Document of The World Bank Report No: 19139-CHA PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN OF US$10 MILLION AND A PROPOSED CREDIT OF SDR 25.7 MILLION (US$35 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE FOURTH TECHNICAL COOPERATION PROJECT April 20, 1999 Poverty Reduction and Economic Management Sector Unit East Asia and Pacific Regional Office - ii - CURRENCY EQUIVALENTS (Exchange Rate Effective February 1999) Currency Unit = Yuan Yuan 1 US$0.12 US$1.00 = Yuan 8.3 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CEM Country Economic Memorandum CIF Cost, Insurance and Freight CRISPP Credit for Reform, Institutional Support and Preinvestment Project FSD Financial and Statistics Division (MOF) GOC Government of China IAD International Affairs Department (MOF) IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IQTE Institute of Quantitative and Technical Economics MOF Ministry of Finance NCB National Competitive Bidding PFBs Provincial Finance Bureaus PIAs Project Implementing Agencies PID Project Information Document PIP Project Implementation Plan PMO Project Management Office PP Procurement Plan PPPS Preinvestment and Project Preparation Support RMC World Bank Resident Mission in China RSID Reform Support and Institutional Development SDPC State Development Planning Commission SOEs State Owned Enterprises TA Technical Assistance TAHRD Technical Assistance and Human Resources Development Division (MOF) TCP IV Fourth Technical Cooperation Project TOR Terms of Reference Vice President: Jean-Michel Severino Country Director: Yukon Huang Sector Manager: Tamar Manuelyan Atinc (Acting) Task Team Leader: Shenhua Wang China Fourth Technical Cooperation Project CONTENTS A: Project Development Objective 1. Project development objective and key performance indicators ......................... ................2 B: Strategic Context 1. Sector-related CAS goal supported by the project ......................................................... 2 2. Main sector issues and government strategy ............................3............................3 3. Sector issues to be addressed by the project and strategic choices ......................................3 C: Project Description Summary 1. Project components .........................................................3 2. Key policy and institutional reform supported by the project ................................. ............4 3. Project benefits and target population .........................................................5 4. Institutional and implementation arrangements ......................................................... 5 D: Project Rationale 1. Project alternatives and reasons for rejection ............................... ..........................9 2. Major related projects financed by the Bank and other development agencies ................. 10 3. Lessons learned and reflected in proposed project design .11 4. Indications of borrower's commitment and ownership ....................................... 12 5. Value added of Bank support in this project ....................................... 12 E: Summary Project Analysis 1. Economic ....................................... 12 2. Financial ....................................... 12 3. Technical ....................................... 12 4. Institutional ....................................... 12 5. Social ....................................... 13 6. Environmental assessment ....................................... 13 7. Participatory approach ....................................... 13 F: Sustainability and Risks 1. Sustainability ....................................... 14 2. Critical risks ....................................... 14 3. Possible controversial aspects ....................................... 14 G: Main Loan Conditions 1. Effectiveness ....................................... 14 2. Other ....................................... 14 - ii - H: Readiness for Implementation 1. Compliance with Bank policies ................................................. 15 Annex 1: Project Design Summary ..................................................... 16 Annex 2: Detailed Project Description ..................................................... 19 Annex 3: Project Cost Estimates ..................................................... 25 Table 3.1: Estimated Project Costs by Component ..................................................... 25 Table 3.2: Estimated Project Costs by Expenditure ..................................................... 26 Table 3.3: Estimated Project Costs by Year ..................................................... 27 Annex 4: Cost Effectiveness Analysis Summary ..................................................... 28 Annex 5: Financial Summary ..................................................... 29 Annex 6: Procurement and Disbursement Arrangements ..................................................... 30 Table A6. la: Project Costs by Procurement Arrangements .................................................. 32 Table A6. Ib: Consultant Selection Arrangements ..................................................... 33 Table A6.2: Thresholds for Procurement Methods and Prior Review ................................... 33 Table A6.3 Allocation of Loan and Credit Proceeds ..................................................... 34 Annex 7: Project Processing Schedule ...................................................... 35 Annex 8: Documents in the Project File.....36 Annex 9: Status of Bank Group Operations in China ...................................................... 37 Annex 10: China at a Glance ..................................................... 41 Annex 11: Review of Financial Management System ..................................................... 43 - 1 - China Fourth Technical Cooperation Project Project Appraisal Document East Asia and Pacific Regional Office Poverty Reduction & Economic Management Sector Unit Date: April 20, 1999 Task Team Leader/Task Manager: Shenhua Wang Country Manager/Director: Yukon Huang Sector Manager/Director: Tamar Manuelyan Atinc (Acting) Project ID: CN-PE-42299 Sector: Public Sector Program Objective Category: Economic Management Lending Instrument: SIL - IBRD Loan / IDA Credit Program of Targeted Intervention: [ ] Yes [x ] No Project Financing Data [x] Loan [x] Credit [ Guarantee [] Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): IBRD Loan: $10 million, IDA Credit: SDR 25.7 million Proposed terms: IBRD (IDA) [x] IDA: Multicurrency: [x] IBRD: Single currency: US$ Basket (SDR) Grace period (years): 5 (10) [ Standard Variable [] Fixed [x] LIBOR-based (for IBRD) Years to maturity: 20 (35) Commitment fee: 0.75 (0.5)% Service charge: (0.75)% Front-end fee: 1% Financing plan: (US$m) Source Local Foreign Total GOC 16.4 5.4 21.8 IBRD 10.0 10.0 IDA 9.6 25.4 35.0 Total 26.0 40.8 66.8 Borrower: People's Republic of China Guarantor: Not Applicable Responsible agency(ies): International Affairs Department of Ministry of Finance Estimated disbursements (Bank FY/US$m): 1999 2000 2001 2002 2003 2004 2005 IBRD 1% Front end fee 0.1 Annual 2.3 7.5 11.7 11.4 6.7 3.6 1.7 Cumulative 2.4 9.9 21.6 33.0 39.7 43.3 45.0 Project implementation period: September 1999-December 2004 Expected effectiveness date: September 1, 1999 Expected closing date: December 31, 2005 - 2- A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The objective of this project is to provide continued support to the Government of China (GOC) in its economic and structural reform effort. While this effort has contributed to China's remarkable economic growth over the last two decades, it has also created a new set of challenges. Among the greatest economic and structural reform challenges facing GOC are (a) increasing macroeconomic vulnerabilities, and (b) growing inequality combined with persistent poverty. Intensifying these challenges are a large number of loss-making state-owned enterprises (SOEs), a rising financial demand from the social security system and a fragile financial sector. The need to resolve these challenges, which underlines the importance of supporting GOC in its economic and structural reform effort, has been exacerbated with the onset of the Asian financial crisis. Supporting GOC will be achieved through: (a) strengthening institutions that are key to GOC's ongoing but unfinished economic and structural reform agenda; (b) developing selected economic and structural reform programs which address priority needs of GOC; (c) strengthening agencies involved in poverty reduction and rural development; and (d) improving the preparation of projects involved in fostering sustainable development. Key performance indicators include: (a) establishment of a national economic forecasting system; (b) establishment of demonstrative regional models for disaster prevention and control; (c) number of economic and structural reform activities undertaken; (d) number of people involved in design of economic reform and/or poverty alleviation programs who receive training; (e) satisfactory feasibility study reports and procurement documentation prepared. B: Strategic Context 1. Sector-related CAS goal supported by the project (see Annex 1) CAS document number: 16321 -CHA (February 25, 1997) Date of latest CAS discussion: May 28, 1998 (Board document R 98-107) The Bank's CAS for China envisages operational support for: macroeconomic growth and structural reform; infrastructure development; human development and poverty reduction; agriculture and rural development; and environment protection. Its over-arching objective is to free from poverty the large number of people who have yet to benefit from the country's economic growth in remote and isolated rural areas, as well as in urban areas. The major vehicles for achieving these objectives are: (a) support for reforms in the financial, state enterprise and public sectors, pension and housing system, and corporate governance; (b) assistance to reduce poverty and promote rural development; (c) support for private sector development; and (d) investment in the reduction of infrastructure bottlenecks. The proposed project will support the Bank's CAS in several ways. First, strengthening reform institutions and developing economic reform programs complements the CAS objective of supporting macroeconomic and structural reforms. The urgency of these reforms has been magnified by the Asian crisis, now into its second year. The