China - Ship Waste Disposal Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17240-CHA IMPLEMENTATION COMPLETION REPORT CHINA SHIP WASTE DISPOSAL PROJECT (CREDIT 2391/TF. 28613-CHA) December 19, 1997 Transport Sector Unit East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of thier official duties. Its contents may not otherwise be disclosed with- out World Bank authorization.  CURRENCY EQUIVALENTS Currency Name Renminbi Currency Unit Yuan (Y) 1991 $1 =Y5.32 1992 $1= Y 5.53 1993 $1=Y5.76 1994 $1 Y 8.62 1995 $1 = Y 8.35 1996 $1 = Y 8.30 1997 $1 - Y 8.30 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES I meter (m) = 3.281 feet 1 square meter (mi) = 10.764 square feet I cubic meter (in3) = 35315 cubic feet 1 kilometer (km) = 0.621 mile I ton-kilometer (ton-km) = 0.621 ton-mile I ton (metric) = 2,208 pounds ABBREVIATIONS AND ACRONYMS BOMTA - Bureau of Maritime Transportation Administration DPA - Dalian Port Authority EACCF - Country Director of China, East Asia and Pacific Region EA2IN - Infrastructure Division, Country Department 2, East Asia and Pacific Region EASTR - Transport Sector Unit, East Asia and Pacific Region EMC - Environment Monitoring Center G-BOMTA - Guangzhou Bureau of Maritime Transportation Administration GEF - Global Environmental Facilities GOC - Government of China GPA - Guangzhou Port Authority ICB - International Competitive Bidding ICR - Implementation Completion Report LME - Large Marine Ecosystem MOC - Ministry of Communications NCB - National Competitive Bidding NPA - Ningbo Port Authority S-BOMTA - Shanghai Bureau of Maritime Transportation Administration SAR - Staff Appraisal Report SEATRAC - Ship Waste Tracking System teu - Twenty-foot equivalent unit TF - Trust Fund TPA - Tianjin Port Authority XPA - Xiamen Port Authority Vice President Jean-Michel Severino, EAP Country Director Yukon Huang, EACCF Sector Manager Jeffrey Gutman, EASTR Staff Member Toshiro Tsutsumi, Senior Port Engineer, EASTR  FOR OFFICIAL USE ONLY CONTENTS PREFACE ...................................................... iii EVALUATION SUMMARY ..................................................... iv PART I: PROJECT IMPLEMENTATION ASSESSMENT .................................1 A. Project Objectives and Description ...................................................... 1l B. Achievement of Project Objectives ....................................................... 3 C. Implementation Record and Major Factors Affecting the Project .............. 13 D. Project Sustainability ...................................................... 14 E. Bank Performance ..................................................... 15 F. Borrower Performance ..................................................... 16 G. Assessment of Outcome ..................................................... 17 H. Future Operation ..................................................... 19 I. Key Lessons Learned ..................................................... 20 PART II: STATISTICAL TABLES ..................................................... 22 Table 1: Summary of Assessments ..................................................... 23 Table 2: Related Bank Loans/Credits ..................................................... 24 Table 3: Project Timetable ..................................................... 24 Table 4: GEF Grant/ Credit Disbursement .................................................... 25 Table 5a: Key Indicators for Project Implementation ..................................... 26 Table Sb: Training (MOC and the Six Ports) .................................................... 27 Table 6: Key Indicators For Project Operations ............................................ 28 Table 7: Studies included in Project ..................................................... 29 Table 8a: Project Costs ..................................................... 30 Table 8b: Project Financing ..................................................... 30 Table 8c: Allocation of Grant/Credit Proceeds . .............................................. 31 Table 9: Economic Costs, Benefits and Major Financial Indicators ............. 31 Table 10: Status of Legal Covenants ....................................... 32 Table 11: Compliance with Operational Manual Statements .. 32 Table 12: Bank Resources: Staff Inputs ..................................... 33 Table 13: Bank Resources: Missions ....................................... 33 APPENDIX A: ICR MISSION'S AIDE MEMOIRE ............................................. 35 APPENDIX B: BORROWER'S CONTRIBUTION TO THE ICR ...................... 53 APPENDIX C: MAP ................................................. 61 ANNEX 1: FINANCIAL ANALYSIS ................................................. 63 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.  I  - iii - IMPLEMENTATION COMPLETION REPORT CHINA SHIP WASTE DISPOSAL PROJECT (CREDIT 2391/TF. 28613-CHA) PREFACE The Ship Waste Disposal Project in China, Credit 2391-CHA (SDR 11 million/$15 million) and Global Environment Facility (GEF) Grant TF. 28613-CHA (SDR 22 million/$30 million), was approved on June 17, 1992 and made effective on December 12, 1992. The Credit and GEF grant were extended for one year, with project closure on June 30, 1997. Final disbursements (recovery) is expected to be made in December 1997; it is estimated that SDR 21,931,154.89 and SDR 10,894,540.45 were disbursed, and SDR 68,845.11 and SDR 105,459.55 were canceled from the GEF grant and Credit, respectively. In terms of US dollars, due to the appreciation of the SDR, $32,309,401.27 and $15,378,043.23 were disbursed, and $93,758.73 and $141,010.71 were canceled from the GEF grant and Credit, respectively. This Implementation Completion Report (ICR) was prepared by Messrs. Toshiro Tsutsumi (Task Manager), Han-Kang Yen (Economic and Financial Analyst) of the Transport Sector Unit of the East Asia and Pacific Region (EASTR) and Scott MacKnight (Environmental consultant), and reviewed by Mr. Jeffrey S. Gutman (Sector Manager, EASTR). The Borrower provided comments that are included as Appendix B. The ICR was begun with the Credit and GEF grant closing and was based on project supervision information and material in the project file. The Borrower contributed to the ICR by evaluating the project execution and initial preparation. The Borrower also agreed to provide information on project performance indicators for the period to June 30, 2003 (six years after closing).  - iv - CHINA SHIP WASTE DISPOSAL PROJECT (CREDIT 2391/TF. 28613-CHA) EVALUATION SUMMARY Introduction 1. To protect and further enhance its sensitive marine and coastal environment from pollution related to dumping of ship wastes, the Government of China (GOC) became a signatory to the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). One component of the Convention is the need to provide port facilities to receive and treat/dispose of wastes from ships. As the international component of its marine commerce increased, reflecting a very large increase in economic activity, China initiated an application to the Global Environment Facility (GEF) to assist in a project to provide appropriate waste reception facilities within its six major sea ports: Dalian, Tianjin, Shanghai, Ningbo, Xiamen and Guangzhou. The Ship Waste Disposal Project, Credit 2391 (SDR 11 million/$15 million) and GEF TF. 28613- CHA (SDR 22 million/$30 million), was approved on June 17, 1992 and made effective on December 12, 1992. Project Objectives 2. The goal of the project was to reduce marine pollution, in both territorial waters of China and adjacent international waters, through implementation of various measures related to port and shipping wastes. Five specific objectives were used to achieve this goal: (a) To assist the Government of China in meeting its obligations as a signatory to MARPOL 73/78, through construction of port facilities to receive and treat/dispose of wastes from shipping. (b) To augment and extend the pollution monitoring capabilities of the Ministry of Communications, the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhou Bureau of Maritime Transportation Administration and S-BOMTA. (c) To develop and implement oil spill contingency and response plans for the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhou Bureau of Maritime Transportation Administration and S-BOMTA, and to promote the implementation of similar plans throughout the coastal ports of China.  (d) To develop and implement a Ship Waste Tracking System (SEATRAC) among the Ministry of Communications, Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhou Bureau of Maritime Transportation Administration and S-BOMTA. (e) To develop and implement a new fee schedule to provide adequate capital repayment and maintenance operating funds for the facilities, thus ensuring project sustainability. Implementation Experience and Results 3. The project was completed satisfactorily by June 30, 1997. The closing date was extended for one year due to delays in the national policy component (development of a new port tariff schedule) and in construction of some of the civil works. 4. Cost estimates at appraisal were reasonable. The final cost was estimated at about $69.5 million (or Y 175.2 million plus $47.7 million) against $77.5 million (or Y 174.6 million plus $45.0 million) at appraisal (para. 13). The difference, when expressed in US dollars, is due to the devaluation of the local currency since the appraisal mission of Spring 1991. 