China - Sichuan Urban Environment Project

Document of The World Bank Report No.: 18960 PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$150 MILLION A1ND AND A PROPOSED CREDIT OF SDR 1.5 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SICHUAN URBAN ENVIRONMENT PROJECT May 14, 1999 Urban Development Sector Unit China Country Unit East Asia and Pacific Regional Office  CURRENCY ]EQUIVALENTS (Exchange Rate Effective May 1, 1999) Currency Name = Renminbi Currency Unit Yuan (Y) Y 1.0(1 = $8.3 $0.12:= Y 1.0 FISCAI, YEAR January 1 - D)ecember 31 ABBREVIATIONS AND ACRONYMS AIC - Average Incremental Cost OED - Operations Evaluation Dept. BOT - Build, Operate, Transfer PMO - Project Management Office CAS - Country Assistance Strategy RAP - Resettlement Action Plan CDC - Chengdu Drainage Company SCC - Sichuan Construction CNAO - China National Audit Office Commission DFID - Department for International SCHB - Sichuan Cultural Heritage Bureau Development (UK) SDPC - State Development Planning DSTC - Deyang Sewage Treatment Commission Corporation SEPB - Sichuan Environmental Protection EA - Environmental Assessment Bureau FMS - Financial Management Systems SFB - Sichuan Finance Bureau GDP - Gross Domestic Product SOE - Statements of Expenditures GIS - Geographic Information Systems SP - Sichuan Province GVIO - Gross Value of Industrial Output SPG - Sichuan Provincial Government ICB - Intemational Competitive Bidding SPMO - Sichuan Project Management IPCAP - Industrial Pollution Control Office Action Plan SUEP - Sichuan Urban Environment IST - Institutional Strengthening and Project Training TVE - Town and Village Enterprise LEWSGC - Leshan Water Supply General UMIS - Urban Management Information Company System LESMB - Leshan Environmental Sanitation WTP - Willingness to Pay Management Bureau WYR - Western Yangtze Region LEWTC - Leshan Wastewater Treatment ZDC - Zigong Drainage Company Company ZWWTC - Zigong Wastewater Treatment LUWSC - Luzhou Water Supply Company Company MOC - Ministry of Construction ZWSC - Zigong Water Supply Comparny NCB - National Competitive Bidding Vice President: Jean-Mi chel Severino, EAPVP Country Director: Yukon ]luang, EACCF Sector Manager: Keshav Varma, EASUR Team Leader: Geoffrey Read, EASUR  CHINA SICHUAN URBAN ENVIRONMENT PROJECT CONTENTS A: Project Development Objective ................................................................2 1. Project development objective ...............................................................2 2. Key performance indicators ...............................................................2 B: Strategic Context ................................................................,.2 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project .....................2 2. Main sector issues and Government strategy ................................................................2 3. Sector issues to be addressed by the project and strategic choices ..............................................3 C: Project Description Summary ................................................................4 1. Project components ...............................................................4 2. Key policy and institutional reforms supported by the project ...................................................5 3. Benefits and target population ................................................................5 4. Institutional and implementation arrangements ................................................................ 6 D: Project Rationale ................................................................7 1. Project alternatives considered and reasons for rejection ............................................................7 2. Major related projects financed by the Bank Group and/or other development agencies ...........8 3. Lessons learned and reflected in the project design ....................................................................9 4. Indications of borrower commitment and ownership ................................................................ 10 5. Value added of Bank Group support in this project .................................................................. 10 E: Summary Project Analysis .................................................................... 10 1. Economic .................................................................... 10 2. Financial .................................................................... 11 3. Technical .................................................................... 12 4. Institutional .................................................................... 12 5. Social .................................................................... 13 6. Environmental assessment .................................................................... 13 7. Participatory approach .................................................................... 14 8. Social Impact and Benefits .................................................................... 14 F: Sustainability and Risks .................................................................... 14 1. Sustainability .................................................................... 14 2. Critical Risks .................................................................... 15 3. Possible Controversial Aspects .................................................................... 15  - ii- G: Main Loan Conditions ................................................................. 15 1. Effectiveness Condition .................................................................. 15 2. Other ................................................................. 15 H: Readiness for Implementation ................................................................. 17 I: Compliance with Bank Group Policies ................................................................. 17 Annex 1: Project Design Summary ................................................................. 18 Annex 2: Project Description ................................................................. 20 Annex 3A: Estimated Project Costs ................................................................. 32 Annex 3B: Project Implementation Program ................................................................. 44 Annex 4: Economic Analysis ................................................................. 45 Annex 5: Environmental Assessment And Mitigation Measures Summary .............................................. 55 Annex 6: Resettlement ................................................................. 60 Annex 7: Financial Summary ................................................................. 61 Annex 8: Procurement and Disbursement Arrangements ................................................... .............. 66 Annex 8, Table A: Project Costs by Procureraent Arrangements ................................................. 68 Annex 8, Table Al: Consultant Selection Arrangements ............................................................. 69 Annex 8, Table B: Thresholds for Procurement Methods and Prior Review ................................ 69 Annex 8, Table C: Procurement Contract Packaging ................................................................. 70 Annex 8, Table D: Procurement-Institutional Development, Urban Management Information System, Construction Supervision and Training ................................................... 74 Annex 8, Table E: Allocation of Loan and Credit Proceeds ......................................................... 75 Annex 9: Project Processing Budget and Schedule .................................................................. 76 Annex 10: Documents in the Project File ............................. 77 Annex 11: Statement of Loans and Credits ............................. 79 Annex 12: Country at a Glance ............................. 82 Map: IBRD 30125  Page 1 China Sichuan Urban Environment Project Project Appraisal Document East Asia and Pacific Region Urban Development Sector Unit Date: May 14, 1999 Team Leader: Geoffrey Read Country Director: Yukon Huang Sector Manager: Keshav Varma Project ID: CN-PE-43933 Sector: Urban Environment Lending Instrument: Specific Investment Loan Theme(s): Urban Services, incl. Water & Wastewater Poverty Targeted Intervention: [X] Yes [] No Project Financing Data [X] Loan [X] Credit [] Grant [] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount (UJS$M): IBRD Loan $150.0; IDA Credit SDR 1.5 Proposed terms: [IBRD] ] Multicurrency [X] Single currency ] Standard Variable [ ] Fixed [X] LIBOR-based Grace period (years): 5; 10 Years to maturity: 20; 35 Commitment fee: 0.75%; 0.50% Service charge: 0.75% Front-end fee on Bank loan: 1.0% Government 173.8 20. 194.7 IBRD 66.0 84.0 150.0 IDA 0.0 2.0 2.0 Other (specify) Total: 239.8 106.9 346.7 Borrower: People's Republic of China Guarantor: Responsible agency: Sichuan Province, and the municipalities of Chengdu, Deyang, Guanghan, Leshan, Luzhou and Zigong Estimated disbursements (Bank FY/US$M): Annual 6.1 10.5 19.4 31.5 32.1 34.4 18.0 Cumulative 6.1 16.6 36.0 67.5 99.6 134.0 152.0 Project implementation period: (July 1999 - June 2005) Expected effectiveness date: November 1999 Expected closing date: June 2006 Implementing agency: Sichuan Provincial Government, through Provincial Construction Commission Contact person: Zhou Guangyan, Vice Governor, Sichuan Provincial Government Address: 30, Duyuan Street, Chengdu, 610016, People's Republic of China (PRC) Tel: 011 86 28 557 1036 Fax: 011 86 28 557 1037 E-mail: suepgpublic.sc.cninfo.net OCS PAD Formn: October 9, 1998  Page 2 A: Project Development Objective 1. Project development objective: (see Annex 1) The development objective of the proposed Sichuan Urban Environment Project (SUEP) is to provide a safe environmental setting for the sustainable long-tenn economic growth of urban areas in Sichuan Province (SP). The project would support the Province in implementing the first phase of a long-term urban environmental services improvement program to recover from past environmental degradation of its water and land resources, provide an adequate supply of safe water to its growing urban population and economy, and maintain water quality at levels compatible with the needs of the basins of the Min and Tuo Rivers, protecting water quality of the Yangtze River while protecting public health, especially of lower income groups. Progress toward this objective would be measured in terms of (a) reduction of total pollution loads from the urban sector to the Min and Tuo Rivers through selective high-impact wastewater and solid waste management improvements; (b) expansion of capacity for supplying safe water in urban areas; and (c) strengthened financial viability and institutional autonomy of municipal services. 2. Key performance indicators: (see Annex 1) Key performance indicators would include quantified targets for reduced water pollution from the urban sector into rivers, reduced water pollution from the industrial sector, expanded supply of safe water to meet urban demand, increase in volume and service area of solid waste collected and disposed of, and reduced level of subsidies for investments in urban environmental infrastructure. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Documentnumber: 16321-CHA Date of latest CAS discussion: March 18, 1997 and Progress Report (R98-107), May 28, 1998 The project would support directly two of the five priorities expressed in the most recent CAS: the safeguarding of the environment and the reduction of infrastructure bottlenecks. Specifically, it would strengthen water quality management capability and expand the capacity of urban environmental services. The project would also support the use of tariffs to finance environment-related public services, and the Bank Group and China's growing focus on river basin pollution control. Discussions with the central and provincial governments have laid the foundation for long-term Bank Group involvement in strengthening these services, with the proposed project acting as the first step in this process. 