train personnel in planning, design, construction, management and operation of water systems; and (f) assist in developing sector plans and strategies.  2 C. Proiect Obiectives and Description Pro-ect Obiectives 1.5 The physical objective of the project was to provide safe and adequate water supply to some six million people who were drinking sub- standard water or had inadequate supply. The institutional objectives of the project were to develop national and provincial planning capabilities, improve the cost-effectiveness of and financial arrangements for projects, and ensure adequate operation and maintenance of completed systems. Project Description 1.6 At appraisal, the project was expected to cover 4,650 villages in 25 counties of the provinces of Liaoning, Shaanxi, Sichuan and Zhejiang and the municipality of Beijing. The provinces had a total population of 213 million and a rural population of 172 million. The 25 counties (five in each province) included in the project had a rural population of about 14 million, almost 80 percent of whom lacked adequate safe drinking water. The types of water supply provided by the project would range from non-piped individual systems such as rainwater storage tanks and handpumps (for 16 percent of the beneficiary population), to piped water systems with groundwater or surface water sources and with varying degrees of treatment. About 80 percent of the services from piped systems would be by house connections. 1.7 The institutional development component of the project comprised: (a) preparation of design, construction and operations manuals; (b) provision of training and technical assistance at national, provincial, county and village levels; and (c) establishment and operation of provincial revolving funds to provide financing for construction of water supply systems in other non-project villages. D. Proiect Desiqn and Oraanization 1.8 As designed, the scope and scale of the project was appropriate, implementation was properly timed and was responsive to a dire need. Although sanitation and health and hygiene education are recognized as important complementary components of any water supply project, the project, as the IDA's first undertaking in the sector in China, focussed only on the water supply side. A second project (Rural Water Supply and Sanitation Project, Credit 2336-CHA approved in FY92) was designed to integrate all three elements. 1.9 Relevant parties such as the National Project Office (NPO), provincial project offices (PPOs), county project offices (CPOs) and the cooperating agencies clearly understood the project design. The success of the project was the result of the following factors: (a) systematic project development; (b) organizational set-up from national to sub-project level (subsequently the process to establish management offices during operation); (c) beneficiary participation, especially on up-front cash and labor contributions; (d) preparation and utilization of technical manuals; and (e) the adherence to formulated operational regulations.  3 E. Prolect Implementation 1.10 The most critical variances between planned and actual project implementation include project coverage, costs and timetable. The performance of the implementing agency at the national level (NPO), particularly after changes in its organizational linkages in of 1989 also had notable effects on project implementation (paras. 1.13-1.14). Project risks were appropriately identified during project preparation. However, the projection of local inflation at 3% p.a. was much below the actual double-digit annual inflation experienced in several years during the project implementation period. Project Coverage and Costs 1.11 The project benefitted about 5,730 villages and 7.4 million persons, about 24% and 27% higher than the respective appraisal estimates. Increase in per capita construction and operation costs of sub-projects, particularly those constructed after 1987, constituted another variance. High local inflation reflected in the cost of labor and materials, and provision of higher level of services (household connections in stead of standposts) were the key reasons. The higher costs were met by: (a) lower than expected ICB prices; (b) amendment of the Development Credit Agreement to allow the use of cost savings to finance local civil works (March 22, 1988); (c) increased contributions by beneficiaries; and (d) construction of more cost effective combined systems to achieve economy of scale. Implementation Delays 1.12 Delays in physical constructions were experienced and the main reasons were: (a) delays of up to eight months in ICB procurement and delivery of construction materials and equipment; (b) slow review and approval of sub- project design reports by NPO, with many design taking 3-4 months to process; and (c) management problems in some provinces in early years of project implementation. Due to paper shortage and inefficient distribution arrangements, the preparation and dissemination of manuals were also delayed (Table 3.3). As a result, IDA agreed to extend the project closing date by one year to December 31, 1991. The National Prolect Office 1.13 The NPO has the overall responsibility for project implementation. At the start of the project, NPO was under the Executive Office of the National Patriotic Health Campaign Committee (NPHCCO). As a result of the government's reorganization in 1989, the Foreign Loan Office (FLO) under the Ministry of Public Health (MOPH) was designated NPO, taking over project implementation responsibilities at the national level. Three officers (out of a total of about 15) from the former office were transferred to FLO which had a staff of over 20 at the time. FLO had been handling World Bank health projects and was familiar with Bank procedures on matters such as loan processing and procurement. Agreement was reached between NPHCCO and FLO that technical matters would continue to be handled by NPHCCO while coordinating functions would be assumed by the new NPO.  4 1.14 Although the agreement appeared straight forward, actual execution and collaboration between the two agencies proved difficult at times. The new NPO, with only one full-time and nine part-time officers (and consultants) on the job, and no water supply expertise of its own was not able to provide the required technical guidance and supervision adequately. The existing problem of insufficient prior review and approval of large sub-project designs with about 60% completion in 1985-86 dwindled to 12% in 1990-91. So far, little effort has been made to inspect completed large sub-projects (some operational since 1987) and to provide the necessary acceptance documents to the PPOs to enable formal transfers of fixed asset accounts from construction units to operating units. At appraisal, it was estimated that a Btaff of 24 including an advisory team of six technical experts would be needed at the national level. Actual staffing turned out to be much lower than expected and the project, as a result, suffered from insufficient supervision and monitoring by the NPO (para. 3.7). F. Project Results 1.15 There was high variability in project design, financing and implementation owing to significant differences in local conditions. Therefore, it must be noted that any generalization made on project results and impacts does not fully reflect the valuable lessons to be learned from less typical situations. Proiect Achievements 1.16 The project was largely successful in achieving its major objectives. Its village and population coverage targets were exceeded by 24% and 27% respectively with about 5,750 villages and 7.5 million people served. About 90% of beneficiaries received piped water of acceptable quality. The target for household connection has also been exceeded by about 15% to allow over 90% of piped water users enjoy maximum time savings and health benefits. At the end of full implementation, an additional 2.9 million persons is expected to be served with the use of provincial revolving funds established under the project (para. 1.25). In addition, the success of the project and lessons learned motivated the central authorities to ask for a second project, this time in poor areas with special emphasis on sanitation and health education. The second project is expected to serve a rural population of about nine million (para. 3.1). 