China - Rural Water Supply and Sanitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 19475 IMPLEMENTATION COMPLETION REPORT CHINA RURAL WATER SUPPLY AND SANITATION PROJECT (CREDIT 2336-CHA) June 29, 1999 Urban Development Sector Unit China Country Management Unit 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 EQUIVALENTS (As of May 1991) Currency: Remninbi Currency Unit: Yuan (Y) Y 1.00=100 fen $1.00=Y 5.31 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Meter (m) = 0.62 miles Liter (1) = 0.264 US gallons lpcd = liters per capita per day Cubic meter or ton of water = 284 US gallons ABBREVIATIONS AND ACRONYMS CPO = County Project Office ICB = International Competitive Bidding O&M = Operations and Maintenance MOF = Ministry of Finance NPHCC = National Patriotic Health Campaign Committee NPO = National Project Office PPO = Provincial Project Office RWSS = Rural Water Supply and Sanitation Project UNDP = United Nations Development Program UNDB/WB = UNDB/World Bank Water and Sanitation Program WHO = World Health Organization Gansu = Gansu Province Guangxi = Guangxi Zhuang Autonomous Province Hunan = Hunan Province Inner Mongolia = Inner Mongolia Autonomous Region Xinjiang = Xinjiang Uygur Autonomous Region Yunnan = Yunnan Province Vice President : Jean-Michel Severino, EAPVP Country Director: Yukon Huang, EACCF Sector Manager : Keshav Varma, EASUR Task Manager : Dawn Vermilya, EACCF  FOR OFFICLIL USE ONLY CONTENTS PREFACE ..........................................................iii EVALUATION SUMMARY .........................................................v 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 ................9 D. Project Sustainability ......................................................... 10 E. IDA Perfornance .........................................................11 F. Borrower Performance ........................................................ 12 G. Assessment of Outcome ........................................................ 13 H. Future Operation ......................................................... 13 I. Key Lessons Learned ......................................................... 14 PART II: STATISTICAL TABLES ......................................................... 15 Table 1: Summary of Assessments ........................................................ 15 Table 2: Related Bank Group Loans/Credits ................................................... 16 Table 3: Project Timetable ........................................................ 16 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual /a ....... 16 Table 5: Key Indicators for Project Implementation ....................................... 16 Table 6: Key Indicators For Project Operations .............................................. 16 Table 7: Studies included in Project ......................................................... 16 Table 8a: Project Costs ......................................................... 17 Table 8b: Project Costs ......................................................... 17 Table 8c: Project Financing ......................................................... 17 Table 9: Economic Costs and Benefits ......................................................... 17 Table 10: Status of Legal Covenants ......................................................... 18 Table 11: Compliance with Operational Manual Statements .......................... 19 Table 12: IDA Resources: Staff Inputs ......................................................... 19 Table 13: Bank Resources: Missions ......................................................... 19 ANNEX A: BORROWER'S CONTRIBUTION TO THE ICR ............................ 21 ANNEX B: ICR MISSION'S AIDE MEMOIRE ............................................... 22 MAPS IBRD 23276 IBRD 23348 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.   - 111 - IMPLEMENTATION COMPLETION REPORT CHINA RURAL WATER SUPPLY AND SANITATION PROJECT (CREDIT 2336-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Rural Water Supply and Sanitation Project in China, for which Credit 2336-CHA in the amount of SDR 78.9 million (US$110.0 million equivalent) were approved on April 10, 1992 and made effective on July 23, 1992. The credit was closed on December 31, 1998. The Credit was fully disbursed and the last disbursement took place on May 24, 1999, with the Special Account recovery. The ICR was prepared by Ms. Dawn Vermilya (Task Manager and Financial Analyst-EACCF) and Lee Travers (Economist and former Task Manager-TWUWS), with contributions from George Plant (Water/Sanitation Engineer-EACCF), Dr. Huang Ping (Sociologist-Consultant), and Li Xiaofeng (Task Team Assistant) and reviewed by Messrs. Keshav Varma, Sector Manager, EASUR and Yukon Huang, Country Director, China. The Borrower provided comments that are included as an appendix to the ICR. Preparation of this ICR was begun during IDA's final supervision/completion rnission, from November 23 to December 4, 1998. It is based on material in the project file. The borrower contributed to preparation of the ICR by the National Project Office contributing summary data, views reflected in the mission's aide-memoire, and their own evaluation of the project's execution.   