2. Main sector issues and Government strategy: The principal environmental problem in Sichuan is the poor and declining water quality in many of the rivers in the province, in particular the Min and the l'uo. These rivers are extensively exploited for agriculture, which results in low residual flows and associated limited capacity for assimilation of wastewater discharges from urban areas and industry. The low flows and the generally inadequate degree of enforcement of environmental regulations result in water quality that is inadequate to sustain the desired beneficial uses of river water. In order to address the growing need for municipal services, the Sichuan Provincial Government (SPG) plans to expand and improve municipal wastewater management, water supply and solid waste management services while strengthening utility delivery mechanisms and pricing reform. Water supply plans include the remodeling of existing systems and construction of new systems to provide water to  Page 3 urban residents in the Min and Tuo river basins. In an effort to curb pollution from urban and industrial sources, ambitious pollution control targets have been set for the year 2000, including a cap on the total amount of heavy metals in industrial wastewater at 1995 levels, and the improvement of surface water quality to meet national standards. A total of 25 percent of domestic and 65 percent of industrial wastewater would be collected and treated, far more than the present levels. To reach these targets, SP would tighten enforcement of existing standards, in particular for industrial pollution control; expand capacity of wastewater collection and treatment systems; and improve solid waste management. In order to finance the expansion of urban environmental infrastructure, the participating municipal governments have created financially autonomous wastewater companies. Given shrinking public investment budgets and subsidies, these companies would, from now on, rely increasingly on user charges to finance their operational costs and debt service requirements. The already established financially autonomous water supply companies would, through tariffs, finance their operational and debt service costs, and contribute to their capital investment financing requirements. These cost recovery objectives are consistent with central and provincial government objectives for utility companies and are supported by the Bank Group. Solid waste management services would be financed increasingly from user fees. The high cost of investments in urban environmental infrastructure calls for integrated water resource management. It would be necessary for SPG to identify cost-effective solutions, which would address water supply and wastewater management simultaneously and which would, for example, take into account the water quality needs of an entire river basin. To reach this goal, SPG would overcome the current institutional fragmentation in water resource management and build management support systems for forward-looking, long-term planning, making effective use of the large amount of data periodically generated by various agencies. 3. Sector issues to be addressed by the project and strategic choices: Municipal Environment and Wastewater Management: The project would support SPG in implementing its water quality protection and environmental rehabilitation strategy. Given the consistently high water quality of the Yangtze River, efforts would focus on the Min and Tuo river basins, the two most heavily polluted river systems. In particular, it would focus on highly polluted sections of the Fu River (a tributary of the Min River) near Chengdu, leading to the Min River, the upper part of the Tuo River and the Fuxi River (a tributary of the Tuo River) near Zigong. Industrial Pollution Control: There is also substantial pollution from industry, particularly in the Min and Tuo river basins. Without a significant effort to control industrial wastewater pollution, expected environmental benefits from municipal investments would be marginal. SPG has agreed to address this issue through the implementation of policy focussed Industrial Pollution Control Action Plan (IPCAP). The IPCAP would reduce pollution loads discharged from the key polluting sectors: fertilizer, pulp/paper, food and mining, by means of a program of investments in wastewater treatment and clean technology, covering process improvements and materials substitution. In the case of pulp/paper production, the IPCAP would adopt a sector-wide approach based on restructuring and rationalization to ensure affordability of pollution control and sustainability for the sector. The initial phase of the IPCAP would involve local investments at four large polluting enterprises in the fertilizer, food and mining sectors. Water Supply: The project would support the upgrading of water supply in Leshan, Luzhou and Zigong cities. In addition to remodeling and building new capacity, the project would support demand-side management, in particular through increased real tariffs. Current national and provincial development plans are based on an increase of water consumption from about 150 liters per capita per day (lcd) to about 210 lcd in the year 2000, for both domestic and industrial use. Taking into consideration the large investment requirements for both water and wastewater infrastructure, this unit water demand appears  Page 4 high compared to other countries. The project investments would enable the cities to meet demand within expanding service areas through about 2010 while at the same time providing demand management through the tariff structure. Solid Waste Management: The project would support Leshan city to increase its service coverage to 100 percent of the urban population, increase its collection efficiency, and provide environmentally safe disposal of collected wastes. Leshan would also increase collection and landfill fees in an attempt to recover a major portion of the operating costs of this service. Region-wide Water Resource Management: SPG lacks analytic tools and management support systems to integrate the various data sources available on water q[uality and quantity. The project would support the development of urban management information systems (UTMIS) for the government and for utilities to project demand for infrastructure and services, assess their impact on the environment, and monitor trends. SPG would have the opportunity to link with a siimilar system currently under development with Bank Group assistance in Chongqing Municipality, allowing both govemments to undertake more effective river basin-wide planning. C: Project Description Summary 1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) Indicative Costs Bank Component Category (US$M) % of financing % of Bank Total (US$M) financing Min River Basin Chengdu Wastewater Physical 93.2 28.6 42.9 46.0 Leshan Water Supply Physical 22.8 7.0 9.0 39.5 Wastewater Physical 18.8 5.8 7.0 37.2 Solid Waste Physical 9.2 2.8 3.5 38.0 Subtotal Min River Basins 144.0 44.2 62.4 43.3 Tuo River Basin Deyang Wastewater Physical 32.3 9.9 12.6 39.0 Luzhou Water Supply Physical 27.8 8.5 11.6 41.7 Zigong Water Supply Physical 66.7 20.5 36.9 55.3 Wastewater Physical 35.2 10.8 14.5 41.2 Subtotal Tuo River Basin 162.0 49.7 75.6 46.7 Urban Management Information Systems Policy- 4.6 1.4 4.5 97.8 Physical Environmental Protection and Rehabilitation Policy- 7.5 2.3 0.3 4.0 Physical Institutional Strengthening & Training Institution- 7.7 2.4 7.7 100.0 Building Total Project Costs 325.8 100.0 150.5 46.2 Interest during construction 19.4 - - - Front-end Fee 1.5 - 1.5 - Total Financing Required 346.7 100.0 152.0 43.8  Page 5 2. Key policy and institutional reforms supported by the project: The policy and institutional reforms would concentrate on: (a) utility enterprise operational efficiency improvements; (b) resource mobilization and cost recovery measures; (c) underpinning of long-term financial and economic sustainability; and (d) industrial pollution control reduction through a focused time-bound action plan with respect to pollution, principally from fertilizer, pulp/paper, food/beverage and mining. The institutional strengthening and training (IST) component would enhance policies and operational experience in environmental protection and water, wastewater and municipal solid waste management. Support for these initiatives has been grouped into a number of main composite packages for the various executing agencies, covering institutional development, financial management improvement, construction supervision and training. The component would also support provincial and sector city agencies, master planning, future project preparation and other programs of assistance to be defined. 3. Benefits and target population: Benefits: The project would help SPG to put in place the policies, institutions, and infrastructure to sustain environmental quality and improve urban services in a period of strong growth. The proposed project would generate benefits in terms of improvements in urban environmental quality, health, municipal services and institutional capacity: * Environmental Benefits: improved ambient water quality in rivers currently at risk, in particular the Tuo and Min river basins, through reduced pollution loads from urban wastewater, wastes and industry; * Health Benefits: reduced incidence of water pollution-related diseases as a result of improved water supply and wastewater systems and reduced surface water pollution near water intakes; * Improved Municipal Services: expanded coverage of water distribution, wastewater collection, treatment and disposal, as well as municipal solid waste collection and disposal services for the urban population of Leshan; and * Institutional Reforms: strengthened financial and management autonomy would enable utilities to sustain and expand the provision of essential services for a growing population. Support for institutional development would ensure the long-term sustainability of the organizations and of the physical investments. Target Population: Sichuan Province is a traditionally agricultural region in south-central China, home to some 85 million people. Between 1987 and 1992, the central government's policy of providing incentives for growth in coastal areas left inland provinces such as Sichuan behind. However, recent attention to the resulting regional income disparities has prompted the Government to promote economic incentives and infrastructure investments in the inland areas. Sichuan's economy responded quickly, growing by 12.8 percent in 1993 (compared to a national average of 13.4 percent), with growth led by town and village enterprises (TVEs) and the emerging private sector; in recent years economic growth has been strong, ranging from 8 to 10 percent annually. More recent estimates show continued strong growth. Sichuan's capital, Chengdu City, forms part of an emerging urban industrial corridor that stretches southeast as far as the newly designated municipality of Chongqing, now the world's most populated municipality. Project beneficiaries are the existing and newly urbanized populations in the main cities of Sichuan, who are contributing to this sustained economic growth: the project would seek to improve the urban service levels in the main cities of Sichuan Province, by providing services affordable to the lowest 10 percent of the income distribution.  Page 6 4. Institutional and implementation arrangements: A Leading Group, headed by a Vice-Governor, was set up to guide formulation and give policy direction for the preparation and, subsequently, implementation of the project. The Group designated the Sichuan Construction Commission (SCC) as the agency responsible for managing the project. SCC organized and staffed the Sichuan Project Management Office (SPMO) to prepare and execute the project. The SPMO's responsibilities include: (a) overall project coordination, management and monitoring: (b) annual budget preparation; (c) project-wide quality assurance; (d) progress reporting to SPG and the Bank Group, including cost management, project impact and environmental improvement assessment; (e) interagency coordination and procurement support; and (f) sectional training facilitation. The participating municipalities have established their own project management offices also. The personnel skill mix of the SPMO and municipal project management offices would be adjusted from time to time to reflect the needs of the various phases of the project, including completion of preparation and implementation. The water supply components of Leshan, Luzhou and Zigong would be implemented by the cities' financially autonomous water supply companies. The wastewater components of Chengdu, Deyang, Leshan and Zigong would be implemented by the cities' recently created financially autonomous wastewater companies. The Leshan solid waste management component would be implemented by the city's existing Environmental Sanitation Management Bureau. The Urban Management Information System (UMIS) component would be managed by SCC, in affiliation with the Sichuan Environmental Protection Bureau (SEPB) and participating municipalities. The environmental protection and rehabilitation component would be implemented by the Sichuan Cultural Heritage Bureau (SCHB) and the Guanghan and Leshan Municipalities. The China National Chemical Construction Corporation International Tendering Company Limited (CNCCC Tendering Company Ltd.) would be retained as the procurement agency for all aspects of civil and electrical and mechanical works requiring bidding through international competitive bidding (ICB) procedures. Construction supervision services would be provided by an international firm using joint international/national supervision teams. Onlending Arrangements: The proposed loan of $150 million would be made to the People's Republic of China. The loan would be for 20 years, including 5 years of grace, at the Bank's standard interest rate for LIBOR-based US dollar single currency loans. The IDA credit of SDR 1.5 million ($2 million equivalent) would be for a 35-year term, including a 10-year grace period on standard Association terms. The proceeds of the loan would be onlent to the Municipalities through SP on the same terms and conditions as the Bank loan to China. The proceeds of the credit would be onlent to Leshan Municipality through SP at IDA's standard service charge for a 17-year period, including a 5-year grace period, and a commitment charge of 0.50 percent per year. The Municipalities would onlend the proceeds of the Bank loan to their utility companies for 15 years including; 5 years of grace, at an interest rate and a commitment charge not less than the rate and charge applicable to the Bank loan to China. Financial Management: Sichuan Province has the requisite systems and staff to carry out the financial management of the project. SP already has ongoing Bank Group-financed projects in other sectors and