1.17 The institutional objectives of the project were largely met with: (a) establishment of national, provincial and county level offices to oversee and provide general guidance to construction and operations of water systems; (b) introduction of systematic approach to selection of alternatives based on economic and affordability considerations during sup-project planning; (c) preparation and dissemination of manuals, guidelines and establishment of review, approval and supervision procedures to upgrade technology and improve construction quality; (d) introduction of provincial revolving funds (by allowing funds to build up because of differences in repayment terms of provincial loans to villages and Government loans to provinces) as a new financing mechanism (para. 1.25); (e) provision of technical assistance and training, including seminars conducted by international and national experts,  5 study tours and workshops (paras. 3.16 and 3.18); and (f) completion of a sector survey study in 1990 in collaboration with consultants funded by EEC as a first step to developing sector plans and strategies. Ouality of Physical Work 1.18 Design reports reviewed by supervision missions appeared to conform with standard requirements. Feasibility studies, including an analysis of alternative technologies, preliminary designs and details drawings, were prepared. However, due to the NPO's slow review process and the PPOs' desire to expedite implementation, many design reports were not reviewed by NPO as agreed during appraisal. Quality of construction and water plant equipment installed appeared to be generally in accordance with the approved design reports (by NPO, PPO or CPO, depending on size) and shop drawings. Periodic water quality testing and surveillance are generally being performed periodically and are adequate. 1.19 Most systems were designed for a 15-year horizon in contrast to the 10-year period stipulated in the Planning Manual. Water production and demand varied from province to province: Shaanxi and Sichuan have very large surplus capacity while Zhejiang is just coping with its current production level, primarily due to the increasing demand of new rural industrial users. For the project as a whole, the average water consumption for domestic use is 40 lpcd. This include drinking for domestic animals and gardening. Reliabilitv 1.20 Intermittent water supply is frequent, but many systems provide 24 hour service. Power cuts are unavoidable causes of unreliability of water supply. Other causes of intermittency include management decisions to save energy costs of pumping and to ration supply when connections are not metered. In the case of systems with public connections, to minimize payment to caretakers and relevant management difficulties, supply is also limited to several hours of the day. On the whole, the higher the level of household connections and the share of enterprises among consumers, the longer is the daily supply period and the higher is the reliability. In non-piped systems, less is known about reliability characteristics. Seasonal fluctuations in rain-water systems is high and household reliance on vendors and on polluted sources increase during dry seasons. Proiect Finances and Accounting 1.21 Many of the larger waterworks in operation are run as autonomous enterprises with independent accounts and well-defined loan repayment responsibilities. Water charges generally cover the full operation and maintenance cost, depreciation and/or debt service. Some, on the other hand, are managed by township/village governments along with all other businesses owned by them. Though full-cost recovery is the aim, there has been frequent cross subsidization, and it is not possible to clearly segregate the finances of the water industry from the rest. An example of financial statements (income statement and balance sheet) prepared by the former type of waterworks is given in Annex 7. Financial statements of medium sized waterworks are  6 similar in nature but generally simpler. Small water plants also prepare financial statements, but they are usually very simple with only a few lines entries in each. 1.22 In most cases, waterworks are run independently, with user charges covering at least full recurrent costs (Y.30-.75/ton) and some depreciation and/or debt service. The balance of loan repayment is met by village funds and/or users. Though the willingness to pay is high, and affordability is not a problem (paras. 1.37-1.38), water prices are under the control of local price bureaus. As a result, small isolated waterworks, serving up to 20% of total beneficiaries, sometimes cannot meet their full costs when operating costs are high. These waterworks have to rely on subsidies from their local governments. 1.23 Billing and collection of water charges are generally effectively handled by the village level collectors, and collections are made monthly, bi- monthly or quarterly. Except in Liaoning, most household connections are metered. Domestic users pay Y.30-Y1.00 for each ton of water used, industrial and commercial rates are up to 50% higher. There is little bad debt, however, due to seasonal fluctuation of agricultural income, accounts receivable sometimes are as high as 20% of total revenue. Non-revenue water is low as line losses are often spread among users, either in the calculation of unit rates or in the form of a surcharge to each household. 1.24 Overall, project construction accounts were found to be in good order. They were prepared in accordance to guidelines and regulations issued by NPO. These accounts were audited regularly by the county audit authorities. Consolidated accounts prepared by the PPOs and NPO were in turn audited annually by the provincial and state audit authorities. The quality and contents of operating accounts vary. Certain large regional waterworks prepare detailed income statements and balance sheets similar to those prepared by urban water companies. At the other extreme, some small village systems lack basic data such as sales volume and unit rates in their simple books. Provincial Revolving Funds 1.25 During appraisal, it was expected that the difference in repayment terms of provincial loans to villages (10-12 years with 2-4 years grace) and Government loans to provinces (25 years with 10 years grace) would allow substantial funds to build up in provincial revolving funds. These funds would then be used to finance other sub-projects in project as well as non- project counties. However, due to implementation delays and sometimes late debt repayments (particularly in Shaanxi), the expected additional benefits (1.4 time the initial coverage amounting to about 8.5 million persons) would not be fully realized. Currently, revised estimates show an overall additional coverage of 2.89 million persons, with individual provincial increases in millions of population estimated as follows: Beijing 0.40, Liaoning 0.70, Shaanxi 0.40, Sichuan 0.72, and Zhejiang 0.67.  7 Proiect Justification 1.26 Water is an essential element for life and is indispensable for economic and social development. It is not, however, an expected practice to estimate the internal economic rate of return for water supply projects as benefits are not easily quantifiable. The importance of the project can be demonstrated by the users' support during construction, and their willingness to pay for services provided. Project Impact 1.27 Major project impact has several sources. From the institutional development perspective, technological and management skills in design, construction, operations and maintenance of waterworks and financial planning were enhanced. Experience with ICB and LCB procurement had also been gained (para. 1.17). 