China - Yangtze Dike Strengthening Project

Document of The World Bank Report No: 20204-CHA PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$210 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE YANGTZE DIKE STRENGTHENING PROJECT May 31, 2000 Rural Development & Natural Resources Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January, 2000) Currency Unit = Renminbi (RMB) or Yuan (Y) Y 1.00 = US$ 0.12 US$ 1.00 = Y 8.3 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS bcm billion cubic meters mu 0.667 hectare (ha) or 0.164 acres mcm million cubic meters CAS Country Assistance Strategy MOF Ministry of Finance CC Construction Contractor MWR Ministry of Water Resources C/EMO Overall Environmental Coordinator NCB National Competitive Bidding CIDA Canadian International Development Agency NPV Net Present Value COL Collaboration O & M Operation & Maintenance CON Consultation PAP Project Affected People CPCO Central Project Coordination Office PFB Provincial Financial Bureau CWRC Changjiang Water Resources Commission PIP Project Implementation Plan CWRCDI Changjiang Water Resources Commission Design Institute PLG Project Leading Group ECI Environmental Construction Inspector PMO Project Management Office EIA Environmental Impact Assessment POE Panel of Experts EMO Environmental Management Office PPLG Provincial Project Leading Group EMP Environmental Management Plan PPMO Provincial Project Management Office EPM Environmental Protection Measures PRC People's Republic of China ERR Econornic Rate of Return RAP Resettlement Action Plan FMS Financial Management System RC Reinforced Concrete FY Fiscal Year RO Resettlement Office GIWP General Institute Water Resources SDPC State Development & Planning Planning and Design Comnmrission IBRD International Bank for Reconstruction & Development TGP Three Gorges Project ICB International Competitive Bidding VEO Village Environmental Office ICR Implementation Completion Report WB World Bank IDA International Development Association WBD World Bank Division IS Information Sharing WCB Water Conservancy Bureau LPLG Local Project Leading Group WCBHB Water Conservancy Bureau Hubei LPMO Local Project Management Office WR Water Resources Vice President: Jemal-ud-din-Kassum, EAPVP Country Director: Yukon Huang, EACCF Sector Director: Geoffrey Fox, EASRD Task Team Leader: Daniel Gunaratnam, EACCF  CHINA YANGTZE DIKE STRENGTHENING PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 5 C. Project Description Summary 1. Project components 7 2. Key policy and institutional reforms supported by the project 10 3. Benefits and target population 11 4. Institutional and implementation arrangements 11 D. Project Rationale 1. Project alternatives considered and reasons for rejection 13 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in proposed project design 15 4. Indications of borrower commitment and ownership 16 5. Value added of Bank support in this project 16 E. Summary Project Analysis I. Economic 176 2. Financial 17 3. Technical 19 4. Institutional 22 5. Environment 23 6. Social 25 7. Safeguard Policies 28 F. Sustainability and Risks 1. Sustainability 29 2. Critical risks 29 3. Possible controversial aspects 30  G. Main Loan Conditions 1. Effectiveness Condition 30 2. Other 30 H. Readiness for Implementation 33 I. Compliance with Bank Policies 34 Annexes Annex 1: Project Design Summary 35 Annex 2: Project Description 38 Annex 3: Estimated Project Costs 50 Annex 4: Cost Benefit Analysis Summary 55 Annex 5: Financial Summary 72 Annex 6: Procurement and Disbursement Arrangements 74 Annex 7: Project Processing Schedule 88 Annex 8: Documents in the Project File 89 Annex 9: Statement of Loans and Credits 91 Annex 10: Country at a Glance 96 Annex 11: Environmental Impact Assessment 98 Annex 12: Resettlement Action Plan 118 Annex 13: Financial Management 139 MAP(S) IBRD 30696 IBRD 30697  CHINA Yangtze Dike Strengthening Project Project Appraisal Document East Asia and Pacific Region EACCF Date: May31, 2000 Team Leader: Daniel J. Gunaratnam Country Manager/Director: Yukon Huang Sector Manager/Director: Geoffrey B. Fox Project ID: P064730 Sector(s): Al - Irrigation & Drainage Lending Instrument: Specific Investment Loan (SIL) Theme(s): Water Poverty Targeted Intervention: N Project Financing Data [ Loan C Credit El Grant Cl Guarantee L Other (Specify) For Loans/Credits/Others: Amount (US$m): 210 Proposed Terms: Variable Spread & Rate Single Currency Loan (VSCL) Grace period (years): 5 Years to maturity: 20 Commitrnent fee: 0.75% Front end fee on Bank loan: 1.00% Fi.,--' ---n 'Surc '&~at 'or~i~ -- .. GOVERNMENT 328.11 7.40 335.51 IBRD 0.00 210.00 210.00 Total: 328.11 217.40 545.51 Borrower: PRC Responsible agency: MWR/CHANGJIANG WR COMMISSION, HUBEI AND HRUNAN PROVINCES Provincial Finance Bureau, Hubei Province Address: No 8 Zhongbei Road,Wuchang, Wuhan, 430071, Hubei Province, PRC Contact Person: Vice Governor Tel: 86-27-87824427 Fax: 86-27-87849682 Email: Other Agency(ies): Finance Bureau, Hunan Province Address: No 1 West Cheng'nan Road, Changsha City, 410015, Hunan Province, PRC Contact Person: Vice Governor Tel: 86-731-5165180 Fax: 86-731-5165184 Email: Ministry of Water Resources Address: No 2 Baiguanglu Ertiao, Xuanwu District, Beijing, 100053, PRC Contact Person: Vice Minister Tel. 86-10-63202821 Fax: 86-10-63548037 Estimated disbursements (Bank FYIUS$M): 20( 0i 2003 20 Annual 45.0 65.0 52.0 48.0 Cumulative 45.0 110.0 162.0 210.0 Project implementation period: 4.0 years Expected effectiveness date: 09/01/2000 Expected closing date: 12/31/2004 OCS PAD Fo., Rov Maro, 2D)  A. Project Development Objective 1. Project development objective: (see Annex 1) The main Project development objective is to enhance the protection of the river bank against erosion and to improve critical sections of existing main dikes along the banks of the mid-Yangtze River in Hunan and Hubei Provinces, thus protecting the properties and lives behind the dikes against floods. The Project will also support institutional reforms aimed at enhancing the existing dike operation and maintenance organizations, both organizationally and technically. The objective will be achieved by: (i) strengthening the river bank and existing flood protection dikes along the Yangtze River to lower the risk of dike breaches that could lead to catastrophic damage; (ii) rehabilitating the flood gates and cross dike structures along the dikes to discharge flows from tributaries and curtail flood flows behind the dikes; (iii) providing flood control facilities for dike operation and maintenance organizations; (iv) expanding dike monitoring systems and developing an emergency preparedness system to reduce flood damage and loss of lives; (v) developing autonomous institutions at provincial and municipal levels based on the existing organizations for O&M of the dikes; and (vi) enhancing self-financing through flood levy collection from the beneficiaries for operation and maintenance of dikes. 2. Key performance indicators: (see Annex 1) The Project will be monitored through a set of indicators that takes into account the key elements of a sustainable development strategy for flood control: (i) reduction in flood damage through structural and non structural measures; and (ii) establishment of self financing institutional systems to operate and maintain flood control facilities. Specifically, Project staff will monitor flood damage reduction, enforcement of policies on introducing flood protection fees and setting up institutional systems for flood management. Key performance indicators will be: (i) setting up dike inspection programs; (ii) processing and evaluation of inspection results; (iii) formulation of annual maintenance programs and the funding thereof; (iv) the projected and actual cost of annual maintenance programs; and (v) damage occurring from floods. Project performance will be assessed for each dike section by monitoring key indicators as listed in the PIP (see also Annex 1). The indicators will be compared with: (i) benchmark parameters on maintenance costs and flood damage prior to Project implementation; and (ii) projections made for future maintenance operations. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: R 98-107 Date of latest CAS discussion: 05/28/98 CAS document #: 16321-CHIA, February 25, 1997. Date of latest CAS discussion. March 18, 1997. CAS Progress Report #: R98-107 of May 6, 1998 discussed May 28, 1998. The Project will support Government's strategies endorsed in the CAS to: (i) promote agricultural development and the rural economy by incorporating major water storage, transfer, irrigation drainage and flood control programs into future projects, that include institutional reform and user participation as integral components; (ii) improve cost recovery; (iii) focus on the reconstruction of essential infrastructure and reduce infrastructure bottlenecks; (iv) improve rural employment and incomes; and (v) alleviate poverty. -2 -  2. Main sector issues and Government strategy: China's rivers and floodplains have been the focus of human settlement since the dawn of civilization. The rivers were the natural transportation routes and the floodplains offered vast tracts of fertile land. Today, the floodplains provide a home to the bulk of the China's population, most of its industry, and the vast tracts of farmland that feed a population of 1.2 billion people. Unfortunately, this vastly productive area is vulnerable to flooding. The 1998 floods in the Northeast and along the Yangtze River caused the government to refocus on the flood mitigation measures especially along the Yangtze River. The 1998 flood on the Yangtze coincided with torrential rain over the middle and lower reaches and affected principally the provinces of Hubei, Hunan and Jiangxi. The flood affected some 21 million people in the three provinces and displaced permanently 4.0 million people. In addition, a total of 3.3 million houses, factories and commercial centers were affected, of which 1.3 million were destroyed. The damage was estimated at Yuan 158 billion (close to US$20 billion). After these floods many weaknesses (piping through the dike foundation, leakage through the dikes, bank erosion, nearly overtopping) were discovered along the dikes and the river banks that need to be addressed to ensure that main dikes will not breach in the future. The 1954 flood on the Yangtze, one of the worst in history, caused widespread damage and loss of lives (some 30,000 people) that would have been much worse without the newly completed dikes. After this flood a masterplan for flood control was drawn up in which improvements of dikes and detention basins were the main consideration. The Yangtze River has caused other historic floods, such as the 1931 event where 3.3 million ha were flooded and 140,000 people died. The 1935 flood in the Han and Lishui tributaries led to losses of a similar magnitude. Flood damage overall in China in the 1990s has been exceptionally high. On average it has been US$15 billion per year with a low in 1990 of US$5 billion and a high of US$36 billion in 1998. Dikes to protect land from the annual floods date back centuries and in some places more than 2,000 years. Since the creation of the People's Republic of China, the incomplete and poorly maintained dikes have been strengthened and extended. At the same time, there has been rapid growth in the value of assets protected by the dikes and this demands much higher levels of protection against floods. In the past, a breach of a dike would destroy low-value field crops and inundate houses and public buildings. But now, properties at risk include modem factories, processing plants, and high-value commercial real estate. In addition, potential crop losses range from $1,500 per ha for field crops to several times that figure for vegetable gardens and orchards. The Government's strategy for addressing the flood problem has evolved over the years. Its main elements are described below: * Construction of dikes and protection of riverbanks against erosion. Over 200,000 kilometers (km) of new and rehabilitated dikes have been completed in China, protecting some 32 million ha of cultivated land (33 percent of the total), and about 316 million people, although the protection standards are not ideal. Of the dikes built, 56,000 km are along major rivers protecting some 21 million ha of cultivated land and about 216 million people in agricultural areas, cities and small towns, and industrial centers. Construction of a dike requires that it is high enough to protect against an extreme flood. The difference in height between a dike designed for a 50-year flood and a 1,000 year recurrence flood is relatively small on most rivers and the higher level is justified by the potential losses if the dike is overtopped. Dikes are normally found on the natural riverbank some distance from the river. A common problem is seepage through the foundation material. This is known as "piping", and it can lead to a loss of dike foundation material and, then the collapse of the riverbank and dikes. This happened at the site of the only breach of the Yangtze dikes in the 1998'flood. This problem can usually be treated by adding material to the inside (land side) face of the dike at places where seepage appears. River bank erosion can cause bank collapse and threaten the dikes. On the Yangtze, rock aprons are placed to protect the river bank. On the Yellow River, rock spurs are built to deflect the flow from vulnerable river bank sections. - 3 -  * Urban flood protection. Dikes also need to be constructed around cities to protect them from floods. There are presently 16,000 km of dikes around cities. About 530 out of 660 cities in the country need additional protection of key urban and industrial sites from floods. Most of the cities that are already protected need to be protected to higher levels. It is internationally recognized that, as a minimum, key cities need to be protected from floods of a 100-year recurrence period. However, 80 percent of the cities in China are protected from floods of a 50-year recurrence period and less and 65 percent are of a 20-year recurrence period or less. Almost 65 percent of the US$130 billion of flood damage that occurred during 1990-98 was in city and township areas that had low levels of flood protection or were unprotected. In 1996, the Government embarked on a major program of upgrading and investing in new urban flood protection measures. * Creation of flood detention areas for temporary storage of flood waters. Detention areas can be natural lakes or low-lying areas designated for temporary flood storage. The Dongting Lake on the Yangtze serves as a natural detention area but its capacity has declined over the years because of siltation and land reclamation. For most rivers, the artificial detention areas contain high-value farmland and other valuable assets. The use of a detention basin is, therefore, a last resort to prevent much more severe losses that would be incurred by flooding the basin. About 98 localities have been designated as flood diversion areas, providing off-stream flood storage for the major rivers, particularly in the Yangtze, Huai, Hai and Yellow river basins. These areas have a total capacity of 97 billion cubic meters (bcm) and are capable of raising flood protection standards, typically from floods of a 20-year recurrence period to 50 or 60-year. However, at present there are 16 million people living in these detention basins, who are cultivating 2 million ha of farmland. The Government has embarked on a major program to safeguard the people living in these basins and to resettle some of them. * Dredging of river channels and removal of polder development in the channel areas. The natural river channels often have inadequate conveyance capacity. Part of the reduction in capacity is due to siltation and part due to the building of polders and structures within the river channel. Dredging to enlarge channels can lead to significant increases in capacity and lower flood levels. This has been particularly successful in the lower reaches of the Huai River. In addition to desilting, the Government is removing the polders within the river channels and natural detention areas, such as Dongting Lake. In some countries this is called giving "space to the rivers". * Construction of dams on the rivers to regulate downstream flows. Over 84,000 reservoirs, with a total storage capacity of 450 bcm, have been built in China, most having multipurpose functions including flood protection. Some 374 large reservoirs with a total capacity of 325 bcm, and 2,562 medium-size reservoirs with a capacity of 70 bcm have been built in the seven major river basins to regulate and mitigate flood flows. The function of dams on the main rivers and tributaries is to intercept floodwaters and thereby reduce peak flows and flood volumes. Although there are many dams on the tributaries and main stem of rivers and there is significant flood storage that could be used, about one third of the dams are considered unsafe. The dams that were built between 1949 and 1957 were generally of reasonable quality but the spillway and outlet capacity were grossly undersized due to lack of hydrological information. Between 1957 and 1975, the quality of dams was poor due to inadequate designs and construction methods. Dams built after 1975 are generally of good quality. The Government has proposed a Yuan 330 billion program to upgrade and rehabilitate unsafe dams. CIDA has provided a Can$8.0 million program to assist in developing a pilot rehabilitation program for ten (10) major dams and to set up institutional arrangements for large-scale dam rehabilitation programs. * Improved drainage systems behind the dikes to mitigate flooding caused by direct rainfall. Heavy rain behind the dikes can cause flooding if high river levels impede drainage. Drainage systems must be designed to move the water out as quickly as possible after the river levels recede. Pumps are needed to drain the land when river levels are high, but it is seldom economically justified to design for more than a 10-year storm. -4 -  * Soil and water conservation in the drainage basins of the rivers. The flood problem can be aggravated by sediment accumulation in riverbeds and in the lakes connected to the rivers. In the Yellow River, the riverbed in the lower reach is rising at a rate of nearly 1 meter every 10 years. Measures to curb the sediment runoff that causes this problem in the Yellow River include the construction of sediment check dans, afforestation, and terracing of severely sloped lands. This has led to a marked decline in sediment flow in some large tributaries of the Yellow River. An IDA-financed project in the Loess Plateau, in the Yellow River Basin, has shown that soil and water conservation measures can be made compatible with profitable forestry and crop production, and result in a marked improvement in farm incomes. Sediment buildup is also present in the main rivers in the Hai and the Huai river basins. On the Yangtze, sediment buildup has reduced the capacity of Dongting Lake to function as a natural flood control reservoir. Since the 1998 flood, the Government has ordered a reduction in logging and it has plans to speed up soil and water conservation programs in the tributary basins of the Yangtze and other major rivers. 3. Sector issues to be addressed by the project and strategic choices: The main sector issues in flood control in the Yangtze River Basin are the following: * The existing flood control standards of the Yangtze River are of a very low level. This is not in line with the social and economic status of the region. The Yangtze River Basin is a region with a relatively well developed economy, but the flood protection is for less than a 40-year recurrence period. The Jingjiang stretch is the main focus of flood protection, but can only safely pass a peak flow of 80,000 cubic meters per second (m'/s) under the condition of using the Jingjiang detention basins. This is approximately equivalent to a 40-year frequency. The flood control standard without using the Jingjiang detention is only a 10-year return period. The flood control standard for the middle reaches of the Yangtze, which the Project's focus is on, is generally only a 10- to 20-year return period and the flood control standards in the middle and lower reaches of the major Yangtze tributaries in Sichuan Province only reach a 5- to 10-year return period. * The flood control standards of some major cities along the river are not adequate. Some of the cities have no flood protection measures. A large number of cities along the river have suffered economic losses of various extent due to flooding. * Flood detention basins are heavily populated and poorly protected. Detention basin facilities could be improved to protect people in the event that these basins need to be used. There is no flood-proofng of buildings in the detention basins and there is a lack of main roads to evacuate people when needed. The safety of people in the basins cannot be guaranteed when the flood detention areas need to be used. Consequently many detention basins are hardly usable during serious flooding. For example, one of the difficulties of using the Jingjiang detention basin during the 1998 Yangtze flood was that the safety of people living in the basin could not be assured. Finally when it was ascertained that the basins had to be used and 300,000 people had to be moved, it was estimated that this would cost Yuan 2.4 billion. * Some existing flood control levees have been poorly designed, constructed and maintained and dikes are unsafe. Some levees were constructed on thick permeable foundation layers. Long-duration high water levels cause leakage and piping, which then result in the failure of the foundations of the levees. For example, breaches, piping and slope slides in many dikes occurred during the 1998 flood. Yangtze Basin Flood Control Master Plan. After the 1954 flood, a serious attempt was made to masterplan the basin for flood control. This included the establishment of 16 detention basins for flood control purposes. In the 1970s and 1980s, the master plan was updated several times. However, the complete basin master plan was approved only in 1990 after the TGP was approved for construction. This "new" 1990 master plan calls for the rehabilitation of the dikes to provide protection against floods with a - 5 -  20-year recurrence period. Prior to TGP construction the dikes were already designed for the protection of floods with a 20-year recurrence period. Together with the detention basins the dikes would give a protection for the 100-year recurrence period. To provide protection for the 100-year recurrence period flood at least 15 bcm is needed to be stored in the detention basins. After TGP is constructed this facility together with the improved dikes will be able to protect against 100-year recurrence period flood. The detention basins will no longer be used for floods of a 100-year recurrence period after the TGP becomes operational. Since there are 6.6 million people living in the detention basins, it is desirable not to use them for flood water storage unless absolutely needed. However, floods in excess of 100-year recurrence and up to 1000-year recurrence, the dikes, TGP and the detention basins will all need to be used to contain the floods. The main masterplan features are indicated in Table 1 below. The masterplan details were verified for the 1998 flood and no major changes to the plan were made after evaluation of the verification findings. It is unnecessary to get involved in any further master plan studies, because the 1990 masterplan is comprehensive and there is a good understanding of what needs to be put in place under the Yangtze Basin Flood Control Plan. Table 1: Flood Control Master Plan Before and After TGP Flood Refore TGP Afte GTPis Frequency is Colted Completed Dike G trg X Detetion Die TGr: storage ; Detention WkW_ ,',5!p : o 3 : lused NA 0 ybasin use in se in br bainuse in * ben f ater of water berm of water stordorere stored 1/20 Fully used NA 0 Fully used 0 1/50 (1998) Fully used NA 7.5 Fully used 7.5 - 1/100 (1954) Fully used NA 15.0 Fully used 15.0 1/1000 (1870) Fully used NA 50.0 Fully used 22.0 28.0 The masterplan studies determined the optimum detention basin and reservoir storage requirements. The optimization reveals that there should be a provision of about 50 bcm of storage: 22 bcm from TGP and 28 bem from the detention basins. The use of detention basins will depend on the river section flow capacity and actual flows that cannot be sustained. Generally, the constricted portion of the Jingjiang section of the river is from where the Jingjiang detention basin will be used. For the river section flowing passed the Dongting Lake the Honghu detention basin will be used. There are clear operating rules for the use of the detention basins. The Yangtze Basin Flood Control Master Plan calls for a number of actions to be taken, including the following: * the dikes are the main works to provide protection against floods and have to be designed to the flood levels of the 1954 storm; * the TGP will be the main flood control structure and will provide 22 bcm of flood storage, with supplemental control from reservoirs upstream and on tributaries (15 reservoirs with - 6 -  a total flood storage capacity of 19.1 bcm); * construction of detention basins (63.3 bcm storage) to store flood water in the event the 1870 flood levels occur; * river training, soil and water conservation measures in the upper Yangtze basin to reduce soil erosion, especially in the tributaries and sediment in the lakes; * enhancing the capacity of lakes and floodways by removing flood-resistance polders and return lake-side farmlands to lake areas for better flood regulation; and * a combination of engineering and non-engineering measures such as flood-proofing of low-lying areas, voluntary resettlement of people from flood-prone area. All the above measures are being implemented to various degrees. Dikes form the first line of defense for floods of low to medium peaks up to the 20-year recurrence period. Before TGP is completed, all other floods larger than 20-year recurrence are to be mitigated by using the dikes and detention basins. After TGP is completed, the floods larger than 20-year will be handled by TGP and the detention basin will be used. The dikes are independent of whatever else is built in the river basin to control floods since they form the first line of defense. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Project Area Hunan Province. In Hunan Province, the Yangtze river is 163 km long and forms the northern border with Hubei Province. The 99.5 km section upstream of Chenglingji is the Jingjiang reach, and the 63.5 km section downstream of Chenglingji is the Yueyang reach. The main Yangtze dike in Hunan is 140.5 km long, of which 50 percent is close to the river and threatened by bank erosion. The dike protects over 2,000 km of land, including 90,000 ha of intensively cultivated farmland, a population of 1.6 million, the Beijing Guangzhou railway, and National Highway 107. A notable feature of the Yangtze in Hunan is Dongting Lake. Three channels of the Yangtze break away from the main channel near the city of Zicheng. About one third of the flow of the river in high flood enters Dongting Lake from these channels and then returns to the river at Chenglingji. Four tributaries of the Yangtze flow into Dongting Lake: the Li Shui, Yuan Jiang, Zi Shui and the Xiang Jiang. Sometimes, as in 1998, early floods in these four rivers fill the Lake and this reduces the storage available when the Yangtze goes into flood. Over the years, the capacity of Dongting Lake has been depleted by natural sediment deposition and by polders that have been created for settlement and agriculture. During the 1998 flood, 110 polders out of a total of 248 were flooded. Hubei Province. In Hubei Province, the Yangtze river is 1,061 km long. This includes the 163 km of the river shared with Hunan, and the 70 km shared with Jiangxi. The main Yangtze dikes in Hubei, with a length of 1,557 km, protect the city of Wuhan and other large cities, 43 counties, a population of 30 million, 2 million ha of farrnland, and many large industries including the Wuhan Iron and Steel Company and the Jianghan oilfield. There are numerous lakes in the lands bordering the river. Channels link the lakes to the Yangtze, and these are controlled by gates and drainage pumping stations. These lakes serve to absorb rainfall runoff that would otherwise flood farmland. Normally the water level in the lakes is lower than high-flood levels in the Yangtze, but they would only be used to store floodwaters if a breach of the main dike appeared imminent. The Honghu is designated as a flood detention basin, as also is the Jingjiang area north of Dongting Lake. -7 -  The Project consists of the following components: Component 1: River Bank and Dike Foundation Seepage Protection (US$103.4 million) River bank protection works, over a length of 132.7 km (82.4 km in Hubei and 50.3 km in Hunan), will be undertaken by Changjiang Water Resources Commission (CWRC) with full support from the Central Government. The proposed river bank protection measures under this component include the following: * Gabion rockfill, large pre-cast concrete blocks and dumped rip-rap protection for the underwater portion of the bank, including dike toe and with a filter layer of geo-textile or other filter material; and * 0.1 to 0.3 m thick pre-cast concrete slabs or hand placed rip-rap protection for the above-water portion of the bank; * Where piping is evident, treatment of the foundation material that underlies the dike by an impermeable blanket or a grout curtain. Component 2: Dike Strengtheningfor Hubei and Hunan Provinces (US$264.5 million) (i) Dike rehabilitation and seepage control of 558.8 km of Class I and RI dikes (442.8 km in Hubei and 116.0 km in Hunan). The main measures of the dike strengthening component include the following: * Raise the height of the dikes to provide an adequate margin (freeboard) above the design flood level; * Protect the face of the dike at vulnerable locations with dumped or hand-placed stone, or concrete blocks (revetment) and plant trees on the berms for wave protection; * Treat the main body of the dike, where necessary, by a grout curtain (injection of clay slurry) or by placing geo-synthetics * Repair/upgrade culverts and gates through the dike; * Slope protection with grass covers inside of the dikes; and * Upgrade and pave dike roads and install lighting. (ii) Cross-dike structures rehabilitation and replacement. Typical cross-dike structures include culverts, sluices, pumping stations and traffic passes with flood control gates. On average, there are two cross-dike structures per kilometer length. The outdated structures, most of which were built in the 1970's and are of poor quality materials, require foundation treatment for seepage control. Also, snail traps, nets and isolation ponds will be installed for containing the spread of schistosomiasis prevalent in the area. The length of most structures will be extended to meet the cross-sectional profiles of the rehabilitated dikes. Foundation treatment for the cross-dike structures includes concrete cutoff walls, jet grouting, and cement mixed piles. In addition, a total of 70 cross structures will be rehabilitated and upgraded Component 3: Dike Monitoring and River Modeling (US$22.1 million) (i) Dike Monitoring (US$2.0 million) Under the Project Hubei will setup a computerized system to monitor the seepage through the dike and settlement/deformation of the dike. The system will consist of placing piezometers at regular and critical locations inside and outside the dike to monitor possible flows through the dike body and foundations. A real time data acquisition system will be established for all the piezometers measurements, dike deformation and water levels along the dike. These measurements will provide advanced warning for possible weaknesses in the dikes during high water levels so that advanced protection measures can be taken to prevent dike breaches. -8 -  (ii) River Modeling (US$20.1 million) In addition the Project will support CWRC in the development of a physical model of the middle Yangtze River reach covering the middle part of the lower reach. The model will predict the sediment and water flows from Yicheng to Hukou. It will also predict the movement of the river channel in time and therefore give CWRC advance waming for river bank protection and provide information on Lake Dongtinghu sedimentation and its capacity to retain flood storage volume. It will also provide information for flood mitigation strategies into the future. Component 4: Equipmentfor Dike Maintenance (US$6.1 million) At present, dike maintenance, which is mainly carried out during the dry season from September to May, relies mainly on a large labor force with basic handtools and outdated equipment. This method is inefficient and the work carried out is of poor quality. This component will provide modem equipment for dike maintenance, which will increase the organizational capacity to carry out regular maintenance. The equipment will include wheel loaders, bulldozers, excavators, dump trucks, light vehicles and boats. Office equipment, such as computers, fax machines and printers, to improve further the efficiency of the maintenance organizations will also be provided. Component 5: Resettlement (US$96.9 million) Under the Project the Resettlement Action Plan (RAP), which has been prepared in accordance with OD 4.30, will be implemented. This includes the resettlement of 47,992 (10,958 families) people. The Project will affect 33,750 mu or 2,250 ha of land of which 21,906 mu or 1,460 ha is cultivated, 1.52 million m of housing, and 0.24 million m2 of industrial and commercial units. Independent resettlement supervision teams will be will be employed by the provincial PMOs to supervise the implementation of the RAP. The Resettlement Program consists of various housing and economic restoration measures, which have been developed to: (a) minimize disturbance to resettlers by providing local resettlement options, family production/income restoration alternatives and necessary support in the period of transition; (b) be acceptable to both resettlers and host populations; and (c) maintain or improve income levels and standards of living of people in the affected areas. The mechanisms for restoration of enterprises, infrastructure and utilities affected by the Project will be fully covered (see Annex 12). Component 6: Environmental Management (US$1.9 million) An Environment Impact Assessment of the Project (EILA) has been prepared, which includes an Environmental Management Plan (EMP) to be implemented under the Project. The EMP details environmental protection measures. including mitigation, offsetting and enhancement measures. The Project will establish an international Panel of Environmental Experts to provide guidance and monitor implementation of the EMP. An Environmental Management Office (EMO) will be established in each province, which will carry out environmental monitoring and training programs. Component 7: Engineering and Project Management (US$19.2 million) The engineering and Project management component provides for the preparation of final designs and bidding documentation of the Project works and construction supervision thereof. In addition to the normal engineering and Project management arrangements the component also provides for a design and construction standards review panel and consultants to assist the provinces with supervising the construction of works, with particular focus on quality control. Component 8: Institutional Development and Flood Prevention and Disaster Mitigation (US$5.6 million) (i) Institutional Development The Project will provide for technical assistance, training programs and study tours in China and other countries for MWR/CWRC, Hubei and Hunan Provinces. -9-  These activities will help the Project address institutional constraints in such critical areas as: (i) dike maintenance; (ii) review of standards for flood control and design of dikes; (iii) resolving complex design and construction issues; (iv) adoption of modem construction technologies; and (v) ensure financial and physical sustainability of the infrastructure facilities. (ii) Flood Prevention and Disaster Mitigation Flood prevention and disaster mitigation technical assistance will be located in MWR's Technical Research Center. The assistance will be provided for: (a) review and recommendation of changes of flood control standards, regulations and emergency response and disaster relief procedures; (b) training and design in geo-technical investigation of dikes for Provincial Design Institutes; (c) training of flood fighting staff; and (d) the setting up of a technical help desk for solving specific problems in flood control in the provinces and river basin. River Bank Protection - CWRC Engineering 93.56 17.2 0.00 0.0 Foundation Seepage Control - CWRC Engineering 9.82 1.8 0.00 0.0 Dike Rehabilitation - Hubei Engineering 215.77 39.6 158.44 75.4 Dike Rehabilitation - Hunan Engineering 48.75 8.9 27.60 13.1 Dike Monitoring/River Modeling Irrigation & 22.07 4.0 11.78 5.6 Drainage Equipment for Dike Maintenance Engineering 6.08 1.1 5.15 2.5 Resettlement Resettlement 96.92 17.8 0.00 0.0 Environmental Management Environment 1.87 0.3 0.61 0.3 Adjustment Engineering and Project Management Engineering 19.17 3.5 0.00 0.0 Institutional Development Institutional 5.63 1.0 4.32 2.1 Development 0.0 0.0 0.0 0.0 Total Project Costs 519.64 95.3 207.90 99.0 Interest during construction 23.77 4.4 0.00 0.0 Front-end fee 2.10 0.4 2.10 1.0 Total Financing Required 545.51 100.0 210.00 100.0 2. Key policy and institutional reforms supported by the project: The Project supports China's efforts to: (a) ensure a more rational and standardized approach for the improvement of the flood control infrastructure facilities along the Yangtze river; (b) introduce modem technology for the slope protection (revetments) of river banks and dikes; (c) improve the physical and financial sustainability of flood protection works, through introducing improved safety assessments and maintenance programs and innovative mechanisms for funding of these programs; (d) ensure that there is good coordination for Project implementation between Changjiang Water Resources Commission and the two provinces; and (e) protect and improve the quality of the environment and establish a transparent approach to planning and implementing the resettlement and environmental management plans. - 10-  3. Benefits and target population: The Yangtze river and its floodplains provide a home to over 100 million people representing about 9 percent of China's population, its industries, and vast tracts of farmland. The region is one of the most economically developed in China with gross output value of industry and agriculture of about Yuan 500 billion or approximately 16 percent of the nation's total output. Unfortunately, this vastly productive area is also vulnerable to flooding. The dikes along the Yangtze in the two provinces participating in the Project provide protection to about 75 million people. Dikes to protect land from the annual ravages of floods date back centuries and in some places more than 2000 years. The Yangtze floodplain was heavily settled between the 9th and 13th centuries when an agricultural shift from dry land fanning in the north to paddy production in the south, accompanied by a shift in the distribution of population, occurred. Over these four centuries, living standards rose 30% whilst the population doubled. Since the creation of the People's Republic 50 years ago, the dikes have been strengthened and extended to some extent, but they remain incomplete and poorly maintained. Due to inadequate protection from dikes, the people living in the floodplains continue to be affected during the flood season. The primary aim of the Project is to reduce flood losses in the future. Thus, the primary category of benefits to be evaluated is the expected value of the reduction of flood losses in future years. Losses in the past have been substantial: the 1954 flood affected nearly 19 million people, of which more than 30,000 died, 4.3 million houses were destroyed and more than 200,000 hectares of farm land were flooded. The 1998 flood involved, in some instances, an even higher water level and resulted in losses valued at nearly US$4 billion in Hunan alone. Floods on the Yangtze create crisis conditions at many places along the dikes that call for vast inputs of manual labor, most of it unpaid. In the 1998 flood, over half a million people were employed for nearly two months to construct temporary floodwalls of sandbags to contain bank erosion and to deal with dangerous seepage through the foundations of the dikes. The costs of these activities were estimated at about US$400 million. Evacuation of 0.3 million people from flood-prone areas such as the Jingjiang detention basin has a high economic cost (forgone production), financial cost (loss of earnings) and social cost (disruption of family life, interruption of education, etc.). Further benefits include the expected reduction in flood fighting costs; at present, the costs of strengthening weak points in a dike during a flood and of emergency dike raising are substantial. Strengthening and raising the dikes will reduce the frequency with which such actions are needed. The effects upon navigation and tourism have also been assessed: both are estimated to be small but positive, in particular in the case of navigation. Even a very conservative estimate of benefits indicates a high economic rate of return for this Project of 40% or higher. 4. Institutional and implementation arrangements: Central Government level The Yangtze Dike Strengthening Project is a Central Government undertaking to be implemented by the Chiangjiang Water Resources Commission (CWRC), Hubei and Hunan provinces. A Central Project Steering Committee (CPSC), headed by a representative of the Ministry of Water Resources with representatives from SDPC, MOF and the Project Provinces as members, have been set up in Beijing to oversee Project implementation and provide policy guidance to the CWRC and the two provinces. A Project Coordination Office (PCO) has been established by MWR, which will coordinate: (i) the planning and implementation of the river bank protection works and selected foundation treatment works by CWRC and the dike strengthening works by Hubei and Hunan; and (ii) the adoption of adequate quality control assurance measures under the Project. The PCO will be headed by a senior official of MWR and assisted by qualified staff in adequate numbers assigned from MWR, CWRC, and Hubei and Hunan provinces. A Panel of Experts (POE) specialized in design and construction of major river dikes and embankments will be retained by the PCO not later than October 15, 2000. The POE will convene periodically and as required during Project preparation and implementation to review design and construction programs and provide advice. The PCO will also retain a POE to review the implementation of the Environmental - 11 -  Management and Resettlement Action Plans. Both panels will comprise of international and national experts and the cost of both panels will be borne by the participating provinces. The main roles of the CWRC will be to implement the river bank protection and critical dike foundation treatment works or "underwater works" and to ensure on behalf of the Central Government that: (i) all standards and criteria for design and construction of river dikes are applied as detailed in the Yangtze Basin Master Plan; and (ii) adequate quality control assurance and control measures are put in place, to meet the technical specifications for construction of works. To achieve this, a "construction site quality oversight group" will be set up in each province as required by MWR regulations. CWRC level CWRC has in place adequate organizational arrangements for the irnplementation of the river bank protection and selected dike foundation treatment works in close consultation with Hubei and Hunan. CWRC has set up a River Bank Construction Bureau for the planning and implementation of the physical model for the middle reach of the Yangtze river. Provincial Government level Project Leading Groups (PLG) have been established in the two provinces to provide policy guidance and coordination between provincial agencies. Each province has set up a Provincial Project Management Office (PPMO), which will be responsible for overall project planning, financial management, technical affairs, preparation of annual work plans, procurement, coordination between the PMOs at local Government levels and through them between the implementation agencies, and assuring counterpart funding. Local Government level Local Project Leading Groups (LPLG) with similar structures and functions as the provincial PLGs have been set up in each of the Cities, Municipalities and Counties participating in the Project. They will also set up Local Project Management Offices (LPMO). Each local government PMO will be responsible for Project planning, financial management, technical affairs, preparation of annual work plans, coordination between Government organizations and the implementation agencies, and assuring counterpart funding. Planning, design, implementation and construction supervision The river bank protection works and selected dike foundation treatment works will be implemented by CWRC without Bank financing. CWRC will also be responsible for the river modeling program. The implementation of other Project works will be entrusted to owner organizations at local government levels, such as Dike Management Offices or Water Conservancy Bureaus. The structure and staffing of the Project implementation offices will be adjusted to match the Project scope and the technical complexity of contracts to be implemented. Local governments will establish additional implementation units as needed. CWRC's Design Institute (CWRCDI) has assisted the Provincial and Local Govermment Water Conservancy Bureaus and Dike Management Offices since 1998 with Project formulation, the preparation of feasibility studies and the planning and design of Project works. To ensure continuity the implementation agencies will retain the same organizations to prepare final designs of the major Project works including construction drawings, technical specifications and bill of quantities for the bid documents. They will also be retained to carry out design changes during Project implementation. Technical specialists will be contracted as required to assist with resolving complex design or construction issues. Local government organizations will retain, through a competitive process, nationally recognized "Grade A" organizations to act for the owners as the "Engineer" for the construction of works. - 12 -  Monitoring and evaluation A qualified organization recognized by the central government will be employed by the implementation agencies to supervise the implementation of the Environmental Management Plan (EMP) as detailed in the EIA report. The PPMO on behalf of the implementation agencies will also employ a qualified independent external agency to monitor and evaluate the implementation of the Resettlement Action Plan (RAP) and the EMP. The PPMO will carry out regular technical inspections in the Project areas and be responsible for bi-annual reporting of physical and financial progress of Project implementation. The provincial report will draw on information provided by the LPMOs and the implementation agencies. This will include monitoring and evaluation of construction quality of Project works, Project costs, compliance with the World Bank's procurement procedures and key performance indicators. Major issues will be summarized in the progress reports. These reports are to be submitted to the Bank by October 15 of each year covering the preceding March to August period, and by April 15 for the preceding September to February period. A mid-term review will be undertaken by July 15, 2002. Prior to that, the PPMO will prepare a mid-term report that will summarize the results of monitoring and evaluation, identify problems encountered during implementation, revise Project costs, and discuss measures to complete the Project as scheduled. The Borrower's Implementation Completion Report (ICR) for the Project will be prepared and furnished to the Bank within six months of Project completion Quality oversight units in CWRC and the provinces will establish joint teams to carry out site inspections to assess the effectiveness of the construction quality assurance system. This will be carried out in accordance with central government regulations for key national projects. Key Performance Indicators Key performance indicators will be: (i) introduction of systematic dike inspection programs; (ii) evaluation of inspection results, in particular the number and extent of defects detected; (iii) formulation of annual maintenance programs and the funding thereof; (iv) the cost of annual maintenance programs; and (v) damage and problems caused by floods. Standardized inspection and reporting routines are therefore essential to evaluating the performance of the Project and to programming the maintenance activities necessary to ensure Project sustainability. Project performance will be assessed for each dike section by monitoring key indicators as given in Annex 1. The indicators will be compared with: (i) benchmark parameters on maintenance costs and flood damage prior to Project implementation; and (ii) projections made for future maintenance operations. D. Project Rationale 1. Project alternatives considered and reasons for rejection: The Project focuses on the rehabilitation and strengthening of Yangtze river embankrnents and dikes in two provinces. There is no realistic alternative to strengthening the river banks and main dikes. Due to inadequate protection by dikes, the people living in the floodplains continue to be affected by floods during the rainy season. Most notable flood causing widespread damage and loss of life occurred in 1954. The impact due to the flood would have been much worse without the then newly completed dikes. More recently during the 1998 flood (1:50 year), only one breach occurred in the dike, but numerous weaknesses were revealed requiring costly emergency measures. The flood, which affected the Hubei, Hunan and Jiangxi provinces, killed 1,562 and affected about 21 million people, and permanently displaced 4.0 million people. In addition, 3.3 million houses, factories and commercial centers were flooded of which 1.3 million were destroyed. The total damage due to flooding combined with torrential rain over the middle and lower reaches of the Yangtze was estirnated at Yuan 158 billion (about US$20 billion). As an immediate result of the 1998 flood the 1990 flood master plan for the Yangtze River Basin was updated in the event of - 13-  another extreme flood. Apart from dike strengthening the plan includes measures to lower the risk for flooding of people living in the flood detention areas and in the vulnerable polders by moving them to higher ground and providing refuge platforms. An alternative that is not applicable to most rivers in China is to realign or eliminate the dikes in order to allow the rivers to flow unconfined. The argument is made that the cost of confining the rivers far exceeds the benefits. However, this overlooks the fact that the dikes are mainly justified by preventing annual floods (not just the extreme floods) to reach the farmlands, cities, and industries of the floodplains. The option of allowing the rivers more freedom (giving them more space) was foreclosed centuries ago when the floodplains were first settled. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Implementaton Development Bank-financed Progress (IP) Objective (DO) - Strengthening the structural measures Taihu Basin Flood Control S S and management of flood control in the (FY93, US$200 million) Taihu Lake basin. - Restoration of roads, water supply, Yangtze Flood Emergency S S schools, hospitals, clinics, and Rehabilitation (FY99, US$80 irrigation systems ravaged by the 1998 million) Yangtze floods, for 54 counties in Hubei, Hunan and Jiangxi. - Flood and sediment control for the Xiaolangdi Multipurpose HS S lower reach of Yellow River to reduce (FY94, US$460 million) damage resulted from extreme floods and alleviate the sedimentation of river channel. - Resettlement of 200,000 people from Xiaolangdi Resettlement S S Xiaolangdi Multipurpose Project, incl. (FY94, US$110 million) livelihood & production development. - Sediment control to reduce sediment Loess Plateau Watershed S HS inflow from the Loess Plateau region Rehabilitation into the Yellow River, which has the (FY94, US$150 million) highest silt content. - Rehabilitation and construction of Yangtze Basin Water S S irrigation and drainage systems and a Resources (FY95, US$210 flood control dam, plus setting up million) self-financing irrigation and drainage districts and a river basin management organization. - 14-  - Flood and sediment control for the Xiaolangdi Multipurpose II HS S lower reach of Yellow River to reduce (FY97, US$430 million) damage resulted from extreme floods and alleviate the sedimentation of river channel, and support for institutional development. Other development agencies Asian Development Bank - Dike North East and Yellow River strengthening and urban flood control Flood Control (FY01, US$300 l million) - under preparation IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Since 1982, the Bank has assisted China in more than 50 water resources related operations. The majority of these projects have been implemented efficiently, and time and cost overruns have not been excessive despite periods of sharp price increases. The key lessons learned from previous Bank supported water resources projects include: L detailed organizational and staff arrangements should be fornulated and agreed before Project implementation starts; * intemational consultants and technical panels can make substantial contributions to improving the designs, economic impact assessment, and resettlement planning and design; 3 counterpart funding should be committed before implementation, based on an accurate and realistic year-by-year Project financing plan, prepared and approved by the provincial planning commission and finance bureau; * to avoid delays and cost overruns the bidding process for major civil works should start early in the Project cycle, so that bid award will correspond with the date of loan effectiveness; * implementation support to the executing agency should include a competent construction supervisory organization suitably reinforced with intemational consultants; * adequate cost recovery should be sought from the beneficiaries of flood protection measures to make the Project sustainable; * projects should include institutional development support for the strengthening of the Project implementation and management organizations, including transfer of know-how and technology from abroad; * active participation of beneficiaries from the initial project formulation stages into the operation and maintenance stages would increase effectiveness of Project implementation and performance; * baseline data of key performance indicators should be established for all components before or at appraisal; and * the project launch workshop and/or initial Bank supervision missions should focus first on resolving procurement and disbursement issues. The above lessons leamt, together with the key success factors identified by the Bank such as strong govermnent commitment and ownership, beneficiary participation, adoption of a realistic O&M plan, introduction of water charges, financial autonomy of Project entity, have been reflected where appropriate in the Project design. - 1 5 -  4. Indications of borrower commitment and ownership: The two provinces have prepared feasibility and other reports in Chinese and English in an efficient and timely manner and put in place adequate arrangements for Project preparation and implementation. Generally, central government agencies and the provinces were cooperative and responsive in providing data and information needed for efficient and timely processing of the Project. Central and provincial governments are giving very high priority to this Project, especially after the occurrence of a major flood in the Yangtze Basin in 1998. The State Development Planning Commission formally approved this Project in May 1999. The Central Government has allocated a large budget for flood mitigation programs (which includes this Project) to the upper and middle Yangtze reaches for next three years (1999-2001) covering the following major activities: * Dike/embankment rehabilitation Yuan 76.7 billion * Detention basin rehabilitation Yuan 21.9 billion * Lake and floodway desilting Yuan 4.2 billion * River training Yuan 3.6 billion * Soil and water conservation Yuan 87.4 billion Total Yuan 193.8 billion (about US$23 billion) The Central Government has already invested Yuan 3-4 billion this year on Yangtze dike repairs to ensure that they were safe for the 1999 flood season (July-October) and is committed to provide the necessary funds to complete the entire Project in three years. 5. Value added of Bank support in this project: The experience in China is that Bank fnancing of large civil works leads to a more structured approach to planning, design, procurement of goods and works and construction, than is customary in locally financed projects. For example, design review procedures are established and procurement packages are generally larger and attract wider competition. Bank involvement and the use of Bank procurement procedures and documents have often resulted in cost savings of as much as 20 to 25 percent. The quality of works is normally of higher standard, because of better construction supervision. Counterpart funds are generally provided by the various levels of government as stipulated in the agreed Project financing plan. Organizational arrangements for Project implementation are more transparent and driven by technical and economic judgments rather than political. Bank involvement will help the development of autonomous institutions at provincial and local government levels as well as promote self-financing of annual operation and maintenance programs. Bank support tends also to promote knowledge management exchanges between national and foreign experts. Bank involvement in the preparation of this Project has convinced central and provincial agencies of the value to pay more attention to economical and financial analysis and to pay closer attention to achieve financial sustainability of dike maintenance organizations and to the resettlement and environmental aspects under the Project. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): * Cost benefit NPV=US$1440 million; ERR = 49.2 % (see Annex.4) O Cost effectiveness O Other (specify) - 16 -  Province NPV (US$ million) B/C ratio ERR Hubei 1,128.0 4.3 53.1% Hunan 312.0 2.3 25.0% Overall, the Project in the two Provinces was found to have Net Present Values (NPV) which are robustly positive. The indicators of economic efficiency and the economic internal rate of return (ERR) for the Project in each Province are good (see above). The economic benefits arise from: (i) avoidance of losses due to a reduced risk of breaches in the main Yangtze dikes; (ii) avoidance of having to resort to the flood detention areas except when extreme floods occur; (iii) lower cost for emergency operations during floods; and (iv) reduced maintenance costs. In the past 40 years a number of high floods have occurred that could have caused breaches at weak sections of the dikes. A discount rate of 12% and a planning horizon of 50 years were used in preparing the benefit-cost analyses. The principal economic benefit from the Project's investments is a reduction in the expected value of future flood losses. These losses were estimated per unit area, based upon detailed surveys of the losses during past floods and estimates of land areas flooded by events of different return periods. Together, these two sets of data enabled the construction of the loss-probability curves. The flood loss figures were checked in part by reference to the levels of compensation set out in the Resettlement Action Plan (RAP), a summary of flood losses in China in the 1980s, and the losses as a proportion of the assets at risk found in other countries that have good loss data. Because the Project involves dike strengthening as well as dike raising, estimates of the probability of a breach as a function of the return period of the flood have been made. The assessment takes into account the impact of the Three Gorges Project (TGP) when it comes on stream in 2007 as well as the use of detention basins. In Hubei, the Three Gorges Project is projected to have a major effect upon the flood losses; while its impact on the flood losses in Hunan is less predictable. The use of the detention basins reduces the probability of downstream breaches, but also involves: (i) a substantial cost for evacuating the population inhabiting the detention basins; and (ii) flood damages to assets within the detention basin. Up to eight sets of breach probabilities have been used in the analyses. A further stream of benefits included is the potential reduction in flood fighting costs. At present, the costs of strengthening weak points in a dike during a flood and of emergency dike raising are substantial. Strengthening and raising the dikes will reduce the need and frequency of such actions. The effects upon navigation and tourism were investigated; both are estimated to be small but positive in the case of navigation. Future Operation and Maintenance (O&M) costs have been taken into account in the analyses. Inadequate maintenance of dike systems contribute to premature failures, which is the case with the current dike systems in all three provinces. It is estimated that the future O&M cost for the improved dikes and associated infrastructure, will be less than the cost of maintaining the present system of poorly constructed dikes. In addition flood fighting cost, which may be considered part of the O&M costs, are likely to be lower with well constructed and maintained dikes resulting from the Project. Therefore, there will be economic benefits from reduced O&M costs. 2. Financial (see Annex 5): NPV=US$ -582 million; FRR = % (see Annex 4) Financial Management Procedures for management of Bank funds will be improved in accordance with OP/BP 10.02. Because of past Bank Group supported projects, the Finance Bureaus in both provinces (PFBs) are familiar with - 17 -  financial management requirements of the Ministry of Finance (MOF) and the Bank. World Bank funds will be channeled through MOF as a grant since this is a Central Government Project. MOF has issued instructions and guidelines for the introduction of adequate financial control of Bank financed projects, which meet Bank requirements. The Project's Financial Management System (FMS) aspects (budgeting, accounting, internal control, auditing and reporting), staffing and equipment requirements have been analyzed. Plans, procedures, guidelines and reporting and staffing requirements for an improved FMS to be adopted under the Project have been confirmed by all parties concerned. To facilitate and clarify withdrawal and reimbursement procedures and ensure efficient financial control, PFBs have also issued regulations and instructions providing: (i) details of supporting documentation required for withdrawal and reimbursement applications from Bank loans; (ii) withdrawal and reimbursement procedures applicable to PMOs; and (iii) formats of withdrawal applications and financial statements. Detailed guidelines for the introduction of the improved FMS are provided in the Borroweres Project Implementation Plan (PIP). They include plans for strengthening financial management capacities of the Provincial, City and District/County Finance Bureaus, and of the Provincial and Local PMOs, including staff training. MOF issued "Accounting Procedures for World Bank-Financed Projects" in January 2000 aimed at strengthening accounting methods under Bank supported projects. The Bank participated in the preparation of this document, which covers accounting principles, general ledger accounts and accounting statements, and in development of accounting software for the use by PMOs. Project accounting will use double entry bookkeeping on an accrual basis. The accounting statements applicable to the Project will include balance sheet and statements on; (i) sources and uses of funds; (ii) Loan Agreement implementation; and (iii) the Special Account (SA). Reporting formats are given in the PIP. Separate general ledgers, subsidiary accounts, cash and bank deposit journals have already been established by the PMOs for accounting of funds received and expenditures made. Each PMO will prepare its own accounting statements. The PPMO will be responsible for consolidating the accounting statements provided by the LPMOs. Special Account (SA) for the Bank funds will be kept in Ministry of Finance (MOF). MOF has managed Bank supported projects in the past and the staff is familiar with the processing of withdrawal applications and disbursement of funds. The PPMOs will review disbursement requests from the LPMOs, make changes, if necessary. These will be forwarded to MOF through PFBs for review and, if found to be correct, withdrawals will be made from the Special Account and the funds transferred. MOF will also process requests from the PFBs for direct payments to suppliers from the Special Account. Financial management and control systems for the Project, including tabular formats for financial reporting have been confirmed. CWRC's PMO will submit their disbursement requests through MWR to MOF. Audit The review of the status of compliance by the Borrower and Project implementing entities with audit covenants in on-going Bank-financed projects revealed financial management weaknesses in Hubei Province. These weaknesses were discussed during appraisal of the Project and Hubei agreed to take appropriate corrective measures to minimize the risk for reoccurrence of the financial management weaknesses under the Project or under any other Bank financed operation. Project records and accounts, including the SA, for each fiscal year will be audited, and the annual audit report will be submitted by MOF to the Bank by each July 1 of the following year. The National Audit Office will be retained as the auditors for the Project. At the provincial level the Hubei and Hunan Audit Administrations will carry out audits under the Project. For a detailed assessment of the financial management reviews carried out see Annex 13: * Review of Financial Management System for the assessment of the adequacy of the Project financial management system. The results of the assessment and corresponding Action Plan to address measures needed to improve capabilities are included in Annex 13, - 18 -  Attachment 1. * Review of Financial Management System, Section V: Internal Controls. * Review of Financial Management System, Section IV: Financial and Accounting System, Section VII: Project Reporting Requirements and Section VIII: Audit Arrangements. Financial aspects of O&M Operation and Maintenance (O&M) of the Yangtze dike systems is currently organized at Dike Management Offices at three levels: Province, Prefecture/City and County/District. The Dike Management Offices will also be the main agencies responsible for implementation of project works, which will ensure a smooth transition to their O&M functions and responsibilities. In the long-term, O&M of the dikes and river banks are planned to be self-financing through improved collection of flood control and river structure maintenance fees from those benefiting from the flood protection works. During Loan Negotiations the Borrower has assured that a consolidated plan designed to ensure the proper operation and maintenance of all flood protection facilities included in the Project will be prepared by the provinces for submission to the Bank for exchange of views by December 1, 2002, accompanied by an adequate financing plan therefor. The plan will include the schedule of charges and timetable for its establishment and a proposal for funding the part not covered by such charges, together with other information that the Bank may reasonably request. During the preparation of the O&M Plan, MWR and the provinces will exchange views with the Bank on the various elements of the Plan, which is to ensure financial and physical sustainability of the flood protection facilities improved under the Project. Advisory services from foreign and domestic sources will be required to prepare this O&M plan. Fiscal Impact: The Project is a Central Government Project because of its responsibility for flood protection of large rivers which traverse several provinces. Hence the Project is largely fmanced by the Central Government. The Central Government's share in the investments for dike strengthening will be 80%, with the provinces providing the remaining 20%. For the "underwater" river bank protection works the Central Government will fund 100% of the costs with implementation carried out by CWRC, a Central Government Agency and part of MWR. The Central Govermnent will provide US$225.2 million during the construction of the Project, of which it will allocate US$112.4 million to the provinces and US$112.8 million to CWRC. In addition to that amount the Central Government will also assume responsibility for payment of Interest During Construction (IDC) on the Bank loan estimated at US$23.8 million over the entire Project implementation period and the front-end fee of US$2.1 million. The Central Government is making arrangements to provide US$215 million (86%) from floating domestic bonds. Therefore, the immediate fiscal impact of this Project will be the IDC and front-end fee payments of US$23.8 and US$2.1 million respectively, which is relatively insignificant. The provinces will provide US$84.5 million in counterpart funding to this Project. The provision of these funds will have a fiscal impact on both Provincial Governments, although these are relatively small compared to their provincial budgets which are in excess of US$ 10 billion per year (See Annex 4 for other impacts during the operation of the Project). 3. Technical: 3.1 General The provinces prepared the detailed designs for the Project works, based on the Yangtze Basin Master Plan and national codes established for such works. The Changjiang Water Resources Commission, in particular their in-house specialized institutes, and the Water Conservancy Bureaus and Design Institutes in the two provinces all have considerable know-how and experience in the design of river dikes and river embankment protection works. The review and approval procedures vary depending on the classification of the dikes. The designs of the more important dikes, such as the class I and II dikes under the Project, will have to get State Development Planning Commission approval, while - 1 9-  other classes are approved by the MWR. Reviews are also carried out to ensure consistency in designs between the provinces. The table below lists the agencies reviewing and approving the designs: Class of Dikes Design Stage Reviewing Agency Approving Authority Class I and II Feasibility Study MWR (GIWP) SDPC Preliminary Design MWR (GIWP) MWR Class III and IV Feasibility Study CWRC MWR Preliminary Design CWRC MWR Note: SDPC - State Development and Planning Commission MWR - Ministry of Water Resources CWRC - Changjiang Water Resources Commission GIWP - General Institute Water Resources Planning and Design Technical assessments were made of the proposed remedial solutions for the current problems and weaknesses of the river embankments, dike bodies, dike foundations and cross-dike structures experienced during major floods, with special reference to what happened during the 1998 flood. The 4ssessments revealed that China is behind in adopting new design features and in using modem materials and technologies tested and applied elsewhere in the world. Recommendations have been made to adopt the modem materials and new technologies, which will be more cost-effective. 3.2 River embankment protection works With the exception of a few cases in Hubei, the proposed measures for "under-water" bank protection works include the following standard practices: (i) dumped rip-rap protection for the bank, with extra rocks specified for the toe section; and (ii) use of gabion rockfill and large blocks. For the above water portion of the embankment the standard practices are: (iii) placed rockfill and pre-cast concrete slabs protection. To protect the soil of the river bank a graded gravel filter is laid between the rocks and the bank to be protected is specified for the "above-water" portion, but not for the "under-water" portion of the river bank. Other special types of bank protection methods have been tested and are being considered for selected sites. The methods include the use of a mattress of chain-connected concrete slabs together with a geo-textile filtering sheet, as applied at the Long Wang Miao critical section, which is situated at the confluence of Han and Yangtze River. The mattress was laid to the toe of the slope about 20 m below the water surface. The flow velocity during the construction period of low flow was below I m/s. In the Bapu dike, where the unprotected bank receded at a rate of 100 m/year, a testing section was constructed with a combination of dumped rip-rap for the "under-water" portion and concrete-lining in the "above-water" portion. The use of geo-textile mattresses with interwoven pockets injected with concrete has also been contemplated by the local design and contracting firms in collaboration with overseas manufacturers/suppliers and trials have been installed. In addition to the above the following methods and materials will also be tested and considered for implementation: (i) the use of gabion or wire-mesh rock mattresses, in conjunction with the placement of a filtering layer or sheet; and (ii) the use of geo-container and other suitable forms and materials. 3.3 Dike strengthening works The major defects and problems with the existing dikes are: (i) inadequate height and width, slope failures, toe scours and excessive leakage; (ii) piping of the foundation; (iii) defective connection of cross-dike structures and the dike embankments; and (iv) buildings on the dikes. The proposed dike strengthening works are: (i) construction of RC flood walls, normally with 4-6 m high backfill; (ii) heightening the dike with a crest width of 8 m for Class 1 or Class II dikes and repairing - 20 -  by clay grouting; (iii) foundation treatments by concrete diaphragm and cut-off walls, including jet grouting and cement mixed piles; (iv) construction of down slope berms, in some cases surcharged; (v) laying of geo-textile sheets to improve drainage and minimize the loss of material; (vi) back-filling ponds (old borrow areas) located on the land side of the dikes; and (vii) construction of relief wells. In addition to these measures a variety of seepage control techniques, such as the provision of steel sheet pile and thin-diaphragm walls, are being analyzed and tested for possible use. 3.4 Cross-dike structures Most of the cross-dike structures, such as culverts, sluices, pumping stations and associated pipelines, were built before the 1970s. They are in poor operating conditions due to uneven settlement and due to the lack of maintenance, low design standards and sub-standard material and construction. Structural cracks and leakage are common. Many structures require strengthening, extension and reconstruction, among others to meet the cross-sectional profiles of the heightened and broadened dikes. In addition, foundation treatment for leakage control, which calls for the provision of concrete cut-off walls, jet grouting and cement mixed piles, and installation of snail trap pools are required. 3.5 Monitoring and inspection In view of the scale and importance of the Project, a long-tenn structural monitoring system will be developed for the river dikes. Simple and low-cost instruments or gages will be installed at selected locations of the dikes and its vicinities, to monitor the performance of the river and dike embankments, foundations, and cross-dike structures. A system has been incorporated under the Project to monitor the safety of the dike during the high water levels during floods, in particular the physical settlement movements in the dikes and also the movement of subsurface water through the dike and the foundation. A special task force will be forrned to formulate this long-term monitoring system for implementation under the Project. Hubei will establish a computerized data acquisition system of piezometers for monitoring seepage through the dike body and foundation and monument gauges for deformation and settlement for critical sections of the dike body and foundation. In spite of renewed efforts to provide better bank protection and channel stabilization, there will be the continuous process of adjustments and movements of the river channel as a result of the dynamic fluvial processes. The shifting of the channel alignments is expected to be more pronounced in river sections with extensive meandering. This invariably will require remedial measures to counter the changes in the river regime in the future. The potential degradation of the river bed resulting from the completion of the Three Gorges Dam will introduce further complications to the river training and bank protection program. Solutions to these longer-term issues can also be improved with the help of the continuous monitoring and surveying program of the changes in the channel regime. Coordination and dissemination of information and exchange of experience among the provinces in the Yangtze River Basin and the various research and planning organizations are needed to enhance the overall efficiency of the Project. Regular inspection and maintenance of the entire system of flood control dikes are of utmost importance to the success of the Project. The ultimate design objectives will only be achieved with adequate supervision of works and quality control. Progress with Project implementation will be monitored through the preparation of semi-annual reports providing: (i) physical and financial statements; (ii) recommendations and findings of the international/national panel of experts; and (iii) recommendations for improvement of implementation performance. The progress reports will be due not later than April 15 and October 15 of each Project implementation year. For resettlement the reports will present progress with: (i) construction of houses and infrastructure; (ii) payment of private and public compensation; (iii) establishing development programs for resettlers which will incorporate the results of the independent monitoring program of the RAP and the findings of the international/local panel of resettlement/environmental experts. Regarding environmental management the reports will state progress with : (i) the implementation of the environmental management plan which will include the periodic monitoring results of the construction inspectors and the international/local panel of resettlement/environmental experts. In addition to the progress monitoring - 21 -  reports a mid-term report will be prepared not later than July 15, 2002 which will summarize the results of all the monitoring and evaluation activities carried out under the Project and measures to ensure the efficient canying out of the Project and the achievement of the objectives. Regarding Project implementation plans CWRC will provide their annual implementation. plan and required investments by October 15 of each year commencing October 15, 2000. A consolidated plan of all other aspects of Project implementation for the following year will be provided October 15 of each year starting October 15, 2001 but for the first Project year by December 15, 2000. 4. Institutional: 4.1 Executing agencies: The Project is a Central Govermnent undertaking, with the Changjiang Water Resources Commission (CWRC) and Hubei and Hunan provinces responsible for Project execution. CWRC will oversee the implementation of the river bank protection works and execute the river modeling studies. Hubei will assign the responsibility for the implementation of Project works to local govermment agencies owning the dikes. These are either the Dike Management Offices or the Water Conservancy Bureaus at local government levels (Prefecture/City and District/County). The structure and staffmg of these offices will be adjusted to match the Project scope and the technical complexity of contracts to be implemented. The local governments will establish additional implementation units as needed. In Hunan all works fall under the jurisdiction of Yueyang City, which has established the Yueyang Project Implementation Office. The implementation agencies will follow instructions from central and provincial government agencies, to ensure that adequate attention is being paid to important Project implementation actions, such as adopting agreed bidding procedures for the contracting of construction supervisors, suppliers and contractors. 4.2 Project management: At Central Government level, a Central Project Steering Committee (CPSC) has been set up in Beijing, with representatives of the Ministry of Water Resources, Ministry of Finance (MOF), State Development and Planing Commission (SDPC) and the Project Provinces for oversight of Project implementation and to provide policy guidance to the CWRC and the provinces. A Project Coordination Office (PCO) has been established by MWR, which will be headed by a senior official of MWR and assisted by qualified staff in adequate numbers assigned from MWR, CWRC, and Hubei and Hunan provinces. The PCO will ensure that: (i) an integrated approach towards the implementation of river bank protection works by CWRC and dike strengthening works by the provinces exist; (ii) CWRC and the provinces apply the agreed procedures and national standards for design and construction of river dikes and embankments as well as for resettlement; and (iii) the adoption of adequate quality control assurance measures under the Project. Provincial Project Leading Groups (PPLG) will provide guidance to the Provincial Project Management Offices (PPMOs) responsible for Project implementation. Each province has set up Project Leading Groups (PLG) for coordination and policy guidance and Project Management Offices (PMO) for day-to-day coordination for Project implementation and between the PMOs at local Government levels. For the purpose of implementing the River Modeling Studies CWRC has established a Project Leading Group (CWRCPLG). A Project Management Office under CWRCPLG (CWRCPMO) is located at Yangtze River Scientific Research Institute. 4.3 Procurement issues: The CWRC will have responsibility for design and construction of works related to the riverbank protection and foundation treatment of Grade I and II dikes. The PPMOs will be responsible for procurement under ICB procedures and NCB with values exceeding Yuan 35.0 million. It will oversee the procurement of remaining works implemented by the executing agencies at local government levels. The -22 -  Guidelines for procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 will be applied to Bank financed procurement of goods and works. The Model Documents developed by the Ministry of Finance and the Bank will be adopted for all International Competitive Bidding (ICB) and National Competitive Bidding (NCB) for civil works and goods, and the Standard Bid Evaluation Form will be used. Where Model Documents are not available the Bank's Standard Bidding Documents will be adopted. Procurement of civil works through NCB will be managed by the PPMOs. Works procured through NCB costing in excess of Yuan 35.0 million will be processed by the PPMOs. The LPMOs will manage all other NCB contracts. Small civil works contracts and works implemented through force account will be procured by Dike Management Offices at the DistrictlCounty level. Major equipment will be procured through ICB, while other goods will be procured through NCB and National Shopping. The national competitive bidding procedures are not consistent with the Bank's acceptable practices, and therefore the Borrower has agreed to modify their procedures, as set forth in the agreed supplemental letter to the legal documents as mentioned below. The lack of experience with undertaking procurement in accordance with Bank guidelines will be addressed as follows. First, procurement training will be provided to staff handling procurement at the PPMO and LPMO levels. This training will be overseen by Resident Mission procurement staff and will start during the Project Launch Workshop. Second, a strict Bank review of procurement procedures will be put in place during the early stages of Project implementation, which would include Bank review of the first three NCB contracts in each province irrespective of contract values. Third, during Loan negotiations a supplemental letter to the legal documents has been agreed stating that the Borrower and the Provinces will not use local bidding procedures unacceptable to the Bank for procurement of Bank financed works, goods or services. This letter will be signed by the Borrower and Hubei and Hunan provinces at the time of Loan signing. 4.4 Financial management issues: As agreed with MOF the Project will be disbursing in accordance with the Bank's traditional disbursement procedures and will not be using PMR-based disbursements, .The Provincial Finance Bureaus (PPFB) and the PPMOs in Hubei and Hunan Provinces all have experience with implementing Bank financed projects (e.g. the Yangtze Basin Water Resources Project, the Yangtze Flood Emergency Rehabilitation Project) and are therefore familiar with the existing disbursement, procurement, financial reporting and auditing requirements. PFB has accumulated extensive experience with both the Bank and MOF's requirements in preparation and processing of withdrawal application and financial management of Bank-financed projects. However, additional training will be provided to Project staff at all levels (see Annex 13). Pending addressing the steps outlined in the action plan (Annex 13, Attachment 1), the Project satisfies the Bank's financial management requirements as stipulated in OP/BP 10.02. There are no other financial management issues. 5. Environmental: Environmental Category: A (Full Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. 5.1.1 Environmental impact The Project has been allocated environmental Category "A". A comprehensive Environmental Impact Assessment (EIA) of the Project has been prepared by the Yangtze Research Institute for Water Resources Protection, with assistance from Design Institutes for Water and Hydropower of the participating Provinces. A summary of the EIA is attached in Annex 11. The complete EIA report is available in the Project file. The EIA addresses potential adverse environmental impacts satisfactorily. The EIA considers the environmental effects that could possibly occur as a result from the Project. Those include for the participating provinces assessments of impacts on: (i) natural physical resources; (ii) natural ecological resources; (iii) economic development; (iv) quality of life standards, including public health; and (v) global -23 -  environmnental issues. The EIA formulates all Significant Environmental Issues (SEIs) affected by the Project, describes the potential of each SEI to cause adverse environmental effects if left uncontrolled, and recommends control measures defined as Environmental Protection Measures (EPMs). The SEIs of concern include environmental aspects of resettlement, land use, impacts on aquatic species, public health, dike structural stability, downstream impacts, flood emergency programs, borrow areas and spoil disposal, cultural relics, impacts on Dongting Lake flood release, construction operation constraints and several other SEIs of lesser levels of significance. 5.1.2 Additional Environmental Issues In addition to the above, the overall EIA includes an evaluation of adequacy of the Project plan with respect to: (i) provisions for adequate public participation in Project planning an implementation; (ii) compliance of the plan with Chinese national/provincial environmental laws/regulations; (iii) evaluation of environmental economics (adequacy of the Project economic analysis for inclusion of environmental impacts and EPMs); (iv) compliance with environmental standards of the Bank (as well as the Government of China); (v) evaluation of the Project's influence on global environmental parameters (global warming and biodiversity); and (vi) enviromnental risk assessment. 5.2 What are the main features of the EMP and are they adequate? Environmental Management Plan An overall Environmental Management Plan (EMP), with provisions for implementing all EPMs specified in the EIA, and associated costs, has been developed as an integral part of the EIA. This requires : (i) establishment of an Environmental Management Office (EMO) in each participating province, with responsibility for implementing the EMP, including environmental monitoring; (ii) employment of an international panel of environmental (and resettlement) experts; (iii) provision of environmental staff training program. Assurances have been obtained that project works would be implemented following these measures thus ensure an environmental sound and sustainable project. The EMP's main features include: (i) measures to lessen the magnitude of adverse impact; (ii) measures to offset any residual adverse effects not solved by mitigation; and (iii) provisions for meaningful environmental monitoring as described below. In some instances, where feasible, the EIA recommends a third kind of EMP, namely Enhancement measures, for those situations where a small additional investment would yield valuable environmental benefits. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: October, 1999 A supplemental EIA dated March 2000 was received by the Bank in April 2000. 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Participatory Approach About 370 stakeholders were randomly consulted through surveys carried out for all people affected by the Project. A detailed response from the stakeholders is presented in the EIA Report. The stakeholders were screened at the start of Project. preparation. The draft EA was first written to determine who are stakeholders, who are affected people before Bank missions started consultations. The government undertook a wider survey for the entire dike strengthening program in 1998 and 1999. Detailed consultations were carried out through questionnaires developed by the Provinces. -24 -  5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Environmental Monitoring The environmental monitoring program to be carried out by the P/EMO includes the following: * Recruitment and training of a Environmental Construction Inspectors (ECIs), who will be assigned to work with and through the Engineering Construction Supervisors, to check on operations of the contractors to ensure that the works are carried out in accordance with the contract specifications including the application of official instructions and penalties as needed to ensure sound environmental performance. Following completion of the construction stage, the P/EMO will utilize ECIs as needed to monitor Project environmental performance during the operation and maintenance stage. * Arrangements for periodic monitoring of environmental performance of the resettlement program, to be carried out by ECIs of the P/EMOs, including checking of both rural and urban resettlement situations. * An international/national Panel of Environmental Experts shall convene periodically, to evaluate the Project's overall environmental performance including the identification of shortcomings and recommended remedial measures, to be reported directly to Government and the Bank. This includes evaluation of performances of P/EMO and of the contractors. Assurances have been obtained during negotiations that a panel of experts will be employed by September 15, 2000 and thereafter maintained for the implementation of the EMP and monitoring of the impact of the implementation of the Project on the environment. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. 6.1.1 Social Impact This Project will help prevent the loss of lives when floods occur in the Yangtze River Basin. In addition, fighting floods calls for vast inputs of labor from all sections of society to repair damage and prevent breaches at vulnerable locations of the dikes. This has high social costs through disruption of family life, interruption of education and, most of all, diversion of effort from more profitable work. If the dikes are strengthened, there will be fewer crisis situations and less of a demand for emergency labor inputs. In the event of a breach, which is more likely in the absence of the Project, there would be many adverse social consequences. Public facilities, such as govermnent offices, hospitals, schools, would be taken out of service. Also, many private enterprises would be closed down, some of them permanently, and this would have more drastic consequences. The Project's flood protection measures will benefit a land area of over 2.1 million ha, of which about 1.0 million ha is cultivated land. Better flood protection facilities are expected to improve the quality of life of about 15.4 million people and provide improved protection to physical assets, such as houses, schools, hospital, and other public and commercial buildings in key urban and rural areas. Essential infrastructure facilities such as airports, ports, rail roads and the important national highway 107 will also be better protected against flood hazards. 6.1.2 Resettlement and Land Acquisition In accordance with existing Chinese legislation no structures shall be erected on major dikes and within 50 m on both sides of the toes of the dikes. This legislation (Flood Control Law) stipulates that existing structures not complying with the law will need to be removed. In addition, the widening and raising of the - 25 -  existing dikes require acquisition land. As a result, the Project will cause the resettlement of about 47,992 people (10,958 households) living in 22 counties, 44 townships and 180 villages. Of them about 80% are engaged in agriculture. Most (over 60 percent) of the Project Affected People (PAP) will move "backward" (about 1-1.5 km) from their present locations. Similarly, 33,749 mu or 2,250 ha of land, of which 50% is cultivated, 1,519,091 m of housing, and 243,923 m' industrial and commercial units will need to be acquired. The Project will require the rebuilding or restoration of 176 km of roads, 254 km of broadcasting and TV lines, 476 km of telephone lines, 143 km of 10 kV and 20 km of 35 kV transmission lines. To mitigate the adverse impacts of the dike strengthening works, each province prepared a comprehensive Resettlement Action Plan (RAP) in accordance with OD 4.30 for the resettlement and compensation requirements of PAPs. The main objective of the RAP is that both the resettled people and the host populations receiving them, will not be adversely affected by the resettlement, nor will the Project have detrimental impact on their living standard. Their new earning potential will be at least as good as previously and income losses during the transition period will be compensated for. The Bank found the RAPs satisfactory. They adequately cover: (i) details of people and assets affected; (ii) legal framework for land acquisition and compensation; (iii) institutional arrangements; (iv) cost details and budget requirements; (v) implementation schedule; (vi) participation, consultation and grievance procedures; and (vii) monitoring and evaluation by Project agencies and an independent extemal group. Provincial agencies have already gained considerable experience with resettlement in this area, because has already initiated the resettlement of about 2 million people from polder areas that were flooded in 1998. Compensation standards have been established. An independent organization will be employed by each Province to monitor the implementation of the RAPs. The monitoring will cover: (i) physical progress with resettlement implementation; (ii) PAP livelihood restoration; (iii) PAP participation in the resettlement process; (iv) grievances and effectiveness of the grievance procedures; and (v) proposed measures for improvement. The RAP is summarized in Annex 12 and the detailed RAP is available from the Project file. 6.2 Participatory Approach: How are key stakeholders participating in the project? Technical factors have determined the dike sections to be strengthened under the Project. There will be little change in existing dike alignments. The widening and raising of the dikes, which in many cases have been there for hundreds of years, will require the relocation of a significant number of Project Affected People (PAPs) as well as the removal of physical assets. Extensive consultations will be held with the PAPs, regarding: (i) resettlement to new locations; and (ii) levels and extent of compensation. Resettlers will also participate in the decision making regarding the selection of construction teams for the building of their new homes and public buildings, such as schools, hospitals and churches. There will be public campaigns as necessary to alert people in the Project areas about possible environmental hazards caused by the dike strengtiening works under the Project. This applies in particular to concerns that the dike strengthening works may cause the spread of schistosomiasis and possibly other public health hazards. There will be active participation between the provincial Project agencies and those at lower levels of government (city, county, townships and villages) in the formulation and implementation of the Project works, in particular the dike strengthening works. Village communities are expected to actively participate in the implementation of Project works, through the provision of labor to the contractors. A detailed list of key stakeholders and the levels of participation are indicated in the table below: - 26 -  Participatory Approach IdentificationlPreparation Implementation Operation Resettler groups IS, CON and COL IS, CON and COL CON and COL People involved in dike Construction CON and COL COL COL Township government CON and COL CON and COL CON and COL County goverment CON and COL CON and COL CON and COL City governments CON and COL CON and COL CON and COL Prefecture WCB CON and COL CON CON Provincial WCB CON and COL CON and COL CON and COL Provincial government CON CON CON Chiangjiang WResource Commission CON and COL CON and COL CON and COL Note: IS = sharing information; CON = consultation; COL collaboration 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Project activities involve continuous consultations with village and township leaders and PAPs throughout the resettlement and restoration processes. Women's groups, professional groups, local government groups and non-government organizations have been consulted throughout the preparation of the Resettlement Action Plans. This will continue during Project implementation. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? During Loan negotiations assurances have been obtained that Project Management Offices will be maintained throughout the implementation period of the Project. Each PMO at provincial, municipality/prefecture and county level will establish environmental management divisions with a chief and qualified staff in adequate numbers, who will be responsible for coordination and implementation of the EMP in the province. For social monitoring a resettlement monitoring office will be established at province, municipality/prefecture and county levels with a chief and qualified staff in adequate numbers who will be responsible for coordination and implementation of the RAP in the province 6.5 How will the project monitor performance in terms of social development outcomes? During Loan negotiations each Project province shall, not later than September 15, 2000, employ a independent monitoring institution and thereafter retain the institution to monitor, evaluate and report on the socio-economic progress of all persons affected by the Project as well as on all aspects of imnplementing the agreed RAP for each province. - 27 -  7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? O Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) T2 Yes D3 No O Natural habitats (OP 4.04, BP 4.04, GP 4.04) 1 Yes El No El Forestry (OP 4.36, GP 4.36) _ _ Yes E No El Pest Management (OP 4.09) El Yes I No El Cultural Property (OPN 11.03) [ Yes Z No El Indigenous Peoples (OD 4.20) El Yes 1 No El Involuntary Resettlement (OD 4.30) I Yes El No Ol Safety of Dams (OP 4.37, BP 4.37) El Yes 1 No El Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) El Yes [I No El Projects in Disputed Areas (OP 7.60. BP 7.60. GP 7.60) El Yes 1 No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. The Project complies with all relevant Bank policies. The policies that were examined in detail are the environmental, natural habitats, and resettlement aspects of the Project in accordance with the stipulations of OD 4.01, OP 4.04 and OD 4.30 respectively. The following steps have been taken to comply with public disclosure requirements of OD 4.01 and OD 4.30: - The draft Resettlement Action Plan (RAP) and Environmental Impact Assessment (EIA) were submitted to the Infoshop (EXTIN) on November 23, 1999 prior to the December 1999 appraisal of the Project; * The final RAP was submitted to the Infoshop (EXTIN) on December 6, 1999; * A summary of the EIA of the Project was submitted the Bank's Board Operations Division on November 24, 1999 and distributed to the Board members on November 29, 1999; - The revised RAP of March 2000 was submitted to the Infoshop on April 3, 2000; - Supplemental report to the EIA of April 2000 was submitted to the Infoshop on May 8, 2000; * The Final RAP of April 2000 was submitted to the Infoshop on May 31, 2000; and * The draft EIA and RAP in Chinese were made available to the public in Hubei and Hunan in December 1999 and the final versions in March 2000. The EIA also covers natural habitat issues. Television networks and provincial and local newspapers announced for three consecutive days the names and locations of the public libraries in the Project areas where the EIA and RAP were available for the public to consult. The procurement policies and guidelines as indicated in OP 11 and Financial Management requirements as stipulated in OP/BP 10.02 have also been complied with. There are no indigenous people in the Project areas and therefore OD 4.20 does not apply. - 28 -  F. Sustainability and Risks 1. Sustainability: Project sustainability will depend on: (a) effective Project management and implementation arrangements; (b) sound design and implementation standards; (c) strong interagency coordination at various government levels to ensure adequate funding and efficient use of funds, timely completion of procurement plans and good quality design and construction of works; and (d) the introduction of efficient and sustainable inspection and maintenance procedures and effective arrangements to assure adequate funding for inspection and maintenance after Project completion. These elements have been incorporated in the Project design. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rating Risk Minimization Measure From Outputs to Objective - In addition to the Project works, steps S - Borrower and Bank to ensure careful and will be taken to: (i) remove polder areas periodic monitoring of annual funding and bordering the dikes; (ii) rehabilitate implementation plans for key Project works with detention basins and organize that people MWR, CWRC and provincial governments will be moved quickly to safe areas in critical situations; and (iii) properly maintain retention lakes - Government will not carry out the M - Bank to plan regular reviews with MWR and entire dike strengthening and related CWRC on the funding and implementation projects status of this large program - Adequate budget is provided to M - Monitoring of funding commitments and implement all agreed measures detailed in releases; periodic review of financing plan with RAPs all level of Governments - Detailed coordinating arrangements are M - Create awareness of importance of made between the Yangtze Basin coordination in MWR and PLGs at all levels of Commission and the provincial flood government forecasting offices - Government will enforce all aspects S - MWR/CWRC and Bank to monitor the defined in the Flood Control Law implementation of the Law - Government will enforce carrying out of S - Government will establish International /local all EPMs for all project development Panel of Environmental and Resettlement stages as specified in the EIA Experts and will have continuing periodic meetings of the Panel which will have responsibility for periodic environmental performance of all project participants including delineation of gaps and recommendation for needed corrections From Components to Outputs - Adequate and timely provision of M - Monitor commitments and releases and counterpart funds conduct periodic reviews of the financing plans and sources of funds with finance bureaus at all levels of government - 29 -  - Detailed designs are completed as M - Make sure that provinces retain experienced scheduled design organizations, and that their work is reviewed regularly. Mobilize design expert panel to address design issues and design quality - No major floods will occur during the S - Ensure that: (i) adequate stockpiling of flood Project implementation period fighting materials; (ii) early warning systems; and (iii) flood emergency plans, are in place - Continued strong support for Project M - Ensure careful monitoring by the Borrower funding and implementation from all and the Bank of funding and Project levels of government implementation progress - Timely decision making on key M - Bank and local government agencies to cany procurement actions out review processes expediently; make sure MOF/IBRD approved model bidding documents for ICB and NCB are used Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: There are two possible controversial aspects. The first is the association of this Project with the Three Gorges Project. As indicated in the section on Development and Strategy this Project is focused on the rehabilitation of the dikes which have been there for hundreds of years. The design elevation of the dikes have never changed since the 1950's following the 1954 flood. The TGP was approved in 1990 and the dike designs have not been changed. The dikes stand on their own as the basic first line defense for floods up to a 20-year recurrence period irrespective of whether TGP is built or not. The second controversial aspect is the association of the resettlement component under the Project with the voluntary resettlement of about 2 million victims of the 1998 flood. Most of the people who lived within the river side of the main dikes have been resettled. The majority of these people had been living there for decades and have been building subsidiary dikes to protect themselves from the river floods. During the 1998 floods many of the secondary dikes breached. Many of the people living on the river side were permanently displaced, because secondary dikes were breached and the flood waters stayed around for over 9 months in some of the low-lying areas. The Central Government developed a scheme to compensate the affected people by giving them housing and land so that they could restore their livelihoods. The compensation payments for these people are different from the involuntary resettlers. The flood victims are often resettled in different places and the majority of the compensation payment was for housing. Most of them continued farming in their old places. The resettlement under the Project is quite different since it runs along the dikes and is essentially involuntary. The two schemes are different in nature and cannot be assessed as one program. G. Main Loan Conditions 1. Effectiveness Condition Standard 2. Other [classify according to covenant types used in the Legal Agreements.] The Borrower shall: - 30 -  (a) Maintain at all times during Project Implementation a Central Project Steering Committee, with representatives of the MWR, SDPC, MOF and the Project Provinces to be responsible for the oversight of Project implementation. (b) Maintain at all times during Project implementation a Central Project Coordination Office (PCO) with terms of reference and resources acceptable to the Bank, headed by an official of MWR and assisted by qualified staff in adequate numbers assigned from MWR, CWRC and the two Project Provinces, to ensure that: (i) the national standards for design and construction of river dikes and embankments as well as for resettlement are applied under the Project; and (ii) appropriate quality control assurance measures are followed. (c) Employ no later than October 15, 2000 and maintain throughout the period of Project implementation, a panel of independent experts with terms of reference, qualifications and experience acceptable to the Bank, to assist with reviews of design and construction programs under the Project, provide technical guidance to the Borrower and Project Provinces on such programs and to monitor, evaluate and report to the Bank on the implementation of such programs. (d) (i) Take all measures to ensure that the Enviromnental management Plan (EMP) is carried out in a manner designed to ensure that the Project is implemented in accordance with sound environmental practices and standards; and (ii) maintain policies and procedures adequate to monitor and evaluate the implementation of the EMP and the RAP and the achievement of their respective objectives and to include the results of the monitoring program in the semi- annual progress and the mid-term review reports; and (iii) ensure that any proposed revisions to the EAP and the RAP have been agreed with the Bank; (e) Prepare through CWRC, in accordance with guidelines acceptable to the Bank, not later than December 1, 2000 and, thereafter, not later than October 1 in each subsequent year, a proposed plan for the river bank protection works and physical river model implementation, which will: (i) describe the activities proposed to be carried out under these components under the Project during such period; and (ii) be accompanied by a financing plan therefor and evidence satisfactory to the Bank that funds in adequate amounts are available for the payment of expenditures to be incurred in carrying out these components. (f) Consolidate the implementation plan mentioned above, together with the annual implementation plans fumished by each Project province and furnish this plan to the Bank not later than December 15, 2000 and, thereafter, not later than October 15 in each subsequent year, commencing October 15, 2001. The Borrower shall give the Bank reasonable opportunity to exchange views on the plans and thereafter shall promptly take all measures necessary to ensure proper implementation taking into account the views of the Bank. (g) Consolidate the plans designed to ensure the proper operation and maintenance (O & M) of flood protection facilities included under the Project furnished to it by the Project Provinces and furnish these to the Bank by December 1, 2002 accompanied by an adequate financing plan to carry out the 0 & M. The Borrower will give the Bank a reasonable opportunity to review the plan and ensure the proper implementation of such a plan will take into account the views of the Bank. (h) Prepare semi-annual progress reports, not later than April 15 and October 15 in each calendar year, which will: (i) summarize the results of monitoring and evaluation activities on the progress achieved with Project implementation during the preceding six months; (ii) consolidate the semi-annual reports furnished by CWRC and the Project provinces [see section (q) below] and the reports furnished by the panel of engineering experts [see section (c) above]; (iii) set forth physical and financial progress with - 31 -  Project implementation, both cumulatively, during the preceding six months; and (iv) set out additional measures recommended to ensure the efficient carrying out of the Project and the achievement of its objectives during the following Project implementation year. (i) Canry out a mid-term review of Project implementation not later than July 15, 2002 and prepare a mid-term report for this review which will summarize the results of monitoring and evaluation activities on the progress achieved in carrying out of the Project to date; consolidate the mid-term reports furnished to it by the Project Provinces; and set out any additional measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following the date. (j) Furnish each report for its review to the Bank and thereafter promptly take all measures required to ensure the efficient completion of the Project and the achievement of the objectives based on the conclusions and recommendations of the reports. Provinces of Hubei and Hunan shall: (k) Each maintain at all times throughout the period of Project implementation maintain, the following offices with terms of reference, staffmg and resources acceptable to the Bank: (i) Provincial Project Leading Groups for Project oversight and guidance for policy decisions, (ii) Provincial Project Management Offices to be responsible for day-to-day execution of the Project, including procurement of goods and services and monitoring and evaluation of implementation progress; (iii) Environmental Management Office at the provincial and prefecture or municipal levels to be responsible for coordination and supervision of the implementation of the Environmental Management Plan of the Project, as it relates to the impact of the construction works and the resettlement implementation; (iv) a Resettlement management division within the PMO each of the provincial, prefecture or municipal and county levels that will ensure that the RAP is carried in a manner acceptable to the Bank; and (v) Local Government Project Management Offices that will be responsible for the construction of works and implementation of all other parts of the Project. (I) Each employ, not later than September 15, 2000 and thereafter at all times maintain: (i) a monitoring institution with TOR, qualifications and experience acceptable to the Bank, to monitor, evaluate and report on the socio-economic progress of all persons covered by the respective RAPs, and (ii) a panel of environmental and resettlement experts with TOR, qualifications and experience acceptable to the Bank, to assist in overseeing the implementation of the EMP and the RAP and monitoring the impact of the implementation of the Project on the environment. (m) Each carry out its Respective EMP in accordance with sound environmental practices and standards. Each Project province shall carry out its Respective RAP in a manner designed to: (i) minimize involuntary loss of shelter or productive assets or of income or means of livelihood to the extent possible due to any change in land or water use; and (ii) improve the living standards and production levels of all affected persons under the Respective Parts of the Project. In addition, each Project Province shall: (i) maintain policies and procedures to monitor and evaluate, in accordance to guidelines acceptable to the Bank, the implementation of the Respective EMPs and the RAPs; and (ii) include the results of such monitoring and evaluation activities [including those of the monitoring institution in the aforementioned (i)] in each report to be prepared by it and furnished to the Borrower, together with any revisions proposed to be introduced to such plans to achieve their objectives as shall have been agreed with the Bank. - 32 -  (n) Each prepare, in accordance with guidelines acceptable to the Bank, and furnish to the Borrower not later than December 1, 2000 and thereafter , not later than October 1, in each subsequent year, for forwarding to the Bank, a proposed annual implementation plan for the following calendar year; (i) describing the activities which it proposes to carry out under its respective part of the Project including training programs; and (ii) be accompanied by a financing plan therefor and evidence satisfactory to the Bank that funds are adequate to carry out the Province's Respective part. (o) Each, to ensure the financial and physical sustainability of flood protection facilities included under the Respective Part of the Project, shall take the following measures in accordance with terms of reference acceptable to the Bank: (i) furnish to the Borrower not later than November 15, 2002 for forwarding to the Bank a plan designed to ensure the proper operation and maintenance of all facilities accompanied by adequate financing plan; (ii) give the Borrower and the Bank a reasonable opportunity to review the 0 & M plan and thereafter will carry out such a plan; and (iii) in order to assist the Provinces to prepare the 0 & M plan the Project Provinces shall employ consultants with experience and qualifications acceptable to the Bank. (p) Each in order to recover the recurrent cost of 0 & M of the flood protection facilities under the Project take the following measures: establish and collect flood protection charges to recover a substantial portion of the 0 & M facilities incurred and to finance the 0 & M costs of facilities not covered by the flood protection charges. Each Province shall prepare, on basis of guidelines acceptable to the Bank and to furnish to the Borrower and the Bank, not later than March 31, 2002, the proposed schedule of such charges and timetable for its establishment and proposal for financing the operations and maintenance costs not covered by such charges. The Provinces shall give the Bank and the Borrower a reasonable opportunity to exchange views on the schedule and time table to implement the charges. (q) Maintain policies and procedures to monitor and evaluate on an ongoing basis, with indicators acceptable to the Bank under TOR satisfactory to the Bank, and furnish the following reports to the Borrower, for forwarding to the Bank: (i) semi-annual progress reports, on April 1 and October 1 in each calendar year and said reports shall summarize the results of such monitoring and evaluation activities on the progress achieved and physical and financial progress during the preceding six months and set out any additional measures recommended to ensure the efficient carrying out the Project; and (ii) a mid-term report not later than July 15, 2002 to summarize the results of such monitoring and evaluation activities on the progress achieved in carrying out the Respective Parts of the Project and set out any additional measures to ensure the efficient carrying out of its Part of the Project. H. Readiness for Implementation 1S 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. D 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. E] 4. The following items are lacking and are discussed under loan conditions (Section G): - 33 -  1. Compliance with Bank Policies Z 1. This project complies with all applicable Bank policies. El 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. The Project complies with all relevant Bank policies. The policies that were examined in detail are the environmental and resettlement aspects of the Project in accordance with the stipulations of OD 4.01 and OD 4.30 respectively. The procurement policies and guidelines as indicated in OP 11 and Financial Management as detailed in OP/BP 10.02 are complied with. There are no indigenous people in the Project areas and therefore OD 4.20 does not apply. ___ _ Daniel J. Gunaratnam (o frey B. Fox Yukon Huang Team Leader Sector Manager/Director Country Manager/Director - 34 -  Annex 1: Project Design Summary CHINA: Yangtze Dike Strengthening Project Key Peffofmance HiWarcy of Oblecties Indicators -onito & Eoaluation Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Promote agricultural development Value of agricultural output in the Statistical data gathered by the Stable political transition and and rural economy flood-prone areas of the three Provinces maintenance of the reform provinces program Incorporate major water storage, Key investments in flood control Review of annual provincial and Government ensures adequate transfer, irrigation, and flood projects, such as river state investment programs budget allocations for flood control projects embankment protection, dike control investments strengthening and creation of detention basins Alleviate infrastructure Production loss in industry, cities Provincial statistical data, Project Government implements bottlenecks (through reduction of and towns due to floods; implementation data, flood programs to resettle people living flood damage), and safeguard the permanent and temporary impact data including number of on and near the dikes environment dislocation of people, and public people dislocated and public health problems health hazards Meet environmental requirements Water, air and soil quality and As specified in EIA Specified EPMs will be as specified in the Project key social indicators of affected implemented Environment Protection Measures population monitored in Project (EPMs) in the EIA area Project Development Outcome I Impact Project reports: (from Objective to Goal) Objective: Indicators: Improve river bank protection and Eliminate flood damage for MWR's analysis report on flood A bigger than the one in 20 year strengthen dikes and thereby floods of less than I: 20 year damage flood will not occur until lower the risk of dike breaches return period until the completion of TGP during floods completion of TGP. After that protection will improve to 1: 100 year return period Improve dike ownership Improved organizational and Monitor frequency of inspections, Government will actively pursue awareness and responsibility for funding arrangements for dike maintenance funding and quality and support implementation of the dike maintenance inspection and actual of maintenance works the " flood control" law maintenance works. To develop a system of flood Issuance of a MWR directive for Monitor collection rates of flood State Government will approve protection charges from flood protection fee collection or protection fee from Project the flood levy or ear-marked beneficiaries, such as cities, ear-marked taxes entities and provincial agencies taxes level set by the provinces enterprises, and others or and Dike Maintenance Offices ear-marked taxes. - 35 -  Output from each Output Indicators: Project reports: (from Outputs to Objective) component: Improve flood protection for Reduction in flood damage Flood damage analysis reports In addition to the Project works, about 2 million people from the provinces and MWR steps will be taken to: (i) remove polder areas bordering the dikes; (ii) rehabilitate detention basins and organize that people will be moved quickly to safe areas in critical situations; and (iii) properly maintain retention lakes Reduce the flooding in areas Reduction in flood damage Flood damage analysis reports Government will carry out the behind the dikes, through from the provinces and MWR entire the dike strengthening improved discharge into the river and related projects at low flow Project Affected People (PAP) Pre- and post resettlement income M & E processing and reporting Adequate budget is provided to will be properly compensated in levels, restoration of living carried out by independent implement all agreed measures accordance with the agreed RAP environment and complaints organizations detailed in RAPs stipulations and/or grievances received - 36 -  ^ ' ' . .. '~~~~~~~~P6 . <..i-.5-:. '--- --.._., ,':'- ''",,,' -'; Project Components / Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) River bank protection and US$103.4 million Annual work programs, Adequate and timely provision of foundation treatment semi-annual progress reports and counterpart funds expert panel reports Dike strengthening for Hubei & US$264.5 million Annual work plans and Detailed designs are completed as Hunan semi-annual physical and scheduled financial progress reports Dike monitoring systems & river US$22.1 million Period Bank supervision missions No major floods will occur during modeling to review implementation the Project implementation period progress and exchange views with the key stakeholders in the Project Equipment for dike maintenance US$6.1 million Findings and recommendations Continued strong support for from expert panels reviewing Project funding and design and construction of implementation from all levels of complex works as well as the government implementation of RAPs and EMPs Resettlement US$96.9 million Reports from independent groups Timely decision making on key monitoring the implementation of resettlement actions RAPs Environmental management US$1.9 million Findings and recommendations of Competent EMO and panel will expert panel on environment and be established with sufficient resettlement periodic meetings as needed and timely decision making on key inmplementation issues for environment and resettlement Engineering and Project US$19.2 million Project progress reports and Timely decision making on key management procurement audits implementation/procurement issues Institutional Development US$5.6 million (The above cost figures include price and physical contingencies) - 37 -  Annex 2: Project Description CHINA: Yangtze Dike Strengthening Project By Component: Project Component I - US$103.38 million River Bank Rehabilitation 1.1. In Hubei Province, the river can be divided into twelve sections; Shangjingjiang (upper Jingjiang), Xiajingjiang (lower Jingjiang), Yueyang, Luxikou, Paizhouwan, Jiayu, Wuhan, Tuanfeng, Huangzhou, Daijiazhou, Huangshi, Longping. Of these twelve sections, the Bank Project supports activities on the Shangjingjiang, Xiajingjiang, Wuhan, Tuanfeng and Huangzhou sections. The following describes the riverbank protection and dike strengthening works. The riverbank protection and dike foundation treatment works will be undertaken by CWRC, with Central Government support. (a) Jingnan Dike Section: The Jingnan dike lies on the south bank of the river, beginning at Chajiayue and ending at Wumakou, with a total length of 189.3 km. There are nine critical river sections 54.3 km long requiring bank protection works. These nine selected sections are typically with steep bank slopes and relatively narrow flood plains. The most prominent vulnerable areas are Beimenkou and Tiaoguan sections: * Beimenkou section: This section is situated in the north of Shishou. Soon after the natural straightening of the Ox-bow section at Xiangjiawan on June 11, 1994, the impact of the river flow caused a 3-km stretch of bank failure with a maximum shoreline recess of 400 m. The maximum rate of shoreline recession was 55 m/hr. The distance between the shoreline and the toe of the Shengli dike was merely 38 m. On Oct. 14, 1998, another bank failure occurred at an alarming pace of 100 m shoreline recess within 3 hours. The water depth was close to 20 m and the riverbank was in the proximity of the toe of the dike. The critical condition was temporarily under control with the rescue operation of dumped rip-rap and other measures. So far, approximately 15,000 cum of rocks were dumped at the site covering 1,400 m long shoreline. As the river regime is still undergoing the adjustment process, new development of bank failures continues. * Tiaoguan section: This section is situated at the tip of the major river bend with a narrow river cross section, high flow velocities and deep water. Typical river bed elevation is at -18 m and the water depth reaches 60 m during the flood period. During the flood of July 13, 1989, the water level reached 38.4 m and the velocity exceeded 4.0 m/s. The protective stones embankment were washed away and a stretch of 50 m of the toe section of the outer dike slope was damaged. So far, the length of protected shoreline is 1.7 km and the cumulative amount of dumped rip-rap is 27,000 m. (b) Wuhan Section The city of Wuhan is situated at the confluence of Yangtze River with its tributary the Han River. The total length of the dikes is about 279.9 km, which includes 44.6 km of flood protection walls. The total length of the dike considered by this Project is 170.2 km of which the bank protection works cover 30.6 km, comprising 18.9 km in the City area and the rest in the Suburban areas, exclusive the portion along the Hannan Dike Section which is not part of this Project. There are seventeen critical river sections with a total length of 30.6 km. These areas are characterized by narrow flood plains with severe bank failures. - 38 -  (c) Bapu Section The Bapu dike is situated on the south bank of the river where the river bends in an "S" shape fashion due to the presence of a series rocky points. The flow regime is generally stable, except for the frequent lateral shifts of scouring and deposition banks. The critical shoreline lies on the concave side of the river bend where the thalweg, or deep water line, is close to the bank. Notable critical stretches include Liutsu Xian, Zheng Jiawan, and Shuitawu to Wuzhang-gang. The total length of proposed river embankment protection work covers 8.0 kin, which is about 18% of the dike length. (d) Huang-gang Section The Huang-gang dike is located along the north bank of the Yangtze River between the two tributaries Ju and Ba. The total proposed length of embankment protection works is 1.3 km. A summary of the iocation and extent of riverbank protection works, within the scope of the Bank supported Project, is shown below in Table 1.1: Table 1.1: The Extent of River Bank Protection and Dikes Strengthening Works - Hubei River Rank Protection Dwke Wrndro Bnknt N-ed Word Bank Protect River Section Critical Bank . Length of Project Total Length Cross Dike (km) Locations Works (km) (km) Embankment Slope Protecion Seepage Strudur 1km) Works (kin) (kin) ~~~~~~(koo) (km) Control (kin) IN..) Jingnan Dike, South Bank, Jingzhou 54.28 4 54.28 195.82 154.51 134.14 84.44 15 Wuhan Section 18.88 13 18.87 180.92 143.04 136.94 98.07 42 Wuchang Section, South Bank 14.74 11 14.76 60.91 6760 64.62 41.23 22 Hanyang Section, North Bank 412 2 4.12 2634 27.47 27.47 18.11 9 Hankou Sechon, North Bank - - - 9.95 4.25 1.13 Hannan SecAion, North Bank - - 43.72 43.72 43.72 38.73 11 Huanggang Section, North Bank 1.26 1 1.26 42.49 42.49 34.40 18.80 9 Bapu Dike, South Bank, Er2ho. City 19.42 9 .00 43.60 43.60 51.54 43.60 4 Total of Hubei Province 93.82 27 82.41 442.83 383.64 357.02 244.92 70 Note; ' to be implemented by CWRC With the exception of a few trial sections, most of the proposed measures for river bank protection include the following standard practices: * Dumped rip-rap protection for the underwater portion of the bank. Extra amount of rocks is specified for the toe section. However, there is no provision of a graded filtering layer or filter cloth between the rock and the bank soil to be protected. - Placed rockfill protection for the above water portion of the bank slope. A graded layer of gravely filtering layer between the rocks and the bank soil is specified. Other special types of bank protection methods have been tested or are being considered at selected sites. The methods include the use of a mattress of chain-connected concrete slabs, as applied at the Longwangmiao critical section which is situated at the confluence of the Han and Yangtze Rivers. With the help of installation boats, the mattress was laid down to the toe of the slope, about 20 m below the water level. The flow velocity during the construction period of low flow was below 1 m/s. In the Bapu section, where the unprotected bank receded at a rate of 100 m/yr, a test section was constructed with a combination of dumped rip-rap for the underwater portion and concrete lining for the above-water portion. The use of geo-textile mattresses with a series of interwoven pockets injected with concrete has also been contemplated by local design and construction firms in collaboration with intemational manufacturers/suppliers. The trial section is located at Hepu of the Paizhouwan dike of the Wuhan section. - 39 -  1.2 Hunan Province There are a series of prominent meandering segments along the upper reach of the river. A major ox-bow section at the Shangchewan (across the Jincheng polder) has been straightened by training dikes in the 1 970s. This resulted in an overall shortening of the river length by 21 km. The lower reach of the river is comparatively straight. However it is characterized by the presence of several river constrictions, such as Chenglingji, Ruji and Yalan, which tend to create wide river sections in between. The expansion of the river cross sections downstream of the rocky constrictions facilitates the formation of alluvial islands. The thalweg, or the deep water line, of the river is generally closer to the riverbank on the Hunan side than to the Hubei Provinces side. In spite of the repetitive applications of dumped rip-rap protection for the riverbanks, alarming rates of shoreline erosion were observed in various stretches of the river, as shown in Table 1.2. Typical hydrographic survey of the shoreline change before and after the 1998 flood at Xinshazhou, Hongshuigang, Jingjiangmen and Chengluo as shown in Table 1.2. Table 1.2: Recession of Shorelines due to Bank Failures Location Length of Length of Rate of Bank Rate of Bank Maximum Maximum Near Shoreline Bank Failure Erosion Erosion Scour Depth Shore Velocity km km Average (m/yr) Max (m/yr) m/yr m/s Xinshazhui 21.7 10.0 51.7 60.0 14.5* 2-3 Hongshuigan 20.0 9.85 26.7 80.0 12.0 2-3 Jingjianrnmen * 133.5 6 6.75 30.6 96.0 15. 9 33-4 Chengluo 28.0 23.9 30.0 10.0 8.0 2-3 Observed in 1997 The proposed measures for river bank protection include the following: * rip-rap protection of the underwater portion of the bank, including toe protection; * pre-cast concrete slabs or placed rip-rap protection for the above-water portion of the bank; and * use of gabion rockfill and large blocks of concrete for underwater bank protection. A summary of the locations and length of the proposed bank protection works is shown in Table 1.3. Protection works using both rock and pre-cast concrete blocks are proposed for the above-water portion of the bank. Dumped rip-rap protection with extra toe section is proposed for the underwater portion of the river bank. Table 1.3: The Extent of River Bank Protection and Dikes Strengthening Works - Hunan Wnrld R-nS Prial River Section Critical Bank Length of Project Total Length Cross Dike (km) Locations Works (km) (kmj) Embankmet Slope Protection Seepage StDitures (kim) (kim) Control (kmn) __(No. Minsheng Polder Section,O OD0 - 32+624 26.03 9 24.03 32.62 20.13 27.62 18.99 Jianshe PolderSection, 32+724 - 51+012 8.70 4 8.70 18.29 8.60 15.33 8.12 Jianxin State-Farm Section, 51+012 - 53*915 - - 2.90 - - - Jushan State-Farm Section, 53+975 - 76+800 - - - 22.83 20.93 16.23 19.75 Yongji Polder Section, 78+200-86+380 8.06 2 5.48 8.18 6.28 6.18 5.93 Lucheng PolderSection, 86+380 -109+110 5.40 3 5.40 22.73 20.73 20.13 19.56 Jiangnan Polder Secton .109+110 -136.044 - - - 26.93 18.58 22.99 17.54 Huanggailou Slate Farm Section, 139+044 - 142+055 1.40 1 1.40 7.21 1.70 5.01 1.60 Total of Hunan Province 49.59 19 45.01 141.70 96.95 113.49 91.49 Note: ^ to be Implemented by CWRC Oniv 116 km Is Included In the Pro/ect -40 -  Project Component 2 - US$264.52 million Dike Strengthening and Seepage Control Works 2.1 Hubei Province In Hubei province 1,577 km of dikes on both banks of the river, are divided into nine sections: Xiabailizhou, Jingjiang, Jingnan, Jianli - Honghu, Xianning, Wuhan, Bapu, Huanggang and Yangxin. Most of the dikes were built as early as the 17th century. They have been subsequently raised and improved throughout the years. As expected, the structural conditions are generally poor due to the inherent shortfalls of construction materials, construction methods and dike maintenance. This is compounded by the variability of foundation conditions and the presence of animal/termite holes throughout the embankment. Piping and sand boils occur frequently throughout the dike and foundation areas whenever there is a prolonged period of high water level in the river. The dike sections under the Bank financed portion are Jingnan, Wuhan, Bapu and Huanggang described below: (a) Jingnan Section The Jingnan dike lies on the south bank of the river, beginning at Chajiayue and ends at Wumakou, with a total length of 189.3 km. Except for a stretch of 0.9 km long new embankment, the remainder of the 186.8 km dike length are to be raised and strengthened. The Project covers the heightening and strengthening of the dike systems in Shishou, Gong-an, Jingzhou and Songzi, with a total length of 154.0 km. (b) Wuhan Section Wuhan, the capital city of Hubei Province, is situated at the confluence of the Yangtze River with its tributary Han River. The dikes along the Yangtze River in Wuhan are 285.64 km long, of which 175.3 km is located on the left bank and 111.2 km on the right bank, including 44.6 km of flood protection walls. The dike protection system is categorized into two parts: "City" and "Suburb" front. * The "city" portion of the dikes comprises three flood protection rings: Hankou (10.0 km of dikes in three segments along the Yangtze), Wuchang (59.0 km of dikes in 5 segments along the Yangtze) and Hanyang (14.2 km of dikes in three segments along the Yangtze River). * The "Suburban" portion of the dikes, with the total length of 56.7 km along the main stem of the Yangtze River, comprises six flood protection revetments: Hannan, Shiyigong, Junshan, and Wuhui. (c) Bapu Section The Bapu dike is situated on the south bank of the river, within the territory of Erzhou City. The total length of the Bapu dike is 43.6 km excluding the stretches of natural high ground. It is the key flood control barrier for the Liangzi Lake drainage basin. Liangzi Lake is the second largest lake in Hubei, with a drainage area of 3,365 km2. Bapu dike was built almost 300 years ago in the Qing Dynasty. Over the years, it has been raised and strengthened. However, it has various deficiencies including poor embankment material and inadequate height and width. As a result, incidents of piping, sand boils and slope failures are common during a major flood. During the 1998 flood, there were over 300 locations of piping, sand boil, cracks and slope failures observed. In addition, eight dike breaching cases of the subsidiary dikes occurred around the polders. The main river dike was saved from a major disaster through large scale emergency rescue efforts. The dike strengthening works under the Project covers the entire stretch of the Bapu dike or 43.6 km. (d) Huanggang Section The Huanggang dike is located along the north bank of Yangtze River between the two tributaries of Ju and Ba. The total length of the dikes is 108.6 km, including 40.6 km along the tributary Ba river: Laocheng and Changsun dikes. The Project covers 45.5 km of dike strengthening - 41 -  work, including a 3-km stretch of floodwalls. The dike system comprises Changcheng and Dulong dikes in the Huangzhou District and upper Dulong Dike in the Tuanfeng County. Most of the dikes were built 500 years ago. Over the years, they have been raised, widened and straightened. However, they show various deficiencies including the lack of height and width, poor embankment material, close proximity to the riverbank, and the existence of numerous ponds and open pits behind the dike. The ponds and pits were formed as a result of the excavation of construction material for building the dikes. In the past, the ponds and/or pits were within 50 m distance from the toe of the dike in certain sections. A high percentage of the drainage improvement works and pressure relief wells have been seriously clogged. During the 1998 flood, 118 out of the total 260 relief wells malfunctioned. There are many cases of embankment cracks and termite holes. A summary of the locations and lengths of the dike sections for strengthening, heightening and broadening is also shown in Table 1.1. The proposed remedial works for the dikes are the following: * Construction of RC flood walls, normally with 4 - 6 m backfill; * Heightening the dike with a crest width of 8 m for Class I or Class II dikes; most of the dike will be repaired by clay grouting; * Foundation treatments by diaphragm walls (under CWRC's responsibility); * Construction of berms and back-filling the ponds on the land side of the dike; * Construction of relief wells; and o Dike slope protection with masonry and plant trees to protect against wave action on the riverside and grass on the landslide of the dikes; and * Upgrade and pave dike roads and provide lighting. A variety of seepage control techniques, such as steel sheet pile wall, and thin-diaphragm wall, are being evaluated and tested. 2.2 Hunan province In Hunan province the existing main dike length is 137 km. The upper reach has four dike sections: Minsheng, Jianse, Jianxin and Junshan, with an aggregated length of 76 km. There are four dike sections in the lower reach: Yongji, Lucheng, Jiangnan and Huanggaihu, with a total length of 61 km. The major defects and problems of the dikes can be categorized into the following areas: * Inadequacies of the dike section; * Piping through the foundation; * Presence of buildings on the dikes; and * Numerous cross-dike structures with defective embankment connections. A summary of the locations and lengths of dike sections to be strengthened, heightened and broadened is shown in Table 1.3. The proposed remedial works for the dikes are: * Construction of RC flood walls; * Heightening the dike from either upstream or downstream side of the dike, depending on the location of borrow pits, and environmental limitations; and * Consolidation of the dike by clay grouting; -42 -  * Foundation treatments by cutoff walls including jet grouting and cement mixed piles (under CWRC's responsibility); * Construction of down-slope berms, and back filling the ponds created in the past as borrow areas for the dike construction; * Dike slope protection by masonry outside, grass cover inside of the dikes and trees for wave protection on the riverside berms; and * Upgrade and pave dike roads and install lighting devices. Cross-Dike Structures: 2.3 In Hubei Province most of the cross-dike structures, such as culverts, sluices and pumping stations, were built before the 1970s. They are in poor operating conditions due to poor maintenance, low design standards and use of sub-standard material and low construction quality. Structural cracks and leakage are common. There are many structures that require strengthening, extension and reconstruction. Some of the badly deteriorated structures, which no longer serve any significant role for providing irrigation and drainage, will be taken out of operation. Seventy (70) cross dike structures will need to be repaired, extended or reconstructed under the Bank financed Project. Details of the cross-dike structures in Hubei province to be improved under the Project are given in Table 1.1. 2.4 In Hunan province cross-dike structures are culverts, sluices, pumping stations and traffic passes with flood control gates. On average, there are two cross-dike structures per kilometer length of dike. Most of the structures were built in the 50's or 60's with poor material and outdated design. Most of these suffer from leakage and cracks due to uneven foundation settlement. These structures invariably require foundation treatment for seepage control and installation of snail trap pools. The length of most of the structures will be extended to meet the cross-sectional profiles of the heightened and broadened dikes. The foundation treatments for the cross-dike structures include concrete cutoff walls, jet grouting, and cement mixed piles. There are 3 sluices to be repaired, 29 to be lengthened and 32 to be rebuilt. In addition to improving 64 sluices one new culvert is to be built. These works will be carried out with 100% government financing. Project Component 3 - US$ 22.07 million (i) Dike Monitoring (US$2.0 million) and River Modeling (US$20.1 million) 3.1 Dike Monitoring System. Under the Project Hubei will set up a computerized system to monitor possible seepage through the dike and settlementldeformation of the dike. The system will consist of piezometers placed at regular and critical locations on and away from the dike. This will enable the monitoring of flows through the dike body and foundations. A real time data acquisition will be established for all the piezometer measurements, dike deformation and water levels alongside the dike. The measurements will provide advanced waming for possible weaknesses in the dikes during periods with high water levels. This will allow taking early protection measures to prevent dike breaches. 3.2 River Modeling Under the Project CWRC will develop a physical model of the middle reach (Yichang to Hukou) of the Yangtze River. The model will be a movable bed type used to predict the changes in the geomorphology of the river. It will also depict the flows through Dongting and other lakes. The CWRC has not been very successful in using mathematical models, although several such models have been tried. The Yangtze River has in most parts established a stable river regime water course. However, there are several sections of the river which are still unstable and need to be studied using a physical model. The physical model will be built with the instrumentation and equipment available to CWRC in Wuhan. - 43 -  Project Component 4 - US$6.08 million 4.1 Equipment for Dike Maintenance At present, dike maintenance, which is carried out during the dry season from September to May, relies mainly on a large labor force with basic tools and outdated equipment. This method is inefficient and the work carried out is of poor quality. The Project will provide modem equipment for dike operation and maintenance and step up the organizational capacity to carry out regular maintenance. The equipment will include wheel loaders, bulldozers, excavators, dump trucks, boats and other related equipment. Included under this procurement will also be gates and hoists for the various cross-dike structures. Project Component 5 - US$96.92 million 4.2 Resettlement In accordance with the "Flood Control Law", no residential structure shall be erected: (i) on the dike; (ii) within 50 m from the landside of dike toe; and (iii) within 50 m from the riverside of dike toe. Existing structures not complying with this law will be removed. In addition, the construction of enlarged dike sections will require acquisition of about 16,150 mu of cultivated land. A Resettlement Action Plan (RAP) for the Government's Mid Yangtze River Flood Control Project has been prepared in accordance with OD 4.30 to facilitate the mitigation of adverse project impacts on the affected people. The Resettlement Program for this Project includes various housing and economic restoration measures which have been developed in order to; (i) minimize disturbance to resettlers by providing local resettlement options, family production/income restoration altematives and necessary support in the period of transition; (ii) be acceptable to both resettlers and host populations; and (iii) maintain or improve income levels and standards of living of Project Affected People (PAPs). The mechanisms for restoration of enterprises and infrastructure and utilities affected by the Project are described below and in more detail in Annex 12. (a) Household Restoration Some 10,958 families or 47,992 people in the Project area will have to be resettled, of which 4,464 families or 19,213 people come from Hunan and 6,494 families or 28,779 people from Hubei. In accordance with the guidelines to minimize distances to altemative resettlement sites, and considering resettler's preferences, the following resettlement altematives were developed, based on available land areas and their capacity for increased production, and the viability of industrial expansion. Resettlement Type Number of 1H Number of People Internal Resettlement (resettlement of rural households within the existing village area) 8,078 35,484 Collective Resettlement (relocation to new residential areas in rural and urban sites -- as 2,890 12,508 appropriate --, urban resettlement to apartment blocks and rural safety platform sites) Total 10,958 47,992 (i) Internal Resettlement Over 70 percent of resettlers (35,484 people and 8,078 families) will be relocated within their existing village administrative areas, minimizing disturbance to existing social and economic systems. This type of rural resettlement will require land improvement and the redistribution of village productive lands, and in eleven instances, the transfer of lands from adjacent villages to supplement lands currently available within the village. Environmental and economic capacity investigations identified the 168 villages as feasible for this type of resettlement, in light of the production restoration measures -44 -  proposed. In most cases of internal resettlement, infrastructure and service displacement will be minor, and the restoration of all impacted services is included in the resettlement program and budget. House reconstruction will be undertaken by the villagers themselves, in accordance with agreed standards. (ii) Collective Resettlement Collective resettlement shall involve 2,880 families or 12,508 people to 22 sites. These sites consist of three types for collective resettlement: * Towns or Communities - where new housing areas can be constructed in existing communities; * Township Blocks - where new residential blocks will be developed for resettlers; and * Safety Platforms - elevated platforms will be built nearby to villages, on top of dykes where residential housing will be constructed. In Hunan and Hubei, 22 residential sites will be developed for rural resettlers in towns or communities, providing for a total of 2,880 households with 12,508 people with facilities and houses. Through land re-allocation and land development, the RAP provides for the largely rural resettlers to maintain agricultural livelihoods. In Hunan, 10 residential safety platforms are proposed for the resettlement of 1,715 rural households totaling 7,331 people. In each instance, minimum housing and living space standards will be met (35 m' /person), and where adequate infrastructure and facilities including water supply and sanitation, drainage, power will be provided. (b) Production Resettlement The income and production restoration program described in Annex 12 was developed according to guidelines of: (i) providing a variety of restoration alternatives, with land as the primary means of support; (ii) utilizing local resources and development activities without adverse impact to the environment; and (iii) development of secondary and tertiary village run industries. Target net income per capita rates have been set by the program as a target and measure for successful implementation of the program. An analysis of the land capacity in the affected villages, examined land availability and level of development of existing lands in the identification of the selected sites where reduced land holdings, with appropriate investment an development would not compromise carrying capacity. Production plans for each province are detailed in Annex 12 and outlined below: Hunan Province - Improve 52,762 mu (3,517 ha) of land to support 5,077 resettlers and transfer 1,277 mu (85 ha) of "foreign" village tilled land to support 893 resettlers, among which 623 mu is irrigated tilled land and 604 mu is non-irrigated tilled land. Hubei Province - Support 7,651 rural resettlers, among which 6,183 persons will be involved in improving low-output land, 342 persons in animal husbandry, and 1,126 persons in village-run enterprises and tertiary industry. Implementation of these programs will require an estimated investment of Yuan 166.96 million, of which Yuan 54.6 million in Hunan and Yuan 112.34 million in Hubei, which will be provided from the land compensation and resettlement funds. The average investment per capita is Yuan 12,048. (c) Occupation of Temporary Lands Total land affected by the Project has been identified as 12,954 mu (864 ha). Compensation will be provided based on annual output (for lost production), and to meet restoration costs. These costs are not included in the RAP as they are met by the Project construction costs. - 45 -  (d) Infrastructure and Enterprise Recovery All relocation or reconstruction of Project affected infrastructure will cost approximately Yuan 64.4 million. Affected enterprises total 247, and in many instances land acquisition will result in only* partial relocation or loss of land with minimal impact to production. Investment for their relocation and lost production is estimated at Yuan 107.25 million. In addition, a contingency of 5 percent of the housing compensation value has been included in the overall Project contingency to provide a safety net fund for vulnerable groups. 