the Sichuan Finance Bureau (SFB) is familiar with the Bank Group's disbursement procedures. Sichuan prepared a Financial Management Systems (FMS) Manual, satisfactory to the Bank Group, which would be the basis for financial management during project imnplementation. To facilitate disbursements, a Special Account would be opened with an authorized allocation of $11.0 million, equivalent to the estimated average expenditures to be financed by the Bank Group over about a four-month period; the account would be opened in US dollars in a bank acceptable to the Bank Group and be managed by SFB. Auditing Arrangements: As with other Bank Group-financed projects in China, the Foreign Investment Audit Bureau of the China National Audit Office (CNAO), established in 1983 under the name of State  Page 7 Audit Administration, would have overall responsibility for auditing the accounts of the project. The actual auditing work would be conducted by the Sichuan Provincial Audit Department under CNAO's supervision. The Bank Group currently accepts audits performed under the responsibility of CNAO. Audits of the financial statements of implementing agencies and audit of the Special Account would be submitted to the Bank Group within six months after the end of the financial year. The audit reports of the implementing agencies would include opinions on whether the agencies were in compliance with their respective financial covenants, and whether these agencies had taken out adequate insurance on goods and works financed from loan and credit proceeds. Monitoring and Evaluation Arrangements: The project would be supervised through Bank Group missions scheduled for twice a year. Headquarters and resident mission staff would cooperate in this activity. During implementation, project performance, including the achievement of project outputs and progress towards the attainment of development objectives, would be monitored through the use of semiannual progress reports prepared by the SPMO. The first such monitoring report would be submitted by January 31, 2000, and the last by January 31, 2007. In addition, an implementation completion report, reviewing the planned objectives and the achievements of the project, including costs and benefits derived, and performance and contribution of all parties associated with project execution, would be prepared by the SPMO and submitted to the Bank Group within six months of the closing date. D: Project Rationale 1. Project alternatives considered and reasons for rejection: Combined Project for Sichuan and Chongqing. Initially, one urban environmental project had been planned for Sichuan Province, which included Chongqing Municipality. However, after the 1997 separation of Chongqing as an independent municipality with provincial-level status, the new Government of Chongqing requested that a separate project be prepared supporting the new government in its urban environmental program. Maintaining a combined project under these circumstances would have been difficult in terms of decision-making and institutional coordination. Hence, a parallel Chongqing Urban Environmental Project is being prepared. Project Focus: The Sichuan Provincial Government has determined that the focus of this urban environment project should be river basin water resource management, with investments concentrating on urban wastewater, water supply, solid waste management and environmental rehabilitation. To reduce pollution from industrial wastewater discharges, and strengthen environmental management, the project would support the implementation of a time-bound IPCAP addressing the largest polluters. Identified investments in clean technology, end-of-pipe treatment, pretreatment before discharge to sewers and industrial sector rationalization would be financed by Government and industry in parallel with the proposed project. Project Site Selection: During project formulation, the Government submitted proposals for prioritized investments in several cities located in the Tuo and Min river basins, includinrg investments in municipal wastewater, water supply and solid waste management. These proposals were based on a review by SPG, assisted by international consultants, with regard to their technical and economic viability. Several criteria were applied in the prioritization of subcomponents, including the contribution to water and wastewater resource management, alleviation of infrastructure constraints, local priority and commitment, and the financial viability of the service provider. The final selection was based on a river basin focus and cost- effectiveness decision criteria. In Leshan City, protection of cultural heritage was an additional factor in its selection as the current wastewater outfall discharges immediately in front of the "Grand Buddha" statue, China's largest, threatening the cultural and touristic value of this site.  Page 8 Wastewater and Water Supply Options: The initial proposals for water quality management typically called for the construction of a large number of wastewater treatment plants. These proposals were reassessed in the light of several options, including: (a) discharge of wastewater through conveyance pipes or tunnels without treatment to rivers where the assimilative capacity was adequate; and (b) the combination of several wastewater streams to be intercepted and conveyed to one large treatmnent plant. Additional water quality modeling and cost comparison were undertaken as part of project preparation to determine the optimal level of treatment to meet health standards and water quality targets. Nongovernment Sources of Funding: Alternatives to pub][ic financing of the proposed investments were considered, in particular the scope for private sector financing of urban infrastructure. However, private sector participation, e.g., in form of "build, operate, transfer" (BOT) schemes, is currently limited to a pilot program under the supervision of the national State Development Planning Commission (SDPC). Chengdu is one of five pilot sites where private investors are financing a bulk water supply project under the auspices of an Asian Development Bank Technical Assistance Project. SPG is awaiting the outcome of this pilot initiative before entering into other private sector arrangements. Hence, the option for private sector financing is not available for the proposed investments, but may be considered for future investments. 2. Major related projects financed by the Bank Group and/or other development agencies: (completed, ongoing and planned) Latest Supervision Sector issue Project (Form 590) Ratings (Bank- financed projects only) Implemen- Develop- tation prog- ment objec- ress (IP) tive (DO) Bank Group-financed Urban Environment: Water, wastewater, China:Yunnan Urban Environment Project S S sanitation, solid waste, industrial pollution (Ln 4055/Cr 2892) Urban Environment: Water, wastewater, Guangxi Urban Project: S S sanitation, solid waste, industrial pollution (Ln 4348/Cr 3097) Wastewater & tariff reform policy China: Second Shanghai Sewerage Project HS HS (Ln 3987-CHA) Formulation of multicomponent intervention China: Shandong Environment Project S S strategy (Ln 4237-CHA) Delivery, management and operations of Shanghai Environment Project HS HS large-scale urban water and wastewater (Ln 371 1-CHA) systems. Environmental pollution mitigation through time-bound action plans Provision and management of basic services to Third Rural Water Supply & Sanitation Project HS S low-income communities (Cr.N0270) Other development agencies The Asian Development Bank has supported a Reported to have been generally successful range of investment programs in the urban investment programs. sector of China, mainly supporting urban envi- ronmental services, in provinces that do not overlap with World Bank supported programs.  Page 9 . Latest Supervision Sector issue Project (Form 590) Ratings (Bank- financed projects only) Implemen- Develop- tation prog- ment objec- ress (IP) tive (DO) Bilateral support from a number of sources These investnents have generally been success- including KfW and the Governments of fully implemented, though attention has not Austria, Australia, Finland and Denmark, has been paid to institutional and financial matters. financed equipment for urban water supply, Finance has been available mainly to support wastewater and industrial waste treatment equipment sourced (restrictively) from the plants. lending country. The Department for Intemational Develop- Performance has been reported to be satisfac- ment-DFID (of the United Kingdom) has tory. focused support on institutional and financial development needs of urban utilities, and on broad aspects of environmental management. The Government of Japan has financed Performance is reported to be satisfactory. equipment for urban water supply, wastewater Financial policies are not developed, however. and industrial waste treatment plants. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory). 3. Lessons learned and reflected in the project design: Greater Reliance on User Charges: The Operations Evaluation Department (OED) review of Bank Group-financed water and sanitation projects has shown generally good achievement of physical targets but less success in sustaining the financial viability of municipal service providers. Recent sector work on China ("Urban Environmental Service Management," Report No. 13073-CHA) supports these findings, noting the need for greater reliance on user charges, which are presently levied at levels that do not sustain assets or institutions. The report concludes that adequate charges for water supply, wastewater and solid waste would be affordable, induce resource conservation and create a more dependable income stream. Hence, tariff reforms have been a centerpiece of the policy dialogue with SPG and adjustments of tariff levels are an integral part of the project design. Municipal solid waste user charges, for example, would have to triple from present levels to provide sufficient funding for sustainable collection and disposal operations. Timing of Tariff Increases: Previous urban environment projects in China have frequently encountered difficulties in implementing agreed tariff increases in a timely manner, sometimes delaying project implementation by six months or more. Tariff increases often represent politically difficult decisions for local governments, but are critical for the sustainability of the project. To avoid such delays after loan and credit effectiveness and to ensure that changes meet the approval of all relevant authorities, this project design has required that tariff adjustments be implemented during the preparation stage, not later than negotiations. Support for Institutional Management. The establishment of financially autonomous water utility enterprises to develop and manage urban services is a long-standing Chinese practice and avoids many of the management difficulties of publicly owned utilities in other countries. However, wastewater collection and treatment services have only recently been given the same autonomy, generally by absorbing the existing drainage bureaus and construction management units already active in the sector into separate enterprises. The prior technical experience of these bureaus would undoubtedly permit a smoother transition, but high levels of technical assistance would be needed to strengthen the new enterprises' managerial, financial and operational capacities. Tariffs, charges and reallocation of existing taxes and urban construction charges would help ensure adequate funds for operations and management. The  Page 10 establishment of financially autonomous utilities prior to project implementation has provided additional time for management and operational issues to be clarified. During project formulation and preparation, detailed analyses of IST needs were undertaken; this led to the design of a comprehensive IST component to be included in the project, which would assist the project utilities address the challenges described above. Sufficient Preparation Time and Budget. Experience in China has shown that first-time projects demand significantly greater time and monetary investments in the preparatory and initial implementation phases than those managed by experienced project offices. As this would be the Bank Group's first involvement in the urban environmental services sector in Sichuan, a longer lead time has been needed to develop clear understandings of institutional and service delivery arrangements. Adequate resources were allocated by government for preparation. DFID provided key support during preparation; further assistance was provided in the project formulation stage by the governments of Austria, Australia, Canada and Denmark. Technical assistance would be available ior construction supervision and the building of strong institutions. The experience gained in this project would ensure smoother implementation for later urban environment interventions in the province. 4. Indications of borrower commitment and ownership: Sichuan Province has demonstrated its commitment to the proposed project through the following: (a) the formation of a leading group to give policy guidance; (h) the establishment of provincial and municipal project management offices to prepare and coordinate t:he proposed investments; (c) the investment of provincial resources in the preparation of feasibility studies; (d) the hiring of the Southwest Engineering Design Institute as lead consultant; (e) the high priority attached by the national and provincial governments to addressing the deteriorating water qua]ity in the rivers of Sichuan, for example, the establishment of the Tuo River Rehabilitation Commission; and (f) adjustments to water tariffs, and implementation of wastewater tariffs for both domestic and nondomestic users, prior to the commencement of project implementation. 