1.28 From the beneficiaries perspective, time savings, although variable by region, are substantial in water scarce regions. Prior to the project, distances walked were long, heights climbed were tiring and queuing time was extensive. Empirical evidence on health impact, where available, is strong. Moreover, hygiene practices have improved in many areas. Sharp declines in morbidity of dental fluorosis among children, in dysentery and water-borne diseases were reported everywhere. Substantial savings in medical expenditures incurred by households were also noted. As anticipated at appraisal, both the households and enterprises continue to use existing water sources for non-potable purposes. This makes the full realization of time savings and health benefits difficult and, in some counties, reduces the actual consumption to 25-30% of the planned levels, thus creating problems of excess capacity. 1.29 One of the project's major contributions was to the growth of town and village based enterprises and to the development of income-generating activities at the household level. Besides households, small and medium scale enterprises are key consumers of water supply in many project counties. Their share in consumption is highly variable, ranging from 10-40%. Their activities ranged from family run restaurants, food processing shops, light industries, to auto-parts production, water bottling, fisheries and other agro-industries. Both the employment and the local/regional development effects of these appeared large but inadequately documented. Of direct and substantial benefit to households were their ability to use water from the project to start or augment economic activities such as pig raising, poultry, horticulture, vegetable gardening and green house agriculture. A household could as much as double its income by starting a small green house. From part-time bean-curd preparation, a household could make as much money as from rice growing. Even when households shifted from use of hand-pumps to tap water, quality and volume produced of vegetables, bean-curd, etc., increased substantially. The use of water for these purposes also contributed to cost recovery of the project. 1.30 In addition to the employment impact mentioned above, about 15-20% of total project costs was spent on wages for local people. For the poor  8 families, the wage employment provided in civil works constituted an important motivation for participation in the project. Additional employment was also generated from the operation and management of the water systems. The supply of local materials through ICB and LCB procurement was an added benefit of the project for the local economies. 1.31 The evidence of significant economic and social benefits from the project can also be inferred from the pressure villages, left outside the planned scope of the project, brought upon the administration, high willingness to pay for investment and operating costs, and their expressed desire to have household connections as a key investment for their children. Women in Development (WID) Effects 1.32 Some of the health effects are particularly strong for women. Because many women continue to wash raw food, dishes and laundry in polluted traditional sources, they are less able to enjoy time savings from the project. However, rapid changes are visible in those rural households which participate in industry, construction and service sector employment; in some regions, 20-45% of households belong to this category. Among these, higher income and high value attached to female labor encourage broader use of tap water and stimulate investments in sanitation infrastructure. At the same time, food, textile and other industries facilitated by improved water supply create jobs for women who enjoy the convenience of tap water. 1.33 The project's direct employment effects on women are not easily measurable. Women appear to have constituted from 15-35% of the construction labor force in different counties. Their share in project staff range from 10-35% and their participation in water plants and among technical specialist is below 10%. Gender differences in fields of academic studies appear as the main cause of lower level of female participation in water supply sector employment. Women's participation in training activities averaged 15% of the total provided under the project. Poverty Effects 1.34 Time savings of the project is particularly strong in poorer and resource short regions where households did not have dug-wells, rainwater collectors and other relatively safer water sources prior to the project. Poorer households, if connected to pipe water, are also able to make a relatively larger difference in their income by using their water for home based income generating activities. Health impact was also stronger for the poor who were the least able to get health care. However, in order to cover cost of care-taking arrangements, standpost users usually pay 40-65% more for less convenient and intermittent services as compared to those with household connections, and are unable to fully enjoy the time saving and income effects of the project. To avoid this situation, the government is encouraging household connections in poorer regions as well. While the imposition of minimum level for water consumption may help enhance health and time savings effects in most areas as well as allow a better use of the water supply capacity, it may force the poorest of the poor to spend 5-6% of their  9 household income on water. However, only a very small fraction of households appear to be in this category in the project areas. G. Prolect Sustainability 1.35 The project is likely to maintain an acceptable level of net benefits throughout its economic life because of the following: (a) responsive organization at the county and township levels; (b) a majority of financially viable operations through effective collection of adequate water tariffs from users and profit generating side businesses; (c) the current process of establishing permanent county and township water supply management offices after completion of the project; and (d) formulation of guidelines and regulations on financial and technical aspects of operations and maintenance, and training. 1.36 Risk factors relating to project sustainability include: (a) unregulated water consumption by households with no meters; (b) uncontrolled leakages and other unaccounted-for-water; and (c) non-responsive water tariff, particularly of small plants with high operating costs, resulting in inadequate funds for repairs and maintenance. These risks can be mitigated by improvements in waterworks management. Affordability 1.37 The affordability of capital costs of the project was enhanced by relatively high incomes prevalent in many counties and the existence of village and/or town administration funds. The presence of profitable collectives reduced direct burdens to households as much as 100% and provided the incentive for individual households to contribute. When village funds were lacking, households assumed up to 55% of the up-front costs of the project. More typically, household contributions range from 20-25% and constituted 3-12% of their annual income and within the limits of a year's savings. In some cases, village collectives also facilitated the participation of the poorest in the project by subsidizing their fixed and/or running expenses. The flexibility provided to poor households to make part of their contributions in materials and labor also increased affordability. The World Food Program (WFP) assistance provided in two provinces further reduced the up-front contributions of households. Except in extreme cases (para. 1.33), water charges are generally affordable, ranging from 0.3% to 1.2% of gross household income, and the willingness to pay higher charges is manifested especially in areas without alternative sources of water such as handpumps and rainwater collectors. 