Bank is supporting these economic and structural reform efforts through its Country Economic Memorandum (CEM) and with assistance activities carried out under the CAS. For these initiatives to succeed and the reform momentum to be sustained, institutional capacity for reform must be strengthened, and lessons of international experience be communicated and adapted to the Chinese situation. Secondly, the proposed project will directly strengthen poverty reduction and rural development agencies, one of the vehicles targeted by the Bank to free from poverty the large number of rural people who - 3 - have yet to benefit from the country's economic growth. Furthermore, the proposed project will improve the preparation of the projects related to sustainable development. In addition, the project complements the portfolio management efforts of GOC and the Bank. Partially as a response to the regional crisis, there is a new urgency prevailing to the reform effort. What is needed are a buttress of institutional capabilities for reform and policy related studies that incorporate international experience to the Chinese context. The proposed project could be seen as a needed companion to the CEM, further supplementing the Bank's own program of collaboration with GOC on policy studies to be launched by the CEM's recommendations. The Bank is also introducing more rigorous project requirements, such as those with regard to financial management and procurement. The proposed project will provide a vehicle for addressing current and emerging government institutional weaknesses affecting its ability to implement projects efficiently, and for strengthening capabilities in specific areas important to satisfactory project implementation. 2. Main sector issues and government strategy: Several major sector issues confront GOC as it continues its program of economic transformation. At the macroeconomic and structural level, China's financial sector remains fragile, the SOE sector is awash with red ink, and the social security system is not yet completed. At the social sector level, the education system is not fully responsive to the labor market, the health care sector remains under-financed, and in agriculture and rural development, some people in remote areas remain entrenched in poverty. GOC has adopted reform strategies to deal with the existing sector issues. Some of the specific strategies include: * Development of macroeconomic institutions; * Furthering integration with the international economic system; * Training of high level economic administrators; * Strengthening Chinese banks' capital bases and reducing non-performing loans; * Deepening reforms of SOEs; * Concentrating poverty alleviation efforts on central and western China; * Marketization of housing in urban areas; * Implementation of pension reform; * Improvement of educational access and quality; * Strengthening of health programs. 3. Sector issues to be addressed by the project and strategic choices: The project will address: (a) economic and structural reform issues through strengthening the institutions involved in GOC's reform agenda as well as developing selected programs; (b) poverty alleviation issues through strengthening poverty alleviation institutions, including provincial Offices of Poverty Alleviation and Development, as well as the Yangling Agricultural Demonstration Zone; and (c) implementation issues through strengthening institutions managing sustainable development projects. C: Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): - 4 - The project comprises two related components. Component A, Reform Support and Institutional Development (RSID) is to be executed by selected institutions involved in GOC's economic reform policies based on GOC's priorities. This component will be designed to: (a) strengthen institutions that are key to GOC's ongoing but yet unfinished economic and structural reform agenda; (b) develop selected economic and structure reform programs which address priority needs of GOC; and (c) upgrade agencies involved in poverty reduction. Component B, Pre-investment and Project Preparation Support (PPPS), finances consultants' services, training and equipment required for the preparation of feasibility studies procurement documentation of projects related to sustainable development. Those projects proposed for Bank financing will be selected from those included in China's proposed Three-Year Rolling Lending Program. An illustrative list of projects, of which several are at an advanced stage of preparation, and the criteria and procedures for selection are included in Annex 2. For the projects to be financed by other donor agencies and GOC, the selection will be based on the National Key Construction Project Plans of the State Development Planning Commission (SDPC), with the same criteria and procedures. The Bank will finance about 67% of the total project cost; GOC will finance the remaining 33%. Bank assistance will fund the provision of training, consultants' services, study tours and training as well as some office equipment and materials. Project Summary _ Costs Incl. .Conti nncie % Bank-financing % Component Category Contngencies of (US$m of Bank- equivalent) Total equivalent) financing A. Reform Support and Institutional Development (RSID) RSID 1. Consultant services 22.3 33.4 17.8 39.6 and training 2. Equipment 5.9 8.8 4.7 10.4 3. Miscellaneous 6.3 9.5 0 0 B. Preinvestment and Project Preparation Support (PPPS) PPPS 1. Consultant services 20.2 30.2 20.2 44.8 and training 2. Equipment 3.0 4.5 2.2 5.0 3. Miscellaneous 9.0 13.5 0 0 Front End Fee 0.1 0.1 0.1 0.2 (1% of IBRD)010.0102 Total 66.8 100 45.0 100 2. Key policy and institutional reform supported by the project: Among other activities, the following institutional reform programs will be supported by the project: (a) establishment and improvement of a regional and sectoral economic forecasting system (Chinese Academy of Social Sciences); - 5 - (b) strengthening of capacity in the development of training curricula for market-oriented economic courses, and the building up of the nation-wide civil servants training system (National School of Administration); (c) support for Guizhou Province, one of the least developed provinces in China, in its government reform and poverty alleviation agendas (Guizhou Provincial Government); and (d) support for the development of agriculture science, technology and institutional reform (Shaanxi Yangling Agricultural Demonstration Zone). Although the coverage of these reforms may be potentially extensive, care will be taken to control the scope of the project so as to ensure effective implementation. 3. Project benefits and target population: To the Chinese authorities, the importance of this project lies in part in that it will have substantial spillover effects on increasing the probability of success of economic and structural reform efforts, and on improving the methods of general project management. The specific benefits of the RSID component are that it will: (a) reinforce GOC's economic and structural reform efforts; (b) strengthen institutions involved in GOC's economic and structural reform program; and (c) enhance capacity of institutions to manage and implement projects related to sustainable development. The specific benefits of the PPPS component is that it will provide funds for, in line with international standards, the preparation of sustainable development projects to be financed by the Bank, and hence maintain and further improve portfolio performance, which will be conducive to the portfolio management efforts of GOC and the Bank. In addition, by expanding support to project preparation to the key projects to be financed by other donor agencies and GOC, the proposed project could improve the overall project implementation quality and increase the involvement and contribution of the Bank. The immediate target population is the staff of the institutions involved in GOC's reform agenda, and the staff of the provincial and local agencies covered by the project for RSID component. The immediate target population for the PPPS component is staff working in agencies involved in sustainable development projects. These staff will learn from international consultants through working contact, receive training and be provided with better equipment. 4. Institutional and implementation arrangements: Project Implementation Structure. The Technical Assistance & Human Resources Development Division (TAH1RD), the International Affairs Department of the Ministry of Finance (MOF) will be responsible for the overall project coordination and the supervision of project implementation. Before considering subprojects for financing, MOF will verify, with SDPC, the priority of the subprojects. MOF will also determine that no other suitable grant funds are readily available for funding the proposed project prior to submitting the subproject proposal for approval by the Bank. MOF will ensure effective coordination among the departments and agencies involved in subproject implementation. Moreover, MOF will monitor the substantive and financial performance of all subprojects in components A and B. MOF has appointed an overall project manager in TAHRD, who will play a coordinating role and be the principal point of contact with the Bank. A project coordinator in the division will support - 6 - the overall project manager. The project accounting manager, located in the Financial and Statistics Division (FSD) of MOF, will maintain the accounts for the entire project. A disbursement officer and a cashier will be appointed to work under the accounting manager. They will provide reporting information on project monitoring indicators, project accounts and procurement to the overall project manager and project accounting manager. The selected subproject agencies and units applying to the MOF for the Fourth Technical Cooperation Project (TCP IV) credit and loan will become the project implementing agencies (PIAs) of relevant sub-projects under TCP IV once their request for subproject identification is approved. PIAs are responsible for the respective operation and finance administration. The PIAs will be requested to submit relevant plans and reports to the MOF according to the relevant rules and regulations, and accept supervision and guidance of project administration and auditing institutions. The PIAs will designate sub-project managers and accountants who will administer the relevant operations, keep operational archives, and maintain routine contacts with the MOF. -7- China: Fourth Technical Cooperation Organization Chart | National | | Ministry of Finance L Level | L l International Affairs Departnent | PMO | l Technical Assistance and Financial and Statistics Human Resources Development Division Division FProject Manager FAccounting Manager | roject Coordinator | |Disbursement Officer l l Cashierl Components Refo Support and Institutional Pre-investment and Project Development (RSID) Preparation Support (PPPS) 1. Chinese Academy of Social Sciences 1. Sustainable Forestry 2. National School of Administration 2. Water Conservation Subprojects/ 3. Chinese Academy of Sciences 3. Flood Control Program Subproject 4. Hebei Bureau of Finance 4. Hebei Water Supply & Environment Implementing 5. Guizhou Province Reform and Dev. Study 5. Beijing Environment II Agencies 6. Shaanxi Yangling Demonstration Zone 6. Jiangxi Agriculture Development II 7. Provincial Offices of Poverty Alleviation and 7. Semi-Arid Lands Development Development 8. Huai River Basin Pollution Control 8. Inner Mongolia Auto. Region Finance Bureau 9. Sub-projects to be selected (a). 