5. Value added of Bank Group support in this project: The Bank Group brings considerable international experience to assist in policy formulation and investment program design, in particular in economic and financial analysis and systematic consideration of alternatives. Bank Group assistance would also draw on our growing experience in addressing regional environmental issues, gained from urban environmental projects throughout China (Hubei, Yunnan, Shandong Provinces and others). Bank Group assistance in the design phase has enabled SP to widen the scope of possible options and find more cost-effective solutions than the ones it originally considered. Bank Group involvement would enhance the design and construction quality control of the physical investments, accelerate institutional strengthening and training, and provide additional funds for sector needs. Through its involvement in Chongqing in a similar urban environmental project, the Bank Group can substantially contribute to the introduction of region-wide water resource management in the upper Yangtze River Basin. E: Summary Project Analysis: (detailed assessmnLents are in the project file, see Annex 10) 1. Economic: (supported by Annex 4) [Y] Cost-Benefit Analysis: NPV = n.a.; EIRR = 10-12% [Y] Cost-Effectiveness Analysis [n.a.] Other: not applicable  Page 1 1 For the water supply components, EIRRs were estimated at 10-12 percent; cost-effectiveness analyses were conducted for the wastewater and solid waste management components. The objectives of improving infrastructure and safeguarding the environment and public health in Sichuan are broad and, in the initial stages of project identification, a long list of 147 projects was identified by the SPMO. A screening process reduced this long list by about half and a formal ranking process was then used to select 17 projects for detailed consideration. At the same time, the environmental analysis found that the greatest environmental problems were not in the main stream of the Jinsha/Yangtze River but in the tributaries in the Chengdu Plain. Of the seven tributaries, it was agreed to focus on the Min and Tuo Rivers. These are the most heavily polluted river basins in central and western China; they provide a defined scope for the project area, are centered on the urban area of Chengdu, and include the main municipalities having candidate sub-projects. The long-term environmental objectives for the rivers are to achieve Class III Standard (according to Chinese national regulations), which would allow the use of the rivers as a source for drinking water supply (with treatment). The economic benefits of improving the river quality to Class IJI have not been calculated because large amounts of data would be required and these are not available. However, estimates of the reductions in domestic water supply treatment costs that would accrue from using better quality river water are of the order of tens of millions of yuan annually. In addition, there would be increases in agricultural productivity from improvements in the water quality. In order to assist prioritize investments in river water quality protection, a River Basin Pollution Index was developed to measure the relative cost effectiveness of different options. The eleven municipalities in the river basins that had candidate projects were also ranked for inclusion in the project on the basis of four criteria: rate of urban growth, economic growth prospects, demand for environmental infrastructure and ability to pay for the infrastructure. Combining the analysis of priority cities for infrastructure investment with the ranking in terms of river improvement, the number of potential infrastructure components was narrowed down to eight projects in five cities. Estimates have been made for each component of the average incremental cost (AIC), financial rates of return and affordability. The AICs for the water components range from approximately Y 0.8 to Y 1.6/mi3. The highest AIC is for the Zigong scheme where major works are required because of the lack of available sources for expansion. For the wastewater schemes, the AICs range from Y 0.2 to Y 0.8/m3, although these figures are not all comparable since different levels of treatment are being provided in each municipality. On current income levels, the tariff levels required to achieve SPG's financial objectives for the schemes are broadly affordable; in the two municipalities where more than one component is proposed, the cumulative impacts would need to be considered when annual tariff adjustments are implemented. 2. Financial: (see Annexes 2, 3 and 7) NPV = n.a. FRR = 9-11.5% Provincial fiscal on-budget receipts and expenditures in 1998 totaled about Y 41 billion ($5.0 billion equivalent) and Y 33 billion ($4.0 billion equivalent), respectively. On-budget receipts and expenditures are projected to grow at about 9 percent and 8 percent per year in current terms, respectively. SPG expects to pass on about 98 percent of the Bank loan and IDA credit proceeds to the municipalities and their subborrowers. Should the municipalities and their subborrowers be unable to fulfill their obligations, SPG would have no difficulty in covering debt service through its own resources as the debt service represented by the project is small compared to total provincial receipts. SPG would provide all funding not met by (a) the proceeds of the Bank loan and IDA credit, (b) municipal contributions, and (c) funds  Page 12 generated internally by the implementing agencies. SFB has independently assessed the municipalities' ability to generate their required counterpart funds from assured sources. The base cost estimates of the project reflect preliminary engineering designs and price levels prevailing in December 1998. The unit prices were derived from the following sources: (a) quotations obtained from manufacturers and suppliers; (b) prices of goods and works from recent contracts; and (c) construction costs according to prices published by the Central and Sichuan Governments, all adjusted for inflation. Physical contingencies have been applied to base costs, as follows: civil works-12 percent; equipment and materials, and technical assistance-10 percent. Construction supervision services costs, estimated at 2.5 percent of the civil works and 1 percent of the materials and equipment costs of the water supply, wastewater and solid waste management components, have been included in the project cost estimates. Project management and engineering overhead costs of I 10 percent are also included. Price contingencies have been applied to expenditures at projected global foreign and local inflation rates, as follows: local: 0 percent in 1999; 3 percent in 2000; 5 percent in 2001 and thereafter; foreign; 1.3 percent in 1999; 2.55 percent in 2000; 2.7 percent in 2001; 2.6 percent in 2C002; and 2.5 percent thereafter. The dollar/yuan exchange rate has been assumed to vary in order to maintain purchasing power parity. The financial objectives set by the municipalities for their water supply and wastewater utility companies are to achieve full cost recovery on their operations and, in the case of the water supply companies, to make a reasonable contribution to their capital investnent programs as well. The water supply and wastewater companies have adjusted and implemented tariffs designed to meet these financial objectives for 1999. Financial projections have been completed for each utility company indicating the levels of tariffs required annually to meet the stated objectives. However, in practice, water and wastewater companies' tariffs are adjusted only every two or three years, taking into account the tariff requirements of other utilities, e.g., power, gas and telephone. It is possible, therefore, that in the intervening years between tariff adjustments, the agencies may not be able to meet their annual targets. In such eventualities, the agencies' operating revenues would need to be supplemented from the general revenues of the parent municipality in order to remain financially viable. Solid waste management services have traditionally been funded from the general revenues of local governments. However, where individual users of the services have been identified, local governments have, as a policy matter, charged such users for the services provided. Local governments expect to rely increasingly on user fees and charges to finance these services in the future. The government departments responsible for the urban management information systems and environmental protection and rehabilitation components would rely on government subventions to fund their capital and operating budgets. 3. Technical: The proposed physical investments were designed by first-class Chinese design institutes, taking into account the latest Ministry of Construction (MOC) design standards. The engineering designs and bid documents were reviewed by international consultants and found to be satisfactory. The technologies involved are proven and within the capability of Chinese contractors and manufacturers if successful in winning bids. 4. Institutional: Executing Agencies: The water supply companies of Leshan, Luzhou and Zigong are self-funding, self- accounting state-owned enterprises and have been in operation for some time. They have provided a satisfactory service to their customers in spite of not always having been permitted to adjust their tariffs to maintain financial viability. The self-funding, self-accounting, state-owned enterprise wastewater companies of Chengdu, Deyang, Leshan and Zigong were established during project preparation; this represents a major step in utility reform, consisent with stated national policy, and a model for the rest of Sichuan Province. The staff of these companies was transferred from the existing municipal  Page 13 engineering administration departments responsible for sewerage and drainage services. Therefore, while the wastewater companies would start with operations experience, they as yet lack a "corporate" culture. Leshan's existing Environmental Sanitation Management Bureau would implement the solid waste management component. All implementing agencies would benefit from technical assistance to be provided under the project to help them improve, as necessary, their accounting and management information systems, again stressing the positive steps taken and planned in utility reform and underpinning tangible moves to market pricing. Project Management: The SPMO, working closely with SEPB and other concerned agencies, has arranged for the project preparation work to be completed to the satisfaction of SPG and the Bank Group. The SPMO is being strengthened and the personnel mix adjusted to reflect the needs of the implementation and construction phases of the project. Each city has formed, budgeted and staffed a project management office (PMO), which has been involved throughout project formulation and preparation; it is expected these PMOs, with support from the SPMO, would significantly enhance project launch and subsequent implementation. 5. Social: Land acquisition would be needed for nine subprojects (four water, four wastewater and one landfill, as well as needing temporary land and the economic rehabilitation of affected people. About 1,350 mu (90 hectares-ha) of land would need to be acquired for construction of the project components, and a total of 312 households would require resettlement. Details of the resettlement proposals are given in Annex 6. Resettlement impacts were identified through a detailed census and socioeconomic survey of the affected people. Based on the survey, a Resettlement Action Plan (RAP), addressing issues related to entitlements of affected people in all categories of impacts has been prepared. The RAP contains an adequate description of the institutions responsible for resettlement implementation, the costs and sources of funding to complete the resettlement program, the mechanism for grievance redress and the arrangements for monitoring and evaluating the progress and results of the process. A detailed implementation schedule that would require the completion of all compensation and resettlement activities sufficiently before the proposed start of construction of each subproject has also been prepared; the RAP was reviewed by the Bank prior to negotiations and found satisfactory. As the resettlement requirements of the project are relatively small, the resettlement program is not likely to encounter any significant problems. There is adequate institutional capacity and commitment to complete resettlement successfully. Regular internal and external monitoring of resettlement would ensure timely review of the progress of resettlement implementation. 