CHINA RURAL WATER SUPPLY AND SANITATION PROJECT (CREDIT 2336-CHA) EVALUATION SUMMARY Introduction 1. The Rural Water Supply and Sanitation Project was designed to supply about 9 million rural inhabitants in 75 counties in the provinces and autonomous regions of Guangxi, Yunnan, Hunan, Gansu, Inner Mongolia and Xinjiang with safe drinking water, health/hygiene education, and access to improved sanitation technologies. The project supplemented the national rural water supply program's efforts to meet their 1995 target to supply 85 percent of the rural population with improved water supply, including 30 to 40 percent served by piped systems and 35 to 50 percent meeting water quality standards. As of 1997, 89 percent of China's rural population had access to improved water supply, of which 48 percent was being served by piped water and almost all piped water systems meet the government's standards for safe water quality. This project is the second in a series of four rural water supply and sanitation projects that have been negotiated with China, which address raising the quality of rural drinking water to meet national standards and improving the health and hygiene conditions in rural China. Project Objectives 2. The overall project objective was to improve the health and productivity of the poorest and most needy inhabitants of rural China by increasing coverage of water supply, supported by sanitation services, health/hygiene education, technical assistance and training. Supporting project objectives were to: (a) develop sectoral strategies to prioritize investments at the county level, (b) use community participation to maximize project impact, (c) maintain properly staffed institutions to support adoption, implementation and operation of investment programs, (d) increase coverage in water supply, sanitation and health/hygiene education through physical construction, provision of equipment and utility vehicles, technical assistance and training; and, (e) establish ongoing and expanding programs and enhance community participation and replicability through provision of appropriate models, development and distribution of standards and manuals. 3. The project components in brief were: * Water Supply. Construction of facilities such as waterworks systems, communal faucet systems, wells with hand pumps, and rainwater collectors to provide safe and sufficient drinking water to some 9 million rural inhabitants;  - vi - * Sanitation. Construction of facilities such as household, communal and school latrines, animal enclosures and drainage ditches in selected demonstration and pilot villages in each project county; * Health/Hygiene Education. Provision of health/hygiene education to all project counties through training of provincial, county and community administrators, healthcare workers, teachers, and community women and through them the general population; construction of training facilities; dissemination of training and health/hygiene education materials; * Technical Assistance and Training. In conjunction with the ongoing United Nations Development Program (UNDP) project, provision of technical assistance and training in management, finance, procurement, training of trainers, and technical aspects of the first three project components at the national, provincial, prefecture, county and community levels; and * Institution Establishment and Project Management. Construction of project offices and dormitories; provision of office equipment; and financing of project management and supervision activities. 4. There were three legal covenants that, in particular, supported achieving the substance of the objectives and components: * Satisfactory publication and distribution of design manuals for low-cost rural water supply technologies and rural sanitation facilities was a condition of credit disbursement for civil works; * Planning and design of subprojects would be done in accordance with the criteria contained in the planning and design manuals and the criteria and procedures for review and approval of subprojects would be followed; and * Each Project Province and Region shall cause charges for water provided by each piped and nonpiped water systems financed from the proceeds of the Credit to cover: (a) the costs of operating and maintaining such system and a pro-rata portion, determined in a manner acceptable to the Association, of the costs associated with the repayment by the Project Province or Region of the proceeds of the Credit made available to the Province or Region (excluding any grants from the Project Province, Region or Counties to the beneficiaries of water systems), during the period repayments of the Credit proceeds are being made by the Province or Region; and (b) thereafter, the costs of operating and maintaining such system including provision for depreciation on a basis acceptable to the Association. 5. The stated overall objective of the project was assumed to lead directly from the project components, but was not itself monitored. Among the objectives, the clear priority of the Borrower and the project task teams was to "increase coverage in water supply,  - vii - sanitation and health/hygiene education." The specific objectives mentioned above were appropriate at the time of appraisal except, in the sanitation improvement objective, that for "enhancing ... replicability through provision of appropriate models." There, even a preliminary economic analysis would have shown that the model villages and the sanitary latrine models being considered were so costly compared to traditional practices that they exceeded willingness to pay of almost all the targeted poor communities receiving improved water supplies. Implementation Experience and Results 6. The project substantially achieved its major objectives. The project brought sustainable, improved water supplies to over 9 million poor people. Extensive borrower and IDA supervision consistently revealed highly positive beneficiary villager self- assessment of project results. Depending on the original water problem, reduction in incidence of intestinal diseases reported, particularly among children, and time reduction to fetch water daily have been the main ways in which the project has benefited the project villagers. 