5. The five project objectives were met. Further, GOC and various local governments and agencies have initiated laws and measures that will significantly extend the scope of the project to include all marine coastal areas of China. The Government will provide to the Bank information on project performance indicators to June 30, 2003. Summary of Findings, Future Operations, and Key Lessons Learned 6. Summary of Findings. Port and coastal environmental management is inherently complex due to overlapping jurisdictions of different departments and ministries, port authorities and private interests. While numerous agencies and ministries were involved in the project, key leadership was provided by MOC, ensuring a national consistency and providing a mechanism to utilize "model components" in other ports. Further, GOC has a well-established base of environmental laws and agencies, with trained staff, to monitor and enforce these laws permitting the project to build on a strong existing base of law. 7. This project was the first major GEF project within the "Pollution Reduction in International Waters" category. The China Ship Waste Disposal Project can be judged to have clearly met GEF objectives, through reduction of pollution of international waters; devising innovative and replicable systems for collection and disposal of ship wastes and for the tracking of these wastes; designing mechanisms (policies and fee structures) to ensure project sustainability; and providing resources to support increased pollution monitoring to permit evaluation of actual systems created by the project, as well as its impacts on regional seas, using the Yellow Sea as a model marine ecosystem.  - vi - 8. The SAR provided an estimate of approximately 1.1 million tons of wastes that would be treated per year rather than being discharged to international and Chinese coastal waters. However, actual shipping traffic was much higher, so that an estimated 6.3 million tons of wastes will be diverted annually by 1998. Assuming a "working life" of 20 years for the treatment systems and no further increase from the 1996 traffic figures, at least 126 million tons of wastes will not be dumped into the oceans (46 million tons of oil-contaminated wastes, 76 million tons of sanitary sewage, and 20 million tons of garbage). 9. Future Operations. Implementation of project goals was extended by MOC, resulting in further significant environmental benefits. The success in implementation of an oil spill contingency and response plan in the six ports enabled development of a generic plan, which was adopted by MOC and is being implemented in all other coastal ports. Training has been extensive and a pilot oil spill response exercise in May 1996 was so successful, MOC will be organizing an annual exercise in different ports. MOC is in the process of obtaining approval to adopt a new environmental fee schedule for all ports, which will ensure sustainability of the new treatment facilities and provide funds in other ports to develop new or extend existing facilities. 10. Performance indicators were developed and agreed to by MOC: (a) provision of waste management data to 2003; (b) provision of information on the financial status and records of the waste treatment facilities to 2003; and (c) provision of information on future training programs. 11. Success in implementation of the project has identified a new project, "Port and Coastal Environmental Improvement," with five components: (a) investments in additional oil spill response and cleanup equipment for the ports and coastal waters; (b) investments in the State Oceanographic Administration to provide for improved monitoring capabilities; (c) additional oil spill response training; (d) extension of SEATRAC to other marine ports in China; and (e) investments in ship waste treatment and reception facilities in the next 10 largest (defined by ship traffic) marine ports in China. 12. Key Lessons Learned. Success of the project can be attributed to both the Borrower's and the Bank's approach to the project. The Bank utilized a multidisciplinary team of an economic/financial analyst, a port engineer and a marine environmental specialist. This provided a consistency throughout the project, from design and appraisal to implementation. While 10 Chinese agencies and ministries were involved in the project, key leadership was provided by MOC, ensuring a national consistency and providing a mechanism to utilize "model components" in other ports. Further, GOC has a well-established base of environmental laws and agencies, with trained staff, to monitor and enforce these laws; i.e., the project could build on a strong existing base of law. 13. Port and coastal environmental management is inherently complex due to overlapping jurisdictions of different departments and ministries, port authorities and private interests. If China did not already have a strong and existing regulatory base upon  - vii - which the project could be constructed, coupled with good leadership from MOC, this project would have been much more difficult to implement and would likely have required more time. Replication of this project in other countries can be successful, if there are established regulatory and management regimes suitable to the task. Alternatively, such regimes should be first established and stabilized, followed by construction of facilities and other components. 14. Management of ships and port wastes is only one aspect of port and coastal maritime environmental management. The success of a ship waste project can be further enhanced by (a) adoption of an environmental coastal zone and port management plan (a concept already be initiated by the Xiamen Special Economic Zone); (b) implementation of other pollution control activities (e.g., oil spill response); and (c) control and management of land-based sources of pollution.  - 1 - CHINA SHIP WASTE DISPOSAL PROJECT (CREDIT 2391/TF. 28613-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. Pollution of the marine environment can originate from several sources, including dumping of wastes from ships at sea, nonpoint sources along a coast, river-borne transport from inland sources and point sources represented by ports and coastal communities. Such pollution degrades the marine environment by reducing the size and quality of marine-harvestable resources, rendering harvestable resources inedible (particularly shellfish) and degrading of recreational and tourist potential of coastal areas. 2. Since marine pollution typically results from the actions of several countries, regulation and reduction of such pollution has been best achieved through various international conventions, such as the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78). With reference to the discharge of wastes from ships at sea, the Articles of this Convention detail the type of wastes to be regulated, the scope and extent of wastes that can be discharged at sea, how wastes are to be treated before discharge, allowable amounts that can be discharged and the requirement for signatory countries to provide ship waste reception and treatment facilities in their ports. Initially focused on oil-contaminated wastewaters (Annex 1), the Convention has been extended to address chemically-contaminated wastes (Annexes 2 and 3), sanitary sewage (Annex 4) and general garbage and solid wastes (Annex 5). At this time, Annexes 1, 2, 3 and 5 are in effect and final signatures for Annex 4 are pending. 3. China, beginning in its Sixth Five-Year Plan, initiated a policy to protect and enhance its environment, both terrestrial and marine, while also ensuring economic growth. This policy has been implemented through a series of laws and regulations and through China becoming signatory to several international conventions, including MARPOL 73/78. Over the past two decades, China has experienced very significant economic growth, reflected by a sharp increase in marine commerce, both domestic and international. For example, between 1991 and 1995, freight volume for all major coastal ports grew by an average of 10.8 percent, with the international portion growing by an average 20 percent per year. Recognizing the stresses resulting from increased urbanization, industrialization and commercial traffic on its marine environment, the Government of China directed its Port Authorities to develop plans to reduce port-related  - 2 - pollution and to protect coastal resources. These plans were to address ship wastes, port- related wastes, degradation of coastal water quality and the need for adequate oil spill contingency and response plans. 4. The considerable increase in marine commercial traffic within Chinese territorial waters has been paralleled by an increase in the overall marine traffic of the East and South China Seas responding to economic developments within Pacific Rim nations. Thus marine pollution in Chinese territorial waters reflects both national and international sources. To augment a credit from the World Bank Group being used to finance its objectives of reducing national sources of marine pollution, China applied to GEF for assistance to address wastes from international shipping. 