6. Environmental assessment: Environmental Category [X] A [I B [] C An environmental assessment (EA) has been carried out for SUEP. During preparation and evaluation, national procedures including those set out in China's Circular on "Strengthening Environmental Impact Assessment Management for Construction Projects Financed by International Financial Organizations (June 1993)," as well as those required by the Bank Group, were diligently followed. The EA documents such as Environmental Assessment Report and Executive Summary have been prepared, incorporating Bank Group comments, and found to be satisfactory. A detailed annex covering environmental assessment and impact has been prepared (Annex 5), which summarizes the findings of the Chinese EAs on the various components and reflects the appraisal mission findings. Potential Impacts: The environmental impact of the project is, on balance, substantially positive and the benefits greatly outweigh the negative impacts. The project would reduce pollution loads in the Min and Tuo Rivers and allow for the replacement of poor-quality water supply sources. The Leshan solid waste  Page 14 management component would greatly improve waste haLndling, transport and disposal practices. Major potential impacts during the construction phase include excavation, dust, noise, spoil disposal and disruption of urban services. Impacts during the operational phase include sludge disposal, noise, odors and generation of landfill gas and leachate. Mitigation Measures: The EA specified the appropriate imitigation measures, environmental monitoring plans, institutional arrangements and training and equipment requirements, and the cost estimate of implementation of the mitigation measures. Major mitigation measures include controls on construction practice, careful siting of facilities with appropriate buffer zones and controls on noise. Public Consultation and Feedback: During the EA work, local people were consulted. The following approaches were used for public consultation: (a) consultation meetings with local government representatives; and (b) questionnaire analysis of public; opinion, supplemented by interviews. Major concems from the public were resettlement-related issues and noise and air pollution during the construction phase. Information Disclosure: The Environmental Assessment Report (EA) and Executive Summary were submitted to the Bank Group on December 21, 1998; the draft Resettlement Action Plan was submitted on December 11, 1998. Both reports were reviewed and found satisfactory (copies are in the Bank Group's Public Information Center and in the Project files--see Annex 10). 7. Participatory approach: a. Primary beneficiaries and other affected groups: The major beneficiaries would be the majority of the population of Chengdu, Deyang, Leshan, Luzhou and Zigong, who would enjoy enhanced water supply, a cleaner environment through wastewater collection, treatment and disposal and improved collection of wastes and their environmental disposal. The implementing agencies would also benefit through the IST incorporated into the project. The cities would benefit, overall, through benefits emanating to improved city management from the implementation of cost-effective tariffs and charges for these services. b. Other key stakeholders: During the EA preparation, local communities were consulted through meetings with local government representatives, and public opinion questionnaires supplemented by interviews. 8. Social Impact and Benefits: The project has been designed to yield social benefits to avll income groups, in particular to those groups currently not served with basic urban services. Ongoing studies by specialist consultants (funded by DFID) would derive baselines from which to quantify these indirect benefits. Project focus on environmental service provision to meet basic needs would provide a sustainable and equitable basis for underpinning economic development of the lower income and underserved target groups. The Willingness to Pay Study (see Project File) ascertained the high priority given by proposed project beneficiaries to affordable improvements in urban services, and to the consequent health and well- being betterment. A willingness to pay for these improvements was confirmed.  Page 15 F: Sustainability and Risks 1. Sustainability: The project is expected to be sustainable in three respects: (a) financially; (b) institutionally; and (c) in achieving its development objectives. Tariff reforms would enhance the financial viability of municipal service providers. Institutionally, the creation of financially autonomous wastewater companies and continued technical assistance for the participating institutions would strengthen utility management and water quality monitoring capacity. Finally, the project addresses an issue of high priority to both the local and the national governments: vital self-interest in achieving environmental conditions necessary for sustained economic growth, which would be a strong motivation to continue implementing the long-term water resource strategy. 2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) Risk Risk Rating Risk Minimization Measure From Outputs to Objective Complementary pollution reduction in M Monitoring and resource management information sys- industry and agriculture delayed tem that clearly tracks sources of pollution and non- attainment of quality targets Pollution abatement action plan to be incorporated into the project From Components to Outputs Autonomy of wastewater organizations M Companies created before negotiations Financial sustainability of water, M Tariffs and charges covenanted; financial performance wastewater and solid waste services to be core activity of project supervision Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: Public reaction to (a) water and wastewater tariff increases to maintain the financial viability of the water supply and wastewater companies; and (b) increases in fees and charges for solid waste collection and disposal. G: Main Loan Conditions 1. Effectiveness Condition: * Execution of subsidiary loan agreements between the project municipalities and their water and wastewater companies, satisfactory to the Bank Group. 2. Other: Disbursement Condition * The signing of contracts with consultancy firms for (i) institutional and financial technical assistance, and (ii) construction supervision services and quality control, as a condition of disbursement of the civil works category.  Page 16 Implementation Covenants At negotiations, assurances were obtained from SP that it would: * implement or cause to be implemented the Institutional Strengthening and Training component in accordance with a schedule acceptable to the Bank Group and discuss and agree any revisions with the Bank Group; * carry out or cause to be carried out the resettlement of persons affected by the project in a manner and according to the Resettlement Action Plan (RAP) satisfactory to the Bank Group; * cause the project agencies to carry out, in a manner satisfactory to the Bank Group, the findings of the Environmental Assessment and related implementation program; * maintain the SPMO and the municipal project management offices, and urban management information systems (UJMIS) centers throughout implementation, with functions and responsibilities satisfactory to the Bank Group, and with competent staif in adequate numbers for the duration of the project; * carry out or cause to be carried out the time-bound Indu.strial Pollution Control Action Plan (IPCAP) for the Min and Tuo river basins in accordance with a schedule acceptable to the Bank Group and discuss and agree any revisions with the Bank Group; * arrange for the Leshan and Luzhou water supply companies to carry out their time-bound investment programs to strengthen their water supply distribution systems with respect to the project investments. Financial Covenants At negotiations, assurances were obtained from SP that it would: * cause the municipalities to onlend part of the loan proceeds to their respective water and wastewater companies, on terms and conditions satisfactory to the Bank Group; * cause Leshan Municipality to use the credit proceeds toward implementing its part of the environmental protection and rehabilitation subcomponent; * operate financial matters in accordance with the guidelines set out in the FMS Manual, and arrange for the following annual audits to be submitted to the Bank Group within six months after the end of the financial year, commencing with fiscal year 2000: (i) audit of the project accounts maintained by the Sichuan Project Management Office (SPMO), the Leshan Environmental Sanitation Management Bureau (LESMB), CHB, UMIS; (ii) audit of the Special Account; (iii) audit of statements of expenditures (SOEs); (iv) audits of the financial statements of Chengdu Drainage Company (CDC), the Deyang Sewage Treatment Corporation (DSTC), the Leshan Water Supply General Company (LEWSGC), the Leshan Wastewater Treatment Company (LEWTC), the Luzhou Water Supply Company (LUWSC), the Zigong Water Supply Comnpany (ZWSC and the Zigong Wastewater Treatment Company (ZWWTC); * commencing with fiscal year 2000, cause LEWSGC, LUWSC, and ZWSC to (a) produce revenues from their water supply operations sufficient to cover operations and adequate maintenance costs (before depreciation), increases in working capital, debt service, and 20 percent of the average capital expenditures made in a three-year period (the year preceding the reference year, the reference year itself, and the year after the reference year); and (b) incur no additional debt without the Bank Group's agreement, unless a reasonable forecast shows that it would have a debt service coverage of at least 1.3 times; * commencing with fiscal year 2000, cause CDC, DSTC, LEWTC and ZWWTC to (a) produce revenues from wastewater operations sufficient to cover operations and maintenance costs (including depreciation), and the amount by which debt service requirements exceed the provision for depreciation; and (b) incur no additional debt without the Bank Group's agreement, unless a reasonable forecast shows that the entity would have a debt service coverage of at least 1.3 times;  Page 17 * cause the water supply and wastewater companies to prepare, before September 30, 2000, and in each of the following fiscal years, forecasts satisfactory to the Bank Group, (a) to review whether they would meet the covenanted requirements set forth above in such year and the following fiscal year, and (b) to furnish the results of such reviews to the Bank Group; if any such reviews would show that the entity would not meet the requirements set out above, the entity would take all necessary measures, including adjustments to the structure of its tariffs and charges, in order to meet the requirements; and * cause LESMB to complete, not later than July 1, 2000, a study of the fees and charges needed for full cost recovery of solid waste collection and disposal services to industrial and commercial users, the report of that study shall include a detailed time-bound action plan acceptable to the Bank Group, enabling such recovery comnencing January 1, 2001, and thereafter implement such action plan taking into account the Bank Group's comments. Reporting and Monitoring At negotiations, assurances were obtained from SP that it would: * cause each implementing agency to prepare semiannual project progress reports; the SPMO would then send a consolidated report to the Bank Group by the thirtieth of the following month, commencing January 2000; and * carry out with the Bank Group a mid-term review of the project by June 30, 2003, and implement, or cause to be implemented, agreed recommendations. H: Readiness for Implementation [x] 1. The engineering design documents for the first year's activities are complete and ready for the start of project implementation. About 40 percent of the draft final engineering and draft bid documents were reviewed at negotiations. [x] 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. Bid packaging has also been agreed (see Annex 8, Table C). [x] 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality; the Project Implementation Program is shown in Armex 3B. 1: Compliance with Bank Group Policies [x] 1. This project complies with all applicable Bank Group policies. [] [2. The following exceptions to Bank Group policies are recommended for approval. The project complies with all other applicable Bank Group policies.] Team Leader: Geo Ra Country Director: Yukon Huang Sector Manager: Keshav Va  Page 18 ANNEX I ANNEX 1: PROJECT DE,SIGN SUMMARY China: Sichuan Urban Environment Project Hierarchy of Objectives Key Performance Monitoring and Critical Indicators' Evaluation Assumptions Sector-related CAS Goal: Sector Indicators: SectDr/Country Reports: (CAS Objective to Bank Mission) Safeguard the environment Ambient environment con- EPB statistics for environ- and public health through ditions in Sichuan Province mental quality alleviation of urban environ- improved mental infrastructure con- straints Environment-related health Bureau of Public Health problems reduced Urban environmental infra- Statistics of the Construction structure supply meets Commission demand Project Development Outcome/Impact Project Reports: (from Objective to Goal) Objective: Indicators: Protect quality of Sichuan's Reduction of pollution load Statistics of SEPB Parallel efforts to manage rivers and provide safe from urban sector industrial wastewater pollu- water on a sustainable basis tion are successfully imple- to its growing population mented Expansion of supply of safe Statistics of Water Supply Funds availability to fmnance water to meet urban demand Companies distribution network exten- sions Improvement of financial Audited financial state- Timely authority to adjust viability of municipal ser- ments, annual fmancial tariffs to maintain viability vice providers projections Output from each Output Indicators: Project Reports: (from Outputs to component: Objective) Market-oriented pricing and Ratio of actual tariff to rec- Water Supply Co. statistics; Govemment maintains tar- financial management intro- ommended cost recovery Project supervision missions iffs at cost recovery levels duced in participating muni- tariff increased for all utilities cipal service providers in Sichuan Infrastructure capacity for Volume increase for: waste- Sichuan and company sta- Parallel collection systems wastewater, water supply, water collected, safe water tistics and periodic reports implemented; connections and waste management supplied; and waste safely made to water supply increased disposed network Cost-effective wastewater Small and medium indus- Statistics of Sichuan EPB. Pilot experience dissemi- pollution abatement mea- tries adopt clean technology, IWPAAP is implemented in nated and adopted through- sures undertaken in industry and implement end-of-pipe accordance with scope and out Sichuan's industry treatment timing agreed sector; effective regulation 'Baseline and target levels of achievement to be agreed at the Project Launch Workshop, scheduled for late 1999.  