7. The physical completion of water facilities and the connection of beneficiaries has been substantial. At project close, over 2,000 water supply systems and 70,000 hand pumps and cisterns were operating. In total these systems are currently serving 8.9 million beneficiaries (99 percent of target). The target of 9.06 million beneficiaries is expected to be exceeded when the final 125 water plants, under construction at project close, become operational. In most water supply systems, the water tariff is covering operation and maintenance costs and is either fully or substantially covering agreed debt service set-aside payments. Community participation, although in most respects modest during the feasibility and design stages, has had a strong impact on project results. The health education achievements have been substantial. The sanitation achievements of the project have been partial. The improved sanitary latrine construction program failed to generate the expected demand from the target population, even with some government subsidy. This problem arose because of affordability concerns and because the linkage between improved sanitation and better health is not strong enough to overcome traditional preferences for fresh nightsoil use for part of crop fertilization. Although demonstration villages in themselves were successful in improving the quality of their environment and educating the village population on health education and sanitation issues, they have not been as successful as planned in producing an obvious demonstration effect in neighboring nonproject villages and counties. 8. The project was affected by a substantial devaluation in 1994 and by the government ending its import duty exemption on World Bank Group-procured goods, which raised the local currency cost of imports. In addition, in the early 1990s, China experienced inflation that substantially increased local currency project costs. However, devaluation increased the local currency value of the IDA Credit sufficiently to offset inflation during the project period, so the Credit remained sufficient for original project goals. Inflation nonetheless partially affected project completion, since local governments  - viii - had budgeted their local currency contribution in a fixed nominal amount and some of the provinces resisted making the needed counterpart fund adjustments. The cumulative result of the various financial and management problems was a 12-month delay in completing project activities. 9. Project sustainability is rated as likely. Financially, systems are covering operations and maintenance costs and are making a full or significant contribution to debt service repayment through the water tariff. Technically, the equipment and materials are almost all domestically produced and widely available. The mechanical operating skills are available, even in poor counties. Moreover, beneficiaries recognize the time savings and health benefits of safe water, hence have a strong impetus to keep the water systems operating smoothly and finance repairs and expansions. Health and hygiene education programs are ongoing, and the project's contribution was to supplement the existing much larger program, so its sustainability is considered likely. IDA performance has overall been satisfactory from project identification to completion. Borrower performance was highly satisfactory during preparation and has overall been satisfactory during implementation and project completion. Summary of Findings, Future Operations, and Key Lessons Learned 10. Overall, the project is assessed to have achieved a satisfactory outcome. Highly satisfactory aspects of the project, for which all objectives were met, were the physical completion of water systems, and connection of almost 9.0 million beneficiaries, reported high levels of beneficiary satisfaction, and high levels of cost recovery. The physical implementation of the health and hygiene education program was highly satisfactory per the objectives set at appraisal, but since it is not clear that the health messages have resulted in significant behavior changes, the overall rating for this component is satisfactory. The sanitation program and demonstration village program are considered to be satisfactory as far as physical implementation, but because demand was not generated for the improved latrines program, and the model villages program lacked significant demonstration effect, the overall rating for this component is unsatisfactory. 