5. The Ship Waste Disposal Project, Credit 2391 (SDR 11 million/$15 million) and GEF TF. 28613-CHA (SDR 22 million/$30 million), was approved on June 17, 1992 and made effective on December 12, 1992. The goal was to reduce marine pollution, in both the territorial waters of China and adjacent international waters, through implementation of various measures related to port and shipping wastes. This was to be achieved through five specific objectives: (a) To assist the Government of China in meeting its obligations as a signatory to MARPOL 73/78, through construction of port facilities to receive and treat/dispose of wastes from shipping. (b) To augment and extend the pollution monitoring capabilities of the Ministry of Communications, the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhou Bureau of Maritime Transportation Administration and S-BOMTA. (c) To develop and implement oil spill contingency and response plans for the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhoui Bureau of Maritime Transportation Administration and S-BOMTA, and to promote the implementation of similar plans throughout the coastal ports of China. (d) To develop and implement a Ship Waste Tracking System (SEATRAC) among the Ministry of Communications, the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen, Guangzhou Bureau of Maritime Transportation Administration and S-BOMTA. (e) To develop and implement a new port fee schedule that would provide adequate capital repayment and maintenance operating funds for the facilities. 6. The project consisted of national and port-specific components, with an emphasis on ensuring each aspect could serve as a model for implementation in other ports within China.  - 3 - (a) National Component (i) Establishment of a data collection and reference system of ship traffic to related waste types and quantities to facilitate monitoring and regulatory enforcement; (ii) Preparation of a comprehensive oil spill contingency and response plan for ports (Tier 1) in a "generic" format and to test the plan through the development of individualized plans for each of the six ports (including identification of selected equipment); (iii) Preparation of terms of reference for a multilateral study of a large marine coastal ecosystem, using the Yellow Sea as the example system; (iv) Development of a system for the treatment of chemically contaminated wastewaters as defined under MARPOL 73/8 Annexes 2 and 3; (v) Promotion of coordination among the various agencies to upgrade and augment environmental monitoring capabilities within ports, coastal waters and adjacent international waters; (vi) Preparation and implementation of a revised port tariff schedule to enhance cost recovery of the use of ship waste facilities; and, (vii) Provision of technical services and training in connection with or related to activities within the project. (b) Port Component (i) Design, construction and provision of appropriate waste reception, treatment and disposal facilities in the Ports of Dalian, Tianjin, Shanghai, Ningbo, Xiamen and Guangzhou; and (ii) Augmentation of environmental monitoring and enforcement capabilities in the Ports of Dalian, Tianjin, Shanghai, Ningbo and Guangzhou; establishment of such capabilities in the Port of Xiamen. B. ACHIEVEMENT OF PROJECT OBJECTIVES Project Implementation 7. Project Coordination. The Bank project performance was enhanced through the use of one project team from project identification/appraisal through to project completion. Further, two of the Bank staff had considerable project experience working  - 4 - closely with the six port authorities and MOC. The distribution of Bank resources is provided in Tables 12 and 13 in Part II. During the project implementation, staff met at least on an annual basis with the six port authorities and MOC, including site visits to the reception facilities. To ensure coordination of activities among the Chinese agencies (i.e., Port Authorities, MOC, State Oceanic Administration, National Environmental Protection Agency, Provincial Environmental Bureaus), coordinating tearns were organized for each port. 8. Training (Overseas and Domestic). While the six port authorities and M4OC had staff with a large body of experience, the ability for staff to visit other major North American and European ports to view handling and management of ship wastes was considered highly advantageous. Further, training was required for environmental monitoring staff with the introduction of new analytical testing and monitoring equipment. MOC divided the training budget to provide approximately $150,000 for each port authority and S-BOMTA for domestic (primarily training for analytical testing and monitoring) and foreign (primarily training in operation of port waste systems and oil spill response). This budget did not include training or technology transfer such as occurred with the development of a generic oil spill contingency and response plan (in conjunction with the US National Oceanic and Atmospheric Administration) or operator training for SEATRAC. 9. All of the port authorities found the training to be very helpful to the implementation of the project. Further, undertaking training in various foreign centers has also provided a linkage for the transfer of information at a future date. As there was a commonality of monitoring and analytical testing equipment for the eight environmental monitoring centers, it was possible to organize common training sessions in Beijing and other cities. This had the side benefit of providing more interaction among the environmental staff of the six ports. Project Results 10. National Component. Five studies were funded under this component, with project administration by MOC. All five subcomponents were successfully completed and all five offer significant potential contributions to other nations by way of model systems of implementation or products. (a) Treatment of Chemically-Contaminated Wastewaters (contracted to the Department of Environmental Engineering, Xi'an Transportation University; value, $100,000). To meet the requirements of treating Annex 2 and 3 wastewaters, the Port Authorities required a system that was robust and simple to operate but could deal with a variety of chemically- contaminated wastewaters. A very detailed study was conducted in 1993-94, with an excellent report provided in 1994. The recommended system was adopted by those ports constructing facilities for such wastewaters.  - 5 - (b) Oil Spill Response and Contingency Plan Study (contracted to the Beijing Academy of Transportation Sciences, with technical assistance provided by the US National Oceanic and Atmospheric Administration; project value, $290,000). This activity was to develop a "generic" Tier 1 plan (port-level spill), which was further refined for each of the six project ports. The study was undertaken in 1994-95 with an excellent set of reports provided in mid-1996. MOC accepted the study recommendation and has adopted the plan for all ports in China. The study also included several scoping workshops and was followed by a well-attended oil spill response training exercise in May 1997 in Ningbo. The success of the training exercise has led MOC to plan for annual exercises to be hosted by different ports. (c) Cost Recovery and Port Fee Schedule Changes (contracted to the Environmental Center of MOC, with technical assistance from Belgian consultants; value, $100,000). The project was initiated in late 1995 and finalized in early 1997. MOC accepted the study recommendation of a unified national fee schedule, which represented costs of new and existing waste reception facilities. While it was recognized the new fee schedule may not provide sufficient funds for total cost recovery, it provides for a reasonable coverage of expenses. Further, the new fee schedule will apply to all ports, with funds in the other ports to be reserved for construction or improvements to waste-handling facilities. The recommended fee schedule is being reviewed by the State Planning Commission and Pricing Bureau, although actual implementation will not be until 1998 at the earliest. (d) Ship Waste Tracking System (SEATRAC) (contracted to the China Communication Planning and Design Institute for Marine Transportation and Tianjin Research Institute for Waterway Engineering; value, $100,000). The project was initiated in 1995 with final software installation and staff training in early 1997. The objective was to provide a database linking the six ports and MOC. The database provides (i) a means of tracking wastes and ship traffic, (ii) an inventory of wastes processed by type and location, and (iii) a database of environmental data generated by the routine water and air quality monitoring programs. Under a separate budget, computer hardware and printers were purchased for each of the Port Authorities, Harbor Superintendency Administration offices and MOC. If translated into other languages, the software has an excellent commercial potential. (e) Large Marine Ecosystem (LME) Multilateral Study. One of the difficulties in assessing and monitoring coastal waters is the need for an adequate baseline of conditions for areas, which may include territorial waters of more than one