Page 19 ANNEX 1 Hierarchy of Objectives Key Performance Monitoring and Critical Indicators' Evaluation Assumptions Water quality monitoring Long-term water resource Sichuan EPB; draft and final Long-term strategy is being and management capacity strategy developed and staff strategy documents implemented strengthened trained in water quality monitoring Project Components/ Inputs: (budget for each Project Reports: (from Components to Subcomponents: component) Outputs) Wastewater management Achievement of planned Project Progress Reports, Wastewater companies are activities (see Annex 3) supervision missions, data established and sustained of companies and SEPB Water Supply Percent of sewage collected Project Progress Reports, Distribution network and treated, as required supervision missions, data extended, tariffs adjusted to of companies and EPB maintain financial viability Solid waste management Supplies increased to meet Project Progress Reports, Adequate funding through demand, water quality supervision missions increased user fees and improved budgetary allocation Urban management Service area extended, Project Progress Reports, Sharing of data by interested information systems increased collection effi- supervision missions agencies, avoidance of ciency, percent of waste duplication land filled in Environmental protection Development of operational Project Progress Reports, Sufficient counterpart funds and rehabilitation systems, inproved base supervision missions available on time mapping Institutional strengthening Implementation of Imme- Project Progress Reports, Government commitment to and training diate Measures Action Plan supervision missions financing "intangibles" Improvements in accounting and MIS, numbers of man- agement and staff trained, in system operations and financial management  Page 20 ANNEX 2 ANNEX 2: PROJECT DESCRIPTION China: Sichuan Urban Entvironment Project 1. The Chengdu Plain in Sichuan Province which has a population of over 110 million people, is drained by the principal tributaries of the Yangtze, Min and Tuo Rivers; these flow south and discharge into the Yangtze River, China's main water resource. These rivers and their tributaries have become seriously polluted by untreated industrial and domestic wastewater discharges, and by agricultural runoff. Pollution in the Tuo is particularly bad as the catchment population accounts for almost 20 percent of the provincial total. These river systems exhibit extremes in their flow regime, varying between floods during May through September and dwindling to virtually no flow in some rivers during October through April, adversely impacting water supply sources, and causing degraded environmental conditions during low flows. 2. The Sichuan Provincial Government has embarked on a comprehensive program of environmental measures to address environmental degradation and water pollution. An Urban Water and Wastewater Resources Study, including river water quality modelirng, and an Urban Environmental Infrastructure Study have been carried out to formulate environmental strategies for the region, focusing on 11 cities in Sichuan and 3 in Chongqing. Based on these studies, environmental projects, shown in parentheses, have been prioritized for the cities of Chengdu (wastewater) and Leshan (water supply, wastewater and municipal solid waste) in the Min River Basin, and Deyang (wastewater), Zigong (water supply and wastewater) and Luzhou (water supply) in the Tuo River Basin. 3. A comprehensive package of investments are proposed for the cities of Chengdu, Deyang, Leshan, Luzhou and Zigong under the Sichuan Urban Environment Project. They include: Water Supply and Wastewater Systems Development, Municipal Solid Waste Management, Urban Management Information System, Environmental Protection and Rehabilitation, and Institutional Strengthening and Training; the project cost inclusive of contingencies is estimated at about Y 2,802 million ($326 million). Chengdu Wastewater 4. Existing Situation. Chengdu, the capital of Sichluan Province, is an important administrative center. It has an urban area of 118 square kilometers (km2) with a population of 1.8 million. The population is projected to increase to 2.5 million by 2010. The city is facing major pollution of its rivers. Most of the municipal and industrial wastewater enters the river system without treatment, causing significant pollution within the city. Of significance are the levels of pollutants of industrial origin. Oils, phenols and toxic metals are all present in high concentrations, arising from industrial discharges. Biological oxygen demand (BOD) and ammonia concentrations indicate that the water quality of the Chengdu rivers, the Min, Fu, Nan and Sha, are badly polluted. BOD and ammonia concentrations in the downstream reaches of the Min River are expected to rise to 18 milligrams per liter (mg/l) and 10 mg/l. There are two treatment plants serving two of the five drainage areas, and one is currently inoperative. 5. At present, only 186,000 cubic meters per day (m3/d) of the 850,000 m3/d of wastewater produced in Chengdu are treated in two treatment works. The city central zone is served by the Sanwayao with a capacity of 100,000 m3/d at the wastewater treatment works located in the south of the city. Extension of these works by another 300,000 m3/d is currently under way. The main eastern drainage zone, which has a large service area of 183 kM2, has a wastewater treatment plant of 86,000 m3/d capacity at Shizhishan with primary treatment, but is not presently operated. 6. Proposed Wastewater Subcomponent (Y 809,8 million; $93.2 million). The proposed subcomponent will comprise the following works:  Page 21 ANNEX 2 * A 6.7 km interceptor sewer of 2,400 millimeters (mm) connecting to the termination of the existing sewerage system near the junction of the Second Ring Road, to the site of the proposed Chengdu No. 2 wastewater treatment works; * The No. 2 wastewater treatment works with a capacity of 300,000 m3/d; * A 2,600 mm outfall, 0.7 km long, from the treatment works; and * A program of secondary sewer construction, including link sewers. Leshan Water Supply 7. Existing Situation. Three water treatment plants with a combined capacity of 85,000 m3/d are currently operated to serve a total population of about 370,000. One plant of 15,000 m3/d capacity can only be used when river flows are high, as abstraction is downstream of the pollution sources. The water distribution system comprises about 53 km of mains of diameters varying from 150 mm to 800 mm, and does not cover the entire city. The distribution system is in urgent need of rehabilitation and strengthening, and pipe failures are reported to be frequent. There are two high-level reservoirs with a combined capacity of 2,500 cubic meters. 8. Present supplies are inadequate to meet present and future water demand. Extremely poor water quality in the Min River has necessitated the development of sources in the Dadu and Qingyi Rivers. These rivers have large dry-season flows. It has been estimated that by the year 2010, the water demand in Leshan will have risen to a value in the range of 360,000 to 390,000 m3/d. This implies a need for an additional supply of 200,000 m3/d by the year 2010. Studies indicate that it is feasible to develop an additional source from the Qingyi River. It is proposed to develop the new source in two phases. The existing No. 3 treatment works will be extended in 2005 to provide an additional 50,000 m3/d, and next augmentation in 2010 will provide an additional 100,000 m3/d. 9. Proposed Water Supply Subcomponent (Y 196.0 million; $22.8 million). The first phase financed under the project will have a capacity of 100,000 m3/d. The subcomponent will comprise the following works: * An intake from the Qingyi at Ganyan of capacity 110,000 m3/d; e A 1,100 mm raw water transmission main 3 km long, to the treatment plant; * The water treatment plant at Guliba of capacity of 100,000 m3/d; a Treated water pumping station; * Treated water transmission mains comprising 10 km of pipes of 600 mm, 800 mm, and 1,000 mm; * Distribution network improvements. Leshan Wastewater 10. Existing Situation. Leshan is situated at the confluence of three rivers, the Min, Dadu and Qingyi. It has important tourist attractions of the Grand Buddha carved on a cliff, the Emei Mountain and other historic relics. The city population is projected to grow from the present 200,000 to about 350,000 by 2010, under the low-growth scenario. All wastewater from the central area of the city is conveyed in sewers of stone arch construction, rectangular channels or pipes discharging directly to the Min, Qingyi and Dadu or to the Zhugongxi. There are seven large outfalls discharging to the Min River, and a further six outfalls to the Qingyi and Dadu Rivers. The Xugongxi receives discharges from seven minor outfalls. While some industrial wastewater is discharged to the municipal sewers, a dedicated sewer discharges industrial wastewater from five of the largest factories to a point just downstream of the Grand Buddha. The effects of the wastewater discharges are highly visible in the environmentally sensitive area of the 1,200-year-old Grand Buddha. At the low flow season, BOD and ammonia concentrations rise to high levels with ammonia reaching the very high level of 4 mg/l.  Page 22 ANNEX 2 11. Studies indicate that full treatment of wastewater in Leshan will provide little benefit to the quality of the river system as a whole. However, there are othe.r local factors that make water pollution control very important. The pollution control strategy is to intercept all wastewater in the Min andDadu Rivers, and discharge it downstream of the confluence. In the second stage, full secondary treatment will be provided. The total average wastewater flows are projected at 152,300 m3/d in 2010, and 224,400 m3/d in 2015 under the low-growth scenario. 12. Proposed Wastewater Subcomponent (Y 160.7 million; $18.8 million). The proposed works would comprise the following: * Reinforced concrete pipe interceptors 12.5 km in length, of diameters ranging from 500 mm to 1,500 mm; * A tunnel 0.85 km long under the Dadu River; * Twin 1,200 mm steel outfall mains, 2.3 km long; * Three pumping stations with nominal capacities of 130,000 m3/d, 32,000 m3/d, and one pumping station with nominal capacity of 254,000 m3/d including preliminary treatrnent with screening and gritting; * Link sewers and missing connections. Leshan Municipal Solid Wastes 13. Existing Situation. Present per capita solid waste generation is estimated at 0.84 kilograms per day (kg/d), and is projected to rise to 0.96 kg/d by 2010. Low and high estimates of population projections for 2010 are 327,000 and 410,000. Solid waste generation is projected to rise from the current 196 tons/d to between 301 and 391 tons/d in 2010. Industrial and commercial waste generation is expected to be dealt with separately. 14. The existing collection system relies on householders bringing their wastes to a transfer station or collection point consisting of a variable number of stee]. bins. Handcarts are also used to transfer waste from a small station to a bigger one. Waste is loaded by several means on to trucks, which deliver the wastes to the existing unsanitary landfill at Ling Yun, at a distance of 7 km by road to the southeast of the city. The age of the trucks varies from 3 to 12 years, and the older trucks are not in reliable working condition. The landfill site incorporates end-tipping down the advancing face of a slope that is unstable, and generates leachate at a peak rate in the wet season of up to 100 m3/d, which passes into local watercourses. Some gas venting has been arranged. 15. About 41 percent of the 200 tons of municipal solid waste generated is delivered to the existing landfill. The remainder is recycled or disposed of elsewhere. Current problems concern the efficiency of both the waste collection methods and the system for transferring waste to the landfill, as well as the health and environmental impacts of these activities. The city plans to increase the proportion of wastes collected and delivered to the municipal landfill to 90 percent by 2010. The current landfill is inadequate in terms of site capacity, waste handling and environmental impacts. 