4.3 Public Consultation and Social Adjustments The resettlement program includes provisions for public consultation and social adjustments to ensure achievement of the goal that the affected parties (resettler families and the host communities) involved in the Resettlement Operation are not disadvantaged by the Project and to the extent feasible will share in the Project benefits. Preferential policies specified by the Government and additional policies included in the RAP will be available to resettlers. Policies of primary importance to resettlers include: * Tax and levy deduction for acquired lands, and for exemptions or reductions in the associated grain quotas, thereby supporting both the resettlers and host communities; * Industrial, agricultural and animal husbandry taxes and levies at the county and township levels will be adjusted in accordance with the magnitude of impact in each administrative area; * The resettlement budget includes a contingency for the support of vulnerable groups if they are disadvantaged by the Project, and due to unforeseen circumstances, unable to restore their livelihood under the proposed RAP; and e In the year of resettlement, resettlers will be exempted from contributing annual labor to dike maintenance. Because some resettlement has already started agreements made include that: * The PMOs comply with the compensation standards stated in the RAP in accordance with the appropriate local and national regulations by the end 1999. In doing so, current compensation standards for all project areas will be made uniform, and supplementary compensation to resettlers already compensated at the lower standards will be made to the RAP standards; * Disbursement will commence a minimum of three months in advance of demolition to allow for house completion before demolition, thus avoiding (or at least minimizing) any need for temporary accommodation; * The County/Township ROs will carry out land readjustment and provide land/productive compensation as soon as possible in accordance with the guidelines and standards specified in the RAP, which will fund land improvement and agricultural extension activities to improve the productivity of the land available to resettlers after relocation; * Project specific Resettlement Offices (ROs) will be established at all levels, with staffing in accordance with the requirements outlined in the RAP; * The proposed training programs for the ROs will commence by end December 1999, and guidelines on the management of funds will be issued to all ROs; and * Independent Monitoring and Evaluation Organizations and Supervisors for Resettlement will be appointed by end 1999. -46 -  Project Component 6 - US$1.87 million Environmental Management Plan The environmental impacts of the Project are internalized through measures within the Project to offset all negative impacts. The most significant environmental impact is resettlement. In addition there is a whole host of smaller but also important impacts due to construction activities. All these impacts are internalized through the following measures: * Resettlement impact is offset by a Resettlement Action Plan (RAP) which essentially replaces all that is lost by resettlers with a package of compensation measures for housing, infrastructure restoration and livelihood development; and * Agreed compensation measures to mitigate the impact of the Project works, which are included in the technical specifications for contracts for the construction of works, to protect the environment (See table on the Construction Constraints Table 6.1). The environmental management plan is therefore to supervise the construction of environmental requirements by contractors and the resettlement action plan to ensure that all the environmental requirements are satisfied. These requirements are summarized as action items: * To ensure effective implementation of the Environmental Protection Measures (EMP) specified in the EIA, including environrmental monitoring, Provincial EMOs are to be established in each province. The provincial EMOs are responsible for implementing environmental protection requirements in the Project final design, construction, and operation stages of the Project for both dyke constructions areas and resettlement areas. o The P/EMOs are to be established immediately following the signing of the Loan Agreement with the Bank. T The P/EMOs will be responsible for handling arrangements for visits of Bank Missions and of the International Panel of Environmental Experts. On each visit the Panel will review the Environmental Performance (EP) of the Project including the roles of the C/EMOs, P/EMOs, ECIs, CCs, VEOs, EMO sub-contractors, and all participants will prepare a report on the adequacy of EP, with recommendations for improvements. This work covers all stages of Project implementation including preparation of final design, bid documents for construction, construction and operation. 3 The overall EMP includes provisions for: (i) training of the staff of the P/EMOs including ECIs, VEOs, and subcontractors; and (ii) study tours to foreign countries to analyze and observe how environmental aspects of flood control are managed for large rivers of sirnilar size and problems as the Yangtze, to take advantage of lessons learned there in the comprehensive R&D program (for programs carried out in the Mississippi river basin carried out over the past half-century by the US. Corps of Engineers). Detailed illustrative diagrams are provided in Annex 11, which show the institutional structure of a provincial EMO and its relationship with other parties included in environmental management for the Project of each province; the main work of the P/EMO, etc. The cost estimates for environmental management for Hubei is about US$1.4 million and for Hunan US$0.5 million, which are included in the Project cost. - 47 -  Table 6.1: Environmental Construction Constraints No. ITEM CONSTRAINTS - All items must meet applicable National/Provincial standards. 1 Wastewater Acceptable management of wastewater discharge 2 Air Pollution Control A. Acceptable management of all fuel burning machines B. Blasting and quarrying dust; C. Road dust control (wetting, paving); and D. Control of obnoxious and toxic fumes. 3 Water Use Use water as planned with care not to waste it and to obtain permission of agencies having the rights for use of waters to be utilized. 4 Workers Health A. Worker medical examination to screen out infectious virus carriers (initial and periodic) B. Provision of safe drinking water supply C. Provision of adequate wastewater treatment and management D. Provision of adequate schistosomiasis prevention as described in Section 4.2.4 E. Provision of adequate food sanitation F. Provision of adequate control of disease vectors including mosquitoes, rats and flies. G. Provision of adequate medical care capabilities and facilities including first aid facilities H. Provision of adequate excreta management for buildings not serviced by sewers I. Provision of adequate occupational health and safety measures J. Provision of adequate housing with sanitary facilities 5 Noise Control A. Management of use of all machines to ensure meeting of appropriate standards for noise/vibration control B. No construction activities in night in residential area if feasible C. Adequate protection facilities provided to workers operating high noise/vibration machines 6 Spoil Disposal Dispose construction spoils in specified places and specified manners including protection dikes and resurfacing 7 Solid Waste Collect solid wastes regularly and dispose of collected wastes in adequate sanitary Management manner, including use of fencing to prohibit access to disposal sites by children 8 Soil Erosion Resurfacing all borrow areas and filling areas and furnish dykes as needed to protect ____ against discharge of soil runoff to downstream waterways 9 Cultural Relics No damaging activities to cultural relics; stop construction whenever cultural relics are discovered to allow EMO to determine needed protection measures 10 Aquatic Ecology Specially assign person/persons to watch appearance of the Yangtze rare species when "blow filling" operation is carried out in river sections sensitive to the species 11 Saicheng Lake Make sure workers will not enter the bird migratory area Migratory Birds 12 Land Use Occupy land as specified; no damage to farm land and crops; resurfacing land after use 13 Construction Stage Contractors (C) are fully responsible for environmental protection in his construction area and camping area. C are to make monthly environmental report to define EMO on its performance in implementing the EPMs/constraints. Construction contracts must include listing and description of all EPM to be furnished by C. Also, the EMO will furnish Environmental Construction Inspectors (ECIs) to work with the Engineer Construction Supervisor (ECS) and allow the ECS to make formal requests for __________________________ improvement in C performance as needed. -48 -  Project Component 7 - US$19.17 million Project Management The Project management component essentially finances the activities of: (i) PMO's at various levels of government; (ii) design work and technical assistance for producing the designs and preparation and processing of bidding documents; (iii) construction supervision; (iv) environmental management and supervision; and (v) Project monitoring and evaluation. Project Component 8 - US$5.63 million Institutional Development (US$4.8 million) and Flood Prevention and Disaster Mitigation TA (US$0.8 million). 8.1 Institutional Development Under the Project MWR/CWRC and the Project provinces will be provided with technical assistance, training and study tours in China and other countries. These activities will help the Project to address institutional constraints in such critical areas as: (i) dike maintenance; (ii) resolution of complex design and construction issues; (iii) adoption of modem materials and construction technologies; and (iv) ensuring financial and physical sustainability of improved infrastructure facilities. Technical assistance will also be provided for institutional development of dike management offices to become autonomous corporate bodies which will be self sustaining through the collection of flood protection charges or fees. 8.2 Flood Prevention and Disaster Mftigation TA CWRC's physical model outputs will provide information for: (a) changes in the regimne due to sediment movement in the middle and lower reaches as various structures -- mainly dams -- are completed on the tributaries and main stem of the river. This would give advanced forecasts for locations needed for river bank protection and for river training needs; (b) changes in flow in the river and lakes due to sediment movement and its effect on lake sedimentation rates and the capacity of the lakes to maintain flood storage volume; and (c) flood control strategies after the completion of the flood control structures. -49 -  Annex 3: Estimated Project Costs CHINA: Yangtze Dike Strengthening Project River Bank Protection, including Dike Foundation Treatment 46.54 37.84 84.38 Dike Strengthening - Hubei 103.16 84.28 187.44 Dike Strengthening - Hunan 27.91 15.03 42.94 Dike Monitoring/River Modeling 15.96 4.46 20.42 Equipment for Dike Operation and Maintenance 1.99 3.83 5.82 Resettlement, Hubei and Hunan 73.83 11.93 85.76 Environmental Management & Monitoring 0.78 0.94 1.72 Engineering and Project Management 13.72 4.28 18.00 Institutional Development 2.22 2.94 5.16 Total Baseline Cost 286.11 165.53 451.64 Physical Contingencies 31.14 18.97 50.11 Price Contingencies 10.88 7.01 17.89 Total Project Costs 328.13 191.51 519.64 Inte,est during construction 23.77 23.77 Front-end fee 2.10 2.10 Total Financing Required 328.13 217.38 545.51 Estimated Project Cost Project cost have been prepared by dike sections and Project components using mid-1999 prices. Physical contingencies have been added at the rate of 20 percent for the River Bank Protection works, 10 percent for other Civil Works and Resettlement and 5 percent for the Electrical and Mechanical works, Engineering and Project Management and Institutional Development. Together physical contingencies amount to US$50.11 million. The cost related to planning, survey, design, construction supervision and quality control have been estimated at 3 percent of the base costs. An overhead of 0.3 percent of base costs for the Borrower's management offices and 0.7 percent for the Provincial Management Offices have been added under Project management. Price contingencies for the local cost share for works, goods and services have been calculated based on projected escalation factors of 1.0 percent for 2000, 2.0 percent for 2001 and 3.0 percent for the years thereafter. Price contingencies for foreign costs were as forecasted by the MUV indices of 1.6 percent for 2000, 2.5 percent for 2001, 2.6 percent for 2002 and 2.5 percent thereafter. Price contingencies add up to about 4 percent of the Project base cost, which is equivalent to about US$17.89 million. Interest During Construction (IDC) and other charges, including the front-end fee, levied during the Project implementation period on the disbursed and undisbursed portions of the Bank Loan are estimated to be about US$25.87 million over the four year Project implementation period. The latter costs which will be fully borne by the Central Government. The total Project cost is estimated at US$519.6 million (or about Yuan 4.31 billion equivalent), exclusive of IDC and commitment charges (US$23.77 million) and the I% front-end fee charged by the Bank (US$2.10 million). - 50 -  Table 2-1: Project Cost Summary The People's Republic of China Yangtze Dike Strengthening Project (YDSP) tRMB Million) IUSS Milliont Components Project Cost Summary % % Total Foreign Base Local Foreian Total Local Foreian Total Exchanae Costs A. Changjiang Water Resources Commission 1. River Bank Protection 346.0 283.1 629.2 41.7 34.1 75.8 45 17 2. Seepage Control for Dike Foundaton 40.3 31.0 71.3 4.9 3.7 8.6 44 2 3. Technical Review Panel 3.3 6.8 10.1 0.4 0.8 1.2 67 - 4.RiverModeling 127.2 272 154.3 1531 33 1R6 IF 4 SubtotalChangjiangWaterResourcesCommission 516.8 348.1 864.9 62.3 41.9 104.2 40 23 B. Flood Disaster Prevention Center 1. Standards Review 25 37 62 03 05 n R - Subtotal Flood Disaster Prevention Center 2.5 3.7 6.2 0.3 0.5 0.8 60 - C. Hubei Province 1. Dike Rehabilitation 856.2 699.5 1,555.8 103.2 84.3 187.4 45 42 2, Dike Safety Monitoring System 5.3 9.8 15.2 0.6 1.2 1.8 65 - 3. Operafion and Maintenance Equipment 15.5 28.7 44.2 1.9 3.5 5.3 65 1 4. Resettlement 465.4 74.6 540.1 56.1 9.0 65.1 14 14 5. Environmental Management and Monitoring 2.8 0.9 3.7 0.3 0.1 0.4 25 - 6. Project Management 102.9 34.3 137.2 12.4 4.1 16.5 25 4 7. Institutional Development 76f 12 3 199 05 1 5 2 4 C 1 Subtotal Hubei Province 1,455.7 860.2 2,316.0 175.4 103.6 279.0 37 62 D. Hunan Province 1. Dike Rehabilitation 231.6 124.7 356.4 27.9 15.0 42.9 35 10 3. Operation and Maintenance Equipment 1.0 3.1 4.1 0.1 0.4 0.5 75 - 4. Resettlement 147.4 24.3 171.7 17.8 2.9 20.7 14 5 5. Environmental Management and Monitoring 3.7 6.9 10.5 0.4 0.8 1.3 65 - 6. Project Management 11.0 1.2 12.2 1.3 0.1 1.5 10 7. Institutional Development 511 1 7 66 0.6 02 OR 25 - Subtotal Hunan Province 399 7 1f1 9 551 6 48 2 195 fi77 29 15 Total BASELINE COSTS 2,374.7 1,373.9 3,748.6 286.1 165.5 451.6 37 100 Physical Contingencies 258.4 157.4 415.8 31.1 19.0 50.1 38 11 PrceContingencies 874 F71 144.'i 109 7n 170 39 4 Total PROJECT COSTS 2,720.5 1,588.5 4,309.0 328.1 191.5 519.6 37 115 Interest Durng Construction - 196.9 196.9 - 23.8 23.8 100 5 Front-end Fee - 174 174 - 21 21 100 Total Costs to be Financed 2,720.5 1,802.8 4,523.3 328.1 217.4 545.5 40 120 - 51 -  Table 2-1 A: Detailed Project Cost The People's Republic of China Yangtze Dike Strengthening Pnoject (YOSP) (RMB Mitlion) (USS Millionj Components Project Cost Summary % % Total Foreign Base I oral Fo-ein Tot-al I -al ForCin Totat Exchange Costr A. Changjiang Water Resources Commission 1. River Bank Protecion 346.0 283.1 629.2 41.7 34.1 75.6 45 17 2. Seepage Control for Dike Foundation 40.3 31.0 71.3 4.9 3.7 8.6 44 2 3. Technical Review Panel 3.3 6.8 10.1 0.4 0.8 1.2 67 4. River Modeling River Models 127.2 27.2 1543 153 33 186 18 4 Subtotal Changjiang Water Resources Commission 516.6 348.1 864.9 62.3 41.9 104.2 40 23 B. Flood Disaster Prevention Center 1. Standards Review 2 s7 6 7 n I 0 9 o 8 60 Subtotal Flood Disaster Prevention Center 2.5 3.7 6.2 0.3 0.5 0.8 60 - C. Hubei Province 1. Dike Rehabilitation Embankment 552.0 451.6 1,003.6 66.5 54.4 120.9 45 27 Seepage Control 162.7 133.1 295.7 19.6 16.0 35.6 45 8 Cross Dike Structures 31.9 26.1 58.0 3.8 3.1 7.0 45 2 Other Minor CAvil Works /a 10967 ARA 1 65 139 107 239 49 5 Subtotal Dike Rehabilitation 856.2 699.5 1,555.8 103.2 84.3 187.4 45 42 2. Dike Safety Monitoring System 5.3 9.8 15.2 0.6 1.2 1.6 65 3. Operabon and MaintenanceEquipment 16.5 26.7 44.2 1.9 3.5 5.3 65 1 4. ReseBlement Land Acquisibon and Other Compensabons 236.8 39.5 276.3 28.5 4.6 33.3 14 7 Public Faclites 199.2 35.2 234.3 24.0 4.2 28.2 15 6 Resettlement Monitoring & Evaluation 6.7 - 6.7 0.6 - 0.8 - - Resettlement Administration 14.8 - 14.8 1.8 - 1.8 Reseotlement Planning & Design 7 9 - 79 10 1 - - Subtotal Resettlement 465.4 74.6 540.1 56.1 9.0 65.1 14 14 5. Environmental Management and Monitoring Environmental Management Office 1.4 0.6 1.8 0.2 0.1 0.2 25 - Environmental Training 0.2 0.1 0.3 0.0 0.0 0.0 25 Supervision and Monitonng 1 7 0A 1 0 o1 0I n n 7 75 Subtotal Environmental Management and Monitoring 2.8 0.9 3.7 0.3 0.1 0.4 25 8. Project Management Project Administration 30.0 10.0 40.0 3.6 1.2 4.8 25 1 Project Planning and Design 63.4 21.1 84.5 7.6 2.5 10.2 25 2 Construction Supervision 9g5 3 2 127 1 1 0.4 1 5 25 - Subtotal Project Management 102.9 34.3 137.2 12.4 4.1 16.5 25 4 7. Institutional Devetopment Consulting Serices 6.6 6.6 13.3 0.8 0.8 1.6 60 - Study Toum & Training 0.0 0.0 0.0 0.0 0.0 0.0 50 lnsStubonal Support for O&M Organizations 1 0 6 6 66 0 1 07 0 8 B' Subtotal Institutional Development 7 6 12 3 199 0 9 1 5 2A4 62 1 Subtotal Hubei Province 1,455.7 860.2 2,316.0 175.4 103.6 279.0 37 62 D. Hunan Province 1. Dike Rehabilitation Embankment 175.5 94.5 270.0 21.1 11.4 32.5 35 7 Seepage Control 44.7 24:1 68.8 5.4 2.9 8.3 35 2 Other Minor Civil Works lb 114 61 17.6 1.4 n7 21 36 - Subtotal Dike Rehabilitation 231.6 124.7 356.4 27.9 15.0 42.9 35 10 3. Operaton and Maintenanre Equipment 1.0 3.1 4.1 0.1 0.6 0.9 75 - 4. Resettlement Houses and Associated Facilibes 23.1 4.1 27.2 2.8 0.5 3.3 15 1 LandAcquisitonandOtherCompensabons 85.2 15.0 100.3 10.3 1.8 12.1 15 3 Public Facilites 13.6 2.4 16.0 1.6 0.3 1.9 15 - Resetlement Monitoring & Evaluation 2.8 0.3 3.2 0.3 0.0 0.4 10 Resettlement Administration 12.7 1.4 14.1 1.5 0.2 1.7 10 - Resettlement Planning & Design 99 11 111 12 01 13 10 Subtotal Reselement 147.4 24.3 171.7 17.8 2.9 20.7 14 5 S. Environmental Management and Monitoring Environmental Management Office 2.2 4.1 6.3 0.3 0.5 0.8 65 - Environmental Training 0.5 0.9 1.4 0.1 0.1 0.2 65 Supervision and Monitorng 10 18 26 8 n1 0 2 03 65 Subtotal Environmental Management and Monitoring 3.7 6.9 10.5 0.4 0.8 1.3 65 6. Project Management Project Administration 2.0 0.2 2.2 0.2 0.0 0.3 10 Projed Ptanning and Design 7.2 0.8 8.0 0.9 0.1 1.0 10 Construction Supenvision 18 07 20 02 00 02 10 Subtotal Project Management 11.0 1.2 12.2 1.3 0.1 1.5 10 7. Institutional Development Consultng Services 5.0 1.7 6.6 0.6 0.2 0.6 25 Study Tours & Training 00 00 0 0 0 0 0 0 0 0 10 Subtotal Institutional Development 5.0 1 7 6.6 0.6f 0 2 0 8 25 Subtotal Hunan Province 3997 1fi19 Sf1f 482 195 677 91 16 Total BASELINE COSTS 2,374.7 1,373.9 3,748.6 266.1 165.5 451.6 37 100 Physical Contingendes 258.4 157.4 415.8 31.1 19.0 50.1 38 11 Price ConOngencies 874 571 1445 10.9 70 179 39 4 Total PROJECT COSTS 2,720.5 1,588.5 4,309.0 . 328.1 191.5 519.6 37 115 Interest During Construcion - 196.9 196.9 - 23.8 23.8 100 5 Commitment Charges - 174 174 - 21 21 100 Total Costs to be Financed 2,720.5 1,802.8 4,523.3 328.1 217.4 545.5 40 120 - 52 -  Table 2-1 B: Detailed Project Base Cost by Year The People s Republic of Chr,a Yarngtze Dike Strengthwirng Project (YDSP) Project Components by Year -BEass Costs Baase Cost iRM B Million) Base Cost (US S Milli onl 2000 2001 2002 2003 7004 ~~~~Total 2000 2001 2002 2003 2004 Total A Changjiang Water Resources Commission 1. Rher BankPnoterdon 10.5 21R6. 266.0 94.3 41 8 629.2 1.3 26.1 32.0 11 4 5.0 75.8 2.5Seepage Controlbfor Dike Foundafon - 20.1 20.8 15.2 15.2 71.m3 - 2.4 2.5 1.8 1.8 a86 3. Technical Review Panel - 2.5 2.5 2.5 2.5 10.1 - 0.3 0.3 0.3 0.3 1 2 4. River Modeling River Models - 64.3 70.5 19.5 - 154,3 7 77 8.5 2 3 - 18 6 Subtotal ChangjiangWakter Resources Commission 10.5 303.5 359.8 131.5 59.6 864.9 1.3 36.6 43.3 15.8 7.2 104 2 B. Flood Disaster Prevention CeDnterr 1. Standards Review - 2.5 2,9 0.8 - 5.2 - 0.3 0.4 0.1 0 8 Subtotal Flood imsate rPrevention Center - 2.5 2.9 0.8 - 8.2 - 0.3 0.4 0.1 - 0.8 C. Hubei Provbce 1. Dike Rehabilitation Embankment - 250.9 250.9 250.9 250.9 1,003.6 - 30.2 30 2 30 2 30.2 120.9 Seepage Control 73.9 73.9 73.9 73.9 295.7 - 8.9 8 9 8.9 8.9 35.6 Cross D,ke Structures - 23.2 17.4 17.4 - 58.0 - 2.8 2.1 2.1 - 7.0 O6ler Minor Civil Works la- - 3. 639 113 185 - - 0 77 58 29 Subtotal Dike Rehabilitahon - 348.0 345.5 406.1 456.1 1,555.8 - 41.9 41.6 48 9 55.0 187.4 2. Dike Safety MonitornagSystem - 7.7 7.5 - - 15.2 - 0.9 0.9 - - 1.8 3. Operation and Maintenance Equipment 22.1 22.1 414.2 - 2.7 2 7 - 5.3 4. Resetbement Land Acquisition and Other Compensations - 55.3 165.8 55.3 - 276.3 6 67 20.0 6.7 - 33.3 Public Facilities 46.9 140.6 46.9 234.3 5.6 16.9 5.6 28.2 Resetteieent Monitordng &Evaluation 0.8 1.3 2.9 1. 0.6 6.7 0.1 0.2 0.4 0.2 0.1 0.8 Resettlement Administrafion 2.4 3.0 3.8 3.0 2.6 14.8 0.3 0.4 0.5 0.4 0.3 1 8 Resetlernent PlaDnnirng & Design 3.1 . .9 05 05 - - - 1.0 Subtotal Resrttlenmnt 6.9 110.4 313.1 106.5 3.2 540.1 0.8 13.3 37 7 12.8 0.4 65.1 S. Environmnbntl Management and Monitoring EnvronmenbalMana,qement Office - 0.9 0.3 0.3 0.3 1.8 - 0.1 0.0 0.0 0.0 0.2 EnvinonnenSta Trainir,qg 0.2 0.2 - - 0.3 - 0.0 0.0 - - 0.0 Supervision and Monoriton,g 0.4 0.4 0.4 0.4 1 6 - 0.0 0.0 0 0 0. 0 2 Subtotal Envinonmental Managemrnt and Moitoring - 1.4 0.9 0.7 0.7 3.7 - 0e2 0.1 0 1 e1 0 4 S. Project Management Project Admiristratbon 3.0 10.5 9.5 9.5 7.6 40.0 0.4 1.3 1.1 1.1 0.9 4.8 Project Plannin and Design 33.8 33.8 16.9 84.5 4.1 4.1 2.0 10.2 Construction Supervision 0 6 3.2 3.2 3.2 2.5 12.7 0.1 0.4 0 4 0.4 0 3 1.5 Subtotal ProjecttManagement 37.4 47.5 29.5 12.6 10.1 137 2 4.5 5.7 3 6 1.5 1.2 16.5 7. Inshbrhonr Dev lopnment Consulitng Services - 3.3 3.3 3.3 3.3 133 - 04 04 04 04 1.6 Stud,h Tours & Trining 0.0 0.0 0.0 o 0 0.0 o 0 0 0 0.0 0.0 0 0 lrostbtutnal Support forO&M Orgqanizafons - 1.7_ 1.7 1.7 1,7 6.6 - 0.2 0 2 0.2 0.2 0.8 Subtotal Institutional Devetlopment - 5.0 5.0 SO0 5.0 19.9 - 0.6 0.6 0 6 0.6 2 4 Subtotal Hubr,i Province 44.3 520.1 723.6 553.0 475.1 2,316.0 5.3 62.7 87.2 66.6 57.2 279.0 iX Hunan Province t. Dike Rehabilitation Embankment - 28.7 209 8 31.5 - 270 0 - 3.5 25.3 3.8 32.5 Seepage Control 6.2 38.2 24.4 8 8.8 - 0.7 4.6 2.9 8.3 Other MinorCivil Works/lb- - 14 1. 2. 176 02 .7 3 21 SubtotalDike Rehabilitation - 34.9 249.4 69.8 2.4 356.4 4 42 30e0 8.4 0.3 42.9 3. Operabon and Maintenance Equipment 4.1 - - 4.1 - - 0.5 - - O.S 4. Resotfiament Houses arnd Associated Facilities 8.2 13.6 5.4 27.2 1.0 1 6 0.7 - - 3.3 Land Acqbsiton and Other Compemsatons 25.1 25.1 25.1 25.1 - 100.3 3.0 3.0 3.0 3 0 - 12 1 Public Facilibes 4.0 4.0 4.0 4.0 - 16.0 0.5 0.5 0 5 O.S 1.9 Resetfement Monitoring &Evaluation - 0.9 0.9 0.6 0.6 3.2 - 0.1 0.1 0 1 0.1 0 4 Resettlement Administration 4.1 2.8 2.8 2.5 1.9 14.1 0.5 0.3 0.3 0.3 0 2 1.7 Reset3ernent Planning &Design 6.8 2.2 2.2 11.1 0.8 0.3 0.3 - - 1 3 SubtotalResefttiment 47.9 48.6 40.5 32.2 2.5 171.7 5.6 S 9 4 9 3.9 0 3 20.7 5. Environmntal ManagenrBnt and Monitoring Environmental Managemfent Office - 1.6 1.6 1.6 1.6 6.3 0.2 0.2 0.2 0 2 0.8 Envfronmental Training - 0.3 0.3 0.3 0.3 1. A 0.0 0 0 0.0 0 0 0.2 Supervisinand Monitorng - 0.7 0,7 0.7 0.7 2.8 - 0.1 0 1 0.1 0.1 0.3 SubtotalEnvinonmentatManagement and Monitoring - 2.6 2.6 2.6 2.6 10.5 - 0.3 0.3 0.3 0.3 1.3 S. Project Managenent Project Admninistration 0.7 0.7 0.3 0.3 0.3 2.2 0.1 0.1 0.0 0 a 0.0 0.3 Project Plamning and Design 4.8 1.1 0.8 0.7 0.7 8.0 0.6 0.1 0.1 0.1 e1 1.0 Constocbon Supervisin 0.4 0,4 0.4 0.4 0.4 2.0 0.0 0 0 0.0 0.0 0 0 02.2 SubtotalProject Management 5.9 2.2 1.4 1.3 1.3 12.2 0.7 0 3 0.2 0 2 0.2 1.5 7. Institutional Devralop-rint Consutnrg Services - 1.7 1.7 1.7 1.7 6.6 0 2 0.2 0.2 0.2 0.8 Stur.,hTours &Tnaining - 0.0 0.0 0.0 0.0 0 0 - 0.0 0.0 0.0 0.0 0 0 Subtolal Institutional i7evelopment - 1.7 1.7 1.7 1.7 6.6 0.2 0.2 0.2 0.2 0.6 Subtotal Hunan Pronzvn 53.8 90.1 299.7 107.4 10.6 581.6 6.5 l0.8 36.1 12 9 1 3 67.7 TotalBASEUNE COSTS 108.6 916.1 1,38S.9 792.8 545.2 3.748.6 13.1 110.4 167.0 95-S r6S.7 451 6 Physical Contirngencies 9.7 107.8 156.5 84.2 57.5 415.8 1.2 13.0 18 9 10.1 6.9 50.1 Price Contingencies Inflation LoJcal - 3.1 25.0 30.1 29.3 87.4 - 0.4 3.0 3.6 3.5 10.5 Foreign - 2.9 15.0 18.5 21.9 58.2 - 0.3 1.8 2.2 2.6 7 0 Subtotal Inflation - 6.0 39.9 48.6 51.1 145.7 - 0.7 4.8 S 9 6.2 17.5 Devalualon - -1.1 -1.9 0.3 1.6 -1.1 - 0.2 0.4 -0.1 -0.2 0.3 Subtotal Price Con5nrgencies - 4.9 36.0 48.9 52.7 144.5 - 0.9 5. S 8 S.9 179.9 Total PROJECT COSTS 118.3 1,028.8 1.560.5 925.9 655.5 4,309.0 14.3 124.3 191.1 111.5 78 6 519 6 - 53 -  Table 2-1 C: Detailed Project Cost including Contingencies by Year The People's Republic of China Yangtze Dike Strengthening Project (YDSP) Project Components by Year,- Totals Including Contingencies Totals IncIudino Contineencies IRMB Milisol Totals Including Contingencies (USS Millioni 2000 2001 2002 2003 2004 Total 2000 2001 2002 2003 2004 Total A. Changjiang Water Resources Commission 1. RiverBank Protection 12.5 261.2 327.2 119.5 54.6 775.1 1.5 31.6 39.6 14.4 6.5 93.6 2. Seepage Control for Dike Foundation - 22.2 23.5 17.7 18.2 81.5 - 2.7 2.8 2.1 2.2 9.8 3. Technical Review Panel 2.7 2.7 2.8 2.9 11.1 - 0.3 0.3 0.3 0.3 1.3 4. River Modeling River Models - 693 75.6 21.6 16665 - 8,4 9.1 206 - 20.1 Subtotal ChangjiangWaterResources Commission 12.5 355.4 429.0 161.6 75.7 1,034.2 1.5 42.9 51.9 19.4 9.1 124.t B. Flood Disaster Prevention Center 1. Standards Review - 268 31 09 - 6.5 - 0 3 0.4 01 - 0.8 Subtotal Flood Disaster Pevention Center - 2.6 3.1 0.9 - 0.5 - 0.3 0.4 0.1 - 0.8 C. Hubei Province 1. Dike Rehabilitation Embankment 277.4 282.9 291.4 300.2 1,151.9 33.5 34.2 35.1 30.0 13808 Seepage Control 81.7 83.4 05.9 88.4 339.4 - 99 10.1 10.3 10.6 40.9 Cross Dike Structures 25.6 19.6 20.2 - 65.4 - 3.1 2.4 2.4 - 7.9 Other Minor Civil Works la 3.7 74.2 157.1 235.0 - - 0.4 .89 1808 28.2 Subtotal Dike Rehabilitation - 384.7 389.0 471.7 545.7 1,791.7 - 46.5 47.1 56.8 65.4 215.8 2. Dike Safety Monitoring System 81 8.1 - - 16.2 - 1.0 1.0 - - 2.0 3. Operation and Maintenance Equipment - 22.6 23.3 - 45.9 - 2.7 2.8 - 5.5 4. Resettlement Land Acquisition and Other Compensations - 61.1 187.0 64.2 - 312.2 - 7.4 22.6 7.7 - 37.7 Public Facilites - 51.8 158.6 54.4 - 264.8 - 6.3 19.2 6.6 - 32.0 Resedlement Monitoring & Evaluation 0.6 1.5 3.3 1.6 0.7 7.6 0.1 0.2 0.4 0.2 0.1 0.9 Resettlement Administration 2.0 3.3 4.3 3.5 3.1 166 0.3 0.4 0.5 0.4 0.4 2.0 Resettlement Planning & Design 4.3 4.3 - - - 867 0.5 05 - - - 1.0 Subtotal Resettlement 7.5 122.1 353.1 123.7 3.8 610.2 0.9 14.7 42.7 14.9 0.5 737 S. Environmental Management and Monitoring Environmental Management Offnce o0. 0.3 0.3 0.3 1.9 - 0.1 0.0 5.0 0.0 0.2 Environmental Training 0.2 0.2 - 0.3 - 0.0 0.0 - - 0.0 Supervision and Monitoring 0.4 0.4 0.4 0.4 1.7 0.0 0.1 01 0.1 0.2 Subtotal Environmental Management and Monitoring - 1.5 0.9 0.8 0.8 4.0 - 0.2 0.1 0.1 0.1 0.5 S. Project Management ProjectAdministration 3.1 11.1 10.2 10.5 8.6 43.5 0.4 1.3 1.2 1.3 1.0 5.2 Project Planning and Design 35.5 35.5 17.8 - - 88.8 4.3 4.3 2.1 - - 10.7 Construction Supervision 0,7 3.4 34 3.5 2.9 1309 0.1 0.4 04 0.4 0.3 1 7 Subtotal ProjectManagement 39.3 50.0 31.4 14.0 11.5 146.2 4.7 6.0 3.8 1.7 14 17.6 7. Institutional Development Consulting Services - 3.5 3.6 3.7 3.8 14.5 - 0.4 0.4 0.4 0.5 1.8 Study Tours & Training 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Institutional Support lor O&M Organizations - 1.8 1.8 1_ 1 9 7.3 - 02 0.2 0.2 0.2 0 9 Subtotal Institutional Development - 53 5 4 5.5 5,7 21 8 - 06 0.6 0 7 0.7 2.6 Subtotal Hubei Province 46.8 571.6 811.0 639.0 567.5 2,636.0 506 69.1 98.0 76.9 68.0 317.7 D. Hunan Province 1. Dike Rehabilitation Embankment - 31.7 236.6 36.6 - 304.9 - 3.8 28.6 4.4 - 36.8 Seepage Control 6 0.9 43.1 28.3 - 78.2 - 0.8 5.2 3.4 - 9.4 Other Minor Civil Works /b 1.5 16.0 2.0 20.4 - 0.2 1.9 0.3 2.5 Subtotal Dike Rehabilitation - 386 281.2 80.9 2.9 403.6 - 4.7 34.0 9.7 0.3 48.7 3. Operation and Maintenance Equipment - 4.4 - - 4.4 - 0.5 - - 0.5 4. Resettlement Houses and Associated Facilities 9.0 15.0 6.1 30.2 1.1 1.8 0.7 3.6 Land Acquisition and Other Compensations 27.6 27.7 28.3 29.1 112.7 3.3 3.3 3.4 3.5 13.6 Public Facilities 4.4 4.4 4.5 4.6 18.0 0.5 0.5 0.5 0.6 - 2.2 Resettlement Monitoring & Evaluation - 1.0 1.1 0.7 0.8 3.6 - 0.1 0 1 0.1 0. 0.4 ReseotlementAdministration 4.5 3.1 3.2 2.9 2.3 15.9 0.5 04 0.4 0.3 0.3 1.9 ResettlementPlanning& Design 73 24 2,5 - - 122 0.9 03 03 - - 1.5 Subtotal Resettlement 52.7 53.8 45.6 37.4 3.0 192.5 6.3 6.5 5.5 4.5 0.4 23.2 S. Environmental Management and Monitoring Environmental Management Office - 1.7 1.7 1.8 1.8 7.0 - 0.2 0.2 0.2 0.2 0.8 Environmental Training - 0.4 0.4 0.4 0.4 1.5 - 0.0 0.0 0.0 0.0 0.2 Supervision and Monitoring - 0.7 08 08 08 31 - 01 01 01 01 0.4 Subtotal Environmental Managementand Monitoring 2.8 2.8 2.9 3.0 11.6 - 03 0.3 0.4 0.4 1.4 6, Project Management Project Administration 0.8 0.8 0.3 0.3 0.3 2.4 0.1 0.1 0.0 0.0 0.0 0.3 Project Planning and Design 5.0 1.1 0.8 0.7 0.7 8.4 0.6 0.1 0.1 0.1 0.1 1.0 Construction Supervision 0.4 0.4 0.4 0.4 05 22 0.1 01 0.1 0.1 0.1 0.3 Subtotal Project Management 6.2 2.3 1.5 1.4 1.5 12.9 0.7 0.3 0.2 0.2 0.2 1.6 7. Institutional Development Consulting Services - 1.8 1.8 1.8 1.0 7.3 - 0.2 0.2 0.2 0.2 0.9 Study Tours & Training 0.0 0.0 0.0 0.0 0.0 - 0.0 0.0 0.0 0.0 0.0 Subtotal Institutional Development - 15 I8 1 8 1 9 7 3 - 02 0 2 0.2 0,2 0 9 Subtotal Hunan Province 58.9 992 3374 1245 123 6323 71 120 40.8 150 1 5 763 Total PROJECT COSTS 118.3 1,028.8 1,580.5 925.9 655.5 4,309.0 14.3 124.3 191.1 111.5 78.6 519.6 - 54-  Annex 4: Cost Benefit Analysis Summary CHINA: Yangtze Dike Strengthening Project Economic Analysis (Table 1 below) [For projects with benefits that are measured in monetary terms] Present Value of Flows Fiscal Impact ; - ~~~~Economnic Finaneial Ahtalys E-- .COnOmIC I Financial Taxes Subsidies Benefits: 16.81 0.40 16.41 in Yuan Billion Costs: 4.84 4.83 0.11 0.12 In Yuan Billion Net Benefits: 11.97 -4.43 0.11 16.53 In Yuan Billion IRR: 49.2% N/A If the difference between the present value of financial and economic flows is large and cannot be explained by taxes and subsidies, a brief explanation of the difference is warranted, e.g. "The value of financial benefits is less than that of economic benefits because of controls on electricity tariffs." Summary of Benefits and Costs: The economic costs for the Project were derived from the financial costs by adjusting for taxes, duties, and interest during construction and the shadow pricing of foreign exchange at Yuan 8.3 = US$1. All discounted investment costs (including resettlement costs) include physical contingencies and incremental 0 & M costs if there are any. Measured economic benefits derive from: (i) flood alleviation; (ii) incremental cost changes for flood fighting; and (iii) incremental cost changes in the use of detention basins. The largest benefits are the flood alleviation benefits which will be generated because the rehabilitated dikes have less likelihood of breaching. These benefits form 85% of the total. The other benefits are reductions in: (i) flood fighting costs; and (ii) the costs of using the detention basins. The flood fighting benefits are due to less requirements in event of a flood to undertake special emergency measures to prevent breaching of the dikes. As a result of stronger dikes they are able to resist higher flood frequencies and the use of detention basins is reduced. The total discounted benefits are Yuan 16.8 billion and the NPV is Yuan 12.0 billion. Details are given in Table 2 below. Overall the Project has an EIRR of about 49% and a B/C ratio of 3.5 (see Table 2 below). Between the two provinces Hubei clearly has the largest benefits from the Project. In the 1998 flood, Hubei, which has the longest river length, had the greatest damage. - 55 -  Table 2: Summary of Economic Analysis Results Costs Incremental Capital Cost 2.87 1.98 4.85 Benefits Flood Alleviation 10.39 4.22 14.61 Reduction in 0 & M 0 0.21 0.21 Reduction Flood Fighting Cost 0.02 0.14 0.16 Reduction in Land Drainage damage 0 0 0 Reduction in Detention Basin Costs 1.82 0 1.82 Total 12.23 4.57 16.80 NPV 9.36 2.59 11.96 - 56 -  Main Assumptions: A. INTRODUCTION The primary aim of this Project is to reduce flood losses in the future as compared to those that would occur if nothing was done. Thus, the primary category of benefits to be evaluated is the expected value of the reduction of flood losses in future years. Losses in the past have been substantial; the 1954 flood affected nearly 19 million people, of which more than 30,000 died; 4.3 million houses were destroyed and more than 200,000 hectares of farm land were flooded. The 1998 flood involved, in some instances, an even higher water level and resulted in a loss of nearly US$4 billion in Hunan and US$6 billion in Hubei. The Yangtze valley was heavily settled between the 9th and 13th centuries when an agricultural shift from dry land farming in the north to paddy production in the south, accompanied by a shift in the distribution of population, occurred. Over these four centuries, living standards rose whilst the population doubled. The Project largely involves the rehabilitation or reconstruction of existing main dikes, some of which date from the 15th Century with subsequent reconstruction, notably after the 1954 flood. The existing dikes offer a low design standard of protection, many only giving a designed standard of protection against floods of less than a return period of 15 years. In addition, they are generally in a poor condition with many defects such as cracks, piping, a high phreatic line and bank failure. In 1998, widespread breaching of the dikes was only minimized by a massive flood fighting effort at a substantial cost. A second component of the comprehensive flood action plan that is being funded is improvements to the flood warning system. Because flooding is typically meters deep if it occurs, the main objectives of the flood waming system are, firstly, to improve management of flood flows through the use of detention basins. Thus, it is claimed that, for example, the 15 year flood can, through management, be made to have the effect of a 7.5 year event. The second purpose of the flood warning system is to reduce the risk to life rather than to reduce property losses. With the depths of flooding involved, flood proofing will not generally be feasible and a significant number of the buildings are likely to be destroyed by a flood. Therefore, the only contribution flood warning can make in this instance to reducing flood losses would be by the evacuation of livestock and small movable private property. As this should be given lower priority than the evacuation of people, this possible contribution has been ignored. Flooding poses a considerable risk to life because of the depth of flooding and the probable collapse of some buildings. It is not considered that it would be helpful to seek to evaluate the number of lives that the proposed scheme will save and methods of predicting the number of lives that will be lost in a flood are also in their infancy. The flood action plan for the Yangtze river is a program of different actions including afforestation and flood warning as well dike strengthening and raising; it is not within the scope of this analysis to attempt to assess whether the program as a whole is the best option or the operational strategy in total is the best strategy. The main option which is not included as a component of the overall strategy is managed retreat of the defense line. Because wetlands are valuable environmental assets, it is often appropriate to consider retreating the defense line in order to open up the river. The area between the retreated defense line and the river may then be allowed to revert to a natural wetland or used for pasture. At present, this is probably not a viable option in the Yangtze river basin for several reasons. Firstly, the availability of arable land per capita is very low in China. This relative scarcity of arable land makes the potential abandonment of fertile arable land unlikely to be an appropriate strategy at present. Since arable land is considerably more productive than livestock farming, conversion of arable land to livestock use is also unlikely to be appropriate. Secondly, retreating the defenses would involve resettlement of the populations currently inhabiting that land and because of its productivity, the area is one of most densely populated areas of China. Thirdly, construction of a new dike system on a new line is likely to be more - 57 -  expensive than renovating the existing system although the costs of river training may be reduced. In the long run, it is probable that managed retreat will become a viable option as population pressures ease and living standards rise further; and so current actions should bear this in mind. It is common to compare different design standards of protection and this comparison may seek to determine the optimum standard of protection. In this case, the agreed Yangtze Basin Flood Control Master Plan defines the appropriate design standard of protection as being to protect against the 1954 flood level. The renovated dikes are designed to achieve this standard when operated in conjunction with the other elements of the flood action plan. There are considerable uncertainties about the hydrology and the hydraulics of the Yangtze basin and it is not considered realistic to attempt to assess what it is the optimum standard of protection. Such analysis would be complicated because when a flood above the design standard is expected, the response is to undertake emergency works to seek to raise the crest height of the dike so as to allow the extreme flood to be passed safely. Therefore, the assessment of the design standard of protection is perhaps better conceived of as a choice between raising the dike to a specific height now or through temporary emergency works in the event of an extreme event. The determination of the crest width to adopt in part is influenced by such a consideration. Secondly, when a very extreme event occurs, the likely response is to allow some areas to breach or overtop in order to provide additional flood storage areas in order to protect other areas. The categorization of dikes into classes 1 to 5, with different crest widths and freeboards, reflects such an approach. The implication for a benefit-cost analysis is thus that in order to assess the benefits of raising a dike protecting one area of great economic importance, the losses from a flood in another area from such an event need to be assessed. To do this would require detailed modeling of the developing flood; a problem complicated by the different possible timings of floods from the main stem and the tributaries. Overall, therefore, the dike raising project fits into a broader management strategy in which, as a flood develops, the sequence of actions would be: * reservoir retention; * the use of the detention basins; * emergency dike raising; and * breaching of dikes in the lowest priority areas to create emergency detention basins The last strategy would be a desperate last resort and is not formally contemplated. The application of this management strategy is complicated by the need to manage flows not just on the main stem of the Yangtze but also on its tributaries so that the peak flood flows do not coincide. A benefit-cost analysis can identify the best of the options that compare. In this analysis, a single project option, the core of which is dike strengthening and raising, was assessed for the two Provinces. This option in turn is part of a comprehensive flood action plan for the Yangtze river that includes the use of re-afforestation, flood storage reservoirs and flood detention basins. The benefit-cost analysis of the Project for each Province is calculated as the marginal benefits and costs of the Project assuming that the other components of the action plan are undertaken. In the case of the Three Gorges Project (TGP), these benefits are phased in with the completion of TGP. B. BENEFITS Six possible strands of benefits have been identified: * reductions in flood losses both from reduced risk of dikes overtopping and breaching; * reductions in the probability of using the detention basins; - 58 -  * a potential reduction in annual Operation and Maintenance costs; * a reduction in the costs of emergency works during a flood; * reduced disruption to navigation; and * land drainage benefits. B-1: Reduction in flood losses The primary benefits of flood alleviation schemes are given by the losses that would otherwise occur. The National Codes (SL 72-94 and SL 206-98) require surveys to be undertaken after each flood to determine the flood losses. Thus, an extensive data base of flood losses has been built-up, although the sampling strategy adopted was weak in one instance and some of the derived values were for financial rather than economic losses. In general, the raw data was not available and the aggregated loss data has generally been used in the benefit-cost analyses prepared for each of the three Provinces. Where possible and where appropriate, loss data has been developed instead from basic principles. Usually the method used to assess the benefit of flood alleviation is to determine the loss-probability curves for the baseline and do something options, the losses from floods being plotted against the exceedance probabilities of those floods, and then the area between the two curves is calculated. This area is the reduction in the expected annual average flood loss. For this Project, the area between the curves has to be weighted by the probabilities that the embankments will not be breached. For example, if the probability that the existing dike will fail when a flood of a 10 year return period occurs is 0.8 and the probability that the reinforced dike will fail is only 0.01 then the incremental benefit is given by 0.79 times the difference in the loss experienced from a flood with a return period of 10 years and no flood protection at all. Reductions in failure probabilities A primary purpose of the Project is to reduce the probability of a breach in the embankments from a flood event which will not overtop the embankment. Therefore, a critical parameter is the probability of breaching with and without the Project for different return period floods. The use of failure probabilities introduces a way of unifying three different aspects: * the probability of an embankment failing through piping, sand boiling or another problem from an event below the design standard of protection; * the probability of the embankment being overtopped; and * the likelihood of success of emergency flood fighting measures both to reinforce weak points to prevent failure below the design standard of protection and also in raising the crest level to protect against floods greater than the design standard of protection. Thus, it does not matter why the embankment fails as a result of a flood of some return period, and the usual approach of deriving a loss-probability curve can be defined as the simple case where the probability of failure for a flood of a given return period is zero for events below the design standard of protection and one for events greater than that design standard of protection. Although there is a theory available as the basis for assessing the probability that a dike will breach, there is an absence of an empirical data which will allow the prediction of breach probabilities as a function of the features of the soil, dike and flood. Therefore, the design engineers in each of the two Provinces were asked to estimate the failure probability of the present embankments and those as designed in the Project. Moreover, sensitivity analysis was used to test the effect of varying the breach probabilities. A typical failure probability for dikes that was assumed for Wuhan is shown below in Table 3. - 59 -  Table 3: Failure Probabilities for the Dikes in Wuhan Municipality Flood Pre-Project With Project Probabi lities__ _ _ _ _ _ With Existing Existing Existing Strengthened Strengthened Strengthened Strengthened existing dike + dike + dike + TGP and raised and raised and raised and raised dikes detention TGP + detention dike dike + dike + TGP dike + TGP + basin basin detention detention basins basins 1I0 0 0 0 0 0 0 0 2 0.001 0 0 0 0 0 0 0 5 0o015 0 0 0 0.01 0 0 0 10 0.40 0.03 0.005 0 0.20 0.001 0 0 20 0.60 0.40 0.10 0 0.30 0.10 0.05 0 50 0.90 0.60 0.30 0.10 0.65 0.40 0.20 0.02 loo 1.00 0.80 0.65 0.30 1.00 0.70 0.50 0.10 200 1.00 1.00 0.85 0.70 1.oo 1.00 0.70 0.65 500 I00 I.0 1.00 1.00 1.00 I.00 I.00 1000 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Reduced risk of overtopping This is normally a critical parameter but as just described, it is treated in the integrated methodology as any event for which the probability of failure is one. This is to some extent a simplification because the possibility of a partial failure is omitted. Thus, it is assumed that either the whole area which would be flooded by some event is flooded or it is not flooded at all: any breach or overtopping being assumed to flood the area, the extent of this area depending only on the return period of the event. In practice, for some structures, overtopping will not cause complete failure of the structure and the volume of water that overtops the structure will be insufficient to flood the entire area. Loss-probability curves The losses from a particular flood event depend upon the depth and extent of flooding. Therefore, the gradient of the loss-probability curve, the plot of the monetary value of the losses from different floods against the exceedance probabilities of those floods, varies according to the change in the number of properties, or the area flooded, and the change in the depth of flooding in those properties or areas. The Yangtze flood plain is generally a flat area contained within a rim of hills and the flat area is low in relation to the normal water level of the river. If a