country and associated international waters. Using the Yellow Sea as a model regional sea, an LME study was financed through GEF and other funding arrangements, with the partnership  - 6 - consisting of China, People's Democratic Republic of Korea (PDRK) and the Republic of Korea (ROK). Although the PDRK subsequently did not participate, China and ROK conducted several study preparation workshops through 1993 with a submission to the Ministry of Fiinance for project approval in January 1994. Further workshops and meetings were held, culminating in a submission to be made, through the United Nations Development Program to the GEF, in June 1997. Port Component 11. Beginning in 1993 the six port authorities initiated planning and construction of civil works for their waste reception and treatment facilities. With the exception of Guangzhou Port Authority, the facilities were substantially completed by early 1996. The Shanghai component was divided into two parts under the responsibility of Shanghai Port Authority with the Port Authority responsible primarily for garbage collection and treatment and the S-BOMTA responsible for treatment of oil and chemically contaminated wastewaters and oil spill response. This division reflected past practices in the Port and that much of the bulk liquid cargoes were carried in S-BOMTA ships. Delays due to local financing in Guangzhou were overcome in 1995-96, vvith their facilities being completed in early 1997. In contrast to Shanghai, both G-BOMTA and the Guangzhou Port Authority operate oil product terminals. The extensive traffic and geographical distribution of the port facilities necessitated the construction of two wastewater treatment facilities. The facility owned by G-BOMTA was not financed under this project. 12. All projects under the Port Component have been successfully completed and are or have been fully commissioned. (a) Shanghai Port Authority (SPA). Under this project, SPA constructed a new waste facility in Pudong for wastewaters from SPA ships and garbage from all shipping. The facility combines units for treatment. of oil- contaminated wastewater (capacity of 30,000 tons/year); garbage handling and incineration (2 tons/day) and wharf berthing for three 500-ton capacity garbage collection barges. All monitoring equipment and the monitoring van have been delivered and are now in use. The new Pudong facility also includes a new operations building that will also house a portion of the Environmental Monitoring Center, now located in older premises near Terminal 2 in central Shanghai. SPA has a detailed program of monitoring for air and water quality throughout the harbor area and at the separate terminal facilities. (b) Shanghai Bureau of Maritime Transportation Administration (S-BOMTA). Under this project, S-BOMTA constructed a new facility near the Waigaoqiao Terminal in Pudong to receive and process oil- contaminated (capacity of 400,000 tons/year) and chemically- contaminated (capacity of 100,000 tons/year) wastewaters from their  -7 - extensive fleet and other shipping. Located on the south side of the Yangtze River, the facility provides ready access to all shipping both entering the Port of Shanghai and proceeding up the Yangtze River. As part of this project, S-BOMTA purchased 600 meters (m) of oil boom to add to their existing 600 m of equipment. An extensive monitoring and effluent testing laboratory has been set up as part of the new facility. (c) Ningbo Port Authority (NPA). Under this project, NPA constructed waste-handling facilities at their Beilun and Zhenhai Terminals. At Beilun, the facility can process oil-contaminated wastewater (capacity of 30,000 tons/year). In addition, NPA refurbished the iron ore wastewater treatment facility, generating treated water for reuse as a dust suppressant in the ore concentrate storage area, thus saving about Y 400,000 per year. At Zhenhai, the facility can process oil-contaminated wastewater (capacity of 30,000 tons/year) and process about 200 kilograms (kg)/hour of garbage in a new dual incinerator facility. The reception area also provides berthing for a new 50 cubic meter (m3) garbage collection barge served by two new garbage collection trucks. As the berthing facilities are geographically distributed and include an offshore deep-water anchorage, NPA purchased two vessels related to oil spill response: (i) 500-ton waste capacity collection vessel and (ii) an oil spill response emergency command vessel. NPA routinely uses the 2,000 m oil spill containment boom purchased under this project to surround vessels being off-loaded at the Beilun Marine Oil Terminal. In addition, NPA also purchased an additional 2,000 m of containment boom also being used at the Beilun Marine Oil Terminal. All monitoring equipment and a van have been delivered and are now in use. (d) Dalian Port Authority (DPA). DPA has renovated and upgraded waste reception and treatment facilities (investments of $740,000) for oil- contaminated wastewater at Siergou Terminal (capacity of 1.2 million tons/year, mostly from refined product cargoes) and at the New Harbor Oil Terminal (capacity of 1 million tons/year, mostly from crude product cargoes and about 600,000 tons from refined product cargoes). Project funds were used to refurbish the chemically-contaminated wastewater treatment system at Siergou (capacity of 100,000 tons/year) and a sanitary sewage wastewater treatment plant at the Xianglujiao Terminal. Through funding from this project, DPA has purchased 2,000 m of oil containment boom (investment of $120,000) to augment an existing 3,000 m. The booms are routinely used to enclose vessels being off-loaded at both the Siergou and New Harbor Terminals. All monitoring equipment and a laboratory vehicle have been delivered and are now in use (investment of $300,000). While monitoring equipment augmented existing capabilities, DPA is planning to renovate its Environmental Monitoring Center,  - 8 - including provision of additional support infrastructure (e.g., fune hoods, etc.). (e) Tianjin Port Authority (TPA). Under this project, TPA upgraded an oil- contaminated wastewater treatment facility at the Tianjin Oil Bunkering Company (Beijiang) and constructed a new wastewater reception and treatment facility in the Nanjiang area. The Beijiang facility (investment of Y 1.5 million and $429,000) improvements provided for two storage tanks of 4,000 m3 and associated piping to augment existing berthing facilities. The Nanjiang land-based facility has a capacity of 200 tons/hour and a holding capacity of 4,000 mi3; the multiwaste vessel has a holding capacity of 160 m3 and an on-board processing capacity of 10 tons/hour (investment of Y 33.82 million and $881,000). The Nanjiang facility includes a chemically-contaminated wastewater treatment system (100 m3 at any one time, with storage in three holding tanks and a processing capacity of 8 m3 per hour (completion expected by January 1998; investment of Y 12.23 million and $580,000). The Nanjiang facility also includes a sanitary sewage wastewater treatment component (capacity of 600 tons/day). Under this project, TPA purchased five garbage transfer trucks and constructed a waste incinerator in the Beijiang area, with a capacity of 300 kg/hr (investment of Y 6 million and $183,000 plus $143,000 for the trucks). TPA also purchased two roadway sweep and two water spray vehicles to remove coal dust and clean roadways within the port area (investment of $271,000). As part of this project, TPA purchased 2,600 m of oil containment boom (investment of $249,000), two oil skimmer units, 8 special oil mops, 1 surface concentration net, 1 ton of oil- absorbent material and 1.5 tons of oil-dispersant chemical. All monitoring equipment and a laboratory vehicle have been delivered and are now in use. TPA initiated a cooperation agreement with the Department of Environmental Studies of Tianjin Nankai University, in which senior graduate students and research fellows use the new port testing equipment, while assisting in the training of port staff and developing new testing protocols. (f) Xiamen Port Authority (XPA). As the harbor facilities are geographically distributed, XPA, under this project, purchased a new environmental protection services vessel (capacity of 90 mi3 of oil- contaminated wastewater with processing of 2x10 tons/hour). In addition, the vessel is equipped with various oil spill response equipment and can act as a spill response vessel as required. This vessel is routinely berthed at 2 a new 132 m wharf, with a new 262 m storage warehouse (investment of $2.21 million for the vessel, Y 4 million for the terminal and warehouse and Y 680,000 for related design work). XPA constructed a new secondary treatment sanitary sewage wastewater facility at the Dongdu II Terminal area (investment of Y 850,000 for civil works and $570,800 for  -9 - equipment). XPA is completing construction of a new incinerator facility at the old Coal Terminal, with a capacity of 200 kg/hr. Garbage and sanitary sewage will be collected using a new barge with a holding capacity of 20 tons of garbage and 80 tons of sewage water (investment of $175,871 for equipment, Y 400,000 for civil works and approximately Y 1,534,479 for the garbage/sanitary sewage collection barge). Under this project, XPA