9. Xinjiang Uygur Auto. Region Finance Bureau 10. Yunnan Provincial Finance Bureau 11. Henan Provincial Finance Bureau 12. Sub-projects to be selected (a) Note(a): Subproject implementing agencies are not yet finalized; above is a tentative list. - 8 - The Project Implementation Plan (PIP) was prepared by PMO and each PIA for use in the management of the Project. The PIP includes the Implementation Guidelines, Finance Administration and Settlement Method, Disbursement Regulations, Procurement Plan, Monitoring Indicator Table, Outline of Subproject Proposal and Detailed Cost Table of Subproject. A copy of the PIP is available in the Project file. Procurement Arrangement. Procurement arrangements are described in more detail in Annex 6. The ability of the implementing agencies to implement the procurement plan was assessed and found to be adequate. The report of the assessment is available in the Project File. The Bank, in collaboration with PMO, will provide training to enhance the skills of the staff at PIAs as needed. Disbursement Arrangements. Disbursement arrangements are described in Annex 6. A Special Account will be established with the amount of Authorized Allocation equivalent to US$ 3 million. Statements of expenditure will be required for disbursements to be made against (a) contracts for goods costing less than US$100,000; (b) training and study tour expenses; and (c) consultant services costing less than US$100,000 for firms and less than US$30,000 for individuals. The supporting documents for statements of expenditure will be retained by each PIA and made available for review by the Bank's supervision missions. In the case of contracts for goods and consultant services above these thresholds, disbursements will be made against the full documentation of the contracts themselves and other supporting documents. Financial Management and Auditing. The Financial Management System (FMS) to be used during project implementation has been reviewed by the Bank, and has been found satisfactory (Annex 11). The financial management system is in place, the staff has extensive experience from implementing previous and existing Bank projects. Financial reporting formats have been discussed and agreed with the borrowing agencies and approved by the Bank's regional Financial Management Specialist. Under the agreed procedures, GOC will submit to the Bank, on a semi- annual basis, a single set of financial reports covering all components of the project. These reports detailed in PIP will comprise: Balance Sheet. The statement will cover overall progress of the project. Summary of Sources and Uses of Funds. Sources (IBRD, IDA and GOC) of funds, and uses (equipment, consultants' services and training) of funds will be reported on a cash basis for the period and for the project to date. Statement of Implementation of CreditlLoan Agreement: The Statement will classify expenditures according to project categories, and will report current and cumulative withdrawals for Credit and Loan proceeds. Special Account Statement. A report reconciling the closing balance of the project Special Account to the Bank account statement will be prepared. Each PIA will be required to prepare and maintain its own project record as required by the Bank, including a project general ledger and cash disbursement journal, which are needed to facilitate the systematic recording of project transactions in a way that will enable the required project financial reports to be prepared in a timely and reliable manner. Each PIA will also be required to prepare written procedures for the vendor payables/cash disbursement function in the project office, as well as procedures and records for property control related to the large quantity of equipment to be acquired under the project. These procedures and records reflect a sound system of internal controls. The project office has the necessary adequate staff skilful to reliably execute -9- the established procedures and maintain the project records. Annual project financial statement will be audited by the National Audit Office. Terms of Availability of Bank Funds. The maturity will be not less than 10 years, inclusive of a grace period of 5 years; and the interest rate no more than 1% per annum for RSID component. As for PPPS component, an interest rate not exceeding 3% per annum will be charged and the maturity will not be shorter than 5 years. The front-end fee and the commitment charge will be borne by MOF. PIAs will bear the foreign exchange risk. Supervision, Monitoring, Evaluation and Reporting. Responsibility for supervision of the project will remain with the Bank's Resident Mission in China (RMC), with participation from team members from both RMC and headquarters. Specifically, the supervision plan includes the following: * A project launch workshop, which will be arranged soon after Board approval, will give focus on the essential project management activities including procurement, financial management, and any other requirements for project implementation set forth in the PIP. M Two formal supervision mission a year will be scheduled, including the annual review mission. All such missions will comprise the task team leader, an operations officer, procurement and disbursement specialists from HQ or RMC as required. Financial specialists will visit the project at least once a year. Field-based staff will maintain regular contact with PMO and PIAs between scheduled missions, and will make additional field visits as deemed necessary. * A mid-term Review of the project is scheduled for the second half of 2001. This will provide an opportunity for a more in-depth review of the project and evaluation of progress towards achievement of project objectives. Monitoring indicators including performance indicators (as in the PIP) will be used to evaluate progress under the project. A Progress report is required and will be sent by MOF to the Bank Group every six months by February 28 and August 31 each year. Annual Implementation Plan will be sent by the PIAs to MOF by November 30 each year, for consolidation and forwarding to the Bank. MOF will make broad assessment of project implementation in a draft project completion report to be submitted to the Bank Group no later than six months following the close of the Credit/Loan account. D: Project Rationale 1. Project alternatives and reasons for rejection: Most of the previous TA projects adopted a process, or flexible, approach that was appropriate given the uncertainties of the demand for TA and the changing environment at the time. No appropriate alternatives are found. The process approach, therefore, remains appropriate for the proposed project. Past similar projects, as listed below, have achieved the objective in helping institutional building and reforms in China. - 10 - 2. Major related projects financed by the Bank and/or other development agencies: Sector Issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Progress Development (IP) Objective (DO) Bank-financed The project (with total Bank fund of US$ 1. China - Technical S S 10 million) was to assist GOC to prepare Cooperation Credit The credit was fully projects to be financed by the Bank Group; (Cr. 1412-CHA) disbursed and closed on to strengthen GOC's capacity to select, December 31, 1988, after a prepare, and implement projects and to one-year extension. administer TA. The project (total Bank funding of US$20 S million) was to assist and strengthen GOC's 2. China - Second Technical The credit was closed on S capability in project preparation and Cooperation Project June 30, 1994, after two implementation; increase the number of (Cr. 1664-CHA) years of extension, when core agencies involved with Bank SDR 0.5 million (about US$ operations; and improve the economic and 0.7 million) was canceled. policy studies by research agencies. The project was designed to assist GOC in strengthening its development policy and 3.China - Planning Support S planning capability; in preparing and and Special Studies Project The credit was closed on implementing inter-sectoral and innovative (Cr. 1835-CHA) December 31, 1994 after S technical assistance projects; and in two years of extension, strengthening key institutions responsible when a balance of SDR for economic and financial reform. 1,532,670 (approximately US$ 2,260,075) was The project was to support China's overall canceled. economic reform and modernization effort 4. China - Reform, and help to strengthen key institutions Institutional Support and The project is still on going, responsible for policy research, training and Preinvestment Project though slow in implementation; and help prepare projects (Cr. 2447-CHA) disbursement, and the credit financed by the Bank. closing date was extended for two years to June 30, Other development agencies 2000. None known IP/D0 Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HlU (Highly Unsatisfactory) - 11 - In addition, the Bank has approved the Financial Sector Technical Assistance Project (Cr. 2423- CHA), the Environment Technical Assistance Project (Cr.2522-CHA), Economic Law Reform Project (Cr. 2654-CHA), the Fiscal and Tax Reform Technical Assistance Project (Cr. 2709- CHA, Ln. 3873-CHA), and the Accounting Reform and Development Project (Cr. 3173-CHA, Ln. 4442-CHA). 