flood occurs then commonly flooding is several meters deep in the affected area; once a building has been flooded to a few meters depth of flooding, there is little more damage left to do (Figure 1 below). Hydraulic models giving the flood depth in different areas were not available but some estimates of the flood extent for different return periods were available, as were some limited results from more detailed studies. Therefore, loss-probability curves had to be estimated based upon these extent-probability curves (see Table 4 below). Because of the reasons just given, these curves are considered to be a reasonable approximation to the loss-probability curve. An area of particular uncertainty is the success rate of bank protection works. -60 -  Table 4: Typical Loss Probability Curve (Estimated) Return period Loss (% of maximum loss value) 1 6 2 9 5 25 10 33 20 56 50 61 100 68 200 100 B-2: Reductions in flood fighting costs Flood fighting costs may be considered as part of the O&M costs because they are, in part, determined by the standard of O&M undertaken. Flood fighting costs are likely to be higher with poorly maintained dikes than with those dikes for which defects are identified and repaired during routine maintenance. In some cases, details of flood fighting and other costs were available for past floods. An escalating response model was used in the analysis as follows: * Dike watching Almost any flood causes some costs as resources and personnel are mobilized and the condition of the dikes is monitored. Some element of material stock piling may also be involved. These costs are however relatively small. * Emergency works As a flood develops and threatens to become more severe, works will be undertaken to reinforce weak points, particularly those points where a breach threatens. The cost of such works is considerably higher than that of dike watching. The poorer the dike is maintained, then the more likely are such costs to be incurred and the greater will be those costs. * Dike reinforcement If the dike has not failed through breaching, and the flood continues to raise and to threaten to overtop the dike, temporary works are likely to be undertaken to try to raise the dike crest through sandbagging or other means. At this point, a substantial proportion of the local inhabitants, as well as the emergency services and military personnel are likely to be involved. The real cost of this level of response is typically very high. * Repair and closure works If a dike breaches an emergency closure of the breach will be attempted. In Jiangxi Province, such action costed Yuan 12 million in 1998. Once the flood has receded, a permanent repair will be made; in the Jiangxi case, these works costed another Yuan 100 million. * Evacuation Where the population of a threatened area must be evacuated, then there can be substantial costs for transportation, providing temporary shelter and health care. * Relief costs Relief payments and compensation for losses should not be included in the benefit assessment because to do so would double count losses. If a farmer loses property valued at Yuan 1000 and the government makes relief payments to him of Yuan 300, the total economic loss remains at Yuan 1000 but now the farmer carries Yuan 700 of that loss and the government Yuan 300. B-3: Operation of detention basins In some Provinces, there are detention basins which would be used in the event of the more extreme floods. However, the use of the detention basins involves a considerable cost in terms of flood losses to the land - 61 -  uses inside those basins and also the cost of evacuating the population living within those detention basins. Where detention basins are required to be used, these costs will necessarily be incurred. In Hubei Province, these costs were estimated to amount to Yuan 1200 per capita. B-4: Reductions in disruption to navigation When the water level exceeds a critical level, the flood fighting headquarters in Beijing may order the suspension of shipping movements so as to eliminate the risk of wash damage to the embankments. In 1998, ship movements were stopped for one month. Raising the dikes will potentially reduce the probability and duration of such disruptions. The depth of the main channel in Hunan, for example, averages 25 meters and ranges up to 61 meters in maximum depth. In low flow periods, when the minimum depth in Hunan Province falls to 4 meters, there are occasional and short periods when the depth of water in some parts of the main channel results in the suspension of traffic. But given the width of the river, there are anticipated to be no adverse changes to navigation. B-5: Inland flooding It is understood that at present the pumping of local rainfall from the areas behind the dikes is suspended during major floods because of fears that the increased flow in the main river would further increase the risk of dike failure. Raising and heightening the dikes will make pumping possible during major floods and result, firstly, in reductions in localized flooding behind the dike and secondly enable the water table to maintained at the depths below ground level desirable for maximum crop yield for areas of dry land farming. However, no estimates of such benefits have been obtained. Conversely, any such localized flooding as a result of local rainfall will reduce the benefits of the main dike raising and strengthening project because such flooding will occur irrespective of whether the Project is undertaken. The code standard for pumping capacity is to remove all excess water within 3 days of the occurrence, variously, of the 10 year or 20 year rainfall event. In the absence of other information, both possibilities have been omitted from the analysis. B-6: Risk to life and health All engineers know that the real reason why flood alleviation schemes are undertaken is to reduce the risk to people's lives. However, they are then forced to justify the proposed Project in economic terms on an entirely different basis: the reductions in the losses to buildings, their contents and to agriculture. In this instance, the historic record demonstrates that the potential loss of life is very large indeed. It is not however recommended that 'values of life' should be introduced into the benefit-cost analysis of flood alleviation projects. Rather the relative degree of risk should be assessed, although this cannot yet be done with any formal precision. Floods also cause health damage, stress and anxiety; they disrupt life and kinship relations especially when people are forced to leave home. Survey data for the UK shows that 40-70% of flooded households report that the health of at least one family member is adversely affected by a flood and floods in the UK are trivial compared to those in China. There is some evidence to show that children, the elderly and female headed households are particularly adversely affected by flooding. UK survey data shows that to the households affected, these other affects are frequently regarded as more severe than the damages to their home and replaceable property. A number of snail and disease bome diseases are endemic in the two Provinces and both the snails and insects breed in still waters. Secondly, there will no local supplies of potable water in the flooded areas. Therefore, there is a significant risk of disease once polder areas have been flooded. After the 1998 flood, the Ministry of Health carried out a special program to combat the disease vectors and a subsequent survey found that there had been no significant increase in rates of the different diseases in areas where the specified control measures were - 62 -  implemented. Conversely, in 1954 there were many deaths after the flood from epidemic diseases across a large area. In principle, therefore, the costs of mounting such a special health program is a cost that should be added to the losses resulting from flooding. Specific works to reduce the risks of snails entering the polders through the water gates have been included in the Project's cost in some cases. B-7: Losses in urban areas China has collected what are, in many cases, excellent, detailed surveys of flood losses in past floods. The National Codes then require these surveys of losses in past floods to be used to estimate the losses from future floods. These surveys have calculated flood losses in terms of the proportion of the total values of different classes of assets at risk and/or in a loss per mu (rural areas) and a loss per capita (urban areas). This proportional loss approach is consistent with the approach adopted in, for instance, the USA, Japan and Germany. But estimating future flood losses on the basis of the aggregated results from surveys of past flood losses does mean that there are no depth-damage curves which express the losses to particular building types as a function of the depth of flooding. However, flood depths are such that in many cases a property is either not flooded at all or flooded to a depth of several meters. Direct damages The approach applied in some of the Provincial analyses and adopted in the analyses undertaken for this report expresses the expected losses to a particular class of buildings and their contents as a proportion of the total asset value of those classes within the affected area. This is a widely adopted approach: for example, it is that used in France and Hungary. These values were then converted into a loss per mu in rural areas and a loss per capita in urban areas. Indirect losses The National code (SL206-98) proposes that 20% of direct losses be taken to give indirect losses. Detailed analyses in the UK of industrial indirect losses give a similar figure but floods in the UTK usually last less than a day as compared the several weeks on the Yangtze. Therefore, the code value can be taken to be reasonably conservative. In some cases, it was possible to use the industrial turnover figure for the Province to give a turnover per day, and then to multiply this figure by an estimate of the gross margin and by the approximate duration of flooding. The analysis by Hunan Province included estimates of the costs of disruption on the main rail lines and this was included into the benefit assessment described here. B-8: Agricultural losses For agriculture, the two main components of losses are to standing crops and to livestock. Because of the long duration of the flood both the spring and autumn crops of rice are affected; the standing plants of the first crop are lost and planting of the second crop is delayed so that a catch crop must be planted, if possible, instead. The economic loss resulting from the complete loss of the first crop is given by the gross margin on the crop (basically sales price minus variable costs), adjusted to reflect the variable costs that will already have been incurred (i.e. seeds, fertilizer, pesticides). For the second crop, either the unadjusted gross margin should be used or it may be possible to plant a catch crop in the shortened growing season remaining. In the latter case, the loss is the reduction in the gross margin per mu. The Provinces based their analyses upon the National Code approach of converting the losses from past floods to a loss per mu for agricultural areas had been used. In Hubei, an average loss in rural areas of 9,140 Yuan/mu was used, derived on the basis of flood surveys; and in Hunan in the more rural of the two areas, a loss figure of 7,006 Yuan/mu was applied. As cross checks of the reasonableness of these values, they can be compared first to one MWR report ("Impact of flood disasters on the economy, society and the environment") that gives an average loss per mu, on the basis of post-flood surveys, over the period 1980-1989 as 12,120 Yuan/mu (1980s prices). Secondly, the resettlement plans give details on the - 63 -  household size, land access per capita, house size and compensation payments for buildings. From this data, the average compensation payment per mu can be calculated. In the case of Hunan, assuming that the dwelling is of brick/wood construction (and thus likely to be largely destroyed in a flood), the building loss per mu is equivalent to 8,200 Yuan/mu. To this would be added: crop loss, livestock loss, loss of building contents and damage to other items found in rural areas, including roads and bridges. Consequently, the values derived in the studies in each of the two Provinces appear to be quite plausible. The contribution of crop losses to these overall losses is rather minor: output per in Hunan is given as 1,475 Yuan/mu for paddy fields and 820 Yuan/mu for dryland farming. B-9: TGP effects The Three Gorges Project (TGP) will impact to a varying extent on each of the three Provinces (see Table 5 below), this extent depending in part upon the contribution and timing of the flood flows from the tributaries of the Yangtze. It is also necessary to analyze the benefits of the Project before and after the completion of the TGP. Where the TGP has a major effect, then Project benefits, after TGP becomes fully operational, fall accordingly. Table 5: The Impact of the Three Gorges Project on the Flood Problems Province Effect of the Three Gorges Project on Flood Losses Hubei significant reduction for whole length of river (a conservative assumption) Hunan significant reduction for upstream part of the Province; small effect for downstream part B-10: Phasing in of Project benefits Two conservative assumptions have been made in the analyses: * none of the benefits of the Project occur until the fifth year of the Project; in practice, depending upon the phasing of the construction works, there should be expected to be a build-up of benefits starting with the completion of the first part of the Project with full benefits occurTing with the completion of the whole Project. * the benefits of the Three Gorges Project are not phased in; all the reduction in the flood alleviation benefits of the dike Project occurring immediately that the first part of the TGP is operational. Because benefits and costs occurring in the early part of the life of a Project contribute a disproportionate part of the benefits and costs, both assumptions are conservative. C: COSTS The definition of benefits and costs given earlier defines a cost as any negative change relative to the baseline condition. The most obvious costs are therefore associated with the construction of the Project but it has been sought to examine all of the important negative changes. -64-  C-1: Capital costs These include all construction costs and, for convenience, where a particular component has an expected engineering life less than the overall life of scheme, the costs of replacement during the life of the scheme. Renovation of bank protection has been included as part of the annual 0 & M costs but one of the risks is of catastrophic failure of part of the bank protection works requiring replacement. As bank protection costs are a large fraction of the capital costs, the assessment of the likely life expectancy and probability of success are critical considerations to the Project. Commitment costs have also been included in these costs. The practice in China is also to establish a revolving fund at the start of the Project from which 0 & M costs are paid. Strictly, inclusion of this amount as part of the costs of the Project may be regarded as double-counting but it has been included on the grounds that the need arises from the equivalent of market imperfections. C-2: Operation and maintenance There should generally be a reduction in the real costs of Operation and Maintenance (O&M) which should be treated as a Project benefit rather than a reduction in costs. The exception is any new costs which are not incurred under the baseline case. C-3: Residual value No allowance has been made for a residual value of the Project at the end of its predicted engineering life; it is assumed that at that point in time the present value of future benefits has fallen to the present value of future costs and hence that the residual value of the Project is zero. C-4: Resettlement The aim of the resettlement plan is to ensure that those affected have the same level of welfare after resettlement as they have at present. Therefore, there are no negative benefits of resettlement to be evaluated and the costs of resettlement are simply included under the cost side of the equation. C-5: Disruption during construction Construction will give rise to noise and dust nuisance, and to increases in local traffic. Those who would be worst affected by these effects are those who will be resettled in any case. In general, it is likely to be preferable to manage these issues through consultation with local communities rather than to seek to evaluate them in economic terms. The danger of seeking to evaluate them is the potential anomaly that is created whereby a Project which is strongly desired by the community to be protected is rejected on the basis of an economic analysis which asserts that the disruption caused in the construction period to the local community is such as to outweigh the potential benefits. C-6: Environmental impacts Environmental protection action is to be undertaken so that the Project will not adversely affect any significant environmental resources/values but instead will contribute to achievement of an economically-cum-environmentally sound and therefore sustainable project. Therefore, there are no negative environmental benefits of resettlement to be evaluated and the costs of environmental mitigation are simply included under the cost side of the equation. - 65 -  C-7: Impacts on navigation As discussed earlier, the impacts of the Project are likely to be, on balance, positive. C-8: Impacts on tourism A potential negative benefit of the Project, and hence a cost, is the impact on tourism. Raising the banks will reduce the visibility of the countryside and urban areas from tourist boats. However, these effects are likely to be minimal: the degree to which views are obstructed depends upon the change in the angle of sight subtended by the eyes of the passengers on the boats. Since the river is wide, the narrowest points in Hunan Province during the dry season being 500-600 meters wide, the change in the angle of sight of increases in dike crest height of less generally less than 1 meter is small. Bank protection strategies such as rip-rap almost certainly reduce the attractiveness of the banks but some of the rivers most heavily used for tourism, such as the Rhine and Danube, are also the most heavily engineered rivers. Therefore, it is not to be expected that there will be significant effects on tourism. D: FRAMEWORK OF ANALYSIS D-1: Discount rate The national guidelines (SL206-98) require the use of a discount rate of 12% for projects, such as large hydroelectric plants, that yield a fnancial retum. Those guidelines require the use of a discount rate of 7% for projects which do not yield a financial return. In view of the rate of growth in the economy of China, to which the opportunity cost of capital, the basis for discounting, should be related, a discount rate of 12% has been adopted. The problems of establishing the true opportunity cost of capital are similar to those in correcting the Gross Domestic Product measure. The true opportunity cost of capital is the return elsewhere in the economy after all externalities have been included and after corrections have been made for reductions in natural capital. A lower rate than 12% could be defended but constraints on capital availability typically mean that there are other projects which are viable at higher discount rates and which should, therefore, be preferred to the project being appraised. Unfortunately, the use of discounting only gives a measure, weighted by the discount rate used, of the area under the net annual benefit curve. Any preferences that may be held about the shape of the curve will only incidentally be captured by the discounting approach. These preferences are usually labeled as 'individual time preferences'. Therefore, the latest version of the MAFF (1999) guidelines require that the net annual benefit curve be plotted, particularly when different 'do something' options are being compared. If appropriate, a reasoned argument may then be put forward as to why an option with a lower net present value should be preferred to the option with the highest net present value. One reason which might be given for preferring an option which does not have the highest NPV is that the annual net benefits fall below zero in the long run and stay negative; the argument about inter-generational equity is a special instance of this general case. Here, because only a single "do something" option is being compared to the baseline option, the case for plotting the net annual benefit curve is less pressing but it has been done: since the results are uninteresting, the graphs are not included in this report. D-2: Growth rates The national code (SL206-98) allows for losses from future floods to be assumed to increase by a rate usually of around 3% each year. Such growth factors should not be applied in benefit-cost analyses except in special circumstances and then growth factors should be applied to all streams of benefits and costs and not just to a single stream. The reason for using a discount rate is that altemative investments throughout - 66 -  the economy are anticipated to yield a return on capital and therefore some expectation of growth is already built in to the analysis; the discount rate used should thus be related to the expected growth in the national economy. There are then a number of reasons why a growth rate might be considered. The first is that the economy in the Province is anticipated to faster than the national economy as a whole. The correct approach in this case is to use a higher discount rate because other investments in the economy of the Province would yield a greater return than in other parts of the country. Conversely, if the economy in the Province is growing more slowly than the national economy as a whole, then there is a case for the use of lower discount rate. A second reason is to take account of anticipated future intensification of development in the area either through changes in cropping patterns to higher valued crops or urban development. A reasoned case really needs to be made for such an expectation and rather than a blanket growth rate being applied, a phased projection of future development in specific areas ought to be adopted because future development is likely to be geographically concentrated rather than uniformly distributed. In this analysis growth rates were not used. D-3: Scheme life The engineering life for the embankments has been assumed to be 50 years; this is consistent with the engineering life assumed for similar countries in other countries. The engineering lives of other components are lower and are again consistent with those used elsewhere. Figure 1: Household Contents Losses: Flood Damages as a Proportion of Total Value of Contents Contents loss - proportional losses 70 60 - 50- "-"'%?s-'" UK: FLAIR% 30 -a- USA - 20 Appelbaum 1985 10 - , 0 a, Japan o o 0 Cl depth - 67 -  Sensitivity analysis / Switching values of critical items: E: RISKS The outcomes of decisions are always uncertain, not least because they lie in the future. Outcomes can be uncertain in two different ways: parametric uncertainties and systemic uncertainties. The first has been described as 'what we know we do not know' and can be quantified. We can, for example, associate standard errors of the mean to the results of statistical analyses. Systemic uncertainties are 'what we do not know that we do not know': they arise because our models or theories may be incomplete or simply wrong. For example, we may apply a linear model to analyze what is really a nonlinear system or the t-test for difference in means to data whose distribution is not normal. Until climate change was detected, there was systemic uncertainty about long term trends in rainfall intensity and runoff: now this has, arguably, been reduced to parametric uncertainty. In classical terms, parametric uncertainty is risk, because we can identify completely all of the possible outcomes and associate a probability with each, whilst systemic uncertainty is true uncertainty because it is not even possible to identify all possible outcomes. In summary, therefore, the picture of sources and nature of uncertainties is as shown below: Probabilities Well Differentiated Undefined Systemic uncertainty Uncertainty Ignorance (Undefined) Parametric uncertainty Risk Amnbiguity (Well defined) Risks are then a single category within in this classification and one which whilst most easily assessed can be the least important. There is consequently a danger that concentrating upon risks about outcomes will distract from the real issue of decision uncertainty. One way of handling decision uncertainty is to ask how great must be outcome uncertainties before they matter. The benefit-cost ratio itself is a good indicator of the robustness of the choice of the do something option over the baseline option to the uncertainties about the different streams of benefits and costs. Rather than a benefit-cost ratio of one forming a hurdle that must be jumped in order for the Project to be economically viable, it is actually the ratio at which there is the maximum uncertainty as to whether a project is justified. If the benefit-cost ratio is 0.3 then we can be pretty confident that the Project is not viable; conversely, if the ratio is 5, then we can be very confident that the Project is viable. If the benefit-cost ratio is one, then only an infinitesimally small underestimate of the costs or overestimate of the benefits would make the Project inefficient. Experience also suggests that if the benefit-cost ratio is greater than about 15, then it is most likely that there is a major error in the analysis, such as a failure to apply discounting correctly. What we therefore want to know is how robust is the conclusion that the b/c ratio is greater than one; we want to know how hard we can hit the analysis before the b/c ratio falls below one. This can be done by identifying the parameters that have the greatest impact on the b/c ratio and using values that are extremely unlikely to be correct. If the b/c ratio still stays above one, then we can be highly confident that the Project is worthwhile. In effect, we see how hard we can kick the decision before it breaks. Arbitrarily varying the benefits and costs up or down by some percentage adds nothing to what we knew already because the benefit-cost ratio tells us by how much benefits could fall or costs could rise before the benefit-cost ratio fell to one. Experience indicates what the parameters are that will affect the benefit-cost ratio and the relative magnitude of their influence (See Table 6 below). - 68 -  Table 6: Parameters which May Affect the B/C Ratio and the Decision Parameter Affect on decision Test Labor costs of 0 & M Economic growth should be expected to increase the real cost Not necessary of labor over time. However, the contribution to scheme benefits are given by the difference between the costs of 0 & M of the baseline option and the do something option; this significantly reduces the effect upon the net present value of the do something option of prediction errors in future labor costs. It is has moreover be argued that real 0 & M costs should be expected to fall with the Project. Omission is therefore conservative. The Project is inadequately There is inadequate funding available to maintain the Yes, the greatest risk is maintained existing dike system; therefore, there is a risk that the that the bank protection availability of funds will not be sufficient to maintain the works will require more Project. Thus, over time the protection offered by the Project maintenance and repairs; will decline. bank protection costs also constitute a significant proportion of the capital costs Breach probabilities The assessment of the probabilities of a breach occurring Yes; test breach under the baseline and do something options has a major probabilities both for the effect on the net present value of the do something option. baseline and the do One reason why breach probabilities might not be reduced by something condition the anticipated amounts with the do something option is if designed construction standards are not achieved. Existing standard of The majority of flood alleviation benefits come from Usually necessary; here protection reductions in the consequence of high frequency events. breach probabilities are Therefore, errors in the estimation of the design standard of more critical protection offered by the existing embankments will have a significant effect upon the predicted present value of the benefits of the do something option. It has been shown that is acceptable to vary the return period of the flood stages rather than to vary the flood stages in testing for this effect. Impact on existing standard of If the Three Gorges Project will significantly increase the Yes protection of TGP and design standard of protection offered by the existing upstream works embankments, then this would significantly reduce scheme benefits. Capital cost of construction of Because capital costs occur in the initial years, errors in the No, b/c ratio shows how scheme predicted construction costs have a significant effect upon the great must be the predicted net present value of the scheme. underestimation factor must be before the Project would not be justified Geomorphologic stability Bank protection works are intended to protect the dikes and Yes, reduce life to stabilize the river channel. If these works are not expectancy of bank successful then in the extreme case parts of the dike will be protection works - same lost and a retreated dike will have to be built at some future effect as 0 & M date. Before that happens, further attempts would almost estimates certainly be made at river training. - 69 -  Value of property at risk Economic growth should result in higher values at risk; the No assumption of constant real prices in assessing benefits is therefore a conservative assumption. Change in susceptibility of With economic growth, the construction standards of No property to flood damage buildings have risen and are likely in the first instance to reduce susceptibility to damage (e.g. replacement of earlier timber and earth buildings by concrete and/or masonry structures). Conversely, electronic machinery is much more susceptible to damage by flood than the hand and mechanically operated equipment it replaces. Increased industrial concentration similarly increases indirect costs: lost production cannot then be made up elsewhere in China. It is very difficult to assess the likely direction of the overall change but the use of constant real prices is likely to be conservative. Engineering life With a discount rate of 12%, the present value of the benefits No of the scheme in the period of c + 30 to c + 50 years is low. Climate change Climate change is predicted to change both rainfall and No, direction of change is runoff, specific climate predictions for China are not to hand. unknown Therefore direction and extent of the change is unknown. But the effects will be greatest in later years when the effects would have the least impact on present values. Increased development of the With increased intensity of development of the protected No protected areas areas, losses from floods should also be expected to rise. However, the economic objective is not strictly to reduce flood losses but to increase the efficiency of the use of the river basin as a whole. The appropriate way to include the effects of increased development is not to increase the flood losses but to determine whether increased development in the particular location increases the efficiency of use of land. A detailed assessment has been performed for various parametric conditions as mentioned above to test the viability of the Project. It will be noticed from Tables 7A and 7B below that under no circumstance does the B/C ratio drop below 1.2 (EIRR=15%) for any of the provinces examined indicating that the Project is very robust. - 70 -  Table 7A: Parameter Risk Assessment - Benefit Cost Ratio Risk Application Hubei Hunan Base case 5.2 2.3 Delay of 2 years and TGP is on time 3.4 1.9 Loss estimation 30% less than base 3.5 1.6 Breach probabilities are 50% for 1/10 year 4.6 1.5 Probability of breach for 1/20 is 50% etc. 3.0 1.4 Table 7B: Parametric Risk Assessment - EIRR Terms Risk Application Hubei Hunan Base case 53% 25% Delay of 2 years and TGP on Time 30% 24% Loss estimation 30% less than base 37% 21% Breach probabilities are 50% for the 1/10 year 34% 19% Probabilities of breach for 1/20 is 50% 50% 18% Assume high frequency events are not included 38% 15% -71 -  Annex 5: Financial Summary CHINA: Yangtze Dike Strengthening Project Years Ending December 31, 2000 to June 30, 2005 (in US$ million) Year I I Year2 2 Year 3 Year 4 Year 5 Year 6 { Year 7 Total Financing Required Project Costs InvestmentCosts 14.3 124.2 191.0 111.5 78.6 0.0 0.0 Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 14.3 124.2 191.0 111.5 78.6 0.0 0.0 Interest during 0.0 1.6 2.4 5.9 8.6 5.3 0.0 construction Front-end fee 0.0 2.1 0.0 0.0 0.0 0.0 0.0 Total Financing 14.3 127.9 193.4 117.4 87.2 5.3 0.0 Financing IBRD/IDA 0.0 45.0 65.0 52.0 48.0 0.0 0.0 Government 14.3 82.9 128.4 65.4 39.2 5.3 0.0 Central 11.4 57.0 93.2 51.6 32.5 5.3 0.0 Provincial 2.9 25.9 35.2 13.8 6.7 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 14.3 127.9 193.4 117.4 87.2 5.3 0.0 Y eari I Year 2 IYe;ar3 Year erSIYaS e Total Financing Required Project Costs Investment Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Interest during construction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Front-end fee 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing IBRDIIDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - 72 -  Main assumptions: Table 1: Financing Anfangeiit by Components and Sources The Peose'sepubicofChina The Govement Provrice Provnwce The Ya-gize DOSke Sfoev Prject (YDSP) World Fundsto SWe Bonds CtylCounty State Bands City/Couty Govemrment Total DtabsnentAocounts by Finances Bank WlR Hubei Funds Hubei Hunar Funds Huran pU 4ilion) A Chanq Water Resources Commission 1. Site Prepwadon, River Model - 3.8 - - - - - 3.8 2. Civil WOs a River Bak Protedion - 93.6 - - - - - 936 b. Dke RehahEtaon - 9.8 - - - - - 9.8 G Physical RMriModdin 6.6 2.0 - - - - - 8.6 Subttal Civil Works 6.6 105.4 112.0 3. Goods a. CikeMordgir q&Ri-Modleng 19 1.9 - - - - - 3.8 b. Equiiert Fbod Prewon & Milgaton Center 0.5 0.1 - - - - - 0.6 SubltoW GoDds 2A 20 - - - - - 4.4 4. Pmectangementand lrsiftoalAnangment 1.2 1.5 - - - 1.2 3.9 SubtaldChangW ater ResouresCornumsion 10.2 11Z7 - - - - 1.2 1241 B. Flood Disaster Prevention Center 1.4 0.1 - - - - - 1.5 C. FLbei Province 1. CivU Works a Dke Rehabitaton 140.7 - 37.5 9.4 - - - 187.6 b. OherMinorCM VVa 18.2 - 6.2 4.2 - - - 28.6 Subtotal Cvil Works 158.9 43.7 13.6 - - 216.2 Z Goods a DkeMaiaing&OGM Equprent 5.7 - 0.9 0.5 - 0.0 0.0 7.1 b. Offce Equment and Instrument 0.3 - - - - 0.0 0.0 0.3 Subtoal Goods 6.0 - 0.9 0.5 - 0.0 0.0 7.4 3. Reseleent Resetert Housing- - 12.8 19.2 - - - 32 0 Land Ahxuston and Otlers - - 16.4 24.6 - - - 41.0 Sutiotl Resettlernent - 29.2 43.8 - - - 73.0 4. nstitutional Devdopmerrt 2.4 - 0.6 0.4 - - - 3A 5. Project Manageen t - 12.7 5A - - 18.1 Substeota Hubei Province 167.3 - 87.1 63.7 - - - 318.1 D. Hurian Province 1. Civil Woks a. lkeRehabiabfion 24.6 - - - 11.6 8.3 - 44.5 b. OtlerMinorCMisi\ksl 3.0 - - - 0.7 0.5 - 4.2 Subtotal Civil Works 27.6 - - - 123 8.8 - 48.7 2. Goods a Dke Mantarin & OIMI EqupTent OA - - - 0.1 - - 0.5 3. Resetemt Resefterdent,jaig - - - - 1.8 1.8 0.1 3.7 Land Acquisbon and Others - - - 9.2 9.2 0.6 19.0 SubtDtal Reseelerment - - - - 11.0 11.0 0.7 22.7 4. InstSoii DevebpmerTt 1.0 - - - 0.6 0.6 0.0 22 5. ProjectManagement - - - - 1.3 0.3 0.0 1.6 SubtoW Hurnan Province 29.0 - - - 25.3 20.7 0.7 75.7 TOTAL 207.9 112.8 87.1 63,7 25.3 20.7 1.9 519.4 Frcrt End Fee 2.1 - - - - - - 21 Iteret during construdcon - - - - - - 23.8 23.8 Grand1to0bl 210.0 112.8 87.1 63.7 25.3 20.7 25.7 545.3 /a ncuding buLdiWgs, aest road, wSehcuse, grass and tree pantatm /btiduring bulinrgs, aest road, wamsheu, grass and tree ploa n - 73 -  Annex 6: Procurement and Disbursement Arrangements CHINA: Yangtze Dike Strengthening Project Procurement A-I: Institutional Arrangements Provincial Project Management Office Each Province has established a Provincial Project Management Office (PPMO) for the day-to-day responsibilities and to coordinate Project implementation. Although there are slight variations in the two provinces generally the PPMO, which will function as a group headed by a senior official from Provincial Planning Commission or Provincial Finance Bureau, will have staff seconded from the Provincial Water Conservancy. The PPMO will have overall responsible for Project planning, financial management, technical and procurement affairs, preparation of annual work plans, coordination between the PMOs at local Government levels, and assuring counterpart funding. Changjiang Water Resources Commission The Changjiang Water Resources Commission (CWRC), which is under the Ministry of Water Resources, will implement the river bank protection and selected dike foundation treatment works not financed by the Bank. CWRC will also be responsible for the river modeling and be involved in the dike monitoring program. CWRC will put in place adequate organizational arrangements for the implementation of the river bank protection and dike foundation treatment works in close consultation with Hubei and Hunan. CWRC will also set up a Project Management Office (PMO) for the planning, implementation and operation of a physical model for the middle reach of the Yangtze River. Divisional Responsibilities The PPMO will establish five divisions: (i) general services; (ii) finance; (iii) procurement; (iv) engineering; and (v) environment and resettlement. The main responsibilities of the engineering and procurement divisions are: Procurement Division * guide and supervise the preparation of bidding documents for civil works and goods; * co-ordinate and supervise compliance with procurement procedures; - prepare ICB/NCB procurement plans for all major works and goods; * manage, with assistance from a National Tendering Corporation, the procurement under ICB for equipment; and * ensure that contracts are concluded and implemented by the local government agencies as "owners'. Engineering Division: * oversee design and construction progress, construction supervision including quality control and contractor performance; * prepare and monitor annual construction and investment plans; * guide and supervise Project procurement, carry out field inspections to verify payment claims, construction progress and quality of work; and * prepare bi-annual physical progress report, including procurement reporting. The two provinces have managed several IBRD/IDA supported projects (9 projects in different sectors) in the past and their staff is familiar with the processing of: (i) procurement in accordance with Bank - 74 -  Guidelines; and (ii) withdrawal applications and disbursement of funds under World Bank supported projects. Most project expenditures will be made through ICB/NCB contracts and will be properly documented. This will help to simplify financial management for the Project. Detailed arrangements for financial management and control systems under the Project, including the adoption of tabular formats for financial reporting, have been agreed. The Ministry of Finance (MOF) will manage the Special Account (SA) for Bank Loan funds. Local Project Management Office At the local government levels (Prefecture/City and County/District), Project Management Offices (LPMO) have been established. Each LPMO will be responsible for Project planning, fnancial management, technical affairs, preparation of annual work plans, coordination between Government organizations and implementation agencies, and assuring counterpart funding. The LPMOs will adopt and set up a similar organizational structure as the PPMO. They will provide guidance and oversee the construction of works by the owners, which in most cases will be the dike management offices. The LPMO will be responsible for: * coordinating overall Project implementation, preparation of annual design, investigation and construction plans; * reviewing and approving NCB bid documentation, procurement processing, bid evaluation and contract award; * ensuring availability of adequate counterpart-funding; * preparing financial statements and reports on physical and financial progress; * overseeing implementation performance, Project acceptance, financial auditing, Project transfer and trial operation; * processing periodic requests for disbursement against contractor payment certificates from the implementing agencies and forward them to the PPMO; and * monitoring the implementation of RAPs and EMPs. Implementation Agencies The implementation of Project works will be entrusted to owner organizations, which in most cases will be the Dike Management Offices and in a few cases the Water Conservancy Bureaus at local Government levels. The structure and staffing of these offices will be adjusted to match the Project scope and the technical complexity of contracts to be implemented. The local governments will establish additional implementation units as needed. The implementation agencies will follow instructions from provincial and prefecture/city PMOs to ensure that adequate attention is paid to important Project implementation actions, such as adopting agreed bidding and selection procedures for the contracting of construction supervisors, suppliers and contractors. Their main responsibilities are to: * prepare annual financing needs for each contract, construction schedules and supply of materials; * manage procurement processes, including preparation of bid documents, pre-qualification of contractors, evaluation of bids received, recommendation for contract award and contract signing; * organize detailed Project design, construction supervision and organize and prepare Project acceptance and certification reports; * implement the environmental management and resettlement action plans and arrange for timely land acquisition; * control, manage, and supervise the allocation of Project funds; * prepare Project progress report, and assist with preparation of financial and audit statements; - 75 -  * maintain key Project data and files; and * arrange for World Bank missions to inspect Project sites. Planning and Design The Provincial Investigation and Design Institutes (PIDI) and CWRC's Design Institute (CWRCDI) have assisted the provincial and local Government WRHBs and Dike Management Offices since 1998 with Project formulation, the preparation of the feasibility studies and the planning and design of Project works. To ensure continuity, the implementation agencies will retain PIDI and CWRCDI to prepare final designs of the major Project works including construction drawings, technical specifications and bill of quantities for incorporation in the bid documentation. PIDI and CWRCDI will also be retained to carry out design changes during Project implementation. Technical specialists will be contracted as required to assist with resolving complex design or construction issues. Construction Supervision The owner organizations at local government levels will use competitive selection procedures for the employment of nationally recognized "Grade A" organizations to act for the owners as the "Engineer" for the construction of works. The Project Coordination Office (PCO) will make sure that the owners employ consultants with relevant experience. As experience in this area may be limited in China, joint ventures of domestic and international consultants will be considered. The owners will also continue to retain PIDI and CWRCDI during the construction of works to make design adjustmnents as needed. Note also that the EMO is to furnish Environmental Construction Inspectors (ECIs) to work with and through the Construction Engineer to check the environmental performance (EP) by contractors and to require improvements in their EP as needed. Procurement Methods The Guidelines for procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 will be applied to Bank financed procurement of goods and works. The Standard Bidding Documents (SBD) developed by the Ministry of Finance and the Bank will be adopted for all International Competitive Bidding (ICB) and National Competitive Bidding (NCB) for works and goods, and the Standard Bid Evaluation Form will be used. Works procured through ICB and NCB costing in excess of Yuan 35.0 million will be processed by the PPMO. The LPMO will manage all other NCB contracts. Small civil works contracts and works procured through local procedures and force account will be managed by the District and County level Dike Management Divisions or Water Conservancy Bureaus Project cost and procurement arrangements are shown in Table A. For contracting consulting services, the Guidelines for the Selection and Employment of Consultants by the World Bank Borrowers dated January 1997, revised September 1997 and January 1999, as well as the Standard Request for Proposals dated July 1997, revised April 1998 and July 1999 for consultant requirements will be applied. Local Bidding Procedures and Procurement Capacity Assessment A new Law related to procurement procedures - "The Tendering Law" of the People's Republic of China - was adopted and promulgated on August 30, 1999 and had become effective as from January 1, 2000. At present both provinces and CWRC have in place instructions, detailing the local bidding procedures to be followed under state and local government financed projects. Those instructions are based on guidelines issued by the Ministry of Water Resources. The bidding process for civil works starts with the completion of: (i) preliminary designs for the works at hand; (ii) preparation of investment and financing plans; (iii) nomination of the "owner" in charge of implementing the works; and (iv) organizational arrangements for implementation of works. Once this bidding package has been prepared, it is submitted to the Provincial Tendering Administration Committee for their review and approval. The submission also includes: (i) a description of the bidding procedures to be followed; (ii) the type of works, including specifications and bill of quantities; (iii) principles of bid evaluation; and (iv) qualification criteria for potential bidders. This agency checks whether the documentation is in line with provincial regulations and instructions. If everything is found to be in - 76 -  order, an authorization to proceed is issued. Regarding civil works on the Yangtze Class I and II dikes as well as key works on Class III dikes a "public" process of competitive bidding will be followed. Invitations for bids are posted in national and provincial newspapers. For works on lower class dikes competitive bidding is suggested, but inviting bids from at least five qualified bidders is permitted and commonly followed. No sole source invitation to negotiate a contract is followed, except in emergency situations. For the earth/rock works on Class I dikes, only national contractors certified as Grade "A" and "B" are allowed to participate. For the construction of cross-dike structures only Grade "A" contractors are authorized to participate. The following steps are generally followed for inviting and processing bids: (i) prepare bid documentation and cost estimate; (ii) advertise the invitation to submit pre-qualifications; (iii) evaluation of pre-qualifications and preparation of list of bidders; (iv) issue bid documents to qualified bidders; (v) schedule bid conference and site visit; (vi) sent clarifications to all qualified bidders based on questions asked during the bid conference and site visit; (vii) bid preparation period is generally 7-8 days but sometimes as short as 3 days; (viii) form a bid evaluation committee and detail the evaluation methodology to be followed; (ix) submission of bids followed by public bid opening on the same day; (x) bid evaluation and recommendation for award; (xi) contract award; and (xii) contract signing. Some of the local bidding procedures are not in compliance or inconsistent with the Bank's procurement guidelines. The main inconsistencies are: (i) preparation of cost estimates based on out-of-date normns and guidelines issued by Government; (ii) the use of cost estimates in the evaluation of bids or for "bracketing", e.g. if the bid price exceeds the cost estimate by 5% or more or is lower than 8% or more then bids are declared non-responsive and rejected; (iii) too short bid periods of 7-8 days (new Law stipulates 20 days); and (iv) bid evaluation criteria are not detailed in the bid document, only principles are given. Each bid evaluation committee sets the evaluation method after bid opening. In most cases the "points system" is followed. Points are scored for the following five elements: (i) bid price; (ii) technical approach for construction of works; (iii) quality assurance arrangements; (iv) proposed measures to ensure timely completion; and (v) contractor's experience and financial performance. The bid scoring the most points is awarded the contract. A bid bond of at least 3% of the bid price and a performance bond of at least 8% are required. The advance payment to contractors ranges from 10-20%. Local bidding procedures for goods do not use "bracketing" and bids for goods are generally received from bidders invited to submit bids. As most goods are of local origin, provincial procurement agents are used. The lack of experience with undertaking procurement in accordance with World Bank guidelines will be addressed as follows. First, procurement training will be provided to staff handling procurement at the PPMO and LPMO levels. This training will be overseen by Resident Mission procurement staff and will start during the Project Launch Workshop. Second, a strict Bank review of procurement procedures will