purchased 1,000 m of containment boom (investment of $92,364) and will be purchasing an additional 1,000 m (investment of $60,000). XPA also purchased oil response equipment, including oil skimmer and oil absorbent material (investment of $152,365 for the boom and approximately $200,000 for other related equipment). Under this project, XPA initiated an Environmental Bureau. This effort included (i) a contract to a consultant to provide organizational, general operating and training plans (investment of $30,000); (ii) renovations to an existing structure to house the Environmental Monitoring Center (investment of Y 500,000); and (iii) purchase of monitoring equipment and a laboratory vehicle (investment of $482,340). XPA also intends to make a further investment to purchase additional air quality monitoring equipment. (g) Guangzhou Port Authority (GPA). Under this project, GPA constructed a new treatment facility adjacent to their XiJi Oil Terminal. The oil- contaminated wastewater component has a capacity of 500 tons/day. Alternatively, wastes can be collected by a wastewater reception ship (capacity of 420 tons of oil-contaminated and 100 tons of sanitary sewage wastewater; investment of $813,200) and brought to the Terminal. The treatment facility also has the capability of processing sanitary sewage (investment of $813,200). Total investment is Y 15.61 million for civil works (also includes a laboratory/dormitory building) and $2.514 million for equipment. GPA is completing a chemically-contaminated wastewater treatment system at the DanShuiHe Dangerous Goods Terminal (investment of Y 3.972 million for civil works; Y 1.08 million and $633,000 for equipment). This facility will also have components to process sanitary sewage from the port facilities at a rate of 100 tons/day. GPA constructed a new waste incinerator (capacity of 2.4 tons/day; investment of Y 880,000 (for civil works) and $279,000 (for equipment). Under this project, GPA purchased 2,500 m of oil-containment boom (investment of $150,000). Sections of the boom are routinely used to surround vessels being off-loaded at the XiJi Oil Terminal. As part of this project, GPA purchased an oil spill recovery vessel (investment of $808,835) and an oil boom deployment vessel (investment of $484,620). In addition, GPA has invested about Y 300,000 to purchase other spill response equipment, such as oil skimmers, oil-absorbent material and dispersant chemical. All monitoring equipment and a laboratory vehicle  - 10- (representing a total investment of $551,141) have been delivered and are now in use. GPA has invested about Y 325,000 in additional laboratory equipment and Y 1 million in building renovations for the monitoring center. (h) MOC Environmental Monitoring Center. As part of the Harbor Superintendency Administration, MOC operates an Environmental Monitoring Center in Beijing. The purpose is to undertake research on methods of monitoring and analytical testing, conduct some monitoring either as part of broader national objectives or to assist smaller Port Authorities and to provide technical input to policy decision-making within MOC. An investment of $1.77 million was made to upgrade the analytical testing capability of the Center and to finance the purchase of all (MOC and Port Authority) computer hardware to be used in the ship waste tracking component. Financial Performance 13. Cost estimates at appraisal were reasonable. Final project costs were estimated at about $69.5 million (or Y 175.2 million plus $47.7 million) against $77.5 million (or Y 174.6 million plus $45.0 million) estimated at appraisal (Table 8a). The difference when expressed in US dollars is due to the devaluation of the local currency since the 1991 appraisal (Y 1.0=$1/5.32 in 1991; Y 1.0=$1/8.30 at completion or Y 1.0=$1/7.962 overall average). 14. During implementation of the project, two major changes occurred that affect the financial condition and reporting procedures of the six ports: (a) Revaluation of Fixed Assets. The revaluation of port assets was conducted between 1992 and 1995, the first in over 40 years. This resulted in an increase in the value of fixed assets and related depreciation. While the short-term effect was a dilution of the reported profitability and financial rate of return, in the long term, the revaluation will allow each port authority to reserve a proper depreciation account (based on the new higher value) to replace aging facilities, without jeopardizing the port financial capacity. (b) New Financial Reporting Procedures. Under instructions from the Ministry of Finance, the six ports changed their financial accounting procedures in July 1993 to be consistent with international accounting standards. The new accounting and financial reporting system will accelerate the potential for commercialization and privatization of the port. 15. The general financial condition of the six ports is good and they will continue to earn surpluses, despite some short-term sudden increases in operating costs due to causes beyond their control (e.g., Port of Guangzhou). During the project implementation,  - 11 - between December 1994 and June 1996, the Bank also completed six ICRs for the six ports under different projects. Besides the need for continued capital investments for general port construction, the port authorities were also able to provide sufficient funds to support the capital investment of the Ship Waste Disposal Project largely through internally-generated cash derived from operating revenues (Tables la-6a). 16. The current financial strength of the six ports is superior to the original staff appraisal report (SAR) estimates. The conservative financial forecasts were developed in the SAR during a period when China was hit by severe economic recession in the early 1990s. The recovery, beginning in the spring of 1994, was rapid and was reflected in a higher demand for freight transport, both in domestic and foreign trades. Between 1991 and 1995, for example, the freight volume for all major coastal ports grew an average of 10.8 percent per year, of which, the international freight grew by average of 20 percent per year. 17. High transport demand resulted in a fast growth of operating revenues. The flow of funds for all the six ports is much larger than the original estimates, with increases of 125 to 441 percent. This provides for a greatly strengthened financial position for the six ports and better than projected. The detailed annual funds flow is provided for each port in Tables lb-6b and summarized, in comparison to the SAR estimates as follows: FUNDS FLOW STATEMENT SUMMARY (CLOSING BALANCE)-1995 La (Y million, Consolidated) Shanghai Guangzhou Dalian Tianjin Port BOMTA Subtotal Ningbo Xiamen (Huangpu) ICR actual (1) 254.7 547.0 636.1 1,002.7 1,638.8 310.2 345.7 164.7 SAR estimate (2) 76.5 101.1 282.7 n.a. n.a. 93.8 75.1 73.0 Increase (1)/(2) 233% +441% +125% n.a. n.a. +231% +360% +126% n.a. = not available. da The latest year available in the SAR.  - 12- 18. Based on the current operations scale of the six ports, the Port Authorities should not experience difficulties in maintaining the new waste reception and treatment facilities in the future. Further, the total capital investment of the Ship Waste Disposal Project contributes only a very marginal component of total net fixed assets (overall average of 2.1 percent, ranging from 0.6 percent (Dalian) to 5.3 percent (Xiamen). Details are provided in Tables lc-6c and summarized as follows: CAPITAL INVESTMENT AND NET FIXED ASSETS-1996 (Y million, Consolidated) Total Investment of Net Fixed Assets of Ratio the Project the Port (1) (2) (3=1/2) Dalian 28.4 4,749.7 0.6% Tianjin 111.7 3,872.7 3.0% Shanghai: Port 70.0 4,216.5 1.7% BOMTA 189.4 10,301.5 1.8%/o Subtotal 259.4 14,518.0 1.8% Ningbo 57.2 1,447.6 4.0% Xiamen 43.7 827.5 5.3% Guangzhou (Huangpu) 88.6 2,622.3 3.4% Total 589.0 27,947.8 2.1% 19. To ensure the long-term financial viability of these facilities, a study to review port tariffs and waste facility operating costs formed a component of the project and was completed by MOC, with assistance from consultants. The study recommended institution of a unified set of port fees, to be applied to all ports in China with the concepts of "full recovery of costs" and "pay whether used or not." MOC has accepted this recommendation and will provide a proposal to the State Planning Commission for approval for the new tariff schedule. 