16. Proposed Solid Waste Management Subconuponent (Y 78.6 million; $9.2 million). The proposed arrangements would aim to expand collection of wastes with different size vehicles, improve the design of transfer stations, and transfer waste to the lanclfill through larger containers with a compaction facility. Improvements to the existing landfill allow for collection, recirculation and treatment of the leachate before it is discharged, and the collection and flaring of landfill gas. The existing landfill will also be expanded in area. The project will comprise the following works and equipment supplies:  Page 23 ANNEX 2 * Transfer station, vehicle storage and repair facility; * Landfill preparation (clay excavation) including extension; * Treatment works including equipment and gas disposal facility. Collection; * Collection and transportation vehicles with containers, and street sweeping trucks; * Landfill operating equipment. Deyang Wastewater 17. Existing Situation. Deyang situated on the northwest of the Chengdu Plain on the Mianyuan River, has a current population of about 300,000, which is expected to double by 2010. The Mianyuan River bisects Deyang, which is also flanked by the Shiting River. The Mianyuan River receives the vast majority of wastewater generated in Deyang, and the Shiting receives wastewater flows from the urban area west of the railway line. The urban section of the Mianyuan River conveys an average flow of 45 m3/s, which drops to about 0-5 m3/s during the dry season. Dissolved oxygen falls to very low levels, and BOD and COD levels exceed 1 Omg/l and 1 7mg/l, respectively, during the dry season. 18. The largest of the four drainage areas covers the urban center of the city, and the Mianyuan River on the eastern boundary of this catchment is the receiving water for this drainage area. The main sewers in this drainage area flow west to east and discharge to the river. A 11 km interceptor constructed on the east bank of the river collects flows from the top half of the catchment. However, this interceptor is incomplete and discharges through a single outfall halfway down the drainage area. South of the interceptor, a number of outfalls discharge into the river. Wastewater from the drainage area on the east side of the river discharges to the river through a number of outfalls. All domestic wastewater pass through septic tanks prior to discharge to the municipal sewer system; there are no treatment facilities for wastewater. Total wastewater flows of 266,000 m3/d are projected for 2010 under the low-growth scenario 19. Long-term plans for wastewater development aim to improve river water quality through full secondary treatment of wastewater. Phase I of the development plan is to intercept all wastewater from the two largest drainage areas covering the central area of the city, construct wastewater treatment works, and improve river water quality by reduction of BOD from 60 mg/l to 30 mg/l, and ammonia by one third from 24 mg/l to 18 mg/l. 20. Proposed Wastewater Subcomponent (Y 276.8 million; $32.3 million). The proposed wastewater subcomponent comprises the following works: * Extension of the existing box culvert interceptor a distance of 6.7 km to the proposed treatment works site; * Construction of a wastewater treatment works with a nominal capacity of 100,000 m3/d; * Construction of a river crossing to allow transfer of wastewater from the eastern side of theMianyuan River to the new interceptor; * Link sewers and missing connections. Luzhou Water Supply 21. Existing Situation. Luzhou is developing rapidly as a financial, commercial, and container port city. It is situated at the junction of the Tuo and Yangtze Rivers. It is well connected by roads. Construction within the city is going on at a fast pace, and considerable new infrastructure is being installed. The Provincial Government has decided to develop the northern city of Fuji as the new administrative center for the adjacent Luzian County. Additionally, new serviced land is being developed to accommodate the new developments, in particular, Luzhou City is developing a new 460 hectare (ha)  Page 24 ANNEX 2 urban area at Nan Gao. Population is projected to rise, to about 384,000 in 2010 under the low-growth scenario. 22. The total population served by the current water supply service area is estimated at 286,000. The urban area of Luzhou is served by three separate systems, which until recently have operated as separate companies. The systems serve the central area and the area north of the Yangtze including Xiaoshi and Beijiao; the area of Lantian on the south bank of the city; and the satellite towns of Anfu and Naxi. 23. The Luzhou-Beijiao system has three treatment works with total capacity of 120,000 m3/d. Treatment works exist in Beijiao (100,000 m3/d); Zhongshan (20,000 m3 /d), which draws water from the Tuo River; which is heavily polluted with arsenic and volatile phenols, and cannot be used; Lantian (6,000 m3/d) and Fuji (10,000 m3/d). Maximum water requirement for 2010 is estimated at 144,200 m3/d based on the low-growth scenario, and includes the nevw developments of Fuji and Nan Gao. 24. The Luzhou-Daxikuo water system has a treatment capacity of 3,000 m3/d, and purchases about 5,000 m3/d of water from the Natural Gas and Chemical Company, which has set up the infrastructure to supply water to its employees housed within its compounds. The extemal distribution mains are owned by the gas company, but are expected to be transferred to the newly formed Luzhou General Water Supply Company. Total water requirements in 2010 under the low-growth scenario are projected to be 72,800 m3/d. 25. Proposed Luzhou-Beijiao and Luzhou-Daxikou Subcomponent (Y 238.5 million; $27.8 million). The proposed works comprise the following: * Luzhou-Beijiao. The scheme will augment water supply to the Nan Gao development zone to the north of the city, and also expand the supply to cover Fuji city and villages to the north. The works comprise extension of existing treatment works by 50,000 m3/d, and transmission works to deliver 70,000 m3/d to supply the additional 20,000 m3/d coming from the spare capacity of the existing works. Specifically, works would include: * duplication of the existing 50,000 m3/d treatment works; * transmission mains (800 mm and 600 mm) to Nan Gao; * transmission mains of 700 mm of length 31 km to Fuji town with a pump station en route; * distribution mains for supply of new water; * distribution system improvements; and * Luzhou-Daxikuo.. The proposed scheme comprises a new water treatment works of 50,000 m3/d capacity, together with the necessary transmission mains. Specifically, it would include: * An intake/pump station on the Yangtze of capacity 50,000 m3/d, for first phase; * A single raw water pipeline, 800 mm and 1.2 km long, to treatment works; * A water treatment works of 50,000 m3/d capacity; * Treated water transmission mains of 2 km of 1,000 mm, and 2 km of 500 mm; * A reinforced concrete reservoir of 20,000 m3/d capacity; * Refurbishment of an existing 1000 m3 tank; * Distribution network improvements. Zigong Water Supply 26. Existing Situation. Historically Zigong has depended on reservoirs for municipal water supply, such as the Changshaba, Hulukuo and Congtanyan reservoirs. Dry-weather flows in the local rivers are  Page 25 ANNEX 2 low. The Jinfu River, which flows through the city, has flood flows of 3,500 m3/s, but dry-season flows fall to a few cubic meters per second. Nineteen industries have constructed their own facilities for diversion of water from the Tuo River and the upper reaches of Fuxi River. The Fuxi is entirely inadequate since at times the natural flow is zero, or the only flow is largely untreated wastewater. The larger rivers in the area from which abstractions are possible-the Min, Dadu and Yangtze-are at some distance from the city and are costly to develop. 27. While the municipal water treatment works and distribution system have a capacity of 230,000 m3/d, the limited resources frequently fall below this supply capacity. For a few months the supply does not exceed 192,000 m3/d, and has to be restricted to 130,000 m3/d. The water distribution system covers fully the city area and a part of the suburbs. There are 223 km of mains larger than 100 mm, varying between 100 and 1,000 mm, and 13 high-level reservoirs, which are supplied by booster stations. There is an increasing frequency of pipe bursts, and leakage from the system is reported as 10 percent. The projected total water demand for 2010 under the low-growth scenario is 527,800 m3/d. 28. Zigong plans to meet the water requirements of 2010 in two stages. The city plans to develop a new water source from the Min River in two stages of 220,000 m3/d each. 29. Proposed Water Supply Subcomponent (Y 574.2 million; $66.8 million). The proposed scheme will comprise the following: e Intake and conveyance works incorporating a 66 km long 1,600 mm pipeline; * Yuanbachang treatment works of 80,000 m3/d capacity, and including a treated water pump station; e A raw water pump station to deliver 132,000 m3/d of water through a 1,200 mm main 4 km long, to the intake that feeds the Changtu treatment works; * A treated water main of 900 mm length 0.14 km, connecting Yuanbachang to the existing 800 mm distribution main; * An emergency facility to draw water from the Xushui to the Yuanbachang treatrnent works during breakdowns, comprising an intake pump station and a 1,000 mm pipeline 0.17 km long; e Treated water transmission mains of 1,200 mm 8.9 km long, to deliver water from the Changtu treatment works to the distribution system; * Distribution network improvements. Zigong Wastewater 30. Existing Situation. Zigong is situated in the south of the Sichuan basin, on the Fuxi river, a tributary of the Tuo River. Average flow in the Fuji is high at 22 m3/s, but the mean flow in the dry season falls to 4 m3/s. During the dry season, river water quality exceeds by 100 percent the Class IV BOD standard, and dissolved oxygen content of the river falls below 1 mg/l, affecting drinking water sources and creating serious environmental conditions. The city has about 128 outfalls from 12 drainage areas that discharge treated or untreated effluent from a large number of factories, and domestic wastewater. 31. The existing sewerage system covers an area of approximately 37 kM2, and serves about 441,000 people, together with a number of smaller factories and the commercial sector of the city. Large enterprises discharge wastewater directly into local watercourses through privately owned sewerage networks and outfalls. The older urban center is served by a combined sewer system, while the newer developed areas have separate systems. All properties are equipped with septic tanks before discharge to the public sewers. Most of the sewer system in Zigong is very old, and levels and sizes of much of the system are not available. The city has no wastewater treatment works, and all industrial and domestic effluent is at present discharged to the local rivers. Wastewater from a major portion of the city is  Page 26 ANNEX 2 discharged to the Fuxi River through nine outfalls. Other outfalls discharge wastewater to the Weijuan, Xushui and Zhongxi Rivers. 32. The long-term wastewater development plan for Zigong includes full coverage of the drainage catchments, full secondary treatment of domestic wastewater, and industrial water pollution control that requires industries to undertake program to treat all wastewater on site prior to discharge to sewers or watercourses according to a time-bound plan. In the first phase during 2000-05, wastewater from 8 out of 12 drainage areas, comprising about 53 percent of the urban area, will be intercepted, treated and discharged downstream of the city. 33. Proposed Wastewater Subcomponent (Y 30.2.0 million; $35.2 million). The proposed wastewater subcomponent would comprise the following works: * Reinforced concrete pipe interceptor, 5.2 km long in varying diameters of 600 to 1,600 mm; steel pipe interceptors of 2x450 mm, 90 m long; and one 1,000 mm, 90 m long to collect sewage flows from seven major sewage outfalls; * Pumping station at Shawan to lift the flow from an existing outfall into the interceptor; * Secondary sewers, link sewers and missing connections; * Pumping station at Diajiaba to forward flows to the treatment works; * Steel pumping mains from the Daijiaba pumping, station to the treatment works, comprising 2x1,000 mm and a single 1,200 mm for a total length of 1.5 km; * Treatment works of nominal capacity 80,000 m3/d. Urban Management Information System 34. Sichuan cities have entered a period of rapid change that will dramatically increase pressure on municipal infrastructure managers to become more efficient, attract financing from various sources, and serve their clientele better. Currently monitoring and planning depends largely on hard-copy maps, plans and archives. Present management and decision-making tools were created in a time of much slower change, fewer options, and less need to satisfy customers. 