be put in place during the early stages of Project implementation, which will include Bank review of the first three NCB contracts in each province irrespective of contract values. During loan negotiations a supplementary letter to the legal documents was agreed stating that the Borrower and the Provinces will not use local procedures unacceptable to the Bank for procurement of Bankfinanced works, goods or services. This letter will be signed by the Borrower and Hubei and Hunan provinces at loan signing. A-2: Procurement Implementation Plan General Time bound procurement implementation plans for each province have been prepared using Microsoft Project and a critical path method (CPM). The program is structured by Project components detailed in Annex 2, which for most part are linked to the layout of existing dike sections. The contract packaging is also based on this breakdown. Works on various dike sections will start simultaneously and be completed more or less at the same time. - 77 -  A-3: Procurement Action Plan Civil Works The aggregate civil works contract value of works executed under the Project is estimated at US$380.8 million. The total value of NCB civil works undertaken under the Project is estimated at US$253.9 million; the aggregate value of Small Works (SW) contracts is estimated at US$19.70 million. The aggregate value of Non Bank Financed civil works is US$107.2 million. The contracts for riverbank protection (US$93.6 million) and selected dike foundation treatment works (US$9.8 million) will be undertaken by CWRC using 100 percent government financing (NBF). The civil works for the physical river model under the CWRC component, estimated at US$8.6 million (excluding US$3.8 million for site preparation, which is financed by the Govermment), will be procured through three 3 NCB contracts of about US$2.9 million each. The dike strengthening works in Hubei and Hunan will be undertaken in forty four sections involving many local governments dispersed over a river stretch of about 1,000 km. Since the contracts are of relatively small value (about US$6.8 million on average per contract), widely dispersed along the river and with possible annual interruptions by floods, they will not be of interest to international contractors and, therefore, NCB procedures will be adopted. The dike strengthening works, including the cross-dike structures and supply and installation of gates/hoists, will be undertaken through 36 contracts (27 for Hubei and 9 for Hunan) with a total value of US$200.2 million in Hubei and US$45.1 million in Hunan. Remedial works on dike crest roads are valued at US$12.6 million in Hubei and US$1.7 in Hunan and will be procured using NCB procedures in packages ranging in value from US$0.2 million to US$1.0 million and for those works costing less than US$200,000 (US$5.4 million in Hubei and US$0.7 million in Hunan) Small Works (SW) procedures will be used, including lump-sum, fixed price contracts awarded on the basis of quotations obtained from three (3) qualified domestic contractors in response to a written invitation. Procurement of grass and tree plantation, with an aggregate value of US$13.6 million (US$10.3 million in Hubei and US$3.3 million in Hunan), will also be undertaken through SW contract procedures. Total SW packages are estimated at 1 10 scattered along the dikes, of which 85 will be in Hubei and 25 in Hunan. Table B-2 gives the bidding procedures to be used and a detailed breakdown of the contract packaging, by package type (civil works, goods and services), Project component grouping, contract package group, and number of packages by Project component. Goods The total value of goods to be procured under the Project is estimated at US$12.0 million. The supply of goods/equipment for river modeling by CWRC (US$3.1 million) and equipment for O&M and dike monitoring (US$5.2 million) will be procured through three ICB contracts (total value US$8.3 million). A margin of preference of 15 percent of the CIF price of imported goods or actual customs duties, whichever is lower, will be applied to domestically manufactured goods procured through ICB. Another US$3.3 million of O&M and dike monitoring equipment will be procured using NCB procedures through contracts estimated to cost less than US$250,000. Miscellaneous equipment, such as office equipment and vehicles with an aggregate value of US$0.4 million will be purchased in contracts costing less than US$100,000 through "national shopping" procedures. Technical Assistance The aggregate value of international and national consultant services contracts under the Project is estimated at US$9.8 million. The aggregate value of the Bank financed portion of the Technical Assistance (TA) components amounts to US$5.1 million, with the balance or US$4.7 million being Non Bank Financed (NBF). All consulting contracts, including those for river modeling, which are expected to cost more than US$100,000 (aggregate value of US$2.2 million) will use the "Quality Based selection" or "QBS" procedures. Consulting contracts expected to cost less than US$100,000 (aggregate value estimated at US$2.8 million) will use the "Selection Based on Consultant's Qualifications" or "CQ" procedures. "Single Source Selection" procedures will be for consultant contracts costing less than - 78 -  $50,000 each (aggregate value estimated at US$0.1 million) after prior approval of the Bank. Individual consultants will be procured under the procedures in the guidelines for employment of individuals. All consulting assignments with values over US$200,000 will be advertised in the Development Business periodical. Training and Study Tours Bank financed training and study tours, estimated to cost US$1.1 million, are planned for three target groups: (i) the managerial staff of the Borrower; (ii) managerial staff of PPMOs and LPMOs; and (iii) the technical staff responsible for survey, design, construction and maintenance of the Project works. Training and skill development areas will include use of modem and innovative construction technologies, Project management, maintenance of major structures (including dike safety), and modem construction practices. Reimbursement of training and study tours expenditures will be subject to a prior "no objection" from the Bank. These training and study tour programs would be 100 percent financed from Bank Loan proceeds. Other Items not Financed by the Bank The implementation by CWRC of river protection and some dike foundation treatmnent contracts valued at US$103.4 million will not be financed by the Bank. Land acquisition and resettlement cost (US$95.0 million), site preparation for river modeling (US$3.8 million), survey, design and construction supervision, Project management and offices (US$19.8 million), consulting services and training (US$5.8 million) and IDC and commitmnent charges (US$23.8 million) will be funded by local sources of funds. Prior Review All ICB contracts for goods worth US$250,000 or more (US$8.3 million) would be subject to prior review. For NCB procurement of civil works costing US$200,000 or more bid documents, bid evaluation and award recommendation reports for the first three bids per province will be subject to prior review by the Bank. Thereafter only bids with cost estimates exceeding US$5.0 million equivalent will be subject to prior review. This is estimated to cover 27 civil works contracts representing about 81 percent or US$205.0 million of the NCB aggregate contract value of US$ 253.9 million. Contracts for consultant services in excess of US$50,000 for individuals (US$2.7 million) and of US$100,000 for firms (US$2.3 million) will be subject to prior review. Overseas and domestic training and study tours (US$1 .1 million) will be reimbursed based on programs agreed with the Bank. All other contracts will be subject to ex-post review by Bank supervision missions (see Table B). - 79 -  Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) ~~~~~~~~ _t 1. Works 0.00 253.90 19.70 107.20 380.80 (0.00) (180.70) (12.30) (0.00) (193.00) 2. Goods 8.30 3.30 0.40 0.00 12.00 (5.80) (2.60) (0.30) (0.00) (8.70) 3. Services 0.00 0.00 5.10 4.70 9.80 Consultant services (0.00) (0.00) (5.10) (0.00) (5.10) 4. Training and Study Tours 0.00 0.00 1.10 1.10 2.20 (0.00) (0.00) (1.10) (0.00) (1.1 0) 5. Interest during 0.00 0.00 0.00 23.80 23.80 construction (0.00) (0.00) (0.00) (0.00) (0.00) 6. Front-end fee 0.00 0.00 2.10 0.00 2.10 (0.00) (0.00) (2.10) (0.00) (2.10) 7. Resettlement and Land 0.00 0.00 0.00 95.00 95.00 Acquisition (0.00) (0.00) (0.00) (0.00) (0.00) 8. Project Management and 0.00 0.00 0.00 19.80 19.80 Engineering (0.00) (0.00) (0.00) (0.00) (0.00) Total 8.30 257.20 28.40 251.60 545.50 (5.80) (183.30) (20.90) (0.00) (210.00) Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies 2Includes "small works" (SW) civil works, goods to be procured through "local shopping", consulting services, training and study tours and the front-end fee - 80 -  Table A2: Detail Procurement Arrangements by Expenditure Accounts The Peoples Republic of China Yangtze Dike Strengthening Project (YDSP) Prucurement Mefhod ProcurementArrangements Inteat.ional National Training & (USS Million) Compaeitive Competitive Local Consulting Blddino Biddiso Shoontno Setrvicets N B F Total A. Changjiang Water Resources Commission 1. Civil Works a. MajorCivil Works River Bank Protection - 93.6 93.6 Dike Rehahlaitaion 3 8 9.8 Site Preparaton itr River Modeling - - 3.8 Physical Model 8 8 - 8.6 (6.8) (6.9) 2. Goods Control und Measuring System/Office Equipment for River Model 3.1 0.6 - - - 3.7 (1.6) (0.3) (2.0) Office Equipment FPMC la - 0.3 0- - 0.3 (0.3) (0.3) 3. Project Maengemrent Maintenance and Operation fr River Modeling - - 1.1 2.8 3.9 -(1.1) (1.2) Consultng Services. Training and Sdy Tours FPMC - - - 1.9 - 1.9 B. Hubei Province 1. Civil Works a. Major Civil Works Dike Rehabiliation - 187.6 - - - 187.6 (140.6) (140.6) Buildings & Roads - 12.6 5(3 -) 18.0 (7.9) (3.6) (11.5) b. Minor Civil Works Levee Cottage. Turffing and Tree Plantation 10.3 10.3 (8.7) (6.5) 2. Goods Dike Monitoring & OperatniorMaintenance Equipment 5.0 2.1 - 7.1 (4.0) (1.7) (5.7) Office Equipment - - 0.3 - 0.3 (0.3) (0.3) 3. ResetfSiment Resettemrent Housing 32.0 32.0 Land Acquisiteon and Others - 40.9 40.9 4. Tchnical Assistance Resettement & Environmental Monitodndg & Evaluaton - - 0.3 0 (0.3) (0.3) Consulting Services - - 1.3 0.6 1.9 (1.3) (1.3) Study Tours & Training (.0.6 0.6 1.2 (0.6) (0.6) 5. Project Management - 18.1 181 C. Huno Province 1. Civil Works a. Major Civil Works Dike Rehabilitation - 243.4 (244364 (24.6) (24.6) Buldings & Roads . 1.7 0.7 . 2.5 (1.0) (0.4) (1.4) b. Minor Civil Works Levee Cottage. Turffing and Tree Plantaton 3.3 13.3 (1.6) (1.6) 2. Goods OperationtMaintenance Equapment 0.2 0.2 . - . 0.4 (0.2) (0.2) (0.3) Office Equipment -0.1 0.1 (0.1) (0.1) 3. Resettlement Resetliement Housing 1-6 186 Land Acquisiton and Others 18.5 15.5 4. Technical Assistance Resettlement & Environmental MonitoringlEvaluation - - - 0.2 0.9 1.1 (0.2) (0.2) Consulting Services - 0.6 0.3 0.9 (0.6) (0.6) Study Tours & Training - - - 0.2 0.6 0.8 (0.2) (0.2) 5. Project Managemnent 1 - - 1.7 1.7 Total 8.3 2572 20.1 6.2 227.9 519.7 (5.8) (183.2) (12.7) (6.2) - (207.9) Note: Figures in parenthesis are the respective amounts tnanced by The Wodd Bank ka FPMC: Flood Prevention and Mitggano Center - 81-  Table Al: Consultant Selection Arrangements (optional) (US$ million equivalent) A. Firms 0.00 1.20 0.00 0.00 1.10 0.00 4.70 7.00 (0.00) (1.20) (0.00) (0.00) (1 .10) (0.00) (0.00) (2.30) B. Individuals 0.00 1.00 0.00 0.00 1.70 0.10 0.00 2.80 (0.00) (1.00) (0.00) (0.00) (1.70) (0. 1 0) (0.00) (2.80) Total 0.00 2.20 0.00 0.00 2.80 0.10 4.70 9.80 (0.00) (2.20) (0.00) (0.00) (2.80) (0. 1 0) (0.00) (5.10) 1\ Including contingencies Note: QCBS = 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. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. - 82 -  Prior review thresholds (Table B) Notes to Table B: All contracts not subject to the Bank's prior review would be subject to the post review. All contracts for individual consultants and all single source contact in excess of US$ 50,000 would be subject to the Bankes prior review. ICB: Intemational Conpetitive Bidding. NCB: National Competitive Bidding. SW: Small Works FA: Force Account NSP: National Shopping, requiring at least three price quotations. QCBS: Quality and Cost Based Selection. CQ: Consultants' Qualifications. Prior review on NCB procedure for civil works: 1. all contracts > US$ 5,000,000.0 2. the first three NCB bid documents in each province inrespective of value Table B: Thresholds for Procurement Methods and Prior Review' 1. Works Major Works >10,000 ICB n.a. Dike rehabilitation and >200 to <10,000 NCB 205.0 cross-dike structures Other works <200 SW/FA none 2. Goods For O&M, dike monitoring >250 ICB 8.3 and river modeling; >100 to <250 NCB none Office and survey <100 NSP none equipment none 3. Services (a) Consulting services firms >100 QCB 2.3 <100 CQ none individuals >50 Quotations 1.1 <50 Single source 0.1 Total value of contracts subject to prior review: US$216.8 million out of US$285.6 million or 76% Overall Procurement Risk Assessment Average Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits) During Project implementation, the Bank will assist MWR/CWRC and the two provinces to ensure that the Project is carried out smoothly in accordance with the agreed Project objectives. The Bank has extensive experience in managing this type of project. It will be able to tap into a pool of worldwide technical experts to solve managerial and technical problems. It has access to higher government levels to raise issues related to procurement, disbursement and other financial and management aspects of the Project. - 83 -  Table B-1: Procurement Packaging Item MWR and Hubei Hunan Total CWRC Civil Works 1. River Bank Protection Total Value in US$ million 93.6 93.6 Procurement Procedure NBF No. of Contracts N/A Average Size of Contracts N/A 2. Dike Rehabilitation and Cross-dike Structures Total Value in US$ million 9.8 200.2 45.1 255.1 Procurement Procedure NBF NCB NCB NBF/NCB No. of Contracts N/A 27 9 36 Average Size of Contracts in US$ million N/A 7.4 5.0 6.8 3. Small Civil Works Total Value in US$ Million 15.7 4.0 19.7 Procurement Procedure SW SW SW No. of Contracts 85 25 110 Average Size of Contracts in US$ Million 0.18 0.16 0.18 4. River Modeling Total Value in US$ Million 8.6 8.6 Procurement Procedure NCB NCB No. of Contracts 3 3 Average Size of Contracts in US$ Million 2.9 2.9 5. Resettlement/Site preparation Total Value in US$ Million 3.8 72.9 22.2 98.8 - 84 -  Procurement Procedure NBF NBF NBF NBF No. of Contracts N/A N/A N/A N/A Average Size of Contracts in US$ Million N/A N/A N/A Goods 1. 0 & M Equipment Total Value in US$ Million 4.1 7.4 0.5 12.0 Procurement Procedure ICB/NCB ICB/NCB NCB ICB/NCB No. of Contracts 2 2 5 9 Average Size of Contracts in US$ Million 2.1 3.7 0.1 1.3 ICB -International Competitive Bidding NCB -National Competitive Bidding SW--Small Works Contracts NS - National Shopping NBF- Non Bank Financed Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance. - 85 -  Disbursement Allocation of loan proceeds (Table C) Disbursement for civil works will be 65 percent made against eligible payments to contractors for works executed and for authorized mobilization advances. Disbursement for goods and equipment, including vehicles, will be at 100 percent of foreign expenditures for direct imports, 100 percent of the ex-factory costs for locally manufactured items, and 75 percent of expenditures for other items procured locally. Expenditures for training, study tours will be disbursed at 100 percent and for technical assistance 100 percent against Statement of Expenditures (SOEs). See Table C: Allocation of Loan Proceeds. The estimated disbursement schedule for the Bank Loan is given on the summary page of the PAD and further details are provided in the PIP. Table C: Allocation of Loan Proceeds _ Allll_ Civil Works 171.80 65% River Model - CWRC (US$6.6) Dike Rehabilitation - Hubei Province (US$140.6) - Hunan Province (US$24.6) Civil Works 21.20 65% Roads and Buildings - Hubei Province (US$11.5) - Hunan Province (US$1.4) Grass and Tree Plantation - Hubei Province (US$6.7) - Hunan Province (US$1.6) Goods 8.70 100% for CIF, 100% of local O&M and Dike Monitoring expenditures (ex-factory cost) and 75% - Hubei Province (US$6.0) of local expenditures for other items - Hunan Province (US$0.4) procured locally River Modeling & FDPC - CWRC (US$2.0) - MWR (US$0.3) Consultants' Services 5.10 100% - Hubei Province (US$1.6) - Hunan Province (US$0.8) - CWRC (US$1.5) - MWR (US$1.2) Research, Training, Study Tours 1.10 100% - Hubei Province (US$0.6) - Hunan Province (US$0.2) - CWRC - - MWR (US$0.3) Total Project Costs 207.90 Interest during construction Front-end fee 2.10 Loan amount = US$210.0 million Total 210.00 - 86 -  Special account: To facilitate disbursement a Special Account (SA) in US Dollars will be opened at a commercial bank acceptable to the Bank. The SA will be opened by the Ministry of Finance (MOF), with an initial deposit of US$9.0 million and an authorized allocation of US$18.0 million. The authorized allocation is approximately equal to the Bank's projected expenditure for four months of Project implementation. Applications for replenishment for the SA would be submitted monthly or when the account is drawn down to 50 percent of its authorized allocation, whichever comes first. The Provincial Bureau of Finance will make payments within 2 weeks after receipt and review of withdrawal applications. The lower level FB will pass on the funds promptly, and no later than 2 weeks after the funds have been received. Retro-active flnancing To avoid delays in the start-up of the Project, retro-active Bank financing of US$4.0 million is recommended to cover eligible expenditures incurred between December 1, 1999 and the date of the signing of the Loan and Project Agreements. The agreed activities eligible for rectro-active financing have been agreed during Project appraisal and are detailed in the PIP. The procurement procedures for the agreed activities have been agreed and the bidding documents reviewed. - 87 -  Annex 7: Project Processing Schedule CHINA: Yangtze Dike Strengthening Project Time taken to prepare the project (months) 12 10 First Bank mission (identification) 02/12/99 02/12/99 Appraisal mission departure 01/15/2000 12/10/99 Negotiations 04/24/2000 05/02/2000 Planned Date of Effectiveness 09/01/2000 Prepared by: 1. Government of China, Ministry of Water Resources and Changjiang Water Resources Commission 2. Govermnent of Hubei 3. Government of Hunan. Preparation assistance: Policy and Human Resources Development Fund (PHRD), Government of Japan Dutch Consultant Trust Fund (DCTF), Government of The Netherlands World Bank Budget (BB) Bank staff who worked on the project included: Nme _ ic Daniel J. Gunaratnam Task Manager Bert L. Kramer Co-Task Manager Lang Seng Tay Water Resources/Flood Control Li Xiaokai Water Resources Dirk De Bruin River Management *Chen Charng Ning Dike/River bank Protection Specialist *Chen Zuyu Land Slides and Sedimentation *Krystian Pilarczyk River Hydraulics and Dike Engineering *Wu Changyu Dike Geo-technical Expert *Peter Ko Flood Forecasting/River Mechanics Expert *Dale Lille and *Chen Jinrong Flood Forecasting *Anne Nicolson and *Yao Songling Resettlement Specialists *Collin Green Flood Hazard Economics *Kumar Mohit and *Xie Qingtoa Environmental Specialists *Hu Shunong Cost and Procurement *Wu Ning Financial Specialist *Harvey Ludwig Principal Environmental Specialist Yu Youhua Financial Management Nicolette K. Dewitt Legal Advisor Clifford Garstang Legal Advisor Cecilia Belita and Yinfeng Zhi Task Team Assistants * Indicates consultant hired by the Bank - 88 -  Annex 8: Documents in the Project File* CHINA: Yangtze Dike Strengthening Project A. Project Implementation Plan Hubei and Hunan Provinces, MWR and CWRC Reports: 1. Feasibility Study Report on Yangtze River Dike Strengthening Project, Jingnan (Jingzhou) Section, prepared by the Planning, Design and Research Institute of CWRC; 2. Feasibility Study Report on Yangtze River Dike Strengthening Project, Bapu (Erzhou) Section, prepared by the Planning, Design and Research Institute of CWRC; 3. Feasibility Study Report on Yangtze River Dike Strengthening Project, Huanggang Section, prepared by the Planning, Design and Research Institute of CWRC; 4. Feasibility Study Report on Yangtze River Dike Strengthening Project, Wuhan (Urban Zone) Section, prepared by Hubei Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower, Wuhan Urban Flood Control Design Institute and Wuhan City Water Planning and Design Institute; 5. Feasibility Study Report on Yangtze River Dike Strengthening Project, Wuhan (Suburb Zone) Section, prepared by Hubei Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower, Wuhan Urban Flood Control Design Institute and Wuhan City Water Planning and Design Institute; 6. Feasibility Study Report on the World Bank Financed Yangtze River Dike Strengthening Project, Hubei Section, prepared by Hubei Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower and Wuhan City Water Planning and Design Institute; 7. Project Implementation Plan, the World Bank Financed Yangtze River Dike Strengthening Project, Hubei Province, prepared by Hubei Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower; 8. Feasibility Study Report on the World Bank Financed Yangtze River Dike Strengthening Project, Hunan Section, prepared by Hunan Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower and Wuhan City Water Planning and Design Institute; 9. Project Implementation Plan, the World Bank Financed Yangtze River Dike Strengthening Project, Hunan Province, prepared by Hunan Reconnaissance, Planning and Design Institute for Water Conservancy and Hydropower; 10. Proposal for Flood Control and Disaster Mitigation Engineering Technology Research Center, Ministry of Water Resources; 11. Proposal on Flood Control River Models, CWRC, March 2000; 12. Environment Impact Assessment Report for the Yangtze Flood Control Project, Research Institute for Yangtze Water Resources Protection, Hunan Water Conservancy and Hydropower Survey & Design Institute, Hubei Water Conservancy and Hydropower Survey & Design Institute; 13. Supplement to the Environment Impact Assessment Report for the Yangtze Flood Control Project, Research Institute for Yangtze Water Resources Protection, Hunan Water Conservancy and Hydropower Survey & Design Institute, Hubei Water Conservancy and Hydropower Survey & Design Institute; 14 Yangtze Dike Strengthening Project, Resettlement Action Plan, December 1999, Hunan Water Conservancy and Hydropower Survey & Design Institute, Hubei Water Conservancy and Hydropower Survey & Design Institute, Jiangxi Water Resource Planning and Design Institute, Draft Report; 15 Yangtze Dike Strengthening Project, Resettlement Action Plan, December 1999, Hunan Province, Hunan Water Conservancy and Hydropower Survey & Design Institute, Draft Report; 16 Yangtze Dike Strengthening Project, Resettlement Action Plan, December 1999, Hubei Province, Hubei Water Conservancy and Hydropower Survey & Design Institute, Draft Report; 17 Yangtze Dike Strengthening Project, Resettlement Action Plan, March 2000, Hunan Water Conservancy and Hydropower Survey & Design Institute, Hubei Water Conservancy and Hydropower Survey & Design Institute, Jiangxi Water Resource Planning and Design Institute, Final Report. - 89 -  B. Bank Staff Assessments In the course of Project preparation and appraisal various written contributions have been made by Bank staff and Bank consultants. These reports can be found in the Project file in the World Bank Office, Beijing. The PAD has extensively drawn from these contributions. C. Other None *Including electronic files -90 -  Annex 9: Statement of Loans and Credits CHINA: Yangtze Dike Strengthening Project Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd P040513 1996 China 2ND HENAN PROV HWY 210.00 0.00 0.00 146.62 75.96 0.00 P003619 1996 China 2ND INLAND WATERWAYS 123.00 0.00 0.00 113.92 37.26 0.00 P003652 1996 China 2ND SHAANXI PROV HWY 210.00 0.00 0.00 92.41 54.75 0.00 P058844 2000 China 3RD HENAN PROV HWY 150.00 0.00 0.00 150.00 0.00 0.00 P051856 1999 China ACCNTG REFORM & DEV 27.40 5.61 0.00 30.88 12.39 0.00 P003559 1993 China AGRIC. SUPPORT SERVI 0.00 115.00 0.00 4.37 -3.21 0.00 P050036 1999 China ANHUI PROVINCIAL HWY 200.00 0.00 0.00 171.58 13.98 0.00 P003563 1996 China ANIMAL FEED 150.00 0.00 0.00 133.27 130.40 56,61 P049665 1999 China ANNINGVALLEYAG.DEV 90.00 30.00 0.00 97.35 1.48 0.00 P003602 1996 China CH-HUBEI URBAN ENVIRONMENT 125.00 25.00 28.32 76.87 69.26 3.54 P003603 1995 China CHiNA-ENTERPRISE HOUSING & SOC SEC REF 275.00 75.00 20.00 154.42 153.40 16.72 P057352 1999 China CHINA-FOURTH RURAL WATER SUPPLY PROJECT 16.00 30.00 0.00 44.15 3.76 0.00 P036414 1996 China CHINA-GUANGXI URBAN ENVIRONMENT PROJECT 72.00 20.00 0.00 86.11 14.33 0.00 P056491 1998 China CHINA-HEBEI EARTHQUAKE REHABILITATION 0.00 28.40 0.00 0.43 -7.63 0.00 P003598 1995 China CHINA-LIAONING ENVIRONMENT PROJECT 110.00 0.00 0.00 45.66 44.34 0.00 P003637 1997 China CHINA-NATIONAL RURAL WATER III 0.00 70.00 0.00 57.34 25.85 15.47 P040185 1998 China CHINA-SHANDONG ENVIRONMENT PROJECT 95.00 0.00 0.00 79.99 41.33 0.00 P003586 1994 China CHINA-SHANGHAI ENVIRONMENT PROJECT 160.00 0.00 0.00 54.64 54.17 0.00 P003646 1996 China CHINA-SHANGHAI SEWERAGE PROJECT II 250.00 0.00 0.00 123.99 98.37 0.00 P043933 1999 China CHINA-SICHUAN URBAN ENVIRONMENT PROJECT 150.00 2.00 0.00 152.02 4.70 0.00 P003580 1993 China CHINA-SO. JIANGSU ENVMT PROTECTION PROJ 250.00 0.00 0.00 3.25 2.59 0.00 P003566 1992 China CHINA-TIANJIN URBAN DEV & ENVMT PROJECT 0.00 100.00 0.00 9.23 6.44 4.20 P003599 1996 China CHINA-YUNNAN ENVIRONMENT PROJECT 125.00 25.00 0.00 130.46 51.25 -3.43 P003473 1993 China CHINA-ZHEJIANG MULTICITIES DEVELOPMENT 0.00 110.00 0.00 13.07 13.01 3.33 P036952 1997 China CN-BASIC ED. IV 0.00 65.00 0.00 23.29 -9.47 0.00 P036950 1996 China CN-BASIC ED. POOR III 0.00 100.00 0.00 1.03 2.51 0.00 P003636 1995 China CN-BASIC EDUC IN POOR& MINORITY AREA II 0.00 100.00 0.00 0.99 3.04 0.00 P003566 1998 China CN-BASIC HEALTH (HLTH8) 0.00 85.00 0.00 74.02 11.15 0.00 P003646 1996 China CN-CHONGQING IND POL CT 170.00 0.00 153.99 15.61 142.10 11.94 P003589 1996 China CN-DISEASE PREVENTION (HLTH7) 0.00 100.00 0.00 34.51 40.53 0.00 P036953 1999 China CN-HEALTH IX 10.00 50.00 0.00 55.65 2.29 0.00 P046051 1999 China CN-HIGHER EDUC. REFORM 20.00 50.00 0.00 64.39 16.14 0.00 P003624 1992 China CN-INFECTIOUS DISEASES (HLTH5) 0.00 129.60 0.00 22.30 18.39 18.35 P037156 1995 China CN-IODINE DEFICIENCY DISORDERS CONTROL 7.00 20.00 7.00 0.31 9.98 2.98 P034618 1996 China CN-LABOR MARKET DEV. 10.00 20.00 0.00 20.41 22.33 0.00 P003634 1995 China CN-MATERNAL CHILD HEALT(HLTH6) 0.00 90.00 0.00 12.53 15.30 0.00 P058308 1999 China CN-PENSION REFORM PJT 0.00 5.00 0.00 4.98 2.91 0.00 P003502 1994 China CN-RURAL HEALTH MANPOWER (HLTH4) 0.00 110.00 0.00 11.16 10.30 0.00 P003635 1997 China CN-VOC. ED. REFORM PROJ 10.00 20.00 0.00 5.57 0.37 0.00 P003653 1999 China CONTAINERTRANSPORT 71.00 0.00 0.00 69.69 49.69 0.00 P051736 1998 China E. CHINAIJIANGSU PWR 250.00 0.00 0.00 231.00 190.64 52.86 P003647 1995 China ECONOMIC LAW REFORM 0.00 10.00 0.00 5.09 5.76 0.00 P003606 1998 China ENERGY CONSERVATION 63.00 0.00 0.00 60.96 6.52 0.00 P060270 1999 China ENTERPRISE REFORM LN 0.00 5.00 0.00 4.97 3.34 0.00 - 91 -  Difference between expected Original Amount in US$ Millions and actual disbursements Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd P003632 1993 China ENVIRONMENT TECH ASS 0.00 50.00 0.00 9.03 9.67 8.06 P003507 1996 China ERTAN HYDRO 11 400.00 0.00 0.00 11.24 -0.51 0.00 P003623 1993 China - FINANCIAL SECTOR TA 0.00 60.00 0.00 13.55 15.47 10.08 P036041 1995 China FISCAL & TAX REF. & 25.00 25.00 0.00 39.68 41.95 4.41 P003557 1994 China FOREST RESOURCE DEV 0.00 200.00 0.00 16.41 6.18 -39.26 P046952 1998 China FOREST. DEV. POOR AR 100.00 100.00 0.00 171.41 -3.91 20.34 P051705 1999 China FUJIAN 11 HWY 200.00 0.00 0.00 198.00 21.34 0.00 P003626 1994 China FUJIAN PROV HIGHWAY 140.00 0.00 0.00 46.42 45.09 27.56 P003594 1996 China GANSU HEXI CORRIDOR 60.00 90.00 0.00 111.27 36.63 0.00 P003627 1993 China GRAIN DISTRIBUTION P 325.00 165.00 0.00 246.92 249.67 49.20 P003518 1993 China GUANGDONG PROV. TRANSPORT 240.00 0.00 0.00 0.62 0.62 0.28 P058843 2000 China GUANGXI HWY Project 200.00 0.00 0.00 200.00 0.00 0.00 P003614 1998 China GUANGZ. CITY CRT.TRP 200.00 0.00 0.00 142.92 47.94 0.00 P051888 1999 China GUANZHONG IRRIGATION 80.00 20.00 0.00 92.22 15.39 0.00 P003504 1994 China HEBEUHENAN NATIONAL 380.00 0.00 0.00 16.22 16.22 0.00 P038988 1997 China HEILONGJIANG ADP 120.00 0.00 0.00 68.06 18.64 0.00 P003581 1993 China HENAN PROV. TRANSPORT 120.00 0.00 0.00 6.36 6.36 0.00 P035698 1998 China HUNAN POWER DEVELOP. 300.00 0.00 0.00 300.00 65.50 0.00 P003654 1997 China HUNANIGUANG HWY2-NH2 400.00 0.00 0.00 266.32 126.32 0.00 P049700 1998 China LAIL-2 300.00 0.00 0.00 229.68 29.32 0.00 P003493 1995 China INLAND WATERWAYS 210.00 0.00 0.00 35.81 6.41 0.00 P041890 1999 China LIAONING URBTRANSP 160.00 0.00 0.00 141.50 30.50 0.00 P003540 1994 China LOESS PLATEAU 0.00 150.00 0.00 14.16 -1525 0.00 P056216 1999 China LOESS PLATEAU II 100.00 50.00 0.00 142.50 25.67 0.00 P036949 1998 China NAT.HWY 3-HUBEI 250.00 0.00 0.00 194.32 10.99 0.00 P041268 1999 China NAT.HWY4-HUBEVHUNAN 350.00 0.00 0.00 336.50 16.00 0.00 P003590 1997 China OINBAMTS. POVTY RED 30.00 150.00 0.00 115.20 45.64 0.00 P003570 1993 China RAILWAY VI 420.00 0.00 0.00 44.56 44.56 -15.68 P003571 1995 China RAILWAYS VIl 400.00 0.00 29.00 303.81 249.81 38.97 P003595 1994 China RED SOILS It DEVELOP 0.00 150.00 0.00 30.88 20.46 5.00 P003592 1993 China REF. INSTL& PREINV 0.00 50.00 0.00 13.61 14.14 0.00 P046829 1999 China RENEWABLE ENERGY DEVELOPMENT 100.00 0.00 0.00 100.00 0.00 0.00 P003638 1996 China SEEDS SECTOR COMMER. 80.00 20.00 9.40 49.77 28.39 0.00 P003622 1994 China SHANGHAI MTP II 150.00 0.00 0.00 3.89 3.89 0.00 P044485 1997 China SHANGHAI WAIGAOQIAO 400.00 0.00 0.00 361.22 43.26 0.00 P003569 1996 China SHANGHAI-ZHEJIANG Hi 260.00 0.00 7.75 78.35 54.78 46.77 P003649 1996 China SHANXI POVERTYALLEV 0.00 100.00 0.00 25.87 7.29 0.00 P003585 1995 China SHENYANG IND. REFORM 175.00 0.00 0.00 66.21 49.61 0.00 P003609 1994 China SICHUAN GAS DEV & CONSERVATION 255.00 0.00 0.00 79.22 58.72 0.00 P036947 1995 China SICHUAN TRANSMISSION 270.00 0.00 0.00 112.07 111.27 6.45 P045264 2000 China SMALLHLDR CATTLE DEV 93.50 0.00 0.00 93.50 5.80 0.00 P003593 1994 China SONGLIAO PLAIN ADP 0.00 205.00 0.00 14.37 -2.34 0.00 P003639 1995 China SOUTHWEST POV. REDUC 47.50 200.00 0.00 59.02 49.40 0.00 P003591 1998 China STATE FARMS COMMERCI 150.00 0.00 0.00 90.93 -3.40 0.00 P003539 1998 China SUST COAST RES DEV 100.00 0.00 0.00 81.86 3.53 0.00 - 92 -  Difference between expected Original Amount in US$ Millions and actual disbursements Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Frm Revd P003597 1993 China TAIHU 6ASIN FLOOD CO 100.00 100.00 0.00 16.36, 12.01 -0.77 P046563 1998 China TARIM BASIN It 90.00 60.00 0.00 126.37, 26.60 0.00 P042299 1999 China TEC COOP CREDIT IV 10.00 35.00 0.00 42.01, -2.10 0.00 P003600 1995 China TECHNOLOGY DEVELOPME 200.00 0.00 0.00 89.92, 63.50 0.00 P003633 1994 China TELECOMMUNICATIONS 250.00 0.00 30.00 13.80, 43.80 8.20 P003616 1993 China TIANHUANGPING HYDRO 300.00 0.00 0.00 61.23, 4.69, 53.03 0.00 P003533 1993 China TWAJIN IND. 11 150.00 0.00 40.35 320.00, 43.38 3.19 P056424 2000 China TONGBAI PUMPED STORA 320.00 0.00 0.00 191.99, 0.00 0.00 P045788 1998 China TRI-PROVINCIAL HWY 230,00 0.00 0.00 328.15. 57.03 0.00 P003650 1997 China TUOKETUO POWERIINNER 400.00 0.00 24.00 280.10, 234.95 22.66 P036405 1997 China WANJIAZHAIWATERTRA 400.00 0.00 0.00 158.61, 76.10 0.00 P046564 1999 China WESTERN POVERTY RED 60.00 100.00 0.00 208.02, 22.07 0.00 P034081 1997 China XIAOLANGOI MULTI. If 430.00 0.00 0.00 0.25,17.59, 132.09 0.00 P003562 1994 China XIAOLANGDI MULTIPURPOSE 460,00 0.00 0.00 14.86, 4.78 0.00 P003644 1994 China XIAOLANGDI RESETTLEMENT 0.00 110.00 0.00 202.48, 10.95 0.00 P003612 1995 China XINJIANG HIGHWAY I 150.00 0.00 0.00 9.26, 37.37, 14.86 0.00 P003643 1997 China XINJIANG HWY II 300.00 0.00 0.00 41.75, 106.82 0.00 P003596 1995 China YANGTZE BASIN WATER 100.00 110.00 0.00 101.17, -4.60 0.00 P063123 1999 China YANGTZE FLOOD EMERGY 40.00 40.00 0.00 12.88 16.68 1.67 P003641 1994 China YANGZHOU THERMAL POW 350.00 0.00 0.00 41.55 0,00 P003642 1995 China ZHEJIANG POWER OEVT 400,00 0.00 0.00 19.28 0.00 P003534 1992 China ZHEJIANG PROV TRANSP 220.00 0.00 0.00 12.88 12.55 Total: 15940.40 3955.61 349.81 9752.81 4054.88 392.25 - 93 -  CHINA STATEMENT OF IFC's Held and Disbursed Portfolio 30-Apr-2000 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 1996 Beijing Honnel 3.93 0.50 0.00 3.85 3.93 0.50 0.00 3.85 2023 CIG Holdings PLC 0.00 3.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 CIG Port Holding 0.00 1.50 0.00 0.00 0.00 1.50 0.00 0.00 1998 Caltex Ocean 21.00 0.00 0.00 45.00 21.00 0.00 0.00 45.00 1998 Chengdu Chemical 0.00 3.20 0.00 0.00 0.00 0.00 0.00 0.00 1998 Chengxin-IBCA 0.00 0.36 0.00 0.00 0.00 0.36 0.00 0.00 1987/92/94 China Bicycles 0.00 0.95 0.00 0.00 0.00 0.95 0.00 0.00 1994 China Walden IV 0.00 4.63 0.00 0.00 0.00 4.63 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 1994 Dalian Glass 0.00 2.40 0.00 0.00 0.00 2.40 0.00 0.00 1999 Dujiangyan 25.59 0.00 0.00 30.00 0.00 0.00 0.00 0.00 1995 Dupont Suzhou 20.25 4.15 0.00 36.40 20.25 4.15 0.00 36.40 1994 Dynarnic Fund 0.00 12.35 0.00 0.00 0.00 10.70 0.00 0.00 1999 Hansom 0.00 16.10 0.00 0.00 0.00 16.10 0.00 0.00 1996 Jingyang 40.00 0.00 0.00 100.00 40.00 0.00 0.00 100.00 1998 Leshan Scana 6.10 1.35 0.00 0.00 4.00 1.35 0.00 0.00 1996 Nanjing Kumho 10.71 3.81 0.00 30.45 10.71 3.81 0.00 30.45 1995 Newbridge Inv. 0.00 2.13 0.00 0.00 0.00 2.13 0.00 0.00 1997 Ningbo 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 1997 Orient Finance 13.33 0.00 0.00 16.67 13.33 0.00 0.00 16.67 1997 PTP Hubei 12.63 0.00 0.00 25.38 12.63 0.00 0.00 25.38 1994/97 PTP Leshan 3.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 1996 Pacific Ports 0.00 3.64 0.00 0.00 0.00 3.64 0.00 0.00 1998 Rabobank SHFC 2.03 0.00 0.00 2.03 2.03 0.00 0.00 2.03 1998 Shanghai Krupp 30.00 0.00 0.00 68.80 0.00 0.00 0.00 0.00 1999 Shanxi 19.00 0.00 0.00 0.00 4.50 0.00 0.00 0.00 1993 Shenzhen PCCP 3.76 0.99 0.00 0.00 3.76 0.99 0.00 0.00 1995 Suzhou PVC 20.17 2.48 0.00 20.35 20.17 2.48 0.00 20.35 1998 WIT 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1996 Weihai Weidongri 3.61 0.00 0.00 0.00 3.61 0.00 0.00 0.00 1993 Yantai Cement 11.43 1.95 0.00 6.10 11.43 1.95 0.00 6.10 1998 Zhen Jing 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 Total Portfolio: 251.54 91.26 0.00 385.03 174.35 83.41 0.00 286.23 - 94 -  Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2000 BOS RI 0.00 0.00 3841.00 0.00 2000 CIG Zhapu 6000.00 5000.00 0.00 0.00 1998 Chengdu Chemical 7400.00 0.00 0.00 8600.00 1997 Chinefarge 12800.00 0.00 0.00 20000.00 1998 Orient Fin A Inc 3333.33 0.00 0.00 0.00 1997 PTP Holdings 0.00 0.00 1500.00 0.00 2000 PTP Holdings II 0.00 0.00 33.00 0.00 1998 PTP Hubei BLINC 0.00 0.00 0.00 1500.00 2000 SBCF I 0.00 0.00 15000.00 0.00 2000 SBLAV 0.00 0.00 15000.00 0.00 2000 Shizuishan Carbn 6300.00 0.00 1700.00 6000.00 1998 XIB 50000.00 0.00 20000.00 0.00 1998 Zhen Jing 4500.00 0.00 0.00 0.00 Total Pending Commitment: 90333.33 5000.00 57074.00 36100.00 - 95 -  Annex 10: Country at a Glance CHINA: Yangtze Dike Strengthening Project East POVERTY and SOCIAL Asia & Low- China Pacific income Development diamond* 1998 Population, mid-year (millions) 1,238.6 1,817 3,515 Life expectancy GNP per capita (Atlas method, US$) 750 990 520 GNP (Atlas method, US$ billions) 928.9 1,802 1,844 Average annual growth, 1992-98 Population (%) 1.0 1.2 1.7 Labor force (%) 1.3 1.6 1.9 GNP Gross per primary Most recent estimate (latest year available, 1992-98) capita enrollment Poverty (% of population below national povertV line) 6 Urban Population (% of total population) 33 35 31 Life expectancv at birth (years) 70 69 63 Infant mortalitv (per 1,000 live births) 32 37 69 Child malnutrition (% of children under 5) 16 20 .. Access to safe water Access to safe water (% of population) 83 77 74 Illiteracv (% of population age 15+) 17 15 32 Gross primary enrollment (% of school-ape population) 120 117 108 China Low-income group Male 120 119 113 Female 120 118 103 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1977 1987 1997 1998 Economic ratios* GDP (US$ billions) 172.3 268.2 902.0 960.9 Gross domestic investmentGDP 28.5 36.1 38.2 38.8 Trade Exports of aoods and services/GDP 4.8 13.6 23.0 19.1 Gross domestic savinas/GDP 29.0 36.2 42.6 43.4 Gross national savings/GDP 29.0 36.2 41.5 41.4 Current account balance/GDP 0.2 0.1 3.8 3.4 Domestic Iny Interest pavments/GDP .. 0.4 0.6 0.7 Savings Investment Total debt/GDP .. 13.2 1.3 16.2 avigs Total debt service/exports .. 9.6 9.8 9.5 Present value of debtGDP .. .. 14.9 Present value of debt/exports .. .. 62.7 Indebtedness 1977-87 1988-98 1997 1998 1999-03 (average annual growth) GDP 9.8 10.3 8.8 7.8 7.0 -China Low-income group GNP per capita 8.5 8.8 7.4 6.5 6.2 Exports of goods and services 18.4 14.4 23.1 4.6 4.4 STRUCTURE of the ECONOMY 1977 1987 1997 1998 Growth rates of output and investment (%) (% of GDP) 30 Agriculture 29.4 26.8 18.7 18.0 Industry 47,1 43.9 49.5 49.2 20 Manufacturina 31.1 34.4 37.3 36.8 10 Services 23.4 29.3 32.1 32.8 Private consumption 63.4 51.3 45.7 44.5 93 94 9C 96 97 98 General government consumption 7.5 12.5 11.6 11.9 GDI -O-GOP Imports of goods and services 4.2 13.5 18.5 14.3 1977-87 1988-98 1997 1998 Growth rates of expons and imports (%) (averagQe annual growth) Aariculture 6.4 4.4 3'5 3'5 40 Industrv 10.9 14.1 10.8 9.2 30 Manufacturing 11.4 13.4 9.9 8.9 2 Services 12.7 8.6 8.2 7.6 Private consumption 9.7 8.6 7.7 6.7 General govemment consumption 9.0 9.9 8.2 8.4 0 Gross domestic investment 10.7 11.7 7.6 7.6 93 94 95 96 97 98 Imports of goods and services 19.2 12.5 12.7 1.5 Exports : Imports Gross national product 10.0 10.0 8.5 7.4 Note: 1998 data are preliminary estimates. The diamonds show four kev indicators in the country (in bold) compared with its income-aroup average. If data are missina, the diamond will be incomplete. - 96 -  China PRICES and GOVERNMENT FINANCE 1977 1987 1997 1998 Inflation (%) Domestic prices 30 (% change) Consumer prices .. 7.3 2.8 -0.8 20 Implicit GDP deflator 1.6 5.1 1.2 -1.3 10 Government finance 0 I (% of GOP, includes current grants) 93 94 95 96 97 96 Current revenue .. 21.5 12.0 12.8 -10 Current budget balance .. 4.2 0.6 -2.2 GDP deflator * CPI Overall surplus/deficit .. -2.1 -1.5 -4.0 TRADE (US$ millions) 1977 1987 1997 1998 Export and import levels (US$ millions) Total exports (fob) ,. 39,437 182,792 183,757 2r0,000 Food .. 4,781 11,075 10,619 Fuel .. 4,544 6,987 5,181 1 *0.000 Manufactures .. 26,206 158,838 163.157 Total imports (cif) .. 43,216 142,370 140,166 100,000 Food .. 3,055 6,308 6,463 Fuel and energy .. 539 10,306 6,773 Capital goods .. 21,110 57,930 61,915 o Export price index (1995=100) .. 75 95 89 92 93 94 00 96 97 98 Import price index (1995=100) .. 75 92 89 a Exports U Imports Terms of trade (1995=100) .. 99 104 100 BALANCE of PAYMENTS (US$ millions) 1977 1987 1997 1998 Current account balance to GDP ratio(%) Exports of goods and services 8,550 39,120 207,251 207,589 4 Imports of goods and services 8,148 38,880 166,754 165,900 Resource balance 402 240 40,497 41,689 2- Netincome 82 -215 -11,097 -13,428 Net current transfers -70 224 5,144 4,278 0 92 _ 94 gs ~~96 97 96 Current account balance 414 249 34,544 32,540 2 Financing items (net) -320 4,534 1,313 -26,114 Changes in net reserves -94 -4,783 -35,857 -6,426 - Memo: Reserves including gold (US$ millions) .. 22,500 147,000 Conversion rate (DEC, local/US$) 1.9 4.5 8.3 8.3 EXTERNAL DEBT and RESOURCE FLOWS 1977 1987 1997 1998 (US$ millions) Compositlon of total debt, 1998 (USS mllions) Total debt outstanding and disbursed .. 35,340 146,697 156,105 IBRD .. 1,427 8,239 9,610 IDA 1,330 7,830 8,693 A: 9,610 G: 29,473 B 8,693 Total debt service .. 3,852 18,445 13,009 D: 3,946 IBRD .. 208 858 940 IDA .. 12 81 97 862 Composition of net resource flows Official grants .. 209 228 Official creditors .. 626 4,315 2,282 Private creditors .. 5,462 8,134 916 Foreign direct investment .. 2,314 44,236 45,000 Portfolio equity .. 0 8,457 1,153 F: 82,521 World Bank program Commitments .. 1,306 2,425 2,636 A - IBRD E - Bilateral Disbursements .. 702 2,275 2,061 B - IDA D- Other multilateral F- Private Principal repayments .. 97 377 434 C - IMF G - Short-term Net flows .. 605 1,898 1,627 Interest payments .. 124 562 602 Net transfers .. 482 1,335 1,024 Development Economics 9/2/99 - 97 -  Additional Annex No.: 11 YANGTZE DIKE STRENGTHENING PROJECT ENVIRONMENTAL IMPACT ASSESSMENT SUMMARY A: INTRODUCTION The Environmental Impact Assessment (EIA) report for the Yangtze Dike Strengthening Project (YDSP) was prepared by the Research Institute for Yangtze Water Resources Protection (RIYWRP) with assistance from corresponding Water and Hydropower Design institutes in Hunan and Hubei provinces. World Bank staff and consultants also assisted with the preparation of the EIA. The EIA is based on the updated provincial EIA reports prepared by the provincial design institutes mentioned above for the Project components in each province. The provincial EIAs have been approved by the Provincial EPB's and SEPA. The EIA for the Project meets the requirements of both the Government of China and the World Bank. The EIA takes into account the entire spectrum of environmental effects that could result from the Project, including effects on: (i) physical natural resources; (ii) natural ecological resources; (iii) economic development; (iv) quality of life values; and (v) global environmental issues, as they apply to Project components in each of the three provinces. The EIA delineates all "Significant Environmental Issues" (SEIs) affected by the Project, describes the potential for each SEI to cause adverse environmental effects if not controlled, and describes recommended control measures, called "Environmental Protection Measures" (EPMs). The EPMs include: (i) mitigation measures, to lessen the magnitude of adverse impact; and (ii) measures to offset any residual adverse effect not solved by mitigation, so that there will be no significant net adverse effect. In some instances, the EIA recommends a third kind of EPM, namely enhancement measures, for those situations where a small additional investment would yield valuable environmental benefits. An overall Envirommental Management Plan (EMP) has been developed as an integral part of the EIA, which will be carried out during Project implementation. The EMP includes: (i) establishment of an Environmental Management Office (EMO) in each province; (ii) establishment of an international panel of environmental experts; and (iii) implementation of environmental monitoring and training programns. B: PROJECT DESCRIPTION B-1: Project Components The Project is an environmental protection project which includes: (i) civil engineering works for rehabilitation of the river banks, dikes and cross-dike structures; (ii) a resettlement program; (iii) environmental protection measures; and (iv) other components including flood forecasting and flood emergency systems and programs to provide assistance during floods. The civil engineering works have been described in detail in Annex 2 and detailed description of the resettlement action program is given in Annex 12. The following paragraphs summarize the enviromnental protection components and project altematives. - 98 -  B-2: Environmental Protection Components The following environmental protection components have been incorporated in the Project design: * forest and grass planting: some 680,000 m2 of wave-breaking forest and 7,250,000 m 2of erosion prevention grasses will be planted on the dike slopes, costing about Yuan 33 million; * resurfacing of borrow areas following completion of works; and * schistosomiasis control measures including filling borrow areas, construction of snail sinks, and supply of snail nets; In addition, environmental protection measures in the civil works contracts will be: (i) water, air, noise, and solid waste pollution control; (ii) protection of workers' health; (iii) prevention of soil erosion; (iv) protection of aquatic ecological features and migration birds; (v) protection of cultural relics; and (vi) control of land use. B-3: Project Alternatives The possible alternatives considered for the Project include: (i) no-project (do nothing ) alternative; (ii) flood diversion and storage project to enlarge flood diversion areas and increase flood storage capacities; and (iii) higher dikes alternative. No-proiect Detailed analyses shows that many reaches of the dikes, of which some are hundreds of years old, have serious defects such as: weak and dangerous sections, poor and permeable foundations, and aged cross-dike structures. If the dikes are not improved (doing-nothing alternative), dike failures are likely to occur in many places, resulting in serious flood disasters with many people killed and huge economic losses as was the case in 1954 or 1998 when serious flooding occurred. Increasing diversion and storage capacities A proposed diversion and storage project, with a total storage capacity in excess of 50 billion m, depends on present dikes and the upper basin reservoirs to play their roles to hold the flood waters as they occurred during the 1954 flood. In addition, most of the diversion and storage facilities constructed after 1954 have never been used for such purposes. As a result agriculture and many industries have rapidly developed in the areas earmarked for diversion and storage of flood water. In addition, the population in these areas has increased rapidly. It will be difficult to transfer them to other areas and economic losses will be prohibitive. Therefore, this alternative is also considered not feasible. Higher dikes Analysis shows that the maximum probable flood peak level would be 2-3 m higher than the actual water level of the 1954 and 1998 flood levels. If the dikes are to be raised by 2-3 meters, it is estimated that: (i) 7.6 billion m3 of earth will be needed; (ii) more than 1.60 million mu farmland will be occupied; (iii) and about 1.0 million people need to be resettled. Besides, thousands of culverts, pump stations, and bridges will need to be reconstructed. Furthermore, as the geological foundations of many dike sections are poor, such sections may breach in case of high water levels, which of course will cause calamities. Therefore, this alternative is considered too costly to be implemented and is not expected to reduce dike failure risks. Therefore, the present Project, as a key component of the an overall Yangtze Flood Control Master Plan, is necessary and is the only feasible alternative. - 99 -  B-4: Project Economics The total Project cost is estimated at US$545.5 million including financing charges, of which about US$335.5 million will be provided from local counterpart funding sources and US$210.0 million from the Bank loan. A benefit-cost analysis was carried out and the following benefit streams were considered: * reductions in flood losses arising from higher and stronger dikes (Yuan 14.6 billion); * reductions in flood fighting costs (Yuan 0.2 billion); * reductions, in some instances, in the costs of using detention basins (Yuan 0.2 billion); and * reductions in dike operation and maintenance costs (Yuan 1.8 billion). Two baseline conditions were considered: with and without the Three Gorges Project (TGP), because the Project is scheduled to be completed before the TGP becomes operational. The key indicators of the economic analysis are shown in Table I below: Table 1: Summary of Project Economic Analysis Province Net Present Value Benifit-Cost Ratio Economic Internal (in Yuan Billion) Rate of Return (%) Hunan 2.6 2.3 25.0 Hubei 9.4 4.3 53.1 C: ENVIRONMENTAL SETTING C-1: Environmental Study Area The Environmental Study Area (ESA) for the Project includes four sub-areas: (i) areas protected; (ii) construction areas, project affected river reaches, and downstreamn areas. C-2: Land Use The ESA is mainly located in the plain of the Middle and Lower Reaches of the river, which consists of flat terrain with fertile soil, a warm and humid climate, plenty of water, and good conditions for irrigation. As a result, irrigated agriculture has been highly developed with about 86% of land suitable for cultivation. Other land use includes forest land, lakes, urban and residential areas, and unused land. Due to the high population density, the amount of land per capita in the area is lower than the average for China. C-3: Natural Physical Resources The natural physical resources of the ESA include topography/landform, geology, climate, hydrology, floods, surface water quality, air quality and noise. The landforms in the ESA include accumulated plain, low mountains and hills, river terrace, and beaches and sand/clay bars. The Project is located in an area with earthquake intensity equal or lower than Grade VI except for the Yongji embankment area where the earthquake intensity is Grade VII. The ESA belongs to the subtropical monsoon climatic area with rich precipitation (average annual 1,000 -1,600 mm). The Project is along the middle and lower reaches of the Yangtze, with mean annual runoff of 451 billion m at Yichang gauging station and 894 billion m at Datong gauging station and mean annual flows of 14,300 mr/s and 28,300 m3/s respectively. The historic maximum flows at the two gauging stations are 71,100 mn/s and 92,600 m 3/s and minimum 2,770m 3/s and - 100 -  4,620 m3/s respectively. The Yangzte is a river with frequent and serious floods, once in every IO years on average, which usually causes hundreds or even thousands of people killed, millions of people homeless, and countless economic loss. Table 3.4-7 shows the estimated losses caused by floods in the last 100 years. C-4: Natural Ecological Resources The Project area is a highly developed area with limited