1.38 The community participation in assessment of needs, service levels and affordability has been high. In accordance with the project appraisal, affordability has been considered at the sub-project level, and villagers, PPO and NPO have been consulted when project costs were high. Often, smaller sub- projects have been combined into larger schemes to enhance affordability.  10 H. IDA Performance 1.39 IDA performance throughout the project has been satisfactory. The project offices at the provincial and county levels could have benefitted from the establishment of more direct relationships with IDA and from more in-depth and more frequent supervision missions in the field. I. Borrower Performance 1.40 The main strengths of the borrower lie with the local project offices and the supporting agencies in the provinces. They have had a sincere commitment to project objectives, and were very diligent in carrying them out. However, due to management and staffing problems, the NPO was unable to carry out its responsibilities to their fullest (paras. 1.13-1.14). J. Prolect Relationship 1.41 The Bank has developed good relationships with both national and local level implementing agencies. The Bank and borrower relationships with other relevant parties including WFP and GTZ of Germany has also been satisfactory. Because the project provided the first experience for the implementing agencies, closer supervision of implementation would have enhanced its institution building and technology development impacts. K. Lessons Learned 1.42 Many valuable lessons can be drawn from the project. Preliminary lessons learned were incorporated into the design of the Rural Water Supply and Sanitation Project approved in February 1992 (para. 3.1) and would continue to facilitate implementation of the new project. Main lessons are summarized as follows: (a) integration of water supply with health education, sanitation and drainage would be desirable in order to fully realize the health and time savings benefits; (b) institutional development including ICB and LCB procurement, and financial management were crucial to the success of the project. Its sustainability also depends on further strengthening of institutions with a focus on management, operations and maintenance of water plants; (c) early preparation of ICB procurement, use of LCB for items readily available in China and for which no foreign firm would have a competitive advantage, and periodic adjustments of sub-project review thresholds would avoid unnecessary delays in implementation; (d) local level flexibility in the design, finance and implementation of the project had allowed appropriate response to demand. To accommodate this flexibility requires, inter alia, a closer IDA supervision at early stages of implementation, and a direct dialogue between IDA and provincial and county level institutions.  11 A strong national institutional capacity for project review and monitoring is also essential; (e) thresholds for review and approval of sub-project designs by NPO should be adjusted periodically to avoid overloading the office, consequently causing implementation delays and/or non-compliance with agreed procedures; (f) it is crucial to retain the provincial and county offices on a more permanent basis to ensure sustainability and replicability; (g) the cost of unaccounted-for-water, conservatively estimated at 15- 20%, is absorbed by the users, but not systematically recorded. Since leakage is likely to be its major cause, water quality and health benefits will be affected. To avoid this, the issue needs to be recognized and appropriate measures adopted; (h) while women have participated in sector employment and human resources development, the variability in achievements suggests fruitfulness of the adoption of policies to secure a more equitable place for them in training and staffing; (i) while quality control is undertaken, an appropriate set of standards still needs to be developed to ensure sustainability of project benefits. Effective watershed management would also contribute to sustainability; (j) piped-systems with standposts, rainwater collectors and wells with handpumps are low-cost water supply options which are appropriate in many regions; (k) there was substantiated community involvement in project design, finance and implementation. However, some of the current operation and maintenance decisions such as intermittency of services to save cost may have been taken without full consultation with users. Users may benefit from continued involvement in relevant decisions; (1) income generating impacts of the project are major and directly contribute to cost recovery for the water plants and affordability of users. At the household level, the use of tap water for green- houses, animal raising also increases income without requiring excessive consumption. Higher income, in turn, augments sanitary practices and health benefits. Employment benefits of these and larger village/town based enterprises are considerable. These findings give full support to the appropriateness of the project design and illustrate how time savings can be put to use for local and regional economic development; and (m) the lack of quality systematic data made evaluation and monitoring of project results difficult. Future projects could benefit from baseline and periodic data on project results and impacts.  12 L. Proiect Documentation and Data 1.43 The legal agreements for this project was amended twice. The first time was to allow use of cost savings for disbursement against 26% local civil works to ease counterpart funding problems due to high local inflation (1988). The second time was for extension of closing dates, increase thresholds for review of design reports by NPO, and change of implementation agency at the center (1989). 1.44 The Staff Appraisal Report (SAR) which was also translated into Chinese provided a useful framework for IDA and the project offices during project implementation. Data relevant to the preparation of this report was not always readily available but were provided to IDA upon request within a reasonable time frame and of acceptable quality.  13 PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 2.1 China Rural Water Supply Project supported by the IDA Credit has now been completed. The great success of this project is reflected mainly in the following aspects: (a) about 7.43 million rural traditionally underprivileged population has now had access to safe and adequate water supply. The improved water supply has also greatly benefitted the economic development in the project areas; (b) the institutional build-up and training of engineering and managerial staff at all levels help to develop a good mechanism to provide effective leadership and guidance to the rural water supply system; (c) the formulation of series of rules and regulations for the project management will definitely upgrade the nationwide management of the rural water supply; and (d) the technical manuals and guidelines for rural water supply produced under the project will provide an important tool of technical assistance in the improvement of the rural water supply throughout China. 