20. While implementation of a new waste reception fee is desirable, the financial impact of not having a new schedule would be minimal, as existing subsidization by the ports constitutes only a small fraction of the port fund flow. Based on the actual 1996 record, the amount of subsidies from the six ports is typically less than 1 percent of their fund flow; e.g., for the Port of Guangzhou, the annual subsidy constitutes only 0.04 percent of its fund flow. This low ratio indicates the project presents a low financial risk based on lack of resources to support the future operations of the project facilities. Summarized as follows:  - 13 - SHIP WASTE COST, REVENUE AND FUNDS FLow-1996 (Y million) Shanghai Guangzhou Dalian Tianjin Port BOMTA Subtotal Ningbo Xiamen (Huangpu) Total cost 1.6 2.0 2.57 9.10 11.67 0.70 0.20 0.66 Total revenue 0.8 - 0.47 5.70 6.17 0.14 - 0.57 Subsidies (1) 0.8 2.0 2.10 3.40 5.50 0.56 0.20 0.09 Fund flow of the port (2) 496.2 403.7 741.7 608.3 1,350.0 578.0 357.4 256.8 Ratios (1)1(2) 0.16% 0.50% 0.28% 0.56% 0.41% 0.10% 0.06% 0.04% C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 21. The project included several elements to be implemented directly through MOC (National Components) and through six ports (Port Components). This made for a complex and difficult-to-implement project. Several major factors affected the project, having both positive and negative influences. (a) Positive influencing factors were numerous: (i) GOC already had an established regulatory regime. Their environmental structure, first enunciated with the Sixth Five-Year Plan in 1981, now includes a broad set of laws and regulations at the State, Provincial and Municipal levels. Further, this policy approach was adopted by enterprises, such as Port Authorities. Thus the Borrower had in place a strong supportive administrative mechanism to ensure implementation success. (ii) To be able to implement all provisions of MARPOL 73/78, both current and future proposed, GOC recognized the need for additional facilities for waste treatment and reception. Further, GOC also recognized the need for research and development to provide for adequate treatment of chemically-contaminated wastewaters and cargoes to meet changes in their industrial base. Thus the Borrower had begun to develop supportive plans for this project. (iii) While somewhat limited in capability or undersized to meet current and future demands, the six ports, with the exception of Xiamen, already had waste reception and treatment facilities and Environmental Monitoring Centers. Thus the project was based on existing infrastructure operating with trained personnel.  - 14- (iv) While GOC recognized the benefits to their own territorial waters, extensive benefits to the environmental quality of international waters would also result from implementation of the project. Provision of supporting funds through GEF ensured implementation of the project as a whole and, in particular, components other than the basic waste treatment and reception facilities. These included development of SEATRAC, purchase of environmental monitoring equipment, development of oil spill contingency and response plans and training. (v) Through provision of loans to the six port authorities, the Bank had established a long and fruitful working relationship with the Ministry of Communications and the six port authorities. This established relationship ensured a deep degree of trust and confidence on both sides, which while not critical to success, certainly made project implementation smoother. (b) There were also some negative factors: (i) All aspects of maritime commerce within China require considerable investments to meet traffic demands set by the continuing economic growth, both within and external to the country. This competition for funds within each Port Authority made investments in "environmental improvements" difficult to promote. (ii) While the Port Authorities had responsibility to provide waste reception facilities, much of the regulatory authority is vested in the Harbor Superintendency Administration. Port Authorities are partially under MOC and partially a component of mnunicipal governments, while the Harbor Superintendency is totally within MOC. Thus regulatory decisions are divided and organizational linkages, confused. (iii) Where the Port Authorities had an existing foundation of reception facilities and environmental monitoring centers, the planning and construction of additional facilities was readily accommodated. In some ports, the project placed heavy demands on port staff, resulting in slower implementation of the project. D. PROJECT SUSTAINABILITY 22. The project was financed through a loan from the World Bank to the Government of China (Credit 2391 for $15 million) augmented by a grant obtained from GEF (GEF TF. 28613-CHA for $30 million) and administered by the World Bank. This combination of financing recognized the national and international benefits of the project  - 15 - implementation. Although the existing port revenues are adequate for both repayment of the credit and maintenance of the new infrastructure, MOC is finalizing approval for implementation of a new Port Tariff Schedule. Approval and adoption of this new schedule will further ensure project sustainability and place most reception facilities on a "user-pay" basis. Some facilities will still not be fully "user-pay" due to high local costs (e.g., electricity), the need for a nationally standardized tariff schedule for all ports to ensure continued competitiveness and the provision of a full suite of reception facilities although the demand for all facilities is not required at this time. 23. Repayment of the credit onlending will be made from general revenues of each of the six ports. The current financial strength of the six ports has considerably improved over the 1991 staff appraisal report estimates. During the implementation period of the project, the freight volume for all major coastal ports grew an average of 10.8 percent per year, with the international component growing by an average 20 percent per year. High transport demand resulted in a fast growth of operating revenues, providing a greatly strengthened financial position for the six ports. This strengthened position means there is adequate financing available, based on the continued use of the existing Port Tariff Schedule. 24. By way of comparison, current treatment unit costs for oil-contaminated wastewater ranged from Y 12.17 to Y 18.83/ton; for chemically-contaminated wastewater, from Y 35.98 to Y 36.62/ton; for sanitary sewage, from Y 6.30 to Y 16.13/ton; and for garbage, from Y 305.40 to Y 321.85/visit. The Ministry of Communications, in consultation with the six port authorities and other port authorities and users, has developed a new tariff schedule that will ensure adequate financing for both the repayment of the loan and an adequate maintenance fund. Further, adoption of the new tariff schedule, nationwide, will generate funds in other ports for construction of new or additional ship waste reception facilities or renovation of existing facilities. The proposed unified tariff schedule is provided in the following table: Average Unit Operational Proposed Unified Costs (Y/ton) Tariff (Y/ton) Oil-contaminated wastewater treated in land-based facility 15.00 15.75 Oil-contaminated wastewater treated by ship 49.04 51.50 Sanitary sewage treatment 10.55 11.10 Chemically-contaminated wastewater treatment 36.52 38.30 Garbage reception 317.35/ship visit 333.20/ship visit E. BANK PERFORMANCE 25. The Bank identified key issues and prepared the project in a timely fashion. The project was identified in November 1990 and appraised in March/April 1991, with the staff appraisal report issued in November 1991. The loan was approved on June 17, 1992  - 16- and made effective on December 12, 1992. Bank supervision was also efficient. The annual average input of staff resources for supervision was 11.2 staff-weeks, which included various specialties (see Tables 12 and 13). This was possible because supervision of six Bank-financed port projects was coordinated with supervision of this project. 26. Bank performance was enhanced by use throughout the project of the same team, consisting of an economic/financial analyst, a port engineer (as task manager) and a marine environmental specialist. This provided an element of consistency of approach to the issue and an assurance the project design would be successfully implemented. Further, team members had worked with the six port authorities on other port-related projects and thus had established a successful working relationship. 27. The project implementation was supervised on a regular site-visit basis with supervision staff including the three key project staff. Some of the supervision missions were undertaken solely for this project; others were undertaken in conjunction with other supervision projects to the ports. F. BORROWER PERFORMANCE 28. With the exception of the Port of Guangzhou, Borrower implementation of the Port Component of the project was excellent and timely. During 1994 and early 1995, the Port Authorities focused on facility design, equipment procurement and training. Most civil works were well into construction by the May 1995 implementation supervision mission and were essentially complete by the May 1996 mission. The Port of Guangzhou experienced some delays due to availability of local financing, but had managed to complete construction and begin commissioning during the supervision mission of May 1997. 29. With respect to equipment procurement for the waste facilities and vessels, the Borrower was able to obtain excellent price quotations through competitive bidding. With respect to monitoring equipment, MOC worked with the environmental sections of the Port Authorities to maximize purchasing power through consolidated bid packages. This format generated both competitive prices and provided a commonality of equipment base. The commonality also provided for savings through joint training programs and will provide future savings through joint procurement of spare parts. In response to increased estimates of ship wastes, the Borrower provided timely proposals to use the remaining grant/credit to procure additional treatment capability, equipment or spare parts. 30. Borrower performance with respect to the National Component, primarily the development and implementation of policy, was slower. Delays can be partially attributed to a change in staff within MOC and partially to an underestimation of difficulties in completion of some tasks, such as development and implementation of the SEATRAC software and development of a new Port Tariff Schedule. The one-year extension of the Project Closing Date to June 30, 1997 permitted these components to be fully completed,  - 17- although the State Planning Commission and other agencies must still approve formal adoption of the new tariff schedule. 31. One of the key objectives of the project was to use successful application of various aspects as a model for other ports within China. This objective was met and exceeded. The proposed oil spill contingency and response plan has been made the designated national model and is being introduced in other ports. The new Port Tariff Schedule is to be adopted by all ports, thereby providing a means of financing ship waste reception and treatment/disposal facilities in other ports, which primarily serve domestic marine commercial traffic. Further, the successful development and implementation of the project components, both National and Port, provide a model for other countries to use as part of their efforts to manage and reduce ship and port wastes. As shown in Table 10, Part II, covenants were generally met. The Borrower's performance is evaluated as very good. G. ASSESSMENT OF OUTCOME 32. Benefits. China has some 30 major ports, with freight traffic handled by the six ports constituting 53.2 percent of total foreign-going or 55.0 percent of the total national volume. One of the criteria for support of investments by GEF is a positive "environmental rate of return." With implementation of the Ship Waste Disposal Project, the SAR provided an estimate of approximately 1.1 million tons of wastes that would be treated per year rather than being discharged to international and Chinese coastal waters (311,500 tons of oil-contaminated wastes, 750,405 tons of sanitary sewage, and 30,016 tons of garbage). Successful completion of the project will not only prevent dumping of wastes as estimated in the SAR, but will also address the higher loading of wastes related to higher shipping traffic and economic activity. Using volume estimates provided in the SAR and ship traffic for 1990-96, for example, the average annual growth rate was 33.8 percent (Table 7). Thus, projected waste loadings were also underestimated. With the revised traffic figures, an estimated 6.3 million tons of wastes will be diverted (2,320,662 tons of oil-contaminated wastes, 3,800,236 tons of sanitary sewage, and 1,013,394 tons of garbage). Assuming a "working life" of 20 years for the treatment systems and no further increase from the 1996 traffic figures, at least 126 million tons of wastes will not be dumped into the oceans (46 million tons of oil-contaminated wastes, 76 million tons of sanitary sewage, and 20 million tons of garbage). 33. The project provides significant, although not quantified, economic benefits through provision of environmental benefits. While forrnal economic return analysis (environmental economic benefit) has not been attempted for the SAR and the ICR, it is widely recognized that pollution impacts on all aspects of the marine economy from the fishery to recreation. Maintenance of and improvements to the existing coastal marine environmental quality are necessary for the continued success of the coastal fishery, a major industry to China and neighboring countries. Further, methods and protocols providing improvements to marine environment quality, as achieved by the project, will serve as a model for establishing similar facilities in other Chinese ports.  - 18 - 34. Two other environmental benefits were achieved by the project. An objective was the development of a "generic" oil spill contingency and response plan and a "groundtruthing" of this plan using the six project ports. The success in meeting this objective led MOC to implement the plan on a nationwide basis for all ports. Further, MOC and the six project Ports held a national oil spill response exercise in Ningbo in May 1997. The evident success of this exercise (about 100 interested parties attended compared to 50 expected) will shift the program to an annual series, thereby further enhancing the skill set of Port Authority staff to respond to oil spills. 35. Project implementation in the six ports has resulted in the Port Authorities being considered leaders with respect to coastal zone and environmental management. For example, the City of Xiamen has drawn upon the Xiamen Port Authority's experiences with this project in their new Coastal Zone Management Law. Successful project implementation in China also serves as a model for other nations along the major shipping routes of the East and South China Seas. Concepts and approaches developed in this project are being utilized by the Bank to develop maritime environmental projects in the Philippines and Indonesia. 36. Costs and Negative Impacts. A major concern expressed by the six ports and GOC was the impact of project implementation on price competitiveness, particularly with adoption of a new tariff schedule. The project has developed and MOC has recommended to GOC adoption of a uniform nationwide tariff schedule that will provide adequate financing to cover the capital and maintenance cost of the reception facilities, while ensuring no port within China suffers a financial disadvantage. Provision of the facilities also enables China to meet broader regional goals of reducing marine pollution within the context of sustainable development and good environmental stewardship. 37. The focus of this project has been on wastes originating from foreign and larger domestic shipping in six coastal ports. As much of the current Chinese shipping is via small coastal and inland waterway vessels, a considerable portion of wastes is still not being addressed. Success in implementation of the project over the next five years will provide MOC with further support to implement the project in other ports and to address all domestic shipping. Some policy change has already occurred; e.g., as part of the Inland Waterway Project (Loan 39106-CHA) and the proposed Second Inland Waterways Project, the Bank has persuaded GOC to address ship wastes generated by the very extensive inland fleet. The resultant decrease in pollution of waterways and rivers discharging to the coastal waters will also provide an environmental benefit. MOC has indicated environmental improvements to the coastal and inland shipping fleets will be implemented over the next five years. 38. The sheer size and complexity of the maritime transportation industry within China makes successful implementation and continued derivation of benefits in the long term difficult. MOC will continue to have to devote considerable manpower and financial resources to fulfilling its role within the Chinese government policy of protecting the marine environment.  - 19- H. FUTURE OPERATION 39. Under this project, MOC and the six Port Authorities have provided considerable training for staff, both in China and overseas, where training consisted of formal courses offered by training institutes or equipment suppliers, as well as extensive tours of foreign port facilities and operations. In 1996, using some of the designated training funds, supplemented by local funds, the Environment Monitoring Center (EMC) of MOC organized an oil spill training exercise with the Ningbo Port Authority as host. Initially planned for 50 participants, the exercise was considered very successful in attracting over 100 participants for a five-day program, both classroom and field. Workshop staff included both MOC experts who had developed the National Oil Spill Response Plan and other Chinese experts from both the government and industry. The success of this training exercise has led MOC to plan similar exercises in different ports on an annual basis. 40. Financial sustainability of project was a key component in ensuring the full participation of the Port Authorities. Based on an assessment of the cost structures for existing ship waste reception and treatment facilities, MOC has developed a new port environmental fees schedule. This has been approved internally and submitted to the State Planning Commission and Pricing Bureau for final approval and implementation. This fee schedule will ensure the project facilities can be repaid, operated and maintained on an essentially self-sustaining basis. Further, MOC has implemented a policy to extend the new fee schedule to all ports, with other ports devoting the collected fees to a fund for the provision of new treatment facilities or upgrading of existing facilities. 