3. Lessons learned and reflected in proposed project design: The implementation of previous TA projects has yielded valuable lessons for the design of the proposed project. It will continue to build on the strengths of these earlier projects, such as ensuring strong government ownership and good management capability of implementing agencies by emphasizing discipline and accountability. Meanwhile, it will seek to redress several weaknesses. (a) The previous TA projects have a common problem of slow disbursement. In order to avoid similar problem, concrete steps have been taken to facilitate timely project implementation and disbursement for both Components A and B of the proposed project. In Component A, project team has identified adequate potential subprojects. Out of which, eleven subprojects are at advanced stage and hence ready for implementation upon approval of this project by the Board. In fact, retroactive financing has been agreed for some subprojects. In Component B, the restructuring of the former World Bank Department of MOF into the present International Affairs Department (IAD) of MOF ;s an opportunity to broaden the scope of projects eligible to receive TA project proceeds. The IAD will be responsible not only for managing the World Bank projects, but also projects financed by other donor agencies and GOC. As a result, the IAD will have a much larger pool of projects. It is assumed that a larger pool of projects will enable the IAD recommend, in a timely manner, high potential projects for TA project proceeds. By expanding the pool of projects eligible for TA project proceeds, not only could the slow disbursement problem be solved, but the Bank's involvement and contribution to the reform and poverty reduction process in China could also be widened. (b) Coordination and monitoring of subproject implementation are critical for the success of the technical assistance project. Coordination needs to be undertaken by a government agency that can effectively work closely with various government agencies and assign qualified staff to the activity. For better monitoring of the subproject implementation, the simple report format and/or a checklist designed to identify problems in implementation, which were successfully used in earlier projects, have been supplemented by the guidelines and manuals, which can be found in the PIP. These include: MOF Implementation Guidelines for TCP IV Project, MOF Financial Administration and Settlement for TCP IV Project, and MOF Disbursement Regulations for TCP IV Project. All PIAs will be given a full set of these documents upon approval of the subproject for smooth implementation. (c) A thorough understanding on the use of consultants and the procurement process will benefit PIAs. Such training should be undertaken at the time of project launch workshops, before PIAs will start using funds to prepare projects. The Bank, MOF, and the project management agency should make greater effort in familiarizing the staff of the PIAs with the Bank's procurement procedures, especially those for consultants, when assisting them with project preparation. The Bank's Procurement Officer for the proposed project is based at RMC, which enables the Bank to provide immediate support to the clients. (d) Training activities will have much greater impact if identified needs are incorporated into project design. Design of training activities should start at a very early stage. A training needs - 12 - assessment has been completed for the proposed Project, which went through a careful review of the set-up and need for training. In addition to lessons learned in China, lessons learned from projects in other countries, which include simplicity in project design and institutional arrangements (Brazil), flexibility but greater discipline in project implementation (Uganda), and close attention by the borrower and the Bank to implementation, particularly through the use of realistic performance indicators (Mauritania), have been taken into consideration during the preparation of the proposed project. 4. Indications of borrower's commitment and ownership: A clear indication of the borrower's commitment is demonstrated by: (a) the spending of substantial local funds every year on reform oriented activities; (b) the preparation of a series of rules and regulations to facilitate smooth implementation of the project (e.g. MOF Implementation Guidelines for TCP IV Project, MOF Financial Administration and Settlement for TCP IV Project, and MOF Disbursement Regulations for TCP IV Project); (c) completed eleven proposals of high priority subprojects, (d) the recent approval of this project by the State Council, (e) the recruitment of a full time project coordinator paid by MOF, and (f) the commitment in government budgets for the counterpart funding for project implementation. 5. Value added of Bank support in this project: Bank support for this project adds value in several different ways to the GOC programs in this project. Firstly, the Bank will add value to the GOC initiative to strengthen reform institutions by communicating lessons of international experience about macroeconomic modeling and the management of enterprises and institutions. Secondly, the Bank will strengthen the GOC initiative to strengthen poverty reduction and rural development by providing training to staff members and facilitating the purchase of related equipment. Thirdly, the Bank will strengthen the GOC initiative to improve project preparation by communicating international best practice to the staff engaged in the preparation of sustainable development projects. Moreover, as a result of spillover effects springing from the project design, the Bank will increase its involvement in, and contribution to, the reform process. Finally, the project will help improve, both qualitatively and quantitatively, the preparation of sustainable development projects, thereby contributing to the achievement of the CAS goal. E: Summary Project Analysis 1. Economic Not Applicable. 2. Financial Not Applicable. 3. Technical Not Applicable 4. Institutional (a) Executing agencies: - 13 - MOF will be responsible for the overall coordination, management and supervision of the project implementation. Being the key counterpart of the Bank operations in China in the past two decades, MOF has extensive experience in managing Bank-financed projects. (b) Project management: The Project Management Office (PMO) of MOF will be headed by the Director General of the International Affairs Department of MOF. The directors of TAHRD and FSD will assist the Director General in managing the project. TAHRD has designated a project manager. A full-time project coordinator will be appointed to the division not later than 9/30/99 to provide support to the overall project manager. FSD will designate a project accounting manager to maintain the accounts for the entire project. A disbursement officer and a cashier will work under the accounting manger and provide reporting information on project monitoring indicators, project accounts and procurement status to the overall project manager and project accounting manager. 5. Social The project has paid special attention to social issues, poverty alleviation in particular, in design and sub-project selection. A majority of sub-projects identified were directly related to poverty alleviation or located in poor and underdeveloped provinces. This has been addressed more in detail in Annex 2. 6. Environmental assessment Environmental category: [] A [] B [x] C This project will have no discernible environmental impact. The Bank does not propose to finance any land acquisition or building construction. Environmental clearance has been obtained and is on file. 7. Participatory Approach (a) Primary beneficiaries and other affected groups: The primary beneficiaries of the project are staff of the institutions involved in GOC's reform agenda, the staff of the provincial and local government agencies, and staff involved in sustainable development project preparation. During project preparation, the Bank mission had extensive discussions with representatives of the China Academy of Social Sciences, National School of Administration, China Academy of Sciences and representatives from provinces who will participate in Bank-funded poverty alleviation and sustainable development projects. The design of each project component reflects the needs and ideas of the beneficiaries. Their representatives will also oversee project implementation to ensure that the project is carried out to meet its objectives. (b) Other key stakeholders: Universities and specialized training centers, which provide training programs in economic/financial analysis and project management, are limited stakeholders. These groups have been involved in the project preparation. The Bank's project team has had discussions with representatives of Tsinghua University Project Management Training Network and MOF Public Financial Training Network for their coordination during the project implementation period. - 14 - F: Sustainability and Risks 1. Sustainability: Project sustainability will depend on: (a) effective project management arrangements to ensure high quality of project formulation, preparation and implementation; (b) effective participation of beneficiaries in government reform agenda during or beyond project implementation period; (c) PFBs and PIAs continue to play an important role in the management of Bank and other donor agencies financed projects and the personnel trained remain at their position for relatively longer period of time; (d) satisfactory financial arrangements for counterpart funding, and (e) adequate local government support. These elements have been incorporated in the project design to ensure the sustainability of the project. 2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1): Risk Risk Rating Risk Minimization Measure From Outputs to Objective: There is almost no risk in this regard, M Careful project design creates a according to the design of the project and the direct connection between project nature of the project, outputs are almost the object objectives and project equivalent of objectives. outputs. From Components to Outputs: Delays could occur in identifying and M Advance preparation of subprojects preparing suitable subprojects for these sub- will help minimize the risk of components. delays in initial implementation. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), and N (Negligible or Low Risk) 3. Possible Controversial aspects Not applicable G: Main Loan Conditions 1. Effectiveness Standard. 2. Other (a) MOF shall employ not later than 9/30/99 and thereafter maintain a full-time Project coordinator with terms of reference and qualifications and experience acceptable to the Bank. (b) MOF shall at all times continues to maintain a Project Management Office headed by the Director-General of the International Affairs Dept. to be responsible for ensuring overall management and supervision of the project and coordination of the PIAs. (c) Selection of subprojects should comply with the following criteria: (i) the subproject is of high priority to the Borrower; (ii) subprojects under Part A of the project is designed to support the Borrower's economic and structural reform program; (iii) the PIA has the organization, - 15 - management, staff and other resources required for the efficient and effective implementation of the Subproject; and (iv) the subproject's implementing agency has an appropriate financial management system for the Subproject. (d) MOF will make the project proceeds available to each PIA on financial terms acceptable to the Bank. (e) Annual Implementation Plan will be sent by the PIAs to MOF by Nov. 30 each year, for consolidation and forwarding to the Bank. (f) The Borrower shall prepare, under the terms of reference satisfactory to the Bank, and furnish to the Bank the semi-annual progress reports, no later than February 28 and August 31 in each calendar year. (g) A mid-term report will be compiled no later than December 31, 2001. This report will integrate the results of monitoring and evaluation activities of the project performance during the period preceding the date of this report, and recommends measures to ensure efficient project implementation so as to achieve the project objectives during the period following the date of the report. H. Readiness for Implementation [X] The Project Implementation Plan (PIP) has been discussed and found realistic and of satisfactory quality. [X] The procurement documents for the first year's activities are complete and ready for the start of project implementation. 1. Compliance with Bank Policies [x] This project complies with all applicable Bank policies. A-, LM; sLeIV & Shenhua Wang Task Team Leader Tna lanuelya,Ktinc Sec,drMaagetMirector (Acting) ukon Huang 7 /$7 Country Manager/Director - 16 - Annex 1 China Fourth Technical Cooperation Project Project Design Summary Narrative Summary Key Performance Monitoring and Critical Assumptions Indicators Evaluation Sector-related CAS Goals: (Goal to Bank Mission) (a) sustainable (a) continuous growth in (a) statistics on macro (a) GOC will carry out macroeconomic growth national per capita GDP; economic indicators; research and establish and market oriented GOC models for economic institutional reform; (b) strengthening (b) statistics on income forecasting, environment institutions involved in and living standards; protection and disaster (b) poverty alleviation, GOC's economic reduction, even without improvement in development and reform (c) statistics on economic project funding; environmental protection, program; losses caused by natural and disaster reduction. disasters. (b) GOC implements (c) lower the percentage special programs for of population living in targeted poverty groups. absolute poverty; (d) reducing economic losses caused by natural disasters. - 17 - Project Development (Objectives to Goal) Objective: To provide continued (a) increased involvement (a) comparing the policy (a) research institutions support to GOC in its and contribution of recommendation and will be able to give sound economic and structural institutions to GOC economic forecasts of recommendations, and reform effort. economic reform agenda; subproject institutions base economic policies with the actual outcomes; on scientific studies; (b) improved efficiency in project management and (b) performance of (b) staff at PFBs/PIAs administration at subproject PFBs and PIAs; responsible for project provincial levels; management and (c) revision of CAS based implementation are (c) increased exchange of on the emerging situation trained; information on GOC's in China and newly economic reform and proposed projects; (c) under the rapidly support need, as well as changing situations in increased contribution of (d) performance of China, GOC will get the Bank to GOC's reform projects prepared with prompt and effective efforts; Bank support. response from donor agencies, such as the (d) sound preparation of Bank; projects. (d) all projects selected are key projects and are of the highest priorities, such as minimizing bottlenecks. - 18 - Outputs: (Outputs to Objective) (a) establishment of a (a) subproject completion (a) continued attention (a) developing a national national economic report and periodic review will be paid by GOC to economic forecasting forecasting system; of economic forecasts; the economic forecasts to system; decide relevant economic (b) more economic and (b) comparison of policies; (b) institutional support for structural reform activities economic losses caused by economic reform and undertaken; natural disasters before (b) actions are taken by economic development; and after the establishment related GOC agencies to (c) establishment of of the model; improve environment and (c) establishing demonstrative regional reduce disasters damages; demonstrative regional models for disaster (c) statistics on staff of models for disaster prevention and control; PFBs/PIAs and other (c) PFBs and PIAs prevention and control; subproject agencies continue to play an (d) more staff at PFBs, trained and the number of important role in the (d) institutional support for PIAs and subproject training text books management of Bank PFBs and PIAs; agencies trained in developed; financed projects and the relevant areas, and personnel trained remain (e) sound project training courses (d) subproject semi-annual at their position for preparation and staff developed; progress reports, and relatively longer period of training for projects related statistics on personnel time. to sustainable (e) satisfactory feasibility training. development. study reports and (d) the trained staff procurement continue to work on documentation prepared, project preparation to be training courses and financed by the Bank or seminars held. any other sources. Project Components/ Inputs For all components: (Components to Outputs) Sub-components (see For all components: Annex 2 for project (a) Total project cost (a) borrower will regularly description): (US$66.8 million) monitor the (a) counterpart fund and implementation of effective administrative A. Reform Support and (b) IDA Credit and subproject components; support are to be provided Institutional Development; IBRD loan (US$45.0 by GOC promptly and million) (b) semi-annual progress consistently; B. Preinvestment and report will be prepared to Project Preparation (c) Counterpart funds cover the status of project (b) effective Support. from GOC (US$21.8 implementation and implementation is to be million) highlighting issues; carried out by all subproject entities. (c) the Bank will execute a mid-term review of the project in the second half of 2001 to review the implementation issues and revise project design to meet changing needs. - 19 - Annex 2 China Fourth Technical Cooperation Project Detailed Project Description Overall The Project consists of two components: (a) Reform Support and Institutional Development (Component A); and (b) Preinvestment and Project Preparation Support (Component B). Component A -- Reform Support and Institutional Development (RSID), aims at the strengthening of institutions involved in GOC's economic policies based on GOC's priorities, providing support to programs associated with policy reform, and strengthening of the capacity of PFBs/PIAs to manage implementation of Bank and non-Bank financed projects involved in fostering sustainable development. This component of the project has been evaluated to cost US$34.6 million (US$22.6 million of SDR equivalent, and US$12.0 million GOC). Component B -- Preinvestment and Project Preparation Support (PPPS), finances consultants' services, training, and equipment required for the preparation of feasibility studies of projects, has been evaluated to cost US$32.2 million (US$ 12.5 million of SDR equivalent, US$9.9 million IBRD loans, and US$9.8 million GOC). The sub-projects prepared in advance and the future sub-projects shall all be selected according to the following criteria and procedures: Selection Criteria: e the Subproject is a high priority for the Borrower; e the Subproject is designed to support the Borrower's economic and structural reform program; * the PIA has the organization, management, staff and other resources required for the efficient and effective carrying out of the Subproject; and * the PIA has a suitable financial management system for the Subproject. Procedures The MOF shall submit proposal for each sub-project to the Bank for review and approval. The proposal shall include the following information: * description of the proposed subproject, including a time schedule for, the purposes and objectives of, and the benefits expected from the subproject; * description of the role of the PIA and staff responsible for the subproject; * description of the proposed expenditures, including an estimate of foreign and local costs for the proposed subproject, detailed expenditure breakdown by items, counterpart financing and an estimated disbursement schedule; - 20 - * general description of the arrangements to be made by the PIA for the provision of office space, facilities, transportation and other operational facilities for the subproject; * proposed selection procedures, qualifications, terms of reference and duration of service for any consultants to be engaged for the purposes of the subproject; and other information reasonably requested by the Bank. Sub-projects selected: So far, eleven subprojects have been appraised and are in advanced stage of preparation under Component A. These include: (i) Chinese Academy of Social Sciences (CASS). As part of China's economic and structural reform effort, macro-economic