35. The Sichuan Urban Environment Project (SUEP) creates both the need and the opportunity to introduce new information systems, and improved planning and decision-making tools. Major new infrastructure will be constructed as part of SUEP, and efforts will be made to improve operational efficiencies in existing infrastructure. Improved budgeting monitoring and management will be required to meet this challenge. There is an opportunity to equip the provincial and several municipal governments with basic information management tools that can be built upon and extended over time to other cities. The urban management information system (UMIS) had been designed to provide this. 36. Proposed Urban Management Information Systems Subcomponent (Y 38.1 million, $4.6 million). The proposed subcomponent would comprise the following: * Development of a Provincial Decision Support System (PDSS) and Office Automation System (OAS); * Development of an Environmental Management Information System (EMIS) and a related OAS at the provincial level; * Establishment by Deyang of a UMIS center to coordinate development of an Urban Decision Support System (UDSS); * Establishment by Leshan of a UMIS to coordinate the development of an Infrastructure Operations System (IOS) for wastewater management, including surveys of existing buried water facilities; and  Page 27 ANNEX 2 * Establishment by Luzhou of a UMIS center to coordinate development of a UDSS and an IOS for water. Environmental Protection and Rehabilitation 37. Sichuan Province has an economically important and rich heritage including world-famous relics and historic sites from past dynasties, and a vibrant and diverse living culture. Among the better known are the Grand Buddha of Leshan and the archeological site of Sanxingdui. The city of Leshan has a rich cultural history dating back 3,000 years. Across the Dadu River from the city, and set on three rocky hills is the historic park and site of the 1,200-year-old statue of the Grand Buddha, 71 meters high above the river, and carved into the cliffs. The Grand Buddha is a World Heritage Site. Leshan, with a growing population of 230,000, is a center of regional commercial and industrial activities. The number of tourists are projected to exceed the present 1,050,000 a year. The Archaeological Site of Sanxingdui is situated 8 km from the city of Guanghan on the banks of the Yaxi River. The site extends over 12 km2 and contains the remains of an ancient city, yielding unparalleled information about the earliest civilizations to inhabit the region, and will continue to yield information for many years to come. This site is of great cultural significance, and provides opportunities to interpret and present the historical artistic and cultural character and achievements of the Chinese people over four millennia. A museum constructed two years ago receives about 360,000 visitors a year, and is projected to rise dramatically in the growing educational and tourist markets of the area. The planning, operation and maintenance of these and other museums and historic sites would set a valuable opportunity to extend coverage to other sites of the Sichuan and neighboring provinces. 38. The cultural heritage development plan will provide the framework for institutional policy development; conservation area planning; conservation architecture and technology, the business planning for conservation viability; and the promotion of interpretation and presentation of historic sites and museums for the benefit of education and tourism. The activities proposed under the component will provide a valuable model for the planning and development of museums and historic sites, and stimulate good practice. The project would benefit local economies, strengthen the management of cultural assets, promote tourism, and bolster the local economy. 39. Proposed Environmental Protection and Rehabilitation Subcomponent (Y 61.9 million; $7.5 million). The proposed component will comprise the following: * Improvements and environmental rehabilitation of infrastructure and buildings at the World Heritage Site of the Grand Buddha, including improved access to the Grand Buddha; * Equipment for environmental monitoring, promotion, display and adaptation of museums and historic sites, and information technology; * Consultant services for (a) training and strengthening management at Leshan, Sanxingdui and the Chengdu Center for Restoration and Conservation of Cultural Relics, (b) monitoring and analysis of Mahao Rock Tombs at Leshan, (c) relics restoration and analysis at the Chengdu Center, and (d) setting up a cultural heritage information database for the Sichuan Provincial Cultural Relics Bureau. Institutional Development, Strengthening and Training (Y 65.3 million; $7.8 million) 40. The component would comprise a number of main composite packages of technical assistance for the various municipalities and agencies, covering institutional development and financial management for the water supply, wastewater and solid waste management agencies, construction supervision, and training, together with an allowance for support for the provincial and sector city agencies, and other programs of assistance to be further defined. Details are set out in Annex 8, Table D, showing estimated national and international person-months and other supporting relevant information.  Page 28 ANNEX 2 DETAILED PROJECT DESCRIPTION IComponent i Location !Description Capacity/Size Function I Chengdu Wastewater Main Interceptor ISecond Ring Reinforced concrete gravitype sewertocollectal,7 kmDN2400 Toextendthe 14km sewer IRoad to a site iwastewater discharging from a large drainage area interceptor sewer serving the !next to the to convey it to a proposed new treatment works. No. 3 drainage area to the new WWTW new treatment work on the east bank of the 1Fu River Wastewater I East bank of Activated sludge treatment comprising: coarse and i300,000imi/d To treat wastewater of the Treatment Works , Fu River next fine screens, grit channel, primary sedimentation No.3 drainage area of Ito the existing ! with sludge thickening, activated sludge tanks with 'Chengdu 1WWTW plug flow aeration using fine bubble diffused ait, an! anoxic zone at inlet, final settling tanks with waste I activated sludge anaerobic digestion, dewatering of - 'digested sludge by centrifuges, and sludge disposal I to landfill. An overflow chamber and pipe to discharge sewage that cannot be handled at the lworks. Final effluent standard: BOB-20 mg/I; SS- I ,___ 30 mg/I; NH4-N-10 mg/i Outfall NewWWTW Outfall to discharge eated er 695 To discharge trted effluet to Fu River _m_N_60 _to the Fu River. Leshan Water Supply Intake At Qingyi !A 23 m by 26 m rectangular intake 400 lmo upstreamFor ultimate capacity of,New intake to abstract River of the present intake, a pumping station aid 3.1 km 220,000 m3/d. Twin DN additional water for Leshan raw water main 1300 collection lines 30m into river, and 2 -duty and one standby ' fixed speed pumps irated at 2300 1/hr for first phase. Raw WaterMain ;Qingyi to 3.1 km raw water main DN 1100 prestressed _ _ WTW _ _ concrete Water Treatment Located 1.9 Pre-sedimentation, sedimentation, rapid, ravity Tl0,0OOm31d To augment water supplies to Works nkm from filters chlorinafton and disinfection, clear water jLeshan !intake basin adjacent to !existing I WTW ,,I Treated Water jWTW to TTwo prestressed concrete transmission mains DN 1000, 852 m length!To convey treated water to Transmission Mains distribution DN 800, 7.879 km the distribution network system length _ _ . __ .___.__ _ ___ ................ .______ __. .. ___ . .____ _ __._ .........DN 600, 1.7 km let - h ------ ---- Leshan Wastewater Interceptor Sewers Along right iepo 12.5 km ,DN 1500, 2199 m long To convey wastewater land left banks ,length to convey city wastewater (total) flow of ,DN 1250, 2401 m long ,generated in the city t a point , of Zhigongshi 250,000 m3/d to a temporary discharge point 2 km ,DN 1200, 1736 m long south of the famous Grand River, right Eon Dadu River downstream of Leshan and the DN 1000, 915 m long Buddha bank of Min m Grand Buddha, with preliminary treatment through DN 800, 3144 m long 1 River and left i screening and gritting, and including a river DN 700, 819 m long jbank of Dadu crossing DN 600, 651 m long River _ jDN 500. 646 m long Three Pumping (i) At junction' (i) No. I Pumping Station with maximuri capacfit (i) 2 duty pumps and I To lift wastewater to convey Stations iof 130,000 m3/d, (ii) No. 2 Pumping Station with standby, each pump to temporary outfall !Zhugongshi maximum capacity 32,000 m3/d, and (iii) No. 3 rated at 2736 m3/hr at land Min .Pumping Station with maximum capacity of j10.8m head, (ii) 2 duty Rivers, (ii) 250,000 m3/d and I standby pumps l along Min -rated at 674 m3/hr at 7.5 'River, an (iii) m head, and (iii) 4 duty i at junction of and I standby pumps Min and rated at 2650 m3/hr at 2 I Dadu Rivers meter head Tunnel Across Dadu i Horseshoe tunnel 3 m by 3 m 850 m long To convey wastewater across River river  Page 29 ANNEX 2 Component i Location !Description Capacity/Size 'Function Outfall 'At A temporary outfall to the River Dadu until 2x DN 1200 steel To discharge wastewater l Dujiachang .:wastewater treatment plant is constructed next mains, 2.3 km long downstream of the Grand phase -Buddha Lesan Municipal Slid Waste Management Transfer Station Qingguoshani. For transfer of collected wastes tolandf;il. Also 80 ton per d capacity Waste collection and transfer Lu in Leshan 'provided with vehicle storing and repair facility point Waste Collection, Leshan Collection and transportation vehicles incldinu g 2.8 tone ontainer trucks For waste collection and Vehicles containers and street sweeping trucks (3) 10 ton container ,transfer, and street cleaning trucks (3), containers (3), 5 ton rear loaders (6) 2 ton rear loaders i(8), street sweepers (3), 5 ton street washers (3), pedestrian sweepers ______ ~~~~~~~~~~~~~~~~~~~~~~~~~~(2), and repair truck ,_,__ ,, _ __,,_,_ ,_,__,__,,_ _ _ _ 2?, d repar t ,,c,k,. ........... ... ... ... .. ..... ................ . Landfill Equipment At landfill Heavy earth moving equipment landfandfill Compactor (1), 'For moving and excavator (1), bulldozer.consolidating wastes (1) 5 ton trucks (3) Landfill 7km from Landfill extension works including leachate Adequate for 12 years For disposa of wastes city treatment and gas disposal i operation . _ . _ . .. _ ._. _ .. ........... ._ .. _ _ _ . . __ . . _ ........................... __ .... _ _ .. _ _ _ ._ ............ ...... ......_....... ........ . . ................. . ........ . ..... _ . . ....... ............ ..... . .......... Deyang Wastewater Interceptor Sewer !South along i Extension of the existing box culvert interceptor a . 15 m by 1.5 m box . To collect wastewater from I Mianyuan distance of 6.7 km to the proposed treatment works culvert No. 2 Drainage area River River crossing Across Construction of a siphon river crossing to allow the .... .. . .....'.'. . .'"' ."' ..'""" .... .''"''.To 'c'olect w a'tewater'fr'om "'''' Mianyuan transfer of wastewater from the east side of the No. 3 Drainage area River Mianyuan River, into the new interceptor Wastewater At Beijiao, Secondarytreatmentwith coarsebar screening,lift 100i d onteatw wtewater fromtwo Treatment Works 7 km down- ,pumping, fine screening, grit removal, anaerobic 4 anoxic tanks; of the largest drainage areas stream of the biological pretreatment tanks, eight carousal type covering most of the central city oxidation ditches built in pairs, sludge thickening, -urban area of Deyang sludge dewatering using filter belt presses, and sludge disposal to landfill . ... __ _. ... ... _ _ ....................... _ . _ _ _._ ....... _ . ___ .... . ......... . .. ............ ......................... ................ ............................................ ..................... Luzhou Water Supply (a) Luzhou-Beijiao Water Supply Scheme Intake Pumps !Atexisting ..Additiona pumping capacity to deliver new water :Three pumps 576 to ,Toconveyadditional water ,intake pump to treatment works ,972 m3/hr at varying to WTW station heads Treatment Works seof Replicationoofdexisting50,000 ity of 50,000n d Tonextendexistng 50,000 existing north |treatment works incorporating two stage Three forwarding m /d WTW to augment water treatment ,sedimentation followed by rapid gravity filtration, pumps, 980 tol480 supply generally , and works chlorination and disinfection, and forwarding m3/hr at 80 to 65 m provide service to new . pumping station :head for Fuji supply, administrative capital of Fuji 'and 3 pumps rated at and new development area of , ! ,576 to 972 m3/d at 63 to Nan Gao .50 m head for supply to j !__,_,Nan Gao Clear Wae Main From ,Water supply to Fuji city, comprising gravity main To meet average To supply treated water to to Fuji treatment 12.8 km to Shaun Gia pumping station, and 18km demand of 24,000 m3/d Fuji city plant to Fuji pumping main to proposed 9,000 m3 Er Dau Gao for Fuji. 'tank at Fuji CI DN 700 gravity main, CI DN 700 pumping main, , I steel DN 700, 0.7 km spur to tank, booster pumping station, and l9,000 m3 reservoir Clear Water main to From Water supply to new development zone of Nan ,To meet average To supply water to new Nan Gao treatment Gao, comprising a pumping main, a 2,.5 km demand of 24,000 m3 /d, development zone .plant to Nan ,prestressed concrete gravity main, and a reservoir ,for Nan Gao. Gao Steel DN 800 pumping, main to 2,000 m rLeservoir  Page 30 ANNEX 2 Component Location 'Description Capacity/Size 'Function Distributiont Within Nan :Water distribution network of pipes varying from 89 C N60 o supply water within Nan Network to Nan Gao DN 150 to DN 600, 9.6 km long, for first phase of 1.078 km Cl DN 500, :Gao development Gao dvlpetthis new development to meet needs up t2 2005 :1.839 km CI DN 400 izone :1. 168 km DN 300 :391 m CIDN 250 I :2.309 ~~~~~~~~~~~km CI DN 200 2.758 km ClDN 150 _ _ _ _ _ _ _ _ _ _ _ _ _ .1 _ _ _ _ _ _.~~~~~~-.~~...---.......-~~~....-....~~~.......-.~~~.. . .--.