41. The Project developed several outputs that were adopted by MOC for implementation in all marine ports, not just the six Port Authorities involved in this Project. These outputs include: (a) generic oil spill contingency and response plan; (b) port environmental fee schedule; (c) strengthened environmental monitoring systems for ports (through the MOC-EMC); and (d) oil spill response exercises. While the waste tracking system, SEATRAC, is now being actively used in the six ports, other ports are evaluating the system for implementation over the next five years. 42. Performance indicators were developed during implementation of the project and have been agreed with MOC and the six Port Authorities. These indicators are: (a) provision of data from SEATRAC and routine waste data records for the next six years. This will permit assessment of quantities received and treated thereby defining the quantities not disposed into the marine environment (both territorial and international waters); (b) provision of financial records for the ship waste disposal facilities. This will permit assessment of sustainability of treatment facilities and implications of fee implementation on port operations; (c) provision of information on future training and spill response exercises. This will permit assessment of how Port Authorities are maintaining the quality of their staff.  - 20 - 43. During appraisal for this project, MOC and the six Port Authorities wanted to also include considerable investments in oil spill response and cleanup equipment. While some equipment and ships were purchased under this project, the appraisal team recommended and MOC agreed that development of response plans, training of staff and assessment of needs should be undertaken first. During the project, these goals were met. The environmental benefits of this project should be extended through a new project, Port and Coastal Environmental Improvement, which would address five components: (a) investments in additional oil spill response and cleanup equipment for the ports (Tier 1) and coastal waters (Tier 2); (b) investments in the State Oceanographic Administration to provide for improved monitoring capabilities in outer territorial and international waters through the Yellow, East China and South China Seas; (c) additional training for both management of oil spill response and implementation of oil spill response; (d) investments in hardware and training to permit extension of SEATRAC to other marine ports in China; and (e) investments in ship waste treatment and reception facilities in the next 10 largest (defined by ship traffic) marine ports in China. 1. KEY LESSONS LEARNED 44. This project was partially funded by a grant from GEF and was the first major Fund project within the "Pollution Reduction in International Waters" category. The China Ship Waste Disposal Project can be judged to have clearly met GEF criteria. 45. In 1991, pollution levels and sources of pollution in Chinese territorial and adjacent international waters, were poorly defined or could not be adequately quantified. In the absence of other methodology, the project appraisal team calculated the GEF contribution to the project on the basis of foreign-going and domestic ship traffic at the six ports in China that served most of the foreign-going traffic. Although approximately one third of the traffic was foreign-flag, vessels in the six ports used territorial and international waters about equally. Thus it was agreed that China should contribute at least 50 percent of total project costs, representing the estimated "national baseline". The ship waste tracking system put in place under the project would then verify actual waste generation, permitting an ex-post assessment of sources of waste (national versus international). In retrospect, if we assume, based on the shipping pattern and practices, that (a) ocean going vessels stay 15 percent in domestic water and 85 percent in international water, and (b) coastal vessels 70 percent and 30 percent, respectively, and we estimate ship waste quantities following the formula provided in the same formula provided in the SAR, ship waste quantities in domestic and international waters in 1990 and 1996 are estimated as follows: (a) In 1990, ship waste generated by ocean going and coastal vessels was estimated at 355,400 tons and 736,600 tons, respectively, and ship waste generated in domestic and international waters at 568,900 tons (52 percent of the total) and 523,100 tons (48 percent of the total), respectively; and  - 21 - (b) in 1996, ship waste was generated by ocean going and coastal vessels was estimated 621,700 tons and 1,240,900 tons, respectively, and ship waste generated in domestic and international waters at 961,900 tons (52 percent of the total) and 900,700 tons (48 percent of the total), respectively. Thus, it was considered appropriate that GEF provided about 46 percent of the total project cost. 46. Diversion quantities and associated environmental benefits will be quantified and collated using a multiport ship waste tracking computer database and supplemented by additional monitoring facilities and capabilities acquired through this project. This will permit an ex-post assessment of sources of wastes (national or international). 47. The project has proven to have a high demonstration value. Through enhancing and upgrading national standards, policies and waste monitoring and construction of additional waste reception and handling facilities, the project has convinced GOC of the "environmental benefit" of the investments. This has triggered adoption of a multiport ship waste tracking system, port oil spill contingency and response plan for all Chinese ports and holding of oil spill response training exercises to train all ports and other agencies. Further, the ship waste tracking system is truly unique and, with translation into other languages, could provide a revenue-generating component. 48. With approval of a proposed new port tariff fees schedule, the project will also meet the GEF criterion of ensuring project sustainability, not only for credit repayment, but also for system maintenance. Further, GOC will be implementing this fee schedule on a national basis, providing a reserve fund in other ports for refurbishing or expanding existing facilities or constructing new facilities. 49. Success of the project can be attributed to both the Borrower's and the Bank's approach to the project. The Bank utilized a multidisciplinary team of an economic/ financial analysts, a port engineer and a marine environmental specialist. This provided a consistency throughout, from design and appraisal to implementation. While 10 Chinese agencies and ministries were involved in the project, key leadership was provided by MOC, ensuring a national consistency and providing a mechanism to utilize "model components" in other ports. Further, GOC has a well-established base of environmental laws and agencies, with trained staff, to monitor and enforce these laws; i.e., the project could build on a strong existing base. 50. Port and coastal environmental management is inherently complex due to overlapping jurisdictions of different departments and ministries, port authorities and private interests. If China did not already have a strong and existing base upon which the project could be constructed, coupled with good leadership from MOC, this project would have been much more difficult to implement and would likely have required more time. Replication of this project in other countries can be successful, if there are established regulatory and management regimes suitable to the task. Alternatively, such regimes  - 22 - should be first established and stabilized, followed by construction of facilities and other components. 51. Management of ships and port wastes is only one aspect of port and coastal maritime environmental management. The success of a ship waste project can be further enhanced by (a) adoption of an environmental coastal zone and port management plan (a concept already being initiated by the Xiamen Special Economic Zone); (b) implementation of other pollution control activities (e.g., oil spill response); and (c) control and management of land-based sources of pollution.  - 23 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Partial Negligible Not Applicable Macroeconomic policies X Sector policies x Financial objectives X Institutional development X Physical objectives X Poverty reduction X Gender issues X Other social objectives X Environmental objectives X Public sector management X Private sector development X B. Project Sustainability Likely Unlikely Uncertain x C. Bank Performance Highly Satisfactory Satisfactory Deficient Identification X Preparation assistance X Appraisal X Supervision X D. Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation X Implementation X Covenant compliance X Operation (if applicable) E. Assessment of Outcome Highly Satisfactory Unsatisfactory Highly Satisfactory Unsatisfactory x  -24 - TABLE 2: RELATED BANK LOANS/CREDITS Year of Approval Loan/Credit Title Purpose Status Preceding Operations 1. Three Ports Project Expansion 1982 C mpleted on 06/30/88 2. Tianjin Port Project Expansion 1986 Completed on 10/31/94 3. Huangpu Port Project Expansion 1987 Completed on 12/31/94 4. Dalian Port Project Expansion 1988 Completed on 12/31/93 5. Xiamen Port Project Expansion 1988 Completed on 03/31/95 6. Ningbo and Shanghai Ports Expansion 1988 Completed on 12/31/95 Following Operations 1. Shanghai Port Restructuring and Expansion 1992 To b