analysis and forecast is being improved. The Institute of Quantitative and Technical Economics (IQTE) of CASS initiated, in 1991, a project entitled "China's Economic Analysis and Forecast". By 1998, the project had achieved all of its objectives. Among the achieved objectives are the following: (a) China's Macro-economic Annual Model became one of the most authoritative models for China's economic analysis and forecast; (b) from 1995 onwards, IQTE developed China's Macro-economic Quarterly model, which was used to provide tentative quarterly analysis and forecast reports; (c) an 8-sector model was established to study the relations between industrial policies and economic growth in China; (d) regional models were explored, among which the Beijing Economic Model was completed and used for drafting Beijing's 1996-2010 economic development strategy; (e) several important conferences were held, including the "International Conference on Market Economy and China" (1993); the "International Conference on China's Economy in the Year 2000" (1994); the "International Conference on the Theory of the Firm and China's Economic Reforms" (1996); the "International Conference on China's Economic Growth" (1997). Many important people attended at least one of these conferences, including: Nobel Economic Prize Laureates; and internationally famous economists. The two models developed by IQTE, China's Macro-economic Annual Model and the Macro-economic Quarterly Model, are in urgent need of further improvement, especially given current changes in the global economic environment caused by the Asian financial crisis and domestic economic restructuring. CASS, with the support of the project, will seek to improve the accuracy of the forecasting models, set up a sectoral model, establish series of models to conduct comprehensive forecasting on economic development, and strengthen analysis and forecasting on technological progress. The project will provide funding for the cost of further data collection and surveys in several areas, technical input from international experts to improve the quality of the model, overseas training, attendance at international conferences, and purchase of larger capacity computers with relevant software. Specific goals include: (a) to further improve the annual and quarterly models by switching the annual model from supply-oriented to both a supply- and demand-oriented model, and the quarterly model to a demand-oriented model; (b) to fully use the UN LINK model system, linking China's model with the system to analyze the interaction between China's economy and the world economy; (c) to establish China's sectoral model and to be able to analyze and forecast key sectors of China's economy; (d) to establish a model system comprised of the long run forecasting model, the annual econometric model, the general equilibrium model and the quarterly adjustment model so as to comprehensively forecast China's economy; (e) to strengthen the analysis and forecast of technical progress and publish an annual report on China's technology and sustainable development. - 21 - (ii) China National School of Administration (CNSA): As part of China's economic and structural reform effort, CNSA is training highly ranked civil servants and the managing staff of state-owned enterprises (SOEs) in modem economic theory and management methods. CNSA was formally established in September 1994. Up to January 1999, CNSA had established five academic departments (Department of Public Administration; Department of Leadership; Department of Economic Management; Department of Law; Department of Political Theories) which have offered training programs for some 400 leaders at ministerial level, 900 departmental directors, 250 leaders of large SOEs and 300 civil servants from Hong Kong and Macao. The current objectives are to strevngthen the capacity of CNSA to develop a training curricula of market economic courses, and to promote the construction and development of the nation-wide civil servants training system. Specific project objectives include: (a) training the teaching staff to receive training on integrating cutting-edge economic and managerial theory with the most recent practices in China; (b) making a comparative study on different market economy systems in the world with the objective of drawing out lessons for reform in China; (c) conducting an overall comparative study on the economic-management function of governments in market economies with the objective of drawing out lessons for the appropriate role of China's government; (d) introducing the latest technology and equipment for training programs, as well as equipment managers. (iii) Chinese Academy of Sciences (CAS): One of the priority needs of the GOC is to enhance their disaster warning capability and establish demonstrative regional models for disaster prevention and reduction. Two agencies within CAS, the Center for Disaster Reduction (CDR) and the Institute of Atmospheric Physics (IAP) have been collaborating for many years in the area of disaster prevention. The following are some of the major accomplishments: (a) establishment of a China Strategy for Disaster Prevention and Reduction; (b) establishment of a "China Atmosphere-Hydrosphere Synthetic Scientific System on Disaster Reduction" which has been operating for two years and has reduced total economic losses by 1.6 billion yuan RMB; (c) organization of study groups to several countries and international conferences; (d) start of publishing quarterly journals in 1991 in Chinese (Disaster Reduction in China) and English (Natural Disaster Reduction in China); (e) organization of several international conferences in China on disaster reduction. Since the destructive flooding in 1998, flood warning and prevention for the purpose of reducing economic losses have become extremely urgent. In fact, disaster warning and prevention have now assumed a more important role in China. The project will enhance GOC's disaster warning capability in the following concrete ways to: (a) provide funding to cover the cost of data collection and investigation in several regions for the purpose of establishing demonstrative regional models for disaster prevention and reduction; (b) solicit technical input from international experts for improving the quality of the demonstrative regional models for disaster prevention and reduction; (c) provide funding for relevant Chinese scholars to pursue overseas training and attend international conferences; (d) provide funding for the purchase of larger capacity computers with software which will facilitate the establishment of demonstrative regional models for disaster prevention and reduction. (iv) Guizhou Provincial Government: To support the Guizhou Province, one of the least developed provinces in China, in its economic and structural reforms and also to strengthen agencies involved in poverty reduction and rural development. By the end of 1998, there were 36.576 million people living in Guizhou Province. Forty- eight counties in Guizhou (containing 2.74 million people) are classified as poverty-stricken. Economic development, while continuous and stable, has been very slow. This is partly because - 22 - the province is mountainous and hilly (covering 93.5% of the total land). And, it is also because the economy has been slow to modernize its economic base of traditional grain production, much less diversify. However, the province has abundant natural resources, especially in the areas of energy, minerals and biological resources (for instance, Chinese medical herbs). The government has attached great importance to undertaking economic and structural reforms and has now developed the following objectives: (a) summarizing international research on poverty, especially in areas with similarities to Guizhou, with the objective of drawing out lessons for Guizhou; (b) assessing the market potential of natural biological resources in Guizhou and subsequently using techniques of market analysis to estimate demand. The natural biological resources include, but are not limited to, the following: livestock products; tea; traditional Chinese medicinal products. This research, in turn, will be used to develop plans for adjusting and optimizing industrial development in Guizhou through the development of processing industries; (c) undertaking research on the role of urbanization in industrialization. Particular attention will be paid to adopting government structures in a city and a county to better serve a market economy. The results of this research will be used as a basis to undertake further governmental reform in Guizhou Province and also to foster sustainable economic development; (d) researching the relationship between human capital development and industrial development, paying attention to the training provided in training centers and schools. The results of this research will be used to better link the development (supply) of human capital with the industrial demand for human capital; (e) drawing upon international expertise to formulate "The Overall Plan of Developing Specialty Sectors in Guizhou". The objective of this item is to use modern techniques of economic analysis to identify the areas in which Guizhou has comparative and competitive advantages and initiate the development of these industries. Areas currently under consideration include the following: tourism; power (water and coal); The Guizhou Provincial Government will take responsibility for ensuring that this plan is actually put into practice. In sum, the study will cover two parts, a master plan of poverty alleviation for Guizhou and a pilot study on the county and city government reform. The Bank will provide funding for both foreign and local experts, domestic and overseas training, attendance to international conferences, establishment of computers network and relevant software. (v) Shaanxi Yangling Demonstration Zone: To promote the scientific and technological development of agricultural production in the Shaanxi Yangling Demonstration Zone for the purpose of alleviating poverty in Central and Western China, particularly the Northwest. The Yangling Demonstration Zone itself was established in 1997 and is the sole demonstration zone of agricultural high technology industries in China. Given the newness of the Demonstration Zone, there are few concrete results to report. However, there is much importance placed on the zone and there is also corresponding promise. The central government and the Shaanxi provincial government have both devoted significant resources to the development of this zone. Moreover, the zone plays a key role in government plans to reduce poverty in Northwest China. Specific objectives include: (a) establishing the Yangling Agricultural Science and Technology Information Network, which will be used to promote the fast and effective exchange of agricultural information, as well as the application of agricultural information in agricultural education, scientific research, experiment demonstration, technology promotion, and system reform; (b) facilitating the use of international consultants, especially to set up agricultural data base and holding of seminars; (c) enabling the purchase of network equipment and system software, as well as other expenses regarding the establishment of a network center; (d) supporting overseas training for staff of the Yangling Demonstration Zone for the purpose of deepening their understanding of high-technology agricultural production in advanced industrial countries. - 23 - (vi) Provincial Offices for Poverty Alleviation and Development: The objective of this subproject is to strengthen the capacity of provincial agencies under the SCLG Office for Poverty Alleviation and Development to alleviate poverty in China. In 1994, the State Council promulgated and implemented the "8-7 Poverty Reduction Plan", which set the explicit target of basically feeding and clothing the rural poor by the year 2000. Since 1994, the SCLG Office for Poverty Alleviation and Development has mobilized societal resources and spear-headed a national effort to reduce hard-core poverty. By the end of 1997, these efforts had resulted in a decrease of the destitute poor by 50 million. At the same time, agricultural production and infrastructure conditions in the country's poor areas had been significantly improved. One of the areas of greatest need in the war against poverty is the establishment and improvement of grass-roots poverty eradication agencies. While some were established in the 1980s, the conditions of these agencies remain extremely backward. This project will pilot an upgrade of eight provincial poverty reduction offices. Specific methods of improving these eight provincial poverty reduction offices include: (a) procuring basic equipment, such as computers, printers, and fax machines; (b) establishing an internet network connection between the project provinces and all of the country-level poor counties in these provinces; (c) organizing training and study tours so as to enhance the quality of the staff in the poverty reduction offices; (d) upgrading training facilities and faculty capacity of the poverty reduction offices to intensify their guidance and management for poverty reduction and development programs at prefecture and county levels; (e) carrying out unannounced poverty studies on the effective way to implement poverty reduction and development work. (vii) Five Provincial Finance Bureaus (PFBs): In order to enhance the work of poverty alleviation, it is necessary to develop and strengthen the capacity of PFBs in less developed areas to undertake and implement Bank and non-Bank financed projects related to poverty alleviation. This project has selected five such PFBs: Inner Mongolia Autonomous Region PFB; Xinjiang Uygur Autonomous Region PFB; Yunnan PFB; Henan PFB and Hebei PFB. These PFBs have much less experience than most other PFBs in carrying out internationally-informed and internationally-funded poverty alleviation projects because they are situated in remote areas and are more constrained by fiscal resources. Specific project objectives include: (a) purchasing of equipment and software to establish a more modern financial system in each of the PFBs; (b) facilitating the training of PFB staff in the areas of project management; disbursement and procurement; (c) familiarizing PFB staff with risk management, financial analysis, and cost-benefit analysis; (d) Supporting workshops and conferences on topics of financial management; (e) funding project-related study tours. (viii) In addition, discussions have been held on Minority Education Research and Development in Yunnan Province. This Subproject will be finalized upon receipt of detailed cost estimates from Yunnan Province. Yunnan is a province with more than 52 ethnic groups in 50 minority poor counties and as a result ethnic minorities account for more than 33% of Yunnan's population. The development of minority education is essential to the overall economic and social development of the minority communities. This sub-project aims at helping the Yunnan Provincial Education Commission carry out studies of minority education for the next century, and disseminate the best practice from summarizing past successful experiences. The sub-project have three components: (a) the research of overall provincial minority education development strategy in Yunnan for the next century; (b) the study and dissemination of cost-effective measures in establishing and operating minority boarding schools with students from the most remote and poorest minority areas; and (c) the writing and publication of text books in minority languages for schools and the training of bilingual teachers. This sub-project covers about 10 minority poor counties in the province. - 24 - Subprojects under consideration include: Study on Corporate Governance of Large-Sized SOEs and Technical Assistance on Transformation of Agriculture Bank of China. Potential projects under Component B are listed below: (i) Sustainable Forestry (ii) Water Conservation Project (iii) Flood Control Program (iv) Hebei Water Supply & Environment (v) Beijing Environment II (vi) Jiangxi Agriculture Development II (vii) Semi-Arid Lands Development (viii) Huai River Basin Pollution Control II (ix) Sub-projects to be selected - 25 - Annex 3 China Fourth Technical Cooperation Project Project Cost Estimates The total project costs are estimated at US$66.7 million with a foreign exchange cost of US$40.7 million, or 61 percent of the total. Cost estimates are based on quantities derived from the preliminary designs, the unit prices currently prevailing in project areas, and prices of local markets for equipment. The base cost estimates of US$66.1 million are expressed in end 1998 prices and the exchange rate used to convert base cost estimates and physical contingencies is Yuan 8.3 to US$ 1. Costs for the project have been based on prevailing CIF prices for imported equipment in China, or ex-factory prices for locally available goods. Physical contingencies are based on an average rate of 5% for equipment. Price contingencies for costs incurred in foreign exchange are based on annual international price escalation rates of 1.3% for 1999, 2.5% for 2000; 2.7% for 2001; 2.6% for 2002; and 2.5% for 2003 and 2004. Price contingencies for costs in Yuan are based on annual domestic price escalation rates of 0 percent for 1999, 3% for 2000, and 5% for 2001-2004. No contingencies have been applied to costs under Sub-projects to Be Selected and Preinvestment and Project Preparation Support component in light of the nature of its line of credit. Project costs are summarized in Tables 3.1, 3.2 and 3.3 below. Table 3.1: Estimated Project Costs by Component (US$ '000) % % Total Foreign Base Local Foreign Total Exchange Costs A. Reform Support and Institutional Development Chinese Academy of Social Sciences 259 470 729 64 1.1 National School of Administration 585 859 1,444 59 2.2 Chinese Academy of Sciences 435 527 962 55 1.5 Hebei Bureau of Finance 504 674 1,177 57 1.8 Guizhou Provincial Government 1,229 1,611 2,840 57 4.3 Shaanxi Yangling Demonstration Zone 766 735 1,501 49 2.3 Prov. Offices of Poverty Alleviation and Dev. 852 1,331 2,183 61 3.3 Inner Mongolia Autonomous Region BOF 267 877 1,144 77 1.7 Xinjiang Uygur Autonomous Region BOF 532 410 942 44 1.4 Yunnan Provincial BOF 293 825 1,118 74 1.7 Henan Provincial BOF 436 415 851 49 1.3 Sub-projects To Be Selected 8,804 10,209 19,013 54 28.8 Subtotal Reform Support and Institutional 14,962 18,943 33,905 56 51.3 Development B. Preinvestment and Project Preparation 10,798 21,353 32,150 66 48.7 Support Total Base Costs 25,759 40,296 66,055 61 100.0 Physical Contingencies 40 84 124 68 0.2 Price Contingencies 222 303 525 58 0.8 Total Project Costs 26,021 40,683 66,704 61 101.0 - 26 - Table 3.2: Estimated Project Costs by Expenditure (Yuan '000) (US$ '000) % % Foreign Total Local Foreign Total Local Foreign Total Exchange Base Cost I. Investment Costs A. Consultant Services 1. Senior Consultant - 122,347 122,347 - 14,741 14,741 100 22 2. Other Consultant 48,105 20,616 68,721 5,796 2,484 8,280 30 13 3. Research 3,100 1,329 4,429 374 160 534 30 1 4. Other Research/Consultant 12,180 5,220 17,400 1,467 629 2,096 30 3 Subtotal Consultant Services 63,385 149,512 212,896 7,637 18,013 25,650 70 39 B. Training 1. Overseas Training/Study Tours - 105,276 105,276 - 12,684 12,684 100 19 2. Domestic Training/Study Tours 6,622 2,838 9,461 798 342 1,140 30 2 3. Seminar, Workshop & Conference 1,742 747 2,488 210 90 300 30 - 4. Other training/meeting 13,025 5,582 18,607 1,569 673 2,242 30 3 Subtotal Training 21,389 114,443 135,832 2,577 13,788 16,365 84 25 C. Equipment 1. Computer 1,614 6,456 8,070 194 778 972 80 1 2. Office Equipment 21,500 32,251 53,751 2,590 3,886 6,476 60 10 3. Other Equipment 4,184 6,276 10,460 504 756 1,260 60 2 4. Minor Equipment 66 100 166 8 12 20 60 - Subtotal Equipment 27,365 45,083 72,448 3,297 5,432 8,729 62 13 D. Miscellaneous Costs 101,663 25,416 127,079 12,249 3,062 15,311 20 23 Total Base Costs 213,802 334,453 548,255 25,759 40,296 66,055 61 100 Physical Contingencies 331 698 1,029 40 84 124 68 - Price Contingencies 1,827 2,371 4,198 222 303 525 58 1 Total Project Costs 215,960 337,522 553,482 26,021 40,683 66,704 61 101 - 27 - Table 3.3: Estimated Project Costs by Year (US$ '000) 1999 2000 2001 2002 2003 2004 Total I. Investment Costs A. Consultant Services 1. Senior Consultant 1,186 2,545 4,339 3,974 1,363 1,363 14,769 2. Other Consultant 824 2,059 2,483 1,665 666 643 8,339 3. Research 124 89 113 106 109 23 564 4. Other Research/Consultant 638 944 382 178 17 - 2,159 Subtotal Consultant Services 2,772 5,637 7,317 5,924 2,154 2,028 25,831 B. Training 1. Overseas Training/Study Tours 1,102 3,110 4,086 2,630 994 913 12,835 2. Domestic Training/Study Tours 133 342 328 173 86 86 1,148 3. Seminar, Workshop & - 214 96 - - - 310 Conference 4. Other Training/Meeting 398 721 582 426 219 - 2,346 Subtotal Training 1,633 4,387 5,093 3,229 1,299 999 16,639 C. Equipment 1. Computer 500 398 144 - - - 1X042 2. Office Equipment 540 1,207 1,947 1,550 625 625 6,494 3. Other Equipment 574 643 66 23 47 - 1,352 4. Minor Equipment 21 - - - - - 21 Subtotal Equipment 1,635 2,248 2,157 1,573 672 625 8,909 D. Miscellaneous Costs 1,112 2,618 4,569 3,951 1,540 1,534 15,325 Total Project Costs 7,153 14,889 19,136 14,676 5,665 5,186 66,704 - 28 - Annex 4 China Fourth Technical Cooperation Project Cost Effectiveness Analysis Summary (Indicate currency, units, and base year) [Not Applicable] Present Value of Flows Fiscal Impact Economic Financial Analysis Analysis Taxes Subsidies Project Costs Summary of benefits and costs: N/A Main Assumptions: N/A Cost-effectiveness indicators N/A - 29 - Annex 5 China Fourth Technical Cooperation Project Financial Summary Year Ending December 31 (US$ million equivalent, base year 1998) Implementation Period Operational Period Sources Year Year Year Year Year Year Total % of Total Years % of 1 2 3 4 5 6 Total 7-20 Total Project Costs Investment Costs 6.4 13.4 17.2 13.2 5.1 4.7 60.0 90 20.0 15 Recurrent Costs 0.7 1.5 1.9 1.5 0.6 0.5 6.7 10 113.4 85 Total 7.2 14.9 19.1 14.7 5.7 5.2 66.7 100 133.4 100 Financing Sources /a Government /b 2.5 4.7 6.1 4.9 1.9 1.7 21.8 33 133.4 100 IBRD /c 0.6 1.5 3.0 3.0 1.0 1.0 10.0 15 - - IDA /c 4.2 8.7 10.1 6.8 2.7 2.5 35.0 52 - Total /d 7.3 14.9 19.1 14.7 5.7 5.2 66.8 100 133.4 100 Main Assumptions: /a Financing plan is based on total project cost by year including contingencies plus a front-end fee of US$0.1 million at 1 percent of IBRD loan amount. /b Government financing includes funds from various sources at both center and local levels. /c Bank financing includes US$10 million of IBRD loan and US$35 million equivalent of IDA credit. /d The totals may not tally due to rounding. - 30 - Annex 6 China Fourth Technical Cooperation Project Procurement and Disbursement Arrangements 1. Procurement (1) Guidelines. The following Bank's Guidelines will be used in all Bank financed procurement: Procurement under IBRD Loans and IDA Credits (dated January 1995, revised in January and August 1996, September 1997 and January 1999), and Selection and Employment of Consultants by World Bank Borrowers (dated January 1997, revised in September 1997 and January 1999). The Bank-approved Chinese Model Bidding Documents will be adopted for all International Competitive Bidding (ICB) and National Competitive Bidding (NCB) for Goods, where the Standard Bid Evaluation Form will be used. All Consultant assignments will follow the Standard Request for Proposals - Selection of Consultants (dated April 1998). The Bank's Standard Documents will be used where no relevant model document exists. Due to scattered locations and various schedules of project implementation activities, each PIA may undertake and manage its own procurement. The MOF will oversee and coordinate project procurement and will be responsible for ensuring that the Bank's Guidelines and regulations are observed. The procurement profile is shown in Table A. (2) Goods. The Project will require a total value of goods worth about US$8.9 million. To the extent practicable, contracts for goods will be grouped into bid packages whenever possible to attract competition and permit bulk purchasing. All contracts for goods costing US$200,000 equivalent or more will be awarded under ICB. A margin of preference equal to 15 percent of the CIF price of imported goods, or the actual customs duties and taxes, whichever is less, will be allowed to qualified domestic manufacturers bidding under ICB procedures. As currently projected, no goods will be procured under ICB procedures. All goods costing less than US$ 200,000 but equivalent to US$100,000 or more for each contract will be procured through NCB procedures acceptable to the Bank. These will include computers (US$0.4 million), office equipment (US$0.1 million) and network equipment (US$0.6 million). The other goods (US$7.8 million) will be procured using national shopping procedures to include computers, office equipment and other equipment in small patches. About US$20,000 worth of minor and small equipment will be non-Bank funded. (3) Consultant services and Training. Consultant services and training worth US$42.4 million will be undertaken for the Project. Employment of consultants (US$23.6 million) will be in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank Borrowers. "Quality- and Cost-Based Selection"(QCBS) procedures will be used for consultants to be hired through a firm. Individual consultants will be employed in accordance with the procedures applicable to individual consultants. All consulting contract expected to cost more than US$200,000 will be advertised in Development Business. Training and study tours (US$14.3 million) will cover the associated expenses for both domestic and overseas training, study tours, seminars, workshops and conferences, and will be reimbursed based on programs reviewed by MOF and agreed with the Bank. About US$2.2 million worth of consultant services and US$2.3 million worth of training expenses will be funded by the GOC. (4) Other. About US$15.3 million worth of miscellaneous costs be funded entirely by the government. - 31 - (5) Thresholds and Review a. Prior Review. All ICB and NCB documents for goods will be subject to prior review by the Bank. Consultant services contracts costing US$ 100,000 or more for firms and US$ 30,000 or more for individuals will require the Bank's prior review and no objection on budgets, short-lists, selection procedures, letters of invitation, proposals, evaluation reports, and contracts. The details of prior review arrangement are provided in Table A6.2. b. Ex-post Review. All other contracts will be subject to ex-post review by the Bank's supervision missions. It is expected that ex-post review will cover about 15 percent of all contracts according to Bank guidelines. This arrangement will be assessed during the mid-term review. 2. Disbursement (6) Disbursement of the loan/credit proceeds will be made against the following expenditure categories and percentages: (a) goods, 100 percent of foreign expenditures, 100 percent of local expenditures (ex-factory cost) and 75 percent of local expenditures for other items procured locally; (b) consultant services and training, 100 percent of expenditures; and (c) front-end fee, 100 percent of fee at 1 percent of the IBRD loan amount payable on loan effectiveness. The allocation of loan/credit proceeds is shown in Table A6.3. (7) To avoid delay in start-up of the Project, a retroactive financing of SDR150,000 (equivalent to US$0.2 million) is recommended to cover expenditure incurred between March 10, 1999 and the date of signing of the Loan/Credit Agreements. The following activities will be most likely to be covered: consultant services, training/study tour, seminar and some minor office equipment. (8) The Bank may require withdrawals from the Loan/Credit account to be made on the basis of statements of expenditure for expenditures for: (a) contracts for goods costing less than US$100,000; (b) training and study tour expenses; and (c) consultant services costing less than US$100,000 for firms and less than US$30,000 for individuals. The supporting documents for statements of expenditure will be retained by each PIA and made available for review by the Bank's supervision missions. In the case of contracts for goods and consultant services above these thresholds, disbursements will be made against the full documentation of the contracts themselves and other supporting documents. (9) To facilitate disbursement, a Special Account in US dollars to be operated by the MOF will be established in a bank and on terms and conditions acceptable to the Bank. Authorized Allocation for the Special Account will be US$3 million, equivalent to the Bank's financing of average expenditure for four months of the Project implementation period. Applications for replenishment will be submitted monthly or whenever the amount is drawn down to 50 percent of its initial deposit, whichever comes first. The Project is expected to be completed by December 31, 2004 and the Loan and Credit accounts are expected to close on December 31, 2005. - 32 - Table A6.1a: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Method Total Costc ICB NCB Other NBF A. Reform Support and Institutional Development 1. Consultant Services 8.0 2.2 10.2 (8.0) (0.0) (8.0) 2. Training and Study Tours 9.8 2.3 12.1 (9.8) (0.0) (9.8) 3. Goods 1.1 4.8 0.0 5.9 (1.1) (3.6) (0.0) (4.7) 4. Miscellaneous 6.3 6.3 (0.0) (0.0) B. Preinvestment and Project Preparation Support 1. Consultant Services 15.7 15.7 (15.7) (15.7) 2. Training and Study Tours 4.5 4.5 (4.5) (4.5) 3. Goods 3.0 3.0 (2.3) (2.3) 4. Miscellaneous 9.0 9.0 (0.0) (0.0) Total 1.1 45.8 19.9 66.7 (1.1) (43.8) ( (44.9) a Other procurement methods include shopping for periodicals and books, consultant services and training. bNBF denotes non-Bank-financed. cTotal cost includes contingencies. Note: Figures in parenthesis are the amounts to be financed by the Bank loan and IDA credit. - 33 - Table A6.1b: Consultant Selection Arrangements (in US$ million equivalent) Consultant Services a Total Expenditure Selection Method CostC Category QCBS QBS SFB LCS CQ Other NBF A. Firms 12.9 1.6 14.5 (12.9) - (12.9) B. Individuals 10.6 0.7 11.3 (10.6) - (10.6) Total 12.9 10.6 2.3 25.8 (12.9) (10.6) - (23.6) aQCBS = Quality- and Cost-Based Selection, QBS = Quality-based Selection, SFB = Selection under a Fixed Budget, LCS = Least-Cost Selection, CQ = Selection Based on Consultants' Qualifications, Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc., bNBF = Not Bank-financed. cTotal cost includes contingencies. Note: Figures in parenthesis are the amounts to be financed by the IBRD loan and IDA credit. Table A6.2: Thresholds for Procurement Methods and Prior Review = ~~~~~~~~~~~~~~~~~Estimated Total Value Expenditure Contract Value Procurement Subject to Prior Category (Threshold) Methoda Reviewb (US$ thousand) (US$ million) 1. Goods >
Группа Всемирного банка · Project Appraisal Document
China - Fourth Technical Cooperation Project
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