natural forests and terrestrial wildlife. The natural ecological resources in the ESA that might be affected by the Project include: (i) fish species; (ii) migration birds area; and (iii) and wetlands. With respect to fish species, there are some 2 1 0 species in the middle and lower Yangtze river system and 108 species in the Yangtze mainstream. Five (5) state protected species can be found in the river reaches of the Project: (i) Chinese River Dolphin; (ii) Chinese Finless Porpoise; (iii) White Sturgeon; (iv) Chinese Sturgeon; and (v) and Chinese Sucker. Many lakes in the ESA such as Poyang Lake are migration birds areas which are generally far from the Project's construction areas. In 1998, a new migration bird area --- the Saicheng Lake in Jiangxi Province --- was formed when the following five state protected birds were found there: Grus leucogeranus, Grus mamacha, Grus vipio, and Anser albifrons, Cygnus columbianus. With respect to wetlands, there are 15 significant wetland areas in the ESA of which only the Honghu Lake is close to the Project construction area. C-5: Economic Resources The Project protected area is a highly developed area with complete infrastructures, abundant water resources, well irrigated land with high levels of production, and powerful industry bases. The industry in this area includes a number of the nation's top-ranking key enterprises. With a well developed agricultural economy, qualified technical professionals, good education system, and well developed key industries, the area holds an important position in the economy and social development of China. C-6: Quality of Life Quality of life situation in the ESA mainly refers to family income levels, public health conditions, and cultural values including relics and scenery. As mentioned above, the Project region is a highly developed area, with a well developed agriculture and industry base. The mean annual salary of urban and rural residents is in the range of 4,000 - 9,000 yuan and the net income per capita per annum is in the range of 2,000 - 3000 yuan. The average housing area ranges around 10 - 20 m' for urban residents and 25 - 36 m for rural residents. With respect to public health, there are quite complete medical care systems in the Project area including hospitals in all cities and townships and clinics in all villages. A major public health concem is schistosomiasis which has prevailed in the region for a long time. Even now the region is still the most serious schistosomiasis infection region in China. There are many cultural relics and heritage in the ESA including Yueyang Tower in Yueyang, Yellow Crane Tower and East Lake in Wuhan. Of the various environmental resources noted above, those which are most likely to be influenced by the Project are the regional economics and quality of life ones, which are expected to be benefited greatly due to less frequent and less serious flooding. - 101 -  D: ENVIRONMENTAL IMPACT ASSESSMENT AND EPMs D-1: Delineation of Significant Environmental Issues (SEIs) The application of a matrix system, which lists Significant Environmental Issues (SEIs) associated with major flood control/dike rehabilitation projects, identified that more than twelve major (12) SEIs and some others apply to this Project. The 12 major SEIs are (i) resettlement; (ii) land use; (iii) aquatic species; (iv) public health; (v) dike structural stability; (vi) downstream impacts; (vii) flood emergency program; (xiii) borrow areas and spoil disposal; (ix) cultural relics; (x) impacts on Dongting Lake; and (xi) construction operation constraints. The other SEIs include: (i) construction operations; (ii) environmental aesthetics; (iii) traffic; (iv) public infrastructure facilities; (v) quality of life; and (vi) regional wetlands. D-2: Resettlement D-2.1 Description of Resettlement Program The YDSP covers two provinces of Hubei and Hunan, and during the construction of the YDSP, 180 villages of 44 townships/farms in 22 counties/districts will be impacted, with land acquisition of 33,750 mu, house demolition of 1.519 million m and relocation of 10,958 households with 47,992 people. Of this resettlement, 2,880 households (25 percent of the total) for 10,958 resettlers will be relocated in 22 concentrated sites. This will result in an estimated 13,859 persons who will require livelihood development, to be met primarily through the improvement of agricultural land with development of sideline activities and industries taking a lesser role. Over 70 percent of affected households (35,484 persons in 8,078 households) will relocate intemally to their current village/administrative area within their existing community and with continued access to existing infrastructures and facilities. Resettlement to centralized resettlement sites where planning includes required infrastructure and social facilities and allows for resettlement of social and kinship groups together is proposed for 30 percent of households (12,508 resettlers in 2,880 households). With respect to livelihood development, only 4.8 per cent of arable land in the directly affected villages is required for Project construction, and thus no significant adverse impacts on the region are foreseen. For the persons affected by loss of income generating potential, the RAP proposes that there is rehabilitation of farmland which will be improved to increase supply capacities for people to be employed in livestock development and others to be provided with off-farm opportunities. The RAP reasonably and in detail analyzes the income restoration program and gives a conclusion that the resettlers can maintain and improve their income generation under the proposed plan. In order to carry out the plan, a feasible resettlement budget has been developed incorporating costs for compensation, income restoration, planning, monitoring, supervision and contingencies. Mechanisms for consultation, participation and grievance resolution have also been applied and integrated into the RAP. To ensure successful implementation of the RAP, a detailed supervision and monitoring system has been proposed. D-2.2 Environmental Assessment on Resettlement Considering that the resettlement planning and preparation is well underway, and assuming that support from the two provincial planning institutes (Hunan Water Conservancy and Hydropower Survey and Design Institute and Hubei Water Conservancy and Hydropower Survey and Design Institute), and other Governmental agencies will continue as planned, it is concluded that the implementation of the overall resettlement program is at this stage progressing satisfactorily. In addition, if the EPMs specified in the ETA, including environmental monitoring, are implemented as detailed in the ETA and Resettlement Action Plan, the Project resettlement activities will be - 102-  in compliance with both national as well as World Bank environmental directives and standards. This compliance will be monitored by the Project Environmental Management Office and the International Environmental Panel of Experts. The following recommendations are made to ensure efficient and environmentally friendly operation of the resettlement program: Environmental Engineering Aspects: The contractors involved in the implementation of the Resettlement Action program (RAP) will need to submit drawings, specifications and monthly reports on all aspects of RAP implementation including attention to the environmental conditions in the construction areas. The Environmental Construction Inspectors (ECIs) to be furnished by the Project EMOs will monitor the operations of the contractors to ensure that their work complies with the environmental standards stipulated in the civil works contracts. The recommendations of the International Environmental Panel of Experts, including those pertaining to social and cultural issues, will need to be implemented by the EMO. Those may also include the allocation of time and provision of budget for site visits by the Panel to allow for direct contact with resettlement and host families. Resettlement Environmental Monitoring. Efficient resettlement environmental monitoring by the Project EMO is critical to the success of the resettlement program. This includes: (i) delineating resettlement house/facilities design criteria for inspection that they are built according to the standards specified; (ii) requiring the village to appoint a Village Environmental Officer; (iii) preparation of a manual with operating guidelines for officers, including instruction on monthly reporting and record keeping; (iv) training received by officers; and (v) bi-monthly visits to the village by ECI to monitor the situation on the ground, for the first year after moving in, and with subsequent visits every six months. Use of Appropriate Standards for RS Villages/Townships. Technical guidelines will be needed during the construction of resettlement facilities to ensure that all the facilities are being constructed as per the agreed standards and specifications, including (i) for families resettled in municipalities with urban facilities, provisions for participation of the resettler homes in the municipal infrastructure facilities program including water supply, sewage disposal, solid waste management, etc., and (ii) for families resettled in areas without such services, provision of wells furnishing water of acceptable mineral quality, provision for chlorinating or other measures to ensure water is safe to drink, provision of pour-flush toilets discharging to dual disposal pits, arrangements for sanitary solid waste collection and disposal, provision of adequate drainage to protect against flooding, and availability of adequate clinics/hospitals. In addition monitoring will be needed of pollution control measures of the industries proposed to be set-up under the resettlement program. Particular attention will need to be paid to well water quality, to check that mineral content does not exceed specified limits, and does not pose problems of color, hardness, iron and manganese content. In addition monitoring will be needed of pollution control measures of the industries proposed to be set-up under the resettlement program Other Issues: Other resettlement issues evaluated in the EIA include: (i) continuing development of the database of environmental parameters relevant to the resettlement sites; (ii) special issues such as rehabilitation of socially and economically disadvantaged groups of people; (iii) detailed advance planning for Panel of Experts field trips; (iv) environmental reporting system for the Panel's visits, with EMO preparing summary report with detailed reports (to be included as annexes) to be prepared by each of the EMO subcontractors; and (v) disease control in resettlement villages, townships. Summary Evaluations: Table 4 presents a summary evaluation of the environmental adequacy of the Resettlement Action Plan for the Project. It is concluded that the net irnpact of the resettlement program is beneficial to both the resettled and the host population. However, effective surveillance and monitoring as described in the EIA is important to ensure that all the RAP's planned objectives will be achieved. - 103 -  D-3: Land Use The Project will change present land uses in the ESA to a small degree, because the Project will mainly strengthen the existing dikes. After the Project is completed, the land use mode in the Project protected area will not be changed significantly. The impact of the Project is the loss of about 31,404 mu of land for dike widening, which represents only about 0.1 % of the 33.7 million mu farmland protected. During the construction period of the Project, measures will be taken to minimize the impact on land resources, including careful land use planning and ensuring that these plans are adopted by the PMO and implemented by the contractors. After the completion of the Project, the flood control standards in the regions will be greatly improved from the present 10-20-year recurrence of floods to protection against the major floods of 1954 type (50 to 100 year recurrences). This improved level of protection will effectively ease the flood threat on land resources, which will facilitate planning for optimal use of the available land. D4: Aquatic Ecology The Yangtze river in the Project areas is frequented by the following four rare aquatic species: Chinese River dolphin (lipotes vexilliter! This specie is already near extinction in the Yangtze river system (only about 100 left), with their habitats mostly in sandbar/backwater areas. The Project construction operations areas do not include these habitats, however, careful observations must be made during construction to detect the dolphins and if detected, construction must cease until the dolphins have gone or are diverted away. Chinese sturgeon and Chinese Finless porpoise These species migrate along the river channel's deep bottom troughs, and will not be affected by the Project. White Sturgeon (Psephurus gladius), Chinese Sucker (Myxocyprinus asiaticus) and Yangtze Sturgeon (Acipenser dabryanus): These are freshwater fishes that live in the Yangtze River throughout the river sections. These fishes naturally have the ability to avoid adverse surroundings when disturbed, and all fishes live in the deep area of the river, so the implementation of the Project is not expected to cause any significant adverse effects Four Family Fishes In addition, the Yangzte river is also habitat for "Four Family Fishes", namely black carp, grass carp, silver carp and big head. These reproduce in the flood season (May to July) when most construction is halted; hence no significant impact from the Project is expected. Other Fish Species Other important fish species have habitats in lakes and ponds, which should not be affected by the Project. D-5: Public Health Schisto (schistosomiasisl Control: The major public health concem for the Project is the Schisto control. Engineering Control Measures: Project preparation studies include engineering provisions for schisto control. These include snail sinks and snail nets included in the design of culverts and gates, of backfill operations of borrow areas, and of snail infected wet areas. Schisto Control Measures during construction: Schisto control measures during construction include: (i) medical examinations for workers; (ii) schisto control education and training of all the personnel and - 104 -  workers involved; (iii) use of prevention medicines by workers; (iv) control of wet areas; (v) management of excreta; (vi) use of boots and gloves; and (vii) monitoring to ensure the application of the above measures as shown in Table 4.2.4-1. These measures will be included in construction contracts and implementation of the measures will be ensured by the Environmental Construction Inspectors (ECIs). Schisto Control in Flood Emergencies: The schisto control measures used in flood emergencies include use of schisto medicine, use of protective boots/gloves/clothing and use of snail nets. Other Diseases Hazards during Construction: The dike rehabilitation program poses the potential risk for disease outbreaks among construction workers which are common to virtually all major construction projects, including enteric diseases, insect vector transmitted diseases, and others, all of which are to be prevented/controlled by the contractors with monthly reports to the Project EMO as specified in civil works construction contracts and with continuing surveillance by the ECIs fumished by the EMO. D-6: Dike Structural Stability The dikes will be more stable when the Project is completed. With this and the other flood control measures, the overall result will be a system which can manage floods of the 1954 level, provided that emergency control measures of the comprehensive plan (such as use of storage basins) are promptly and efficiently utilized during the flood hazard period With respect to earthquake hazards, most of the dike projects are in regions where no special earthquake protection measures are needed. The exception are dikes in locations where the design earthquake intensity is Grade 7. The designs for improving these dikes include special protection measures: the crest of the dike has been widened from the normal 8.0 m to 10.0 m, and the entire dike body has been widened accordingly. D-7: Downstream Impacts Unlike dam/reservoir projects, which usually result in a variety of changes in the downstream region, this Project will have little impact on the downstream areas. The only major downstream effect of the dike strengthening project will be on the downstream flow hydrology at times of serious floods, as the project measures will increase river flood flows in the downstream river sections. Analyses show that the flow capacity of the downstream region is much greater than in the river system in the project region, hence no adverse downstream flowing hazards are expected. In addition, no other adverse downstream effects are foreseen, such as effects on aquatic species, public health, shipping, etc. D-8: Flood Emergency Program The Yangtze Flood Emergency program is an important component of the national flood control system, which comprises commanding system, emergency programs, and action plans. The emergency programs prepared by the general command of the Yangtze flood control and local flood control commands includes: flood regulation programs; flood forecasting; rescue program for dike failure; implementation program for safe relocation from diversion and storage areas; mobilizing and organizing programs for flood control teams; flood emergency programs conceming materials supply, communications and traffic; emergency programs concerning refugee and anti-epidemic measures. These programs are part of an integral system and will be put into action immediately when needed. During the 1998 flood, which was one of the most serious floods of the Yangtze, the flood emergency programs were started timely and played an important role in minimizing the flood losses and damages. Based on the 1998 flood experiences, on earlier floods along the Yangtze river, and on flooding experience elsewhere in China, an Emergency Flooding Control - 105-  System exists and is updated periodically for application in the Yangtze river basin. D-9: Borrow Areas and Spoil Disposals The Project will require substantial quantities of soil materials for dike rehabilitation, with much less production of spoil. The soil materials are to be taken from some 20,000 mu land areas in which 70 % in Hunan and 30 % in Hubei is in the river bank areas . Compensation for these temporarily used land (one year) has been planned and included in the RAP at a rate of 1,800 yuan/mu. Most of the borrow area will be filled with spoils stored in temporary places or with soils from river bank to become or return to farmland. And a little portion of the borrow area will be developed as fish ponds at request or agreement of the farmers. However, measures have been planned to prevent schisto hazards in the borrow areas. D-10: Cultural Relics/Heritages Upon completion of the Project, flood hazards in the ESA will be reduced and therefore potential flood damage to the relics/heritages in the ESA will be reduced too. All the valuable cultural relics/heritage in the ESA are located far away from the dike rehabilitation construction zones and will therefore not be adversely affected by the construction operations. If any evidence is disclosed during the construction period which indicates possible damage to any valuable relics, the civil works contractors will immediately inform the Engineering Supervisor, ECI, EMO and follow instructions to protect the relics. D-11: Impact on Dongting Lake Dongting Lake, with four tributaries on its north side connecting with the Yangtze, is located in Hunan Province. It is the only area in the Yangtze middle reach that can accept Yangtze floodwater with a significant effect on cutting down Yangtze peak flood level. The lake's outlet to the Yangtze is located at Chenglingji. When the Project is completed the water level at Chenglingji may be somewhat higher in flood season and the flood discharge from the Dongting Lake would be hampered. As a result the Dongting lake will keep a higher water level for some time, exerting great pressure on the Dongting lake area. In order to ensure the safety of the Dongting Lake area, a comprehensive flood control project is being undertaken in this area in parallel with the planned project works. Both are integral components of the Yangtze Basin Flood Control Master Plan. The Project is to be finished in 2000, two or three yeas ahead of the completion of the Project. After completion of the comprehensive flood control project in Dongting Lake area, the function of the Dongting Lake for alleviating Yangtze floodwater can be fully exerted and, at the same time, the Dongting Lake area will also be safer. D-12: Construction Operation Constraints Historically, civil works contractors have often caused unnecessary environmental damages, sometimes serious, simply because it is the nature of contractors, and of the Supervision Engineer, to focus on expediting building the projects' physical components, with generally low-priority attention to environmental protection requirements. However, experience has shown that it is quite feasible and affordable for contractors to observe and comply with the EPMs specified in EIA, provided these requirements are specified in the construction contracts and provided Environmental Construction Inspectors (ECIs) are made available to observe the contractor's operations and to insist on compliance. Table 2 shows the EPMs to be observed by contractors. A team of ECIs will be employed by each provincial EMO, who will, like supervising engineers, monitor on-spot contractor performance to ensure all EPMs specified in the EIA will be actually implemented. A serious environmental issue under the Project is the potential schistosomiasis hazard, because most of the Project construction areas are in serious - 106 -  schistosomiasis hazard areas. All contractors will be required to implement the schistosomiasis control measures described in Table 3 to protect their construction workers, which include medical examination, snail killing, provision of safe drinking water, medicine and protection clothes, adequate excreta management, and other measures. In addition to ECI's daily monitoring, a special schistosomiasis monitoring teamn will check periodically the contractor's performance to ensure the EPMs for schistosomiasis control will be implemented during construction period. D-13: Other SEIs Other SEIs include the following six: Project construction operations, traffic, public infrastructure facilities, aesthetics, quality of life and regional wetlands. The "Project construction operations" cover 4 sub-issues: water quality, air quality, noise, and water supply. The construction activities under the Project are not expected to produce significant wastewater. In addition, construction activities are scattered along the near 700 km dike alignment and the water flow and volume in the Yangtze is very large, with an average annual minimum flow of 3,000 md/s. Therefore, the construction of the Project will have no significant impact on the Yangtze water quality. However, the ECIs will monitor the contractor's performance to ensure that all wastewater from construction and domestic use, will meet national standards when discharged into the river. Because the Project dikes cover 700 km and most of the dike sections are in rural areas, the construction of Project will not have significant adverse impacts on air quality, noise level, water supply, traffic, public infrastructure, aesthetics, except perhaps the construction of dike sections in or near cities/towns. For construction in such sections, sensitive places and corresponding EPMs have been identified. The ECIs will monitor on-site the contractor operations to ensure all these EPMs will be implemented during Project construction. After completion of the Project, the public fears about flooding will be greatly dispelled with the greatly improved flood control standard. This will contribute significantly to promote the economic development in the area, attract more investments, increase employment and incomes and, as a result, significantly improve the quality of life in the area. The Project does not change the hydrology in the wetlands in the ESA. All but one of the wetlands in the ESA are too far from the Project construction areas to be affected by the construction operations. For the one near the dikes (Honghu Lake) the construction operations will ensure that construction workers will be barred from traveling to the lake. E: ENVIRONMENTAL MONITORING An essential component of the Project is its Environmental Monitoring Program, which is to cover both the construction and operation stages of the Project, thus covering a period of some 23 years for Hunan Province, and 24 years for Hubei Province. The monitoring work should begin as soon as the P/EMOs become operative. Individual monitoring programs have been developed in the Project EIA including monitoring activities, monitoring parameters, number of persons and skills needed, monitoring frequency as well as input needed in terms of professional man-months. The individual monitoring programs are summarized in Table 5. The monitoring program will be managed and supervised by the EMO, and most of the detailed field work will be done by the ECIs and by the EMO professional staff. However, other agencies, including the provincial schistosomiasis research institutes, provincial EPBs, and other concerned institutes are to participate in the field work in accordance with agreements with EMO. Costs for monitoring work by these other agencies, which is outside their normal scope of monitoring, are to be reimbursed by the EMO/Project. - 107 -  F: OTHER IMPORTANT ISSUES The other important issues assessed in the EIA include public consultation, public disclosure, compliance with environmental laws, environmental economics, risk assessment, and global environmental issues. F-1: Public Consultation Public consultation programs have been conducted by Project proponent in the two provinces and by the EIA team during Project preparation. Some 327 individuals covering a range of ages, occupations, and education of the people to be affected by the Project and 38 members of NGOs (such as NGO ecological units, NGO fisheries, Peasants Party, Workers Democratic Party, China Democratic League, China Association for Promoting Democracy, Chiu San Society, Worker's Union, Women Units, Rural Teachers Unions, Rural Doctors Asssociation and others) as well as representatives of pertinent government agencies and professional institutions have been consulted. Consultation forms included discussions at meetings, interviews at random and filling questionnaires. Among the 365 people consulted, 364 show a positive attitude to the Project and 160 made donations for flood fighting in 1998. Information of the people consulted and their comments have been summarized in tables in the detailed EIA. Some of their comments have been taken into consideration in preparing the EIA or made available to pertinent agencies such as resettlement offices in two provinces. F-2: Public Disclosure of EIA Report Public disclosure is an integral part of the EIA process. In order to take the views of affected groups and local NGOs fully into account in Project design and implementation, the Project EIA report is released to the public so that affected people and NGOs can understand the Project and its environmental impacts, and give their opinions, suggestions and requirements. The completed EIA report, which includes a detailed description of the RAP, was placed in December 1999 (prior to appraisal) in selected libraries in the two provinces. The libraries are located at places which can be readily reached by people living along the river in the areas subject to flooding and in the capitals of the two provinces. The draft RAP was disclosed to all Project affected counties, townships, villages and people as early as September 1999. The RAP was finalized in November 1999, after full agreements were reached with all counties, townships and villages. After appraisal the govermnent made some changes in the Project locations in February 2000. These changes were documented in a supplemental report to the EIA and revisions to the RAP. Both these documents were placed in early April, 2000 in four libraries (Wuhan, Jinzhou, Changsha, and Yuyang) used by many people in the two provinces. Three days prior to placing the EIA report in the libraries, notices were published in provincial and local newspapers and on television networks informing the public that they may visit the libraries to review the report and to give their comments to provincial PMOs. Comments were received and have been taken into consideration in subsequent Project planning and implementation. In addition for most of 1999 and 2000 on a weekly basis the news media described the Project's main locations, key components and the type of activities proposed under the Project. Apart from the above actions public disclosure of the EIA and related documents was carried out as indicated below: - 108 -  Document Date Location 1. PID/EDS to infoshop June 20, 1999 Infoshop (EXTIN) 2. Draft Resettlement Action Plan (RAP), Nov 23, 1999 Infoshop (EXTIN) 3. Environmental Impact Assessment (EIA), Nov 23, 1999 Infoshop (EXTIN) 4. Resettlement Action Plan (RAP), Oct. 1999 Dec 6, 1999 ISGIM 5. Summary EIA, November 1999 Nov 29, 1999 SECBO ED/Alternates 6. Revised RAP, March 2000 April 3, 2000 Infoshop (EXTIN) 7. Supplement to EIA, April 2000 May 8, 2000 Infoshop (EXTIN) 8. Final Revised RAP, April 2000 May 31, 2000 Infoshop (EXTIN) F-3: Compliance with Environmental Laws During the preparation of the EIA report, the development of EPMs and the Environmental Management Plan, various environment-related laws/regulations of China and the World Bank were observed and complied with. The EIA identifies the chapters/sections, which address compliance with corresponding PRC requirements and Word Bank guidelines. F-4: Environmental Economics EIA analyses show that the environmental benefits of the Project in controlling flooding will result in huge economic and socio-economic benefits, compared to limited and relatively insignificant negative impacts. The Project is for the benefit of all people in the areas protected by the Project, and unlike many major projects, it is not in the "rich get richer, poor get poorer" category. F-5: Risk Assessment The EIA has carried out a risk assessment anlysis for the Project. Table 6 summarizes the evaluation and shows that Project planning and design has given careful attention to this aspect. It should be noted that flood control projects for major rivers anywhere in the world are designed to protect against floods for a selected flood return period, which represents the optimum economic level of protection. Larger floods will of course cause serious damage. The purpose of such projects is to reduce flooding as much as feasible. For this Project the design flood is the 1954 flood, which represents a I in 100 year flood. F-6: Global Environmental Issues The EIA also evaluates Project-related Global Environmental Issues particularly Earth Warming and Bio-diversity degradation. This evaluation shows that the effects of the Project in these areas will be negligible. G: ENVIRONMENTAL MANAGEMENT PLAN To ensure effective implementation of the Environmental Protection Measures (EPMs) specified in the EIA, including environmental monitoring, Provincial EMOs (P/EMOs) are to be established in each province. The provincial EMOs are responsible for management of all environmental issues related to the Project including implementation of the EMP and implementation of environmental protection requirements in the Project final design, construction, and operation stages for both dike constructions areas and resettlement areas. Figure I shows the institutional structure of a provincial EMO and its relationship with other parties - 109 -  involved in environmental management for the Project in each province. An Overall Environmental Coordinator (C/EMO) is to be appointed to work together with the P/EMOs to ensure appropriate coordination between the two PlEMOs. An international Panel of Environmental Experts (POE) will be established to review and periodically (usually at six month intervals during construction period) the environmental performance of all agencies involved in the Project and make recommendations for improvements. The P/EMOs and C/EMOs are to be established immediately following the signing of Government /World Bank Loan Agreement. The overall EMP includes provisions for: (i) training of the staff of the P/EMOs including ECIs, resettlement Village Environmental Officers (VEOs), and EMO subcontractors; plus (ii) a visit to the USA to study how environmental aspects of flood control are managed for the Mississippi River, which is of about the same magnitude as the Yangtze with quite similar problems, to take advantage of lessons learned there in the comprehensive R&D program for the Mississippi basin carried out over the past half-century by the US Corps of Engineers. Tables 7, 8 and 9 show the cost estimates for environmental management for the two provinces respectively, which are included in overall Project budget. H. SUMMARY AND CONCLUSIONS Table 9 summarizes the EIA study. As it shows, the Project is essentially an environmental improvement undertaking, because it will greatly enhance the socio-economic/quality of life of the people living in the flood-hazard areas which will be better protected through the Project. It is indeed a " People's Project", so much so that many individuals living in these areas have made personal contributions to help project funding. Table 9 in addition shows that, assuming the EPMs specified in the EIA, including environmental monitoring, are properly carried out, the Project will not result in any significant adverse environmental effects. To ensure the EPMs will be carried out, the Project includes an Environmental Management Office with responsibility for getting this done, with its budget guaranteed in the Government/Bank Loan Agreement, and with establishment of an International Panel of Environmental Experts who will visit the Project every 6 months during the construction period to review the Project's environmental performance. The Panel will report directly to both the Government and the Bank. Table 2: Estimated Losses Caused by Most Serious Floods in 20th Century Flooded Area Affected Population People killed Houses Economic Losses Year Affected Province (10'mu) (10 persons) (10' person) Destroyed (10' sets) (10" yuan) 1931 Hubei, Hunan, Jiangxi, Anhui, 5090 2850 145,400 179.60 * Jiangshu 1935 Hubei, Hunan, Jiangxi, Anhui, 2264 1003 142,000 40.60 Jiangshu 1949 Hubei, Hunan, Jiangxi, Anhui, 2721 810 5,700 45.20 * Jiangshu 1954 Hubei, Hunan, Jiangxi, Anhui, 4755 1880 33,000 427.60 Jiangshu 1980 Hubei, Hunan, Jiangxi, Anhui 4005 _ 1,339 _ * 1983 Hubei, Hunan, Jiangxi, Anhui 5001 * 8 * * 1995 Hubei, Hunan, Jiangxi, Anhui, 5568.8 9212.3 1,085 78.50 566.05 Jiangshu 1996 Hubei, Hunan, Jiangxi, Anhui, 6509 9718 1,513 265.04 795.66 Jiangshu 1998 Hubei, Hunan, Jiangxi, Anhui, 482 229 1,562 212.85 Jiangshu Notes: * Data not available; ** No official figure is available, but losses are estimated to be over Yuan 100 billion according to data available. - 1 10 -  Table 3: Environmental Construction Constraint No. ITEM CONSTRAINTS 1 Wastewater all discharged wastewater meet national standards 2 Air Pollution Control A emissions from all fuel burning machines mneet national waste gas discharge standards; B. measures to control blasting and quarrying dust; C. road dust control (wetting, paving); and D. control production of obnoxious and toxic fumes. 3 Water Use use water as planned and obtain pemnission 4 Workers Health A. worker medical examination to screen out infectious vnius carriers (inital and periodic); B. provision of safe drinking water supply; C. wastewater treatment and management; D. schistosomiasis prevention as described in Section 4.2.4 E. provision of adequate food sanitation; F. provision of adequate measures for contmol of disease vectors including mosquitoes, rats, and flies; G. provision of adequate medical care capabilites and facilities including first aid facilities; H provision of adequate excreta management; 1. provision of adequate occupational health and safety measures; J. provision of adequate houssng wstb sanitary facilstres; 5 Noise Control A. all machines meet national noise! vibration control standards; B. no construction activities in night in residential area if feassble; C. provision of adequate protecbon facilities to workers operating high noise/vibration machines; 6 Spoil Disposal Dispose construction spoils in specified places and specified manners including protection dikes and resurfacing. 7 Solid Waste Collect solid wastes regularly and dispose in adequate sanitasy manner including use of fencing to prohubit access to disposal Management sites by children. 8 Soil Erosion Resurfacing all borrow areas and filling areas and furnish dikes as needed to protect against discharge of soil runoff to downstream water ways; 9 Cultural Relics No dasnaging activities to custural relies, stop construction whenever cultural relies are discovered so EMO can determine needed protection measures. 10 Aquatic Ecology Specially-assigned person/persons to watch appearance of the Yangteze rare species when warping operaton is carried out in river sections sensitve for these species. 11 Land Use Occupy land as specified, no damage to farm land and crops; resurfacing land after use. 12 Monthly Cdnstructon Contractors (CC) is fully responsible for environmental protection in his construction area and camnping area. CC is Environmental to make monthly environmental report to Environmental Construction ispectors (EClsYEMO on its performance in Report implementing the EPMs/constraints. Constriction contract must include detailed description of aU EPMs to be furnished by CC. Notes: (a) All of the constraints noted above are to comply with National and provincial laws and regulations applicable to construction. (b) Detailed constraints will be prepared according to above items by the P/EMO and will be included in Project construction contracts. -111 -  Table 4: Summary Evaluation of Environmental Adequacy of Resettlement Program Criteria/lssues Adequacy of Design Adequacy of Adequacy of Monitoring & Planning Construction O&M Planning Needed 1 RS Families _______ 1.1 Economics 1.1. I Transportation to new sites B SA SA High 1.1.2 Comparison of property A SA SA Adequate 1.1.3 Rehabilitation compensation A SA SA High 1.1.4 New income levels B SA NI High 1.1.5 Training needs B SA NI Adequate 1.2 Housing and Housing Amenities 1.2.1 Housing Quality A SA SA Adequate 1.2.2 Housing water suplply A B SA Adequate 1.2.3 House exereta management NI NI NI NI 1.3 Public health infrastructure 1.3.1 Water supply quantity/quality/safety NI B NI NI 1.3.2 Solid waste management NI B NI NI 1.3.3 Drainage A SA NI Adequate 1.3.4 Clinics/medical facilities B SA NI NI 1.3.5 School sanitation NI NI NI NI 2 Host Villages ____________= 2 1 Vjila er.Qnnmc' B B SA NI | 2 Village frastnrcturea cpatciy B SA NI Adequate 3 Socio-cultural Issues 3.1 Relocation within same demographic group A A A Adequate 3.2 Relocation in the same region A A A Adequate 3.3 Acceptance bv hosts A SA SA Adequate 4 Institutional issues 4.1 Provincial govermments collaboration A A A Adequate 4.2 Safety netgrievances mechanics A SA B NI 4.3 Public participation SA IN IN NI Note: A = very good; B = OK; IN = inadequate data; NI = needs improvement; SA seems adequate - 112-  Table 5: Summary of Monitoring Program Participant Agencies | Associated Man-month No. Items Section Design Other Sections Const on Operation fmo cc ~~~~~~Chapte 3 Cntuto prto Agencies Agencies and 4 Peiod Period I Resetflement 5.2.1 * * * * 4.2.1 30 30 2 Land use 5.22 * * * 42.2,33 4 10 3Actuatic svecies 5.2.3 * * 4.2.33.3 (ECI) 4 Public health 5.2.4 = -_4.2.4 3.7 66 36 5 Dyke structiral stability 5.2.5 * * * * 4.2.5 1 3 61 Downstn= impact 52.6 * * * 4.2.6 2 6 7 Emergencyrgram 52.7 * * 4.2.7 2 6 8 mhn s miratory birds 5.2.8 * * * 4.2.8,3.5 2 9 Bonow areas and spois 5.2.9 * * * 4.2.9 (EC 10 Cultural relics/heritages 5.2.10 4.2.10.3.5 (ECl- 11 Donginx Lake flood releasing 5.2.11 _ * 4.2.11 2 6 12 Construction constraints 5.2.12 * * 4.2.12 (ECI 13 Other SEls 553 = = _ 43 53 _ 13.1 Conshtuction 5.3.1 _ _ 4.3.1 13.1.1 Water ualitv 53.1.1 4.3.1 3.41 27 _ 13.1.2 Airaualitv 5.3.1.2 * * * * .12.3.4. 13 _ 13.1.3 Noise 5.3.1.3 * * * * 4.3.1.3.3.4. 13 13.1.4 Water suvvly 5.3.1.4 4.3.1.43.6 13.2 Traffic 5.3.2 * * - * * 4.3.2, 3.6 ___ 13.3 Infistructre 5.3.3 4.3.3. 3.6 _ 13.4 Aesthetics 5.3.4 _ 4.3.4,3.7.3 (ECI) _ 13.5 Ouality of life 5.35 * _ * _ * 4.3.5,3.7 Resettlement 14 Constiuchion supervision 5.2.14 * _ = - 4.2.12 648 1' VEOs 5.2.14 * * _ 4.2.1 46 Note: (ECI) = to be monitored by ECI; Resettlement = monitoring has been included in Resettlement monitoring -113-  Table 6: Summary of Risk Assessment Evaluation Risk Item Item given proper Pertinent EIA report attention sections 1. Risk of dyke failure Yes 4.2.5, 6.5.2 1. I Structural integrity of dyke Yes 4.2.5 1.2 Protecting dyke from river erosion Yes 4.2.5 1.3 Consideration of earthquake hazard in design Yes 4.2.5 2. Flooding Emergency Planning/ Preparations Yes 4.2.7 3. Infectious disease risk Yes 4.2.4 3.1 Usual construction zone hazards Yes 4.2.4, 4.2.10 3.2 Special schistosomiasis EPMs during construction Yes 4.2.4 3.3 Hazards from flooding events Yes 4.2.4 3.3.1 Schistosomiasis for flood fighters Yes 4.2.4 3.3.2 schistosomiasis in flooded communities Yes 4.2.4 3.3.3 Enteric disease in flooded communities Yes 4.2.4 4. Safe awareness risk Yes 6.5.3.1 5. Downstream flooding hazard Yes 4.2.6 6. Hazards to wildlife Yes 4.2.3, 4.2.8 6.1 Aquatic species Yes 4.2.3 6.2 Migratory birds Yes 4,2.8 7. Transparency with Public Yes 6.1, 6.2 7.1 Public consultation Yes 6.1 7.2 Public disclosure Yes 6.2 8. Compliance with environmental law/ guidelines Yes 6.3 9. Improper land use Yes 4.2.2 -114-  Table 7: Estimated Total Cost for Overall Environmental Management Operations (US$) -Hunan Item Reference Pre- Construction Operations Sub-total Costs (Figures) Construction period, 3 period, 20 period, 0.5 years years year Environmental Management Office Tab. 7.6.1-1 28,750 146,000 500,000 674,750 Training Program Tab. 7.6.1-4 - 35,000 - 35,000 Supervision and Monitoring Fig. 5.3-2 - 200,000 42,500 242,500 Expert Panel Tab. 7.6.1-8 - 78,000 - 78,000 EMO Facilities 30,000 60,000 100,000 190,000 Sub-total 58,750 519,000 642,500 1,220,250 Contingencies 10% 5,875 51,900 64,250 122,025 Total 64,625 570,900 706,750 1,342,275 Table 8: Estimated Total Cost for Environmental Management Operations (US$) (Hubei) Item Reference Pre- Construction Operations Sub-total Costs (Figures) Construction period, 4 period, 20 period, 0.5 years years year Environmental Management Office Tab. 7.6.1-2 28,750 195,000 500,000 723,750 Training Program Tab. 7.6.1-4 - 67,100 - 67,100 Supervision and Monitoring Fig. 5.3-2 - 287,500 51,000 338,500 Expert Panel Tab. 7.6.1-9 - 24,000 - 24,000 _EMO Fa_lities __-_ r 30,000 80,000 100,000 210,000 |Sub-ttal = | 58,750 653,600 651,000 1,363,350 Contingencies 10% 5,875 65,360 65,100 136,335 _Total64,625 718,960 716,100 1,499,685 -115 -  Table 9: Summary of EIA Evaluation Item No. SEls Sections of EIA Potential for Adequacy of Net adverse report which adverse effects if EPMs environmental discuss SEI not properly effects controlled - -__-_- I Resettlement 2.2,2. 4.2.2. 5.2. It OK NNASEEs 2 Land Use 33422522 . O NNASEEs 3 Aquatic Species 3.5. 4 2 3 * O NNASEEs 3.1 Rare species 5.2.3 OK NNASEEs 3.2 Four Family 5.2.3 N 3.3 Other Fish species 5.2.3 N ___ 4 Public 3.7.2. 4.2.4 5.2.4 O K NNASEEs 4.1 Usual construction 4.2.10 X * OK NNASEEs Schistosomiasis in 4.2 construction zone 4.2.4 **K NNASEEs 4.3 Flooding disease 4.2.4 OK NNASEEs 4.3.1 Flood 4.2.4 OK NNASEEs Enteric disease in 4.3.2 flooded 4.2.4 -* OK NNASEEs 5 Dyke Structural 2.1.1. 4.2.5 iii OK NNASEEs 6 Downstream 3.1.3. 3.1.4. 3.4.4 * NNASEEs 6.1 Hydrology 4.2.6. 5 2.6 * OK NNASEEs 6.2 Other 4.2.6 N 7 Flood Emergency 4.2.7 s**OK NNASEEs 8 Saicheng 3.5.2. 4.2.8 se O NNASEEs 9 Borrow Areas and 4.2.9 O* K NNASEEs 1t Cultural 3.7.3. 4.2.10 _ = OK NNASEEs It |Impacts on 4.2.11 O** K NNASEEs Construction 12 Operations 4.2.12 | iOK NNASEEs 13 Other SEls 4.3 Water supply, environmental 13.1 _pollution control 4.3.1 _ i _ OK NNASEEs Environmental 4 OK NN ASF F 13.3 Traffic and 4.3.2. 433 OK i_ O NNASEEs 13.4 lQuality of life !4.3.5 ! iiOK NNASEEs 114 Public 6i- OK NNASEEs 15 Public disclosure 6,2 | ii OK NNASEEs | Compliance withrT 16 lenvironnnent 16.3 | F*OK NNASEEs Chinese 16.1 government 6.3.1 O* K NNASEEs 16.2 World Bank 6.3.2 ** O NNASEEs 17 Environmental 6.4 OK NNASEEs 18 Risk assessment 6.5 * OK NNASEEs G oal .6.6 OK _ _ _Ev n- MOK Environmental == Ma1 na ement Plan/ 7 .Overall Proj'ect __ 22 environmental 8 Overall 22.1 environmental 8 -Adecuate 222 Environmental 8Exccllcnt Notes: N None, NNASEEs = No net adverse significant enviromnental effects if EPMs specified in EIA are duly applied. ***= Major, ** = Intermediate, * = lesser but significant. - 116-  Figure 1: Provincial EMO Management Structure Provincial Proiect S ManaMement l Enizincering S erttemn Villag nvironmenl Oilc IECIs Moioii nttt I~~~~~~~~~~~~~~~~~~~~~~~~~~~~ cc l VEOsl Notes l. Management or Contract; Cooperation or Supervision 2. CC = Construction Contractor; VEO = Resettlement Village Environmental Office ECI = Environmental Construction InsDector, P/EMO = Provincial Project EMO -117-  Additional Annex No.: 12 YANGTZE DIKE STRENGTHENING PROJECT RESETTLEMENT ACTION PLAN (RAP) SUMMARY 1. Introduction and Background The Yangtze River, the largest river in China, stretches over a length of 6,300 km with a basin coverage of 1.80 million km . The basin is home to some 19 million people, approximately 58% of which live in the rural areas with agriculture being their main source of income. The annual per capita income in rural areas is approximately Yuan 2,156 compared to Yuan 5,531 in urban areas. In addition to being the rice basket of China the Project area is also a major center for industry and commerce. Flooding is frequent in the Yangtze basin with floods occurring in the middle and lower basins resulting in huge losses to people's property and lives and serious damage to the local ecology and environment. The Government is undertaking several initiatives in flood management, and the Project is a major step in that direction. The Project aims to upgrade and strengthen the dike system in the provinces of Hunan and Hubei. The Project will result in a significant number of people being resettled and hence a detailed Resettlement Action Plan has been prepared to implement the resettlement component of the Project. The Project will consist of reinforcement of 559 km of main dikes of the Yangtze in Hunan and Hubei provinces (Hunan: 117 km and Hubei: 442 km). Construction will include heightening and widening dike body, slope protection, bank protection, dike body and dike foundation treatment, building of platforms, improvement in dike operating facilities and equipment, and land compensation and resettlement. In both provinces work is underway, beginning soon after the floods of 1998, with resettlement representing the initial task before construction commencement. Flood protection provided by the YDSP will benefit a land area 20,057 km' including cultivated land of 12.58 million mu and a population of 16.77 million will gain from this. The Project on completion will also provide protection to key urban and rural areas as well as vital infrastructure such as airports, ports, rail routes (Beijing - Guangzhou, Beijing - Jiulong) and important national highway No. 107. It is estimated that the annual benefit from the Project will be Yuan 1.166 billion (Hunan 356 million and Hubei 810 million). The intermal economic rates of return are calculated at 25 and 45 for Hunan and Hubei respectively. Whereas the Project brings substantial economic benefits to the people of the Yangtze basin, it also displaces a total of 47,992 people from 10,958 households that will require resettlement, including acquisition of almost 33,750 mu of land. Resettlers represent approximately 16.5 percent of the population of the directly affected villages, and thus an elaborate Resettlement Action Plan has been prepared to minimize all the related impacts. The Project feasibility study has taken into account the impacts from resettlement and the design has been prepared to avoid/minimize resettlement as much as possible. This has been a result of numerous site investigations and altemative site before preparing the final plan. 2. Impact of the Project A total of 47,992 people from 22 counties, 44 townships and 180 villages, within the provinces of Hunan and Hubei will be affected. - 118 -  Hubei Hunan Total Affected Households 6,494 4,464 10,958 Populations People 28,779 19,213 47,992 Reduced Means of 7,651 6,208 13,859 Production (persons) Land and Land (mu) 15,172 18,577 33,749 Assets Buildings (103 m 2) 884 879 1,763 Enterprises 180 67 247 Graves 2,408 4,408 6,816 Temporary Land Loss (mu) 4,166 8,788 12,954 Due to the linear and elongate nature of the Project affected area, impacts on local social and economic systems will be minor. The Project will however have a considerable impact on local population, primarily through structural and land losses and economic adjustment associated with reduced availability of cultivated land following re-allocation of village lands. Table 1 lists the populations and assets affected by land acquisition for the YDSP, and Table 2 indicates the proportion of the Project areas affected. These impacts have been quantified as follows: v LandAcquisition - a total 33,750 mu of occupied land, of which 65 percent (21,906 mu) is arable land, about one third of which is irrigated will be required. Trees/orchards and fishpond/water ponds, represent the next largest component of the acquired land at 12 percent (3,913 mu), and 12.5 percent (4,220 mu) respectively. Of the total occupied land, 18,577 mu is in Hunan Province (55 percent), and 15,172 mu (45 percent) in Hubei province. A total of 12,954 mu of land will be required for temporary use or lease. * Building Acquisition - 1,763,014 m 2of houses and buildings will be acquired, of which 14 percent are commercial buildings of 243,923m', and 86 percent private houses covering 1,519,091 m. Of the 247 enterprises affected many will be able to relocate partial operations, extend on current sites or absorb land losses with no production loss. Affected enterprise structures include housing for staff who will relocate locally. Affected or lost private buildings and staff housing is considered under resettlement. Province Private Housing Affected Enterprises and Public Buildings Affected Hubei -Total rural area housing - 180 enterprises to be affected, 33 wholly and 147 partially 544,266m' 144,237 m' -Total urban area housing = 195,085m' Hunan -Total private housing area = - Total enterprise and public building area (67 units) =99,686m 779,700m_ * Infrastructure Losses - The Project will require rebuilding or restoration of some 176 km of simple roads, 38 km of concrete road, 254 km of broadcasting lines and TV cables, 476 km of telephone lines, 143 km of 10 kV transmitting line, and 20 km of 35 kV transmission lines. * Resettlement - As a result of land acquisition, 47,992 people from 10,958 households (including resettlers from enterprise housing) will require resettlement. Detailed surveys of affected people - 119-  have not identified any ethnic minority populations. In Hunan and Hubei provinces ethnic minorities can be found in the mountainous western regions of the province, having left the Yangtze Valley with the immigration of the Han over 400 years ago. No remaining communities of ethnic minorities are to be found in the Project area, and though individuals have likely married and integrated into the dominant Han culture, they would not be expected to be considered vulnerable due to their ethnicity, nor are they indigenous to the area, and thus the World Bank's OD 4.20 Indigenous Peoples is not applicable to the current Project. Through the household surveys, vulnerable groups (representing approximately 5% of resettlers) such as widows, female headed households, households without labor and disabled households were identified for special subsidies and support under the resettlement plan. As the Project is a linear/corridor type development, while many villages are affected, in most instances this affects only a small portion of each village, overall an average of 16.5 percent of the total population of 291,474 in the 180 affected villages. * Economic Effects - Land acquisition impacts on production by enterprises will be minor with few of the 234 affected establishments requiring complete relocation. An estimated 13,859 people will be required to readjust their means of income generation as a result of agricultural land loss. Estimated post-resettlement land areas are approximately 5 percent below existing levels. Some 85 percent of the income and production restoration programs are land based, providing for recovery and improvement of the affected workers, primarily within existing or related agricultural practices. * Hosts - Re-allocation of lands within resettlement villages, and in some cases in adjacent villages which may sell their land to the affected villages, will result in land area reductions for all agricultural households in the village. In both scenarios, land compensation (or purchase costs) should be utilized for the development of all remaining village lands. Project monitoring will also review the utilization of designated funds for such purposes. 