2.2 The experience and lessons learned from this project which are of great benefit to the designs and implementation of the future rural water supply projects, ought to be further carefully reviewed, analyzed, and summarized after the completion of the project. A. Comments on Part I 2.3 In Part I, the basic information of the project is given. The analysis and evaluation of the project results are accurate. However, some descriptions of the "project implementation" contained in Part I seem not fully consistent with the actual situation. Proiect Coverage and Cost (Para. 1.111 2.4 During the implementation, by using the increased value of IDA due to the depreciation of US Dollar and additional counterpart funds, the Project Provinces carried out the project plans revised to benefit more villages and people using fewer systems of larger sizes which was agreed by Bank 1988 supervision mission. Therefore, by the completion of the project, the number  14 of the project beneficiaries is 5,730 villages and 7.43 million persons, about 24% and 27% higher than the respective appraised estimates, but the per capita construction kept the same as what estimated at appraisal. In other hand, because of the larger size of water supply systems and the strength of management, the quality of water supply by the project was more reliable. Prolect Extension (Para 1.12) 2.5 The delay in the first ICB procurement and management problems experienced in some Project Provinces constituted the main reasons for the consequent extension of the project rather than the slow review and approval of sub-project designs by NPO and delayed dissemination of the manuals. The time needed to process the review and approval of the sub-project designs by NPO varies from 15-30 days to 3-4 months, but according to the record no construction of sub-projects were delayed due to the slow review and approval. Although the manuals for design was not published until the end of 1988, the main contents contained in the manuals had, in fact, already been disseminated and used as guide to the project design in various ways prior to its official publication. For example, the "Design Manual for Water Supply & Waste Water Disposal in China" and the " Atlas for Standardized Construction of Rural Water Supply Facilities" were provided in the initial operation of the project. In addition, training materials on the engineering design of water supply were produced, and training courses, one-month for each term, were conducted in 1987 and 1988 for the engineering designers from provincial and county project offices. These efforts had resulted in the smooth implementation of the project. Therefore, the delayed dissemination of the manuals itself should not be considered a factor for the delay in project implementation. The National Prolect Office (Para 1.13-1.14) 2.6 The NPO recognizes its insufficient guidance and supervision provided to the project. However, the description of the staffing in the PCR is not accurate. The actual number of NPO's staff under NPHCC were 7-8 (including employed workers). The NPO when transferred from NPHCC to FLO of MOPH in mid-1989 had four full-time staff, in addition to the Division Chief and other part-time supporting staff working for the project. Of which three were transferred to FLO from NPHCC in charge of project management and accounting and one of the FLO staff was assigned for project procurement. Although FLO itself has no experts in water supply, the expertise from NPHCC assumed the responsibility for continued to provide technical expertise in the project supervision. In addition, since the training program was almost implemented by the end of 1990, the officer in charge of the training program was transferred to the second water supply project. With the project approaching to its end and the completion of the procurement tasks, the procurement officer moved to procurement activities of other projects. Therefore, even at the final stage of the project, there were still two full-time staff responsible for the project management. So, in the PCR, the statement that the new NPO only has one full-time and seven part-time staff is not correct.  15 2.7 The relationship between FLO and NPHCC was satisfactory during the implementation of this project, although there were rooms for improvement. NPHCC, responsible for rural water supply at national level and technical assistance to this project, had been invited and participated in important activities of the project and provided expertise for the review and approval of large sub-project designs, whenever requested by NPO. No difficulty was experienced in this regard. Review and Approval of Larae Sub-prolect Desians (Para 1.14) 2.8 It is true that NPO's effort in review and approval of large sub-project designs was insufficient. In the PCR, two sets of data were simply presented to demonstrate the extent of the insufficiency: about 60% completion in 1985-1986, while less than 5% completion in 1990-1991. We think these figures do not fully reflect the actual completion rate. At appraisal, it was decided that a sub-project should be considered as large sub-project if its capital cost exceeded RMB Y 500,000 or RMB Y 100 per beneficiary person, therefore it should be subject to the approval by NPO. But in the subsequent years of the project implementation, some sub-projects which originally were not required to be subject to reviewed and approval by NPO exceeded the thresholds due to the high local inflation. This was one of the reason for which some sub-projects designs were not submitted by the Project Provinces to NPO for review and approval. If the inflation-attributable increase in the number of review and approval of sub-project designs by NPO is excluded from the current calculation, or the threshold was timely adjusted, the completion rate of NPO's review could be higher. B. Adecruacv and Accuracy of Factual Information in Part III 2.9 The data and analysis contained in Part III are considered accurate and reasonable. C. Evaluation of IDA's Performance 2.10 IDA performance had been, in general, satisfactory during the project implementation period. However, the project would have benefitted more from IDA if the following weakness mostly appeared in the later period of the implementation had been timely overcome: (a) the supervision and guidance to the project were weakened with the supervision period being shortened and misslon members reduced; (b) financial analysis was prioritized during the supervision and engineering aspects were not given enough attention; (c) the in-depth and field supervision were inadequate; and (d) some of the problems were not timely identified and brought to the attention of NPO, such as the staffing problem of NPO and the insufficient prior review and approval of large sub-project designs [according to the para. 3.(3), Schedule 4, Development Credit Agreement, each sub-project should be subject to the approval(s) of  16 the NPO and the Association if it exceeded the threshold. Before 1987, the NPO and the IDA did review these sub-projects, but after 1987, no review activity was undertaken on the IDA side, or NPO was reminded to do so]. The project might not have suffered from those problems if they were timely addressed by the supervision missions. D. Evaluation of Borrower's Own Performance 2.11 In addition to the diligence of the local project offices and supporting agencies, the NPO's endeavor in formulating rules and regulations for management purpose, conducting training courses, providing technical assistance, and procuring materials for the project had also contributed to the success of the project. Nevertheless, for lack of experience and management and staffing problems in this first water supply project, some deviations have occurred during the project implementation. E. Proiect Relationship 2.12 Good relationship had been developed with all the relevant parties and had greatly facilitated the project implementation. F. Evaluation of Co-financiers' Performance 2.13 The hardworking and high efficient performance of WFP and GTZ in fulfilling their role as co-financiers had added to the success of the project. G. Lessons Learned 2.14 The following comments should be added to the paragraph of Lessons Learned (para. 1.42): (a) one important feature of this project was that it consisted of several thousands of sub-projects. As the appraisal was based on the typical designs other than the feasibility study of all the sub-projects, consequently, procurement process took precedence over project designs. This arrangement caused a big problem that the materials procured could not fully meet the actual needs of the project. It is recommended that the project design go first and procurement second in planning future projects. For example, the designs of sub-projects could be started soon after appraisal, and the procurement plan be made in accordance of the actual needs of the designs. To adopt this approach, financial support will be needed by the Project Provinces for making designs before the project funds is available. TCC and other resources should be explored in seeking such support; (b) in order to make the procurement through ICB fully satisfy the implementation of the project, ICB procurement should be made in small packages;  17 (c) while low-cost water supply facilities suitable to the local conditions should be developed, town/township based water supply systems should be encouraged in the regions where conditions are permitted in order to achieve economy of scale and to avoid some management problems; and (d) enough contingencies of counterpart funds should be emphasized to ensure that project implementation will not suffer from the inflation.   18 PROJECT COMPLETION REPORT CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) PART III: STATISTICAL INFORMATION A. Related IDA Credit 3.1 The Rural Water Supply and Sanitation Project (Cr. 2336-CHA) for SDR78.9 million (US$110.0 million equivalent) to serve about nine million rural inhabitants of 75 poor and water-scarce counties in six under-developed inland provinces was approved on February 11, 1992. The main lessons learned from the completed project had been integrated into the design of the new project. B. Project Timetable 3.2 The planned, revised and actual dates of key project processing and implementation events are summarized in Table 3.1: Table 3.1: Proiect Timetable Date Date Date Item Planned Revised Actual Identification --- --- 08/83 Pre-appraisal --- --- 02/84 Appraisal Mission --- --- 09/84 Negotiations --- --- 03/85 Board Approval --- --- 04/11/85 Credit Signature --- --- 05/09/85 Credit Effectiveness --- --- 11/13/85 Project Completion 06/30/90 06/30/91 06/30/91 Credit Closing 12/31/90 12/31/91 12/31/91 3.3 The entire project, after the extension of one year, was supposed to be completed by June 30, 1991. Actual completion dates for each province were: Beijing - June 1991; Liaoning - June 1991; Shaanxi - October 1991; Sichuan - November 1991; and Zhejiang - December 1991.  19 C. Credit Disbursements 3.4 The cumulative estimated and actual disbursements of the credit are given in Table 3.2. The credit was practically fully disbursed by Dec 31, 1991. A small balance of SDR 124 was disbursed in April 1992. Due to the appreciation of the SDR against the US Dollar (SDR 1.03 per US$1.00 at appraisal vs SDR 0.73 per US$1.00 at closing), the credit of SDR 82.1 million provided a total of US$104.6 million to the project, against an appraisal estimate of US$80.0 million. This represented a 31% increase in terms of US$. Table 3.2: Credit Disbursement (USS Million) IDA Fiscal Year 1986 1987 1988 1989 1990 1991 1992 Appraisal Estimate 4.0 24.0 56.0 78.0 80.0 n/a n/a Cumulative as % of Total 5 30 70 98 100 Actual Disbursement 15.3a/ 25.8 38.1 64.4 95.8 103.6 104.6 Cumulative as % of Total 15 25 36 62 92 99 100 Actual as % of Estimate 382 108 68 83 120 130 131 a/ First year disbursement included an initial allocation of SDR 2.1 million to the Special Account. D. Prolect Implementation 3.5 At appraisal, key performance indicators were defined, and they were monitored throughout the period of implementation. The following Table 3.3 is a summary of actual results as compared to appraisal estimates. More detailed tables on physical results; staffing; ICB and LCB procurement of goods and civil works; preparation, review and approval of sub-project design reports are presented in Annexes 1-4.  20 Table 3.3: Implementation Performance Indicators Appraisal Estimate Actual/PCR Estimate Sub-projects (Piped/Non-piped) 3,144/758 2,699/131 Date (month-year) of distribution of design/construction/O&M manuals 06-85/12-85/06-86 08-88/03-90/02-89 Staffing of NPO, PPOs and CPOs 24/87/378 10/82/515 ICB/LCB goods procurement (US$ mln) 78.8/52.0 65.9/81.8 Civil works contracts (No./Y mln) 4,395/307.1 3,448/616.7 Designs reviewed by NPO/PPOs 578/529 71/992 3.6 During project implementation, the project offices recognized that in order to achieve economies of scale, single village systems should be combined into larger regional systems wherever possible. This was discussed and endorsed by IDA. As a result, there was a dramatic reduction in the number of sub-projects. The appraisal figure of 3,144 systems was revised to 2,255 systems. A total of 2,699 sub-projects were eventually completed, representing a 27% extension of original population coverage plans. 3.7 During implementation, the NPO and PPOs opted to reduce their size at more manageable numbers while the CPOs increased in size chiefly because the bulk of project activities were done at that level. A critical variance is the disproportionate number of part-time staff and consultant at the NPO. 3.8 ICB procurement of goods was carried out in three batches in 1986, 1987 and 1989. Total cost of ICB goods was about 16% lower than expected, mainly due to more competitive prices offered by Chinese suppliers. Actual cost of LCB goods was about 60% higher than projected, resulting from higher prices as well as increased quantities procured. Except for Zhejiang, many sub-projects were divided into different civil works contracts (such as source, water tank, pipelines and buildings) as opposed to the original plan of a single civil works contract per sub-project. The total contract amount also increased as there was a general trend to expand coverage. 3.9 Of a total of 578 reviews and approval of design reports required of NPO, only 71 or 12% were actually performed. This was cited as one short- coming of project implementation and is reflected in lessons learned (paras. 1.13 and 1.39). E. Project Costs and Financina 3.10 A comparison of actual project costs (1991) and those estimated at the time of appraisal (1984) and after the mid-term review (1987) are given in Table 3.4:  21 Table 3.4: Prolect Costs (US$ Million) Appraisal Estimate Revised Estimate Actual Component Local Foreign Total Local Foreign Total Local Foreign Total Civil Works 38.9 2.2 41.1 70.9 -- 70.9 80.0 -- 80.0 Materials/Equip 38.9 59.8 98.7 57.3 60.2 117.5 93.4 62.9 156.3 Training 1.6 1.1 2.7 13.2 0.1 13.3 2.1 0.5 2.6 Land 9.3 -- 9.3 8.9 -- 8.9 11.1 -- 11.1 Spvn. & Mgmt. 8.0 0.4 8.4 7.2 0.3 7.5 14.2 3.4 17.6 Subtotal 96.7 63.5 160.2 157.5 60.6 218.1 200.8 66.8 267.6 Physical Cont. 9.6 6.4 16.0 12.7 0.9 13.6 -- -- -- Price Cont. 18.2 13.8 32.0 6.6 0.7 7.3 -- -- Total 124.5 83.7 208.2 176.8 62.2 239.0 200.8 66.8 267.6 Working Capital 2.0 -- 2.0 4.0 -- 4.0 -- -- -- Total Project 126.5 83.7 210.2 180.8 62.2 243.0 200.8 66.8 267.6 3.11 Actual project cost, when expressed in US Dollars, was about 27% over the appraisal estimates and 10% over the revised estimates. The increase in the proportion of local cost expenditures in the civil works and goods categories reflect high local inflation during the implementation period. Per capita cost remained about the same as 27% more villagers were served under the project. In terms of RMB, however, actual project cost was almost 120% higher than that estimated at appraisal. The main reason for such a variance is the one-way movement of exchange rates. At appraisal, the RMB/US$ exchange rate was Y2.50 per US$1.00. At credit closing, it was about Y5.40 per US$1.00. 3.12 A comparison of actual project financing with financing plans at appraisal is given in the following Table 3.5. Again, due to changes in exchange rates over the implementation period, actual performance as compared to estimates are quite different when expressed in different currencies.  22 Table 3.5: Proiect Financina Appraisal Actual Appraisal Actual Amount % Amount % Amount % Amount % Source ---- (USS Million) --- (RMB Y Million) -- National Government 1.7 1 1.1 - 3.5 1 4.2 - Provincial Governments 16.2 8 11.4 4 34.0 7 44.4 4 County Governments 18.3 9 11.6 5 38.5 8 56.8 6 Villages and Individuals 82.0 39 127.2 48 172.2 36 496.5 48 IDA 80.0 38 104.6 40 200.0 42 408.2 39 Federal Republic of Germany 1.5 1 0.6 - 3.7 1 1.6 - World Food Program 10.5 5 6.8 3 26.3 5 26.3 3 Total 210.2 100 263.1 100 478.2 100 1.038.1 10 3.13 Overall contribution by national, provincial and county governments dropped by 34% in US$ but increased by about 39% when expressed in RMB. Still, the increase in absolute amount was not able to keep pace with price hikes which resulted in more than doubling of total project cost. Final participation by government was 10% vs. an appraisal estimate of 16%. 3.14 The bulk of project cost overruns were shouldered by two sources: participation of villages and individuals increased from 36% to 48%, in terms of contribution in RMB it almost tripled the amount estimated at appraisal; IDA participation remained unchanged in percentage terms, but more than 30% higher in absolute amount (in USS). This was possible due to the appreciation of the SDR against the US$ (para. 3.4). 3.15 Participation by the Federal Republic of Germany (FRG) appeared to be lower than estimated as the actual figures only represent FRG's contribution to equipment. NPO was not able to keep track of direct payments by FRG to consultants for provision of technical assistance and training. The World Food Program's actual participation was the same as projected. F. Prolect Results 3.16 The following Table 3.6 summarizes the main indicators on project achievements estimated at appraisal, at credit closing and at full development of the project (i.e. after full utilization of provincial revolving funds established under the project). More detailed tables on beneficiaries and training are included in Annexes 5 and 6.  23 Table 3.6: Direct Benefits Appraisal Estimated at Estimated at Indicators Estimate Closing Date Full Dev't Number of Beneficiaries 5.93 million 7.43 million 10.41 million Number of Villages 4,650 5,730 7,960 Courses at NPO/PPO/CPO levels 56/142/492 18/133/3350 -- Trainees at NPO/PPO/CPO levels 1480/3893/11300 778/4033/23790 -- 3.17 The number of beneficiary villages and persons served by the project increased by 24% and 27% respectively over the appraisal estimates, mainly because of the extension of the project into new areas. This situation is very favorable to the project. 3.18 There were fewer number of courses conducted at the national and provincial levels than planned, but more courses were offered at the county level. The average number of trainees per course was higher than envisioned. The number of trainees for technical courses offered by NPO and PPOs was far lower than expected. This can be attributed to the fact that several technical activities such as design and construction work were contracted out to other work units. G. Status of Covenants 3.19 Major covenants monitored during project implementation and the borrower's compliance performance are summarized in the following Table 3.7. Other than insufficient sub-project design reviews (para. 3.9), and staffing at the NPO (para. 3.7), the borrower had been in compliance with the covenants. Annual audited project accounts prepared by the State Audit Administration were of reasonable quality and included separate statements on the Special Account and Statement of Expenditures (SOEs).  24 . Table 3.7: Covenant Comyliance Covenant Subject Deadline Status Credit Agreement Section 4.01(b) Submission of audited June 30 of Complied with (1) and (2) NPO accounts to IDA each year Section 4.02 Maintenance of NPO with On-going Partially competent staff in basis complied with adequate numbers Schedule 4 Approval of sub-projects As required Partially Section 3(a)(3) by IDA and NPO complied with Prolect Agreement Section 4.01(b) Submission of audited June 30 of Complied with, (1) and (2) PPO accounts to IDA each year part of NPO audit Section 4.02 Maintenance of PPOs/CPOs On-going Largely complied (a) and (b) with functions & staffing basis with satisfactory to IDA Section 4.03 Adequate tariff to cover As required Largely complied full cost (para. 1.20) with H. Use of IDA Resources 3.20 The use of IDA resources from project identification to completion in staff weeks (including consultants) and particulars of each IDA mission are summarized in the following Table 3.8 and Table 3.9. Table 3.8: Staff Input (Staff-weeks) Stage of Project Cycle Planned Final Comments Through Appraisal n.a. 72 Actual input are extracted from Appraisal to Board Approval n.a. 55 MIS data base, supervision input Supervision (1985-1992) 11/year 110 includes estimated time required for preparation of PCR Totall  25 Table 3.9: IDA Missions Stage of Number of Speciali- Performance Rating and Type of Project Cycle MM/YY Persons Days zation a/ Problems Identification 08/83 3 21 EG,FA Prep. review 12/83 1 5 EG Pre-appraisal 02/84 3 24 EG,FA Prep. review 07/84 1 3 LO Appraisal 09/84 6 25 EG,FA,LO LG,TR Supervision 05/85 1 7 EG 1, no major problems 09/85 1 17 EG 1, anomalies in construction supervision 06/86 3 13 EG,FA 1, weak Sichuan project offices 01/87 1 18 EG 1, inadequate county engineering staff, slight delays (Mid-term) 04/87 3 24 EG,FA 1, construction supervision engineering and management need strengthening 09/87 2 11 EG,FA 1, cost overruns 03/88 1 4 EG 1, delays in Sichuan and Zhejiang 11/88 2 17 EG 1-2, material delivery delays further delays in Zhejiang 04/89 1 4 FA 1, possible closing extension 09/89 1 3 FA no rating, procurement and delivery delays, closing date extension need for credit reallocation 04/90 3 2 EG,FA 1, no new major problems 09/90 3 8 EG,FA 1-2, insufficient NPO review of sub-project designs 02/91 1 2 FA no rating, non-compliance with design review agreement (Final/PCR) 03/92 3 17 EG,FA,SC a/ EG - Engineer, FA = Financial Analyst, LG = Legal Counsel, LO - Loan Officer, SC = Sociologist, TR = Training Specialist  26 ANNEX 1 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Physical Project Results Appraisal Estimates Revised Estimates Actual Province/ Piped- Non-Piped Total No. of Piped- Non-Piped Total No. of Piped- Non-Piped Total No. of Municipality System System Sub-Projects System System Sub-Projects System System Sub-Projects Beijing 665 - 665 524 - 524 736 - 736 Liaoning 597 - 597 435 - 435 608 - 608 Shaanxi 501 175 676 343 121 a/ 464 351 121 a/ 472 Sichuan 474 479 953 571 43 614 605 9 614 Zhejiang 907 104 1,011 382 1 b/ 383 399 1 b/ 400 Total 3,144 758 3,902 2,255 165 2,420 2,699 131 2,830 a/ 120 cisterns and I well equipped with handpump b/ Includes 59,095 rainwater collectors  27 ANNEX 2 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Staffing of Proiect Offices Beijing Liaoning Shanxi Sichuan Zhejiang Total NPO PPO CPO PPO CPO PPO CPO PPO CPO PPO CPO PPO CPO Manamement Planned 2 2 10 2 10 2 10 2 10 I 10 9 50 Actual 2 3 7 4 25 3 21 3 14 1 18 14 85 of which female - - - 1 4 - - - - - - 1 4 Enuineerina Planned 9 6 28 5 22 5 27 4 23 5 20 25 120 Actual 2 2 16 S 23 4 44 2 46 5 25 18 154 of which female 1 2 - 4 - 3 - 4 - 2 1 15 Administrativo/Accountina Planned 3 2 10 2 10 3 10 2 10 2 10 11 50 Actual 2 2 19 3 15 3 17 2 35 3 20 13 106 of which fenale - I S 1 8 2 8 - 19 2 12 6 52 Sunoort Staff Planned 3 2 5 3 5 2 5 2 5 2 5 11 25 Actual 2 4 - 3 5 3 8 2 35 2 12 14 60 of which female I - - - 3 - 19 - - 1 22 Planned 7 5 25 8 30 6 30 5 30 5 24 29 139 Actual 2 10 28 3 16 4 S0 2 0 2 16 21 110 of which female - - 9 1 7 1 12 1 0 1 6 4 34 Planned 24 17 78 20 77 18 82 15 78 15 69 85 384 Actual 10 a/ 21 70 18 84 17 140 11 130 13 91 80 515 of which female - 3 16 3 23 3 26 1 42 3 20 13 127 a/ Of which 9 are part-time staff or consultant  28 ANNEX 3 Page 1 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) ICB & LCB Procurement Table 1: Procurement of ICB Goods First ICB Batch (1986)] Second ICB Batch (1987) Third ICB Batch (1989) Total Quantity RMB USD Quantity RMB USD Quantity RMB USD Quantity RMB USD (ton) (min) (min) (ton) (miln) (min) (ton) (mln) (mtn) (ton) (min) (min) Stwel bars and Wircs 32,927 26.4 8.0 32,622 32.1 8.4 11,822 18.7 3.9 77,372 77.3 20.3 Sted angle and flatu 3,265 3.1 0.9 4,677 4.9 1.3 - - 7,942 7.9 2.3 Stod pipes 20,597 30.4 8.6 35,233 52.0 14.0 2,499 6.4 1.4 58,328 88.7 24.0 Iron pipes 9,684 5.3 1.4 18,446 10.6 2.8 - - 28,130 15.9 4.3 Plasticpipes 2,873 10.9 3.4 3,739 19.9 5.3 1,750 11 2.3 8,363 41.7 11.1 Timber 10,211 2.8 0.9 - - - 450 0.3 0.1 10,661 3.1 0.9 Water pumps 962 1.9 0.5 588 1.8 0.5 - - 1,550 3.7 1.0 Power transformers 114 0.2 - 126 0.2 0.1 - 240 0.3 0.1 Vehicles 91 1.3 0.4 57 2.3 0.6 148 3.6 1.0 Sted platea 279 0.3 0.1 499 0.6 0.2 778 0.8 0.2 Galvanized steel sheet 293 0.5 0.1 - - - 293 0.5 0.1 Aluminum cable. - - - 650 2.8 0.8 - 650 2.8 0.8 Totial 82.9 24.3 127.0 33.9 36.4 7.6 246.3 65.9 Note: Figure. may not total exactly due to rounding.  29 ANNEX 3 Page 2 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) ICB & LCB Procurement Table 2: Procurement of LCB Goods RMB (mnn) USD (mln) Beijing Liaoning Shaanxi Sichuan Zhejiang Total Beijing Liaoning Shaanxi Sichuan Zhejiang Total Pipeline and plumbing fittings 18.2 55.6 13.1 31.7 51.1 169.8 4.6 14.3 3.5 7.9 11.7 42.1 Water plant control equipment 2.7 9.6 1.4 3.6 3.6 20.9 0.7 2.5 0.4 0.9 1.0 5.4 Pressure filters 3.8 0.1 0.5 - - 4.4 1.0 - 0.1 - - 1.1 Pressure vessels - - 0.3 0.1 0.4 0.7 - 0.1 - 0.1 0.2 Pressure pipelines 3.5 - 20.7 - 27.6 51.9 0.9 - 5.6 - 7.4 13.9 Laboratory equipment 0.1 1.7 0.7 1.5 0.4 4.3 - 0.4 0.2 0.4 0.1 1.1 Office equipment - - 0.5 0.4 0.7 1.6 - - 0.1 0.1 0.2 0.4 Electrical supplies 0.6 2.5 1.6 2.8 2.1 9.6 0.2 0.7 0.4 0.7 0.5 2.5 Transmission line poles 0.3 0.6 0.9 1.2 1.2 4.2 0.1 0.2 0.2 0.3 0.3 1.1 Hand pump - - 0.1 0.3 - 0.4 - - - 0.1 - 0.1 Miscellaneous building supplies 6.9 3.3 8.5 17.4 9.0 45.0 1.7 0.9 2.3 4.5 1.6 10.9 Cement 1.1 5.1 5.4 - - 11.5 0.3 1.3 1.4 - - 3.0 Total 37.3 78.4 53.6 59.1 96.0 324.4 9.4 20.1 14.4 14.9 22.9 81.8 Notc: Figures may not total exactly due to rounding.  30 ANNEX 3 Page 3 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) ICB & LCB Procurement Table 3: Procurement of LCB Civil Works Province/ No. of Contracts Contract Amount (in RMB miln) Municipality Estimated Actual Variance Estimated Actual Variance Beijing 665 736 71 15.5 29.6 14.1 Liaoning 597 1,233 636 40.1 233.5 193.4 Shaanxi 676 464 (212) 37.3 78.4 41.1 Sichuan 953 614 (339) 30.9 169.3 138.4 Zhejiang 1,011 401 (610) 25.0 106.0 81.0 Total 3,902 3,448 (454) 148.8 616.7 467.9 Note: Figures may not total exactly due to rounding.   31 ANNEX 4 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Review and Approval of Sub-proiect Desinm ReportS Province/ by NPO by PPO Municipality Planned Actual Planned Actual Beijing 0 29 - 137 Lioning 180 14 238 404 Shaanxi 8 8 54 80 Sichuan 30 2 200 328 Zhejiang 23 18 37 43 Total 241 71 529 992  32 ANNEX 5 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Proiect Coverage [11 121 [31 Appraisal Estimated at Estimate at Full [2] as % Estimate Closing Date Development of [1] Vilaaes Covered Beijing 665 843 1,243 127 Liaoning 719 1,010 1,423 140 Shaanxi 863 983 1,353 114 Sichuan 953 1,047 1,487 110 Zhejiang 1,450 1,847 2,454 127 Total 4,650 5,730 7,960 123 Population Served ('000) Beijing 658 924 1,324 140 Liaoning 1,252 1,710 2,410 137 Shaanxi 1,368 1,490 1,890 109 Sichuan 1,480 1,559 2,279 105 Zhejiang 1,175 1,744 2,511 148 Total 5,933 7,427 10,414 125  33 ANNEX 6 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Training Program and Results Beijing Liaoning Shaanxi Sichuan Zhejiang Total NPO PPO CPO PPO CPO PPO CPO PPO CPO PPO CPO PPO CPO Manatement Course Planned II I 7 35 2 - 4 10 6 20 45 Actual 5 3 7 35 8 23 3 18 3 24 76 Trainee Planned 210 10 210 1,050 38 - 80 720 165 503 1,770 Actual 142 109 224 1,080 124 667 73 1,732 94 624 3,479 of which female 21 - 14 60 27 38 21 346 16 78 444 Entineerins Course Planneod 42 1 19 80 5 2 12 4 13 50 86 Actual 11 6 19 81 9 19 3 4 6 43 104 Trainee Planned 1,120 15 570 2,400 100 40 260 80 330 1,275 2,520 Actual 474 46 680 2,550 339 375 95 60 190 - 1,350 2,985 of which female 58 7 20 450 28 82 10 10 33 98 542 Finance Coures Planned 3 1 8 42 I - 6 35 6 22 77 Actual 2 3 9 42 6 13 2 69 3 23 124 Trainee Planned 150 15 240 1,260 15 - 130 1,040 165 - 565 2,300 Actual 162 40 - 306 1,310 96 537 53 832 94 589 2,679 of which female 64 22 - 200 610 31 181 38 86 16 307 877 Water Oualitv Courses Planned - I 4 20 9 7 1 2 - 15 29 Actual I 4 19 2 26 1 2 8 47 Trainee Planned 10 120 600 180 145 40 60 . 350 805 Actual 21 136 910 28 455 50 65 235 1,430 of which female 15 66 600 20 211 31 5 132 816 Water System Operation Courses Planned - 22 12 72 - 28 1 9 13 131 Actual 30 12 73 3 34 4 15 19 152 Trainee Planned - 665 360 2,190 - 560 320 420 680 3,835 Actual 785 420 1,874 124 1,168 149 947 693 4,774 of which female 50 60 64 22 33 0 0 82 147 Other Courses Planned - - - - - 13 20 9 106 22 126 Actual 3 32 13 115 16 147 Trainee Planned 260 570 260 2,255 520 2,825 Actual 78 2,512 464 3,097 542 5,609 of which female 0 n.a 32 n.a 32 n.a Total Courses Planned 56 4 22 50 249 17 37 37 80 34 106 142 494 Actual 18 13 30 51 250 28 115 16 140 25 115 133 650 Trainee Planned 1,480 50 665 1,500 7,500 333 745 1,090 2,890 920 2,255 3,893 14,055 Actual 778 216 785 1,766 7,724 711 3,202 498 6,148 842 3,097 4,033 20,956 of which female 143 44 50 360 1,784 128 545 100 447 97 0 729 2,826   34 ANNEX 7 Pap 1 of 2 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Number Two Waterworkm a/ Cixi County, Zhejiang Income Statement (1991) (Yuan '000) Wer Sales (mJ m3) 4.31 of which 1.70 to indutry, 2.61 to houehold Overadna Revenue Water Sales 1,731 Installation 17 Materils ales 7,029 Non-operating revenue 9 Total Revenue 8 786 Overatine Coat Water resources 355 Maintenance 29 Chemicals 13 Energy and ful 3SS Depreciation 363 Salaries 63 Administration 146 Other 45 Miaterials 6,406 Sales tax 125 Total Oleratint Coa 7930 Non-operating Cost 48 Net Income 1 Disbution of Net Income Loa Repayment 275 Enterprise Income Tax 1I Production Expansion Fund 257 Staff Bonus Fund 129 Staff Benefit Fund 103 Remi,ted to Health Bureau 3 Manager' Fund 23 Neat Income 1 a/ Subproject designed by North China Urban Des Institut (surfce war with resevoir, intake and tratment plant). Construction commencod in July 36, complded in July U8. Totsl investmn Y23.9 mli, of which Y6.1 finaced by IDA. System serves 15 township. including 197 admiaitrsva village wih bouWd ecouneto for a totel popultc of about 250,000.  35 ANNEX 7 Page 2 of 2 CHINA RURAL WATER SUPPLY PROJECT (Credit 1578-CHA) Number Two Waterworks Cixi County, Zhejiang Balance Sheet (as of Dec. 31, 1991) (Yuan '000) Assets Cash, Bank and Bonds 589 Inventory 47 Accounts Receivable - Water Sales 145 - Other 2,803 Prepaid Expenses 4,651 Total Current Assets 8,235 Fixed Assets 23,835 less depreciation 364 Net Fixed Asset 23,471 Total Assets 31,706 Liabilities Accounts Payable 2,891 Due to Government 65 Current Maturity 4,649 Total Current Liabilities 7,605 Governrment Funds 23,471 Production Expansion Fund 317 Staff Benefit Fund 111 Staff Bonus Fund 179 Manager's Fund 23 Total Liabilities 31,706