11. Because the Government in China is reorganizing and plans to significantly reduce its staff, a final decision on institutional arrangements to oversee the water systems has not been decided. Currently, the three options under consideration are: (a) maintaining the County Project Offices (CPOs) but expanding their responsibilities to cover all government-sponsored rural water supply projects in the counties; (b) converting the CPOs into Rural Water Supply Companies, which would still allow government budgetary financing for a limited period of time before they would have to fully finance themselves; or (c) allowing the townships to take responsibility for providing services to the village water schemes, since most townships have a water company responsible for town supply, which could provide the technical expertise required. Health intervention initiatives will occur through existing service providers: doctors, women's committees, and through school programs.  -lx - 12. There are five key lessons from this project. First, long-term loans to poor villages can complement village resources to sustainably and significantly improve water supply. Second, demand for improved latrines is correlated with higher income levels, and, in contrast to improved water supply, the income levels of the rural poor in this project were too low to support the latrine improvement strategy. Third, investing in model villages is not a successful strategy for yielding demonstration effects when the external government financing needed to construct the model is not available to other villages seeking to replicate the model. Fourth, training of water plant managers, operators and accountants is critical to the sustainability of the water plant subprojects and proceeds of the Credit should be made available to ensure that adequate training is taking place. Fifth, intensified traditional approaches to health education have reached a saturation point. In order to increase the acceptance of health messages and behavior modification, the inhibitors for improved practice must be identified, and the health education program modified accordingly.   - 1 - CHINA RURAL WATER SUPPLY AND SANITATION PROJECT (CREDIT 2336-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. Objectives. As stated in the project Staff Appraisal Report, the overall objective was to improve health and productivity of the poorest and most needy inhabitants of rural China by increasing coverage of water supply, supported by sanitation services, health/ hygiene educatiQn, technical assistance and training. Through project preparation and implementation, immediate objectives set for the project were to: (a) develop long-term sectoral and subsectoral strategies to prioritize investments at the county level; (b) explore and develop appropriate low-cost alternatives as well as formulate affordable and sustainable programs for water supply, water treatment and sanitation through community participation to maximize project impact; (c) establish and maintain properly staffed institutions as well as provide technical assistance and training to support adoption, implementation and operation of investment programs; (d) increase coverage in water supply, sanitation and health/hygiene education through physical construction, provision of equipment and utility vehicles, technical assistance and training; and, (e) establish ongoing and expanding programs and enhance community participation and replicability through provision of appropriate models, development and distribution of standards and manuals, as well as dissemination of experience and lessons learned. 2. Components. The project components were: * Water Supply: construction of facilities such as waterworks systems, communal faucet systems, wells with hand pumps, developed springs, rainwater collectors and related facilities to provide safe and sufficient drinking water to some 9 million rural inhabitants; provision of water quality testing equipment and utility vehicles; continuation of development, introduction and dissemination of new technologies through demonstration, publication and distribution of manuals and guidelines; * Sanitation: construction of facilities such as household, communal and school latrines, animal enclosures and drainage ditches in selected demonstration and pilot villages in each project county; provision of the foundation for replicable programs by developing and demonstrating all aspects of the program that delivers not just latrines but facilities that are demanded, effectively used and sustained for the duration of their service life;  -2 - * Health/Hygiene Education: provision of health/hygiene education to all project counties through training of provincial, county and community administrators, trainers, healthcare workers, teachers, community women and through them the general population; construction of training facilities; development and dissemination of training and health/hygiene education materials; provision of materials, supplies, equipment and utility vehicles; * Technical Assistance and Training: in conjunction with the ongoing United Nations Development Program (UNDP) project, provision of technical assistance and training in management, finance, procurement, training of trainers, and technical aspects of the first three project components at national, provincial, prefecture, county and community levels; and * Institution Establishment and Project Management: construction of project offices and dormitories; provision of office equipment; and financing of project management and supervision activities. 3. Covenants. There were three legal covenants that particularly focused on achieving the substance of the objectives and components: * Satisfactory publication and distribution of design manuals for low-cost rural water supply technologies and rural sanitation facilities would be a condition of credit disbursement for civil works;