3. Legal Framework and Resettlement Strategy The RAP for YDSP has been prepared within the national Chinese legal framework, and in accordance with the World Bank's Operational Directive 4.30 on Involuntary Resettlement. Appropriate national regulations pertain to land and water resource management. Key regulations studied and used for design of RAP include (i) the "Land Management Act of People's Republic of China", 1998; (ii) "Water Act of People's Republic of China, 1998; (iii) the "Land Compensation and Resettlement Regulation for Large and Medium Sized Water Conservancy and Hydropower Projects", 1991; and (iv) other national and provincial ordinances and decrees of Hunan and Hubei provinces on land management. The key principles of resettlement compensation under the Project have been designed based on these laws and regulations. The guiding principle has been to award compensation costs to the resettlers in such a way that their original standard of living is maintained at the least. A matrix of the entitlements for the people and assets affected by the Project is presented in Table 3. Compensation standards (presented in Table 4) have been determined for: (i) land; (ii) housing; (iii) auxiliary buildings and trees; (iv) relocation and transfer; (v) public utilities in settlements; (vi) relocation allowances; (vii) vulnerable and economically weaker groups; and (viii) infrastructure and special facilities. Average compensation costs for private housing range from 50-100 yuan/rn for auxiliary structures to a maximum of 270-410 yuan/mi for brick-concrete housing, and 700 yuan/mi for frame-structure premises in Wuhan. Enterprises and public/institutional buildings' compensation range from a minimum of 60 yuan/rn to a maximum of 800 yuan/ m between the provinces. Land compensation has been calculated for each resettled family on a per mu basis for two categories of land, one for per capita cultivated land holdings of less than I mu and another for more than 1 mu. The - 120 -  compensation ranges from 3,200 yuan/mu (for other miscellaneous land) to 29,800 yuan/mu (for vegetable field) in the forner category to 3,600 yuan/mu (forest land) to 29,800 yuan/mu in the latter. These compensation estimates not only cover the full replacement costs but also the livelihood development cost which extend far beyond replacement costs. Use of these procedures is essential to achieve the basic resettlement goals, namely that all families involved in resettlement will not be disadvantaged by the Project and instead, to the extent feasible, will share in Project benefits. 4. Resettlement Program Chapter 4 of the RAP presents the Resettlement Program for the Yangtze Dike Strengthening Project. The chapter outlines the various housing and economic restoration measures which have been developed in order to: (i) minimize disturbance to resettlers by providing local resettlement options, familiar production/income restoration altematives, necessary support in the period of transition; (ii) be acceptable to both resettlers and host populations; and (iii) maintain or improve income levels and standards of living of Project affected people. Chapter 4 also describes the mechanisms for restoration of enterprises, infrastructure and utilities affected by the Project. 4.1 Household Restoration Some 10,958 households of 47,992 people in the Project area will have to be resettled, of which 4,464 families or 19,213 people come from Hunan, and 6,494 households of 28,779 people from Hubei. In accordance with the guidelines for minimizing distance to altemative resettlement sites, and with resettler preferences, the following resettlement altematives were developed, based on available land area, its capacity for increased production, and the viability of industry expansion. Resettlement Type Number of HH Number of People Internal Resettlement (resettlement of rural households within the existing village area) 8,078 35,484 Collective Resettlement (relocation to new residential areas in rural and urban sites (as 2,880 12,508 appropriate), urban resettlement to apartment blocks and rural safety platform sites) Total 10,958 47,992 4.1.1 Internal resettlement Almost 74 percent of resettlers will be relocated within their existing village administrative areas, minimizing disturbance to existing social and economic systems. This type of rural resettlement will require land improvement and the redistribution of village productive lands, and in eleven instances, the transfer of lands from adjacent villages to supplement lands currently available within the village. Environmental and economic capacity investigations identified the 168 villages as feasible for this means of resettlement, in light of the production restoration measures proposed. In most cases of intemal resettlement, infrastructure and service displacement will be minor, and the restoration of all impacted services is included in the resettlement program and budget. House reconstruction will be undertaken by the villagers themselves, in accordance with relevant standards. 4.1.2 Collective Resettlement Collective resettlement will involve 2,880 families of 12,508 people to 22 sites. There are the following three types for collective resettlement: * Towns or Communities - where new housing areas can be constructed in existing communities; * Township Blocks - where new residential blocks will be developed for resettlers; and * Safety Platforms - elevated platforms will be built nearby to villages, on top of dikes where residential housing will be constructed. - 121 -  In Hunan and Hubei 22 residential sites will be developed for rural resettlers in towns or communities, providing for a total of 2,880 households with 12,508 people. Through land re-allocation and land development, the RAP provides for the largely rural resettlers to maintain agricultural livelihoods. In Hunan, 10 residential safety platforms are proposed for the resettlement of 1,715 rural households totaling 7,331 people. In each instance, minimum housing and living space standards will be met, and where adequate infrastructure and facilities including water supply and sanitation, drainage, power will be provided. 4.2 Production Resettlement The income and production restoration program described in Section 4 was developed according to guidelines of: (i) providing a variety of restoration alternatives, with land as the primary means of support; (ii) utilizing local resources and development activities without adverse impact to the environment; and (iii) development of secondary and tertiary village run industries. Net income per capita rates have been set by the program as a target and measure for successful implementation of the program. An analysis of the land capacity in the affected villages has examined land availability and level of development of existing lands during the identification stage of the selected sites where reduced land holdings, with appropriate investment an development, would not compromise canying capacity. Production plans for each province are detailed in Table 5 below: 4.2.1 Hunan Province - Improve 52,762 mu of land to support 5,077 resettlers and transfer 1,227 mu of foreign village tilled land to support 893 resettlers, among which 623 mu is irrigated and 604 mu is non-irrigated land. 4.2.2 Hubei Province - Support 7,651 rural resettlers, among which 6,183 persons will be involved in improving low-output land, 342 persons in animal husbandry, and 1,126 persons in village-run enterprises and tertiary industry. Implementation of the above programs will require an estimated investment of Yuan 166.96 million, distributed as Yuan 54.62 million for Hunan Province and Yuan 112.34 million for Hubei Province, which will be met by use of the land compensation and resettlement funds. The average investment per capita for rearrangement is Yuan 12,048. 4.3 Occupation of Tenporary Lands Total affected lands have been identified as 12,954 mu. Compensation will be provided based on annual output (for lost production), and to meet restoration costs. These costs are not included in the RAP as they are met by the Project construction costs 4.4 Infrastructure and Enterprise Recovery Chapter 4 identifies affected infrastructure which will be relocated or reconstructed as a result of the Project, at a cost of approximately Yuan 64.40 million. Affected enterprises total 247, with in many instances land acquisition will result in only partial relocation or loss of land with minimal impact to production. Investment for their relocation and lost production is estimated at Yuan 107.25 million. 5. Resettlement Budget Chapter 5 of the RAP presents detailed cost estimates for implementing the resettlement program in the Project regions, which comprise the costs for the three participating provinces. The discussion covers the following items: (i) compensation costs; (ii) planning and management costs; (iii) costs for contingencies, including basic contingency and contingency for price difference; (iv) budget program, including fund disbursement and fund sources; and (v) annual investment plan. Overall Project cost is approximately Yuan 966.14 million, with Yuan 369.80 million for Hunan and Yuan 596.33 million for Hubei Province (as summarized in Table 6). These costs incorporate compensation for relocation (including houses and - 122 -  assets), land compensation and compensation for public utilities, etc. Based on inventories undertaken and compensation standards, total compensation costs are estimated at Yuan 820.83 million or 85 percent of the total resettlement budget), including Yuan 501.71million relocation compensation for resettlers, Yuan 232 million land acquisition compensation, and Yuan 87.12 million compensation for public utilities. Planning, management, training, supervision and consulting fees are estimated to be 65.54 million yuan. Base contingencies costs are Yuan 20.37 million in Hunan and Yuan 32.83 million in Hubei. Based on the annual investment plan and the price indexes, the contingency cost for price difference is estimated to be Yuan 26.59 million. In addition, a contingency of 5 percent of the housing compensation value has been included in the overall Project contingency to provide a safety net fund for vulnerable groups in Hunan of Yuan 0.86 million. The fund will be supported by local and central government respectively, about 18 percent and 2 percent. The funds will be furnished from the following sources: * Hydrological Construction Fund, * Provincial Governments Agricultural Development Fund, * Provincial, City and County finance, * Hydrological Construction Subsidy, * Special Labor Fund for Poverty Area and Capital from Beneficial Units, * Income from water fee, * Municipal Maintenance Fund, - Central Government. 6. Organizational Structure and Administration The institutional structure for resettlement aspects of the Project is illustrated in Figures 1 and 2, showing the agencies and organizations responsible for management, planning, implementation, supervision and monitoring all aspects of resettlement at the provincial level. In addition they show independent external inputs, and the recommended appointment of an Overall Resettlement Coordinator as a link between the two provinces, the Ministry of Water Resources, and the World Bank. In both provinces the PMO, as Project owner, contracted the relevant provincial Hydropower Planning and Design Institute to develop the RAP, including undertaking inventory, modifying design for resettlement minimization, identification and evaluation of alternative resettlement and production sites and income generation activities in consultation with relevant agencies and affected populations. The PROs, through counterpart offices at the County level and through representatives in each of the affected townships and villages, are responsible for the implementation of the plan. Supervision of implementation will be provided through furnishing an SR in each province to ensure quality and timely progress on resettlement works. In addition, as noted in the EIA, each province will establish an EMO with primary responsibility for ensuring that the resettlement program design and implementation will comply with the EPMs specified in the EIA. The PMO will arrange to appoint in each village a VEO to be responsible for environmental management and for reporting on resettlement progress, while the provincial EMO and ECIs will supervise planning and development public health infrastructure and waste management practices in the resettlement villages. Monitoring will be provided by an IMEO to regularly evaluate the progress of resettlement, including the social and economic rehabilitation of affected populations, and to provide direction and advice to the SR and PMO for adequate performance and in the resolution of problems. IMEO reports will be furnished to both the PMO and the World Bank. Successful implementation of the resettlement program will require sizeable investment in training of resettlement staff in resettlement technology, and of resettlers in undertaking new production techniques and industry skills. The budgets for these training programs total approximately Yuan 3.76 million. - 123 -  7. Public Consultation and Social Adjustments The resettlement program includes provisions for public consultation and social adjustments to ensure achievement of the goal that the affected parties (resettler families and the host communities) involved in the resettlement program are not disadvantaged by the Project and to the extent feasible will share in the Project benefits. Preferential policies specified by the Government and additional policies included in the RAP will be available to resettlers. Policies of primary importance to resettlers will be: * Tax and levy deduction for acquired lands, and for exemptions or reductions in the associated grain quotas, thereby supporting both the resettlers and host communities; * Industrial, agricultural and animal husbandry taxes and levies at the county and township levels will be adjusted in accordance with the resettlement impact magnitude in each administrative area; * The resettlement budget includes a contingency for the support of vulnerable groups if they are disadvantaged by the Project and, due to unforeseen circumstances, unable to restore their livelihood under the proposed RAP; and * In the year of resettlement, resettlers will be exempted to contribute annual labor to dike maintenance. Consultation and participation of affected people and their representatives have been integral components of the development of the RAP. Detailed consultations have been conducted with all the affected counties, townships and villages and thousands of affected and host households on the impact of the Project and proposed locations for resettlement and livelihood development plans. Some of the comments resulted in modifications to the Project to ensure that resettlement was minimized. For example if the construction of a concrete wall to protect from flood waters was feasible rather than a dike, the "wall" design was adopted since the "wall" option occupied about 1/10 the space requirements of a dike. The adoption of this option resulted in some cases with no need to resettle any people. Detailed consultation agreements have been concluded with all resettler households listed in the Resettlement Action Plan. Essential to the success of the planning and assurance of resettler acceptance and understanding of the resettlement program is the issuance of resettlement entitlement booklets (as utilized in the Xiaolangdi Resettlement Project), and the undertaking of agreements with all affected parties. Grievance redress mechanisms in China are clear and comprehensive, yet the publication of the existence and use of this mechanism to affected people through incorporation in the resettlement entitlement booklets will be essential to its effective use, and thus management of resettlement implementation. Comprehensive recording of grievances and responses and actions at all levels will also be undertaken. 8. Resettlement Contracts and Agreements The PMO in each province has lead responsibility for implementing the provincial resettlement program component of YDSP. This work involves participation and cooperation between numerous agencies including the PMO Chief, PRO, SR engaged by the PRO, EMO, CiROs and CoROs, township governments, the resettlement Villages including their leaders. In order for these various agencies/officials to work together efficiently, a number of contracts/agreements are needed which spell out clearly the roles of the participating parties. Primary contracts/agreements to be undertaken between the involved parties include: (i) letter of Agreement between PRO and City RO; (ii) Agreement on Land Sharing between Host Community and Resettlement Village; (iii) Agreement on Resettler Family Compensation between Resettling Family and Township Government; (iv) Agreements on Land and Asset Acquisition with Counties, Townships and Villages; and (v) Contract for Construction of Resettlement Project, including specific constraints relating to environmental protection. - 124-  9. Monitoring and Supervision Regarding resettlement, the PMOs will be responsible for internal monitoring of land acquisition and resettlement (RAP) implementation. The responsible PMO staff will have appropriate experience and will facilitate coordination between different agencies involved in resettlement. A training program is included in the RAP which provides staff training in monitoring and supervision. The PMOs will monitor the performance of ROs at various levels (cities, counties, and villages) during Project implementation, coordinate the resettlement work by all parties, and keep abreast of resettlement implementation status. Key activities will include: (i) resettler relocation, site allocation and housing progress; (ii) quality of production re-establishment projects; (iii) recommendations on any problems encountered with implementation; (iv) income restoration; (v) infrastructure and community facility construction; (vi) re-establishment of vulnerable groups; (vii) timely disbursement of funds; (viii) maintaining public consultations; (viii) resettlement training services; and (ix) project and organization management. The PMO will submit monitoring summary reports to the Overall Resettlement Coordinator and World Bank twice a year. An Independent Monitoring and Evaluation Organization (IMEO) e.g. the Yellow River Resettlement Monitoring and Evaluation Co. Ltd. will be retained by the PMOs for monitoring and evaluation of land acquisition and resettlement work under the Project. Responsibilities of the IMEO will include technical consultation services, monitoring and supervising overall resettlement implementation, evaluate the resettlement supervision organizations (SRs), and report to the PMOs/PROs and the ORC on the status of resettlement progress. The IMEO will also take part in periodic public consultation meetings at village and township levels. During its periodic site visits the IMEO will evaluate public complaints and monitor the efficiency of the grievance redress process and make recommendations as necessary on any possible change to the process. The duration of independent monitoring and evaluation will cover the Project construction period and a two-year period after Project completion. During Loan negotiations an assurance has been obtained that each province will employ, not later than September 15, 2000 and thereafter at all times maintain: (i) a monitoring institution with TOR, qualifications and experience acceptable to the Bank, to monitor, evaluate and report on the socio-economic progress of all persons covered by the respective RAPs; and (ii) a panel of environmental and resettlement experts with TOR, qualifications and experience acceptable to the Bank, to assist in overseeing the implementation of the EMP and the RAP and monitoring the impact of the implementation of the Project on the environment. Supervision of resettlement will be delegated to a Supervisor of Resettlement (SR) who will supervise implementation of the RAP, resettlement Project cost and identify and report on any issues. The SR will report to ROs and PMOs for early resolution of problems with contractors, thus avoiding the intensification and evolution of such problems. The SR will exercise schedule, quality and cost control of resettlement implementation and community infrastructure re-establishment, and arrange acceptance of completed works, in order to facilitate smooth completion of the resettlement component according to quality and scheduled requirements. The SR will include head office staff and field supervision teams. Typical staff profile will include a chief engineer, and two full-time staff to be responsible for office and field work. Supervision work has started in May 2000. The total cost is estimated at Yuan 8.21 million, which has been included in the cost estimate for resettlement. A position of an Overall Resettlement Coordinator (ORC) will be created at the Central Project Coordination Office (CPCO), who will coordinate the resettlement operations in both provinces. The ORC will work with an overall resettlement coordination committee comprising one representative from each PRO. The ORC will report to the Ministry of Water Resources, the Yangtze Water Resource Commission (CWRC) and the World Bank on matters pertaining to resettlement under the Project. The ORC, working with each PRO, will prepare reports describing the overall status of resettlement, incorporating the results of each province's monitoring and reporting to the Panel of Experts (POE), the World Bank, MWR and CWRC officials as required. This support will involve furnishing regular reports to World Bank missions, - 125 -  facilitating field visits and meetings with relevant agencies, and responding to various queries as required. A Panel of Experts (POE) on Resettlement will be established to make periodic evaluations of Project resettlement performance and provide recommendation on measures which may need to be taken so that Project resettlement performance will comply with requirements specified in the Government-Bank Loan Agreement for the Project. The POE is to be an independent panel, reporting both to the Government and the Bank and is expected to provide guidance in planning/implementing the overall resettlement program. Two Panel meetings, of 12 days duration have been planned each year from 2000 to 2003, covering the period of Project construction. At a later time the Government and Bank will evaluate the possible need for Panel function during the operation period. The cost for POE has been estimated at Yuan 2.1 million and is included in the foreign currency component of the resettlement budget. 10. Resettlement Implementation Scheduling Resettlement schedules for Hunan and Hubei have been developed in order to ensure that: (i) the timing of construction activities does not disrupt agricultural production; (ii) compensation and land allocation to resettlers is received a minimum of 3 months in advance of relocation; (iii) provision or replacement of infrastructure and utilities occurs in advance of resettlement; (iv) resettlement construction is scheduled to minimize impacts on the overall YDSP works; and (v) resettler training is scheduled in production ebb period. The overall YDSP resettlement schedule is presented in Figure 3. Resettlement under the Project is scheduled for implementation through the end of 2003. Resettlement activities have commenced at priority dike sections in both provinces and up to now 3,566 households with 15,369 resettlers have been relocated. The implementation of these activities in respect to the standards are outlined in the RAP, and the agreed measures to rectify any shortfalls are described below. As involvement of the Bank and confirmation of the YDSP as a separate project within the overall program is yet to be confirmed, resettlement is being undertaken according to a wide range of compensation standards and modes of disbursement within the Project area, a situation governed primarily by the availability of funds. During field visits to project areas, several aspects of household restoration and resettlement were observed to be progressing well: * Rural houseplant allocations have been provided in conformance with standards described in the RAP. In each internal resettlement area visited these were less than 300 meters from the original sites, and all of the resettlers interviewed were satisfied with the location of the new sites. * Rural housing reconstruction has been managed by resettlers, based on both recommended layouts and individual preferences. In most instances, resettlers have made significant increase in size and quality of housing. * While no resettlement to townships has yet been undertaken, sites have been identified, and resettlers interviewed in Hubei were aware of, and satisfied with the relocation sites and proposed conditions. * In rural areas, resettlers remarked that they had participated in inventories, signed off on their affected assets, and were aware of the schedule and program for resettlement. Consultations with resettlement implementing agencies and field visits also identified areas where improvements are required. These areas, and the agreements reached with the PMOs in regard to specific activities required to address them, and elevating the current program to RAP standards are outlined below: - 126 -  * Current levels of qualified staff at the County level will be increased and the resettlement staff training program described in the RAP will be implemented. It was confirmed during Loan negotiations that Project specific ROs were established at all levels, with staffing in accordance with the requirements outlined in the RAP. In addition it was confirmed during negotiations that the proposed training programs for the ROs had started, and guidelines on the management offunds had been issued to all ROs. * Compensation for rural structures which have been less than adequate for housing replacement, leaving resettlers to rely on personal savings and loans * Compensation standards for land, where proposed, are below standard, and in most instances have not yet been disbursed, preventing rural land development and consequent land re-allocation and livelihood restoration programs. * Compensation for enterprise structures is below the required standard, being provided only for structures, and not for lost production and wages, or associated facilities, causing loss in employment, and in some cases stalling of enterprises or public buildings. * Where compensation was provided for lost crops, this was below the standards proposed in the RAP. The PMOs confirmed during Loan negotiations compliance with the compensation standards stated in the RAP in accordance with the appropriate local and national regulations. In doing so, current compensation standards for all Project areas will be made uniform, and supplementary compensation to resettlers already compensated at the lower standards will be made to the RAP standards. All compensation will meet at least replacement costs and in general be more than replacement costs to meet livelihood needs. The County/Township ROs have agreed to carry out land readjustment and provide land/productive compensation as soon as possible in accordance with the guidelines and standards specified in the RAP which willfund improvement and agricultural extension activities to improve the productivity of the land available to resettlers after relocation. * Disbursement scheduling in most instances has been linked to the commencement of demolition of existing houses, leaving no time for resettlers to construct replacement housing in advance of relocation and thus extending periods of temporary accommodation. Commencement of disbursement a minimum of three months in advance of demolition to allow for house completion before demolition, thus avoiding (or at least minimizing) any need for temporary accommodation. In accordance with the policies and procedures described in the RAP, the following commitments were made during Loan negotiations: (a) Appointment of independent monitoring and evaluation organizations and supervisors for resettlement by September 15, 2000. (b) Agreements to be made with all affected households, enterprises and villages (for both future resettlement and in areas where resettlement has already commenced). (c) Arrangement of relevant land tax, levy and grain quota reductions where appropriate for resettlers. - 127 -  (e) Arrangement for the exemption of resettlers from the requisite annual labor on dike maintenance in the year of resettlement. Gi Immediate preparation and issuance of the resettlement entitlement booklets which describe compensation standards and other entitlements, the grievance process, income restoration programs, and the responsibilities of both resettlers and resettlement implementing organizations in realizing the RAP. Table 1 Summary of Affected Structures, Fixed Assets and Population Item Unit Hubei Runan rotal Affected Cities/Counties/Districts Units 15 7 22 Affected Townships Units 31 13 44 Affected Villages Units 128 52 10 4. fifdetdgmem,en Al. Households to be resettled HH 6,494 4.464 10.958 Urban Households HH 2.214 2,214 A2. Population to be resetded People 28,779 19.213 47,992 Urban Pesettler People 9,649 9,649 A3. Houses needtd to be resetted m SS3,5S7 979,427.50 1,763,015 A3.1 House of enterprises m 144,237 99,686.18 243,923 Frame-structure m 7,566 7,566 Brick-concrete-structure m 96,171 50,289.70 146,461 Brick-wood structure m 37.063 44,628.48 81,691 Wood(earth) strtcture _ _ _ 212.16 212 Miscellneous m 3,437 4,555.84 7,993 A3.2 Private house 739350 779,741.32 1,519,091 Frame-structure ems 7,256 7.256 Brick-concretestructure Im | 210,157.43 500.268 |Brick-wood-structure 412,463 373,483.28 795,946 Wood(earth) structure mX 9,485.00 9.485 Miscellaneous m 29,520 186,615.61 216,136 A4. Other fixed Assets Fene wall m 87,386 190,684 Ground m 292,982 160,030.70 453,013 Water pool _ Im_ _ 4,928 4,928 Tower Pc 66 66 Water well 201 1240 1,441 Presd-water well P. 690 690 Tomb 'n 2,408 4,408 6,816 Simple building pc. 2,639 2,639 A5. Trees finc.fmits.timber) stem . 65.413 143.903 209.316 R.aad._ mu 15,172 18,577.68 33.750 B 1. Irrigadon land mu 4,497 3,054.16 7.551 B2. DrY soil mu 4363 7,085.53 11.448 B3. Veeetable land mu 168.2 2,738.48 2,907 B4. Water pond mu 3,007 1,213.44 4.220 B5. Frost mu 1,471 2,442.63 3,913 B6. Hacienda mu 466.25 466 B7. Land for house mu 1,577.19 1577 B8. Miscellameous mu 1666.33 1,666 Cl. Traffic facilides a. Concrete road surface km 38.39 38 b. Simple road km 106.89 69.24 176 c. Machine-plough road Ian 43.62 44 C2. Electrical facilities a. Low voltage transmission line km 225.44 124.72 350 b. 10 kV electrical transmission line km 93.52 49.6 143 c. 35 kV electrical transsission line Ian 19.8 20 d. transformation device Dc 97 97 C3. telephone line 366.89 109.59 476 C4. broadcasting & TV line km 230.14 23.68 254 CS. water mains km 101.22 3.9 105 C6. Iron Tower Pc. 7 7 - 128-  Table 2: Impact on the Affected Areas Due to Land Acquisition and Resettlement Province County Villages Information of effected area Occupied land and resettlement Percentage of occupie land and reseatlemen Province County effected Household Population Arable land Household Population Arable land Household Population Arable land Hunan 7 52 16,405 72,898 114,815.61 4,464 19,213 10,780.07 27 26 9 Linxiang 9 4,725 20,250 35,870.00 1,738 7,447 2,763.25 37 37 8 Yunxi 8 2,461 10,753 15,301.00 541 2,363 1,397.00 22 22 9 Junshan 9 2,123 7,446 13,159.00 729 2,556 917.07 34 34 7 HuanRaai 4 1,069 5,241 3,732.61 314 1,539 437.60 29 29 12 Junshan 7 1,915 11,524 17,004.00 234 1,408 1,350.35 12 12 8 Huarong 14 4,112 17,684 29,749.00 899 3,871 3,528.00 22 22 12 Jianxin 1 9 29 386.80 Hubei 15 156 54,303 218,576 300,766.95 6,494 28,779 9,028.00 12 13 3 Jingzhou 5 1,208 5,160 7,484.85 314 1,412 535.00 26 27 7 Songzi 1 647 2,633 4,171.00 8 33 70.00 1 1 2 Gong'an 31 16,349 77393 109,802 3228.00 66633 Shishou 29 8,256 32,567 40,212.00 2,300 9,740 22303.00 28 30 6 Hannan 21 6,574 23,565 62,737.00 771 3,423 283.00 12 15 0.5 Caidian 7 494 1,999 3,393.00 17 81 782.00 3 4 23 Zhuankou 7 1,633 6,082 5,514.00 245 91.00 15 18 2 Hongshan 18 5,681 19,974 24,491.80 83 496 62.00 1 2 0.3 _______ Hanyang 5 1,295 5,180 4,481.80 351 1,441 210.00 27. 28 5 Jiangxia 8 3,640 13,084 11,657.50 239 1 364.00 7 11 3 E'zhou 3 1,613 6,180 4,691.00 403 2,041 810.00 25 33 17 Huangzhou 12 5,517 19,703 19,201.00 364 1,497 197.00 7 8 1 Tuanfeng 3 1,396 5,056 2,930.00 288 1,361 93.00 20.6 26.9 3.2 Qingshan 1 80 280 Wuchang 5 25 110 Total in the Project Area 208 70,708 291,474 415,582.56 10,958 47,992 19,808.07 15.5 16.5 4.8 - 129 -  Table 3: Resettlement Entitlement Matrix Impact Affected Compensation Policy Other Measures Entity Loss of arable Arable land, QL Provision of equivalent land O Readjustment of village land land resulting vegetable garden, nearby (if available); within affected villages and host from permanent trees and orchard O Cash compensation to village for villages where applicable; land acquisition areas, arable land for both more and less 0 Use of cash compensation for land acquisition areas, reservoirs/ponds, than I mu/family categories farm intensification, crop in the path (compensation unit prices based diversification and other land locatede on output value of cultivated land, development and agricultural odyengthenig aland compensation times and extension techniques for more strengthening and relative land management efficient use of land. worker population regulations); working these L0 Detailed compensation rates in land areas Table 3-2. Loss of land Arable and 0 Compensation for temporary land 0 Return of temporary land to the from temporary cultivable land acquisition based on the annual land user after use. land acquisition located in the path output of the leased land plus the of dyke costs associated with land strengthening preparation and re-cultivation; s Detailed compensation rates in Table 3-2. Loss of Housing and 0 Compensation for housing 0 Building materials may be settlements auxiliary buildings including private housing (rural salvaged from old housing or (including in the path of dyke and urban); enterprise building to be utilized in housing, strengthening and 0 Replacement land for households new structures; auxiliary th residentialto be provided within the original 0l Assistance to be provided to the auxiliary the residential village (internal settlement), if resettlers in procurement of labor and scatered trees in the houses available; material for construction of new and transfer i h If replacement land not available housing; subsidy) provide alternative 0 Provisions to be made for household/enterprise location as temporary housing and financial close to the original location as assistance accorded where rental possible (collective resettlement); support needed for temporary O House-for house replacement in accommodation; urban areas; 0 Transportation/relocation O Cash compensation based on allowance to be provided to the original house area to urban resettlers on household basis. resettlers; O Detailed compensation rates in Table 3-2. Loss of crops Crops located in 0I Cash compensation to affected 0 Crop loss to be minimized to the the path of dyke farmers based on the average of extent possible by avoiding strengthening the previous three years acquisition during harvesting production value - 130-  Loss of Enterprise and O Compensation for land and U Provision for continuance of enterprises workers employed reconstruction of enterprises' employment of workers affected from with the structure/buildings and facilities; enterprise relocation during the enterprises 0 Compensation for loss in transition period through provision of production and relocation of temporary premises, or compensation enterprises; for lost wages. U Detailed compensation rates in Table 3-2. Loss of Water supply, O Compensation for reconstruction /reconnection to water supply/ utilities sanitation in electricity! sanitation (previous resettled houses infrastructure); andsettledrprses U Detailed compensation rates in and enterprises Table 3-2. Loss of public Roads, power U Compensation to O Prompt allocation of land for infrastructure supply, water owners/operators for reconstruction of public infrastructure supply, infrastructure replacement; including labor and material. telecoynmunication L Detailed compensation rates in and media Table 3-2. broadcast facilities in the affected areas Impact to Elderly, orphans, U Additional cash allowances U Prompt payment to vulnerable vulnerable widows, and provided to vulnerable and and economically disadvantaged groups female headed economically disadvantaged groups early in the resettlement households being groups; process. resettled U Detailed compensation rates in Table 3-2 Loss of cultural No significant U Not applicable O Not applicable property impacts arising from the Project Based on: (a) Land Management Act of the People's Republic of China 1998 (b) Water Act of the People's Republic of China 1988 (c) Land Compensation and Resettlement Regulation for Large and Medium-Sized Water Conservancy & Hydropower Projects, State Council promulgated Order No. 74, February 15, 1991 (d) Design Regulation for Flooded Reservoir Area Treatment at Water Conservancy and Hydropower Projects, 1985, the Ministry of Hydropower (e) Investigation Details for the Reservoir-flooded Physical Substances at Water Conservancy and Hydropower Project, the Ministry of Hydropower, 1986 Wfl Standards for Village/lTown Planning, the Ministry of Construction, September 27, 1993, 2) Classification of Villages and Towns; 4) Standards for Construction-occupied Land, Chapter 4, Land for National Construction (h) Hubei Province Land Management Implementation Method, Hubei Province, September 3, 1987 (i) Jiangxi Province Implementation of Land Management Act, July 15, 1989, Chapter 4 - Land for use in State Construction - 131 -  Table 4: YDSP Resettlement Compensation Standards Description Unit Unit price (Yuan) I Hunan | Hubei SETTLEMENTS I Buildings Public Buildings Wuhan/Other Framework m2 800/N/A Brick-concrete or2 345 450/320 Brick-wood Ml 260 350/260 Clay/wood in' 1 - Miscellaneous in2 60 100170 Private House Rual/ other urban/Wuban Frame-work m2 700 in Wuhan Brick-concrete m2 a * ij 270/320/410 Brick-wood m2 203 240/260/320 Clay/wood 112 153 Miscellaneous M2 50 60/70/100 2. Auxiliaries Private-owned Rural area/town Fence _ _m2 20 24126 Sun-drying ground mw 12 20122 Water pond n?_ 80 Well pce 1,000/1,000 pressure well pce 70 2001200 Simvle stuctare pe _ _ 50/50 Tomb pce 100 190/190 Public-owned_ _ Concrete_______________Fence_______ __rn________28 Concret Ground M= 25 Water Tower item 6,000 Well -___pce 2__ ,000 Simple StmuctuTes |_ _ce _ 60 3 Trees pce | 20 30 4 Resettlement Subsid Rural/urban per HH Town ___ Materials Relocaton person 50 5001550 Materials Loss person if) 350/450 For work delay person 100 400/500 5 Reconstruct Public Facilities________ Land acquisition in resettlement area mu r _ N/A n/700/1 0i0oo Land leveling person 390/200/330 Roads person ! 60/70/320' Tap water person | 60/70nOO2 Drainage person 50/50/160 Power supply person _80/80/180_ Others person 50/50/205 6 Other Coinpensation _ RS area township constsucton HH 3 00 Subsidy for moving to towns HH 3_50 7 Vulnerable Groups Housine HH Elderly orphans and widows HE 3,00 Female headed or labour short households HH 4,000 LAND COMPENSATION I Per capita cultivated land < 1 mu Regular area/Wuhan (I) Paddy field mu R 409 8,832/13,248 (2) Dry land mu 5n 7 5,754/8,631 (3) Market garden mu 8,409 13,200/29,80O (4) Water pond mu 8,409 8,250/13,200 (5) Forest land mu 3,835 3,600/6.750 (6) Garden plot mu 5,990 (7) House Plot mu 'A 4Sf (8) Other land mu _ _ 13.200/3.200 - 132 -  2 Per capita cultivated > I mu mu (1) Paddy field nut 6,932 9,832/13,248 (2) Dry land un 3,854 5,75418,631 (3) Market garden mu 6,932 13,200/29,800 (4) Waterpond mu 6,932 8,250/13,200 (5) Forest land mu 3,835 3,600/6,750 (6) Garden plot mu 3,835 (7) House Plot mu 4,425 3 Temporary land requisition mu Cultivated land mu 1.800 4. Green crops mu 500 SPECIAL FACILITIES INFRASTRUCTURE I Roads km _ 250.000 2 Simple Roads km 169,038 170,000 3 Tractor Road Iam 12,531 4 Power facilities kmI (I) Low-voltage lines kmn 380v trnsmission line km _ 12,000 220v transmission line km 9,127 9000 (2) High-voltage lines km 35kv transmission lne km _ 35,000 10kv transuassion line km 22,525 23 00( (3) Transforming facilities set 3,000 5 Telecommunication Lines km 12,860 13,000 6 Broadcasting Lines akm 8,000 _ 8 oo 7 Cable T.V Lines kan 10,000 8 Steel Tower pole 150,000 9 Tap Water Trunk Lines km 50,000 70,000 1. Move nearby(intemal resettlement)tTownship building (collective resettlement of urban resettlers)lTownships(uwban) -133-  Table 5: YDSP Resettler Income Restoration Planning Improvement of Improvement of Resettled Village Lands Lands (inlcuding land Resettlement Resettled into Province County (city, by transfer from other into Animal Vilage Enterprise Tot district, farm) producion Husbandry and Tertiary (person) Area Populatson Area opulation (person) Industry (person) (mu) resettled (mu) rsne . ____ __ (Pg ) (nerson) . . Hubei 15 5,501 56,629 3,775 367 1,362 5,504 Jiangzhou 340 3,291 219 20 101 340 Songzi 45 678 45 45 Gong'an 396 5,946 396 396 Sbhshou 146 2,194 146 146 Caidiuan 233 3,498 233 233 Xinzhou 1,822 18,770 1,251 191 381 1,823 Huangpi 248 3,482 232 16 248 Zhuankou 72 1,086 72 72 Jiangxia 316 4,744 316 316 Hongshan 127 1,232 82 20 25 127 Jiangan 41 621 41 41 Hanyang 258 3,024 202 20 36 258 E'zhou 1,122 3,881 259 463 60 803 1,122 Huangzhou 169 2,076 138 20 11 169 Tuanfeng 165 2,106 140 20 5 165 Hunan 6 6,208 52,763 5,077 1,227 893 238 6,208 linxiang city 1,692 16,636 1,368 378 286 38 1,692 Yunxi district 1,058 9,291 776 284 280 2 1,058 Junshan farm 234 3,161 234 _ 234 Huanggaihu farm 166 1,350 166 166 Junshan district 753 7,975 753 753 Huarong county 2,305 14,350 1,780 565 327 198 2,305 TotalofProjectArea 11,709 109,391 8,852 1,227 893 367 1,600 11,712 - 134 -  Table 6: Summary of Resettlement Costs (1,000 yuan) lUlinqn -1ith i -- Tal - | . ~~~~ ~ ~ ~ ~~~~~Cost % Cost % Cost 1 ReIpe2tipn Cnqts .........259,07&70 .52 249,611-AS .37 -Nl8.6R&fRS 0 44 l l T Tmge"Z 214q1 1 1;1 n 139 611 11 = R2 74? 73 = 1 2 Enterpriseq 7-1l 4n _ 4R 14-,47R _ I I Attpi me-nts, A4Rsvn In nSm I _, IA PR, AC,= 1 4 Snh-idy for the Pnnr -9 -_ 1 n7 nn 1 776nn __ q1i,frtnirctlre - -R61 n 1= 861J n = 1 h Other -RR3n SR _ 944 OR 2 Land Crnpenltinn 94O869.13f 21 nns92-34 A 7 V4si9664 ?.2h. 3 Pihlie Iffilitips 16,79s1-7TL 3 79,7o916, 17, o6nxlw 14 X I. 1nning+ M nns gem ent 33,19j-5f) 7 I 3X7 h 71,X76.44 h 4 1 S,RnrvcX+P1gnning qs76R 4( n7Rnn M44R 40 7 ImpI ement.t nn Management I 1J I-?? In 1J617 nn - . 11.1. 4 1 - 13 Teehnir.nI Tr-ining 3 S35L 1 - - 5nn 5D -if) 4 4 qiiperviqinn 7074 2nil -An = s,04J7 - 4 5 Mmnitaring + Fvad,uation 2 s92fl - 3.77n 0f - 6,36h 2L 4 I Re'Pett1ement Panel 1 1 1 7 -n . nnnnn = M 1 1 9 .n = 14 7 Other l RR 70 1 RSI - _ Osntigene Cactc s 4 1 S&2.1 13 1h637L161 1fi 5 1 Rasic 39R17 sn .2 97.5SR7 - incl Weak GTrnip Snlh-idy S76 nn =94sf0n 1 066nn0 = S 9 Prire Diffprenne s73ss4 R3D _ RR-16ss _ I TOTA I 501,664.6n) 666265-49 - 1,16Z9s30-09 - 135-  Figure 1: Provincial Resettlement Management Structure Figure 2: Coordination and External Monitoring (ORC and POE) ORC Overall Resettlement Coordination Commnittee (Imember from each PRO) Infonnal AssoctatEon City/County RO C ty/Count R . ..................................... .....- RS Village RS Village Note: ORC.: Overall Resettlement Coordinator; RO: Resettlement Office; MWR: Ministry of Water Resources; PRO: Provincial Resettlement Office; CWRCe Yangtze Water Resource Commission; IMEO: Independent Monitoring and Evaluation Organization; RS: Resettlement Supervisor; EMO: Environmental Management Office; PMO: Project Management Office; PPlI: Project Planning Institute; POE: Panel of Experts -136 -  Figure: 3 Resettlement Implementation Schedule 1999 2000 2001 2002 2003 ID Task Name Duratio o 24 32j 314 1 Preparation of Mid Yangtze River Flood Control I loo - 2 Bank Procedure for Project Preparation 97.5 _ 1 3 Revisioin of Design, by the Project Implemnents 49.75 20 Procurement Procedure of Civil Works 46.25 N 80 River Bank Protection, CWRC 99.7 - 81 Within Hubei Province 99.7 A 82 Jingnan Section 99.4 M 91 Wahan Section 60.4 v 1 OC Bapu Section 95.2 M i Q C H uanggang Section 69.2 is 117 Within Hunan Province 84 w - 11i Minsheng Polder Section, from 0+000 to 84 w 1 2, Jianshe Polder Section, from 32+724t0 S 49.5 M_ 132 Jianxin Polder Section, from 51+012 to 5 33 w 1 4C Junshan Farm Section, from 53+975 to 7 53.5 M I4 r Yongji Polder Section, from 78+200 to 8f 70.5 m is 153 Luchang Polder Section, from 86+380 to 56.5 Mi 1 ~ Jiangnan Polder Section, from 109+1 10 t 28w 162 Huauggaihu Farm Section, from 136+04' 26.9 M 1 7C Dike Rehabilitation, Hubei Province 123.4 - 171 Jingnan Dyke 117.7 - 184 Wuhan Dike 123.4 - 197 Bapu Dike 113.4 - 208 Huanggang dike 93.3 M a 22C Dike Rehabilitation Works, Hunan Province 154.25_ 221 Minsheng Polder Section, from 0+000 to 32+6 128.5 _ 24r Jianshe Polder Section, from 32+724 to 51+01 90 a 261 Jianxin Polder Section, from 51+012 to 53+97 51.5 'A 293 Junshan Farm Section, from 53+975 to 76+80 122.55' _ 31 1 Yongji Polder Section, from 78+200 to 86+384 78.25 a 34E Luchang Polder Section, from 86+380 to 109+ 100 373 Jiangnan Polder Section, from 109+110 to 131 97 w 391 Huanggaihu Farm Section, from 136+044 to 1 62.5 M 422 Ponds Backfill, Wrapping 58 w 427 Office Equipment & Vehicles 72.45 N r - 137 -  1999 2000 2001 2002 2003 200. ID TaskName Duration 2F314 2 12T3 4 1|2|3 4 1|2|34 1|2F3 220 Dike RebabIitation Works, Hunsm Province 154.25w w 221 Mlnsheng Polder Section, from 0+000 to 32+624 128.5w w 245 Jianshe Potder Section, from 32+724 to 51+012 90 wi _ 269 Jianxin Polder Section, from 51+012 to 53+975 51.5 wI _ 293 Junshan Farm Section, from 53+975 to 76+800 122.55w w 319 Yongii Polder Section, from 78+200 to 86+380 78.25 w i M.. 346 Luchang Polder Section, from 86+380 to 109+110 100 wI 373 Jiangnan Polder Section, from 109+110 to 136+044 97 wi - 398 Husaggaihnu Fann Section, from 136+044 to 142+055 62.5 wi 422 Ponds Backill, Wrapping 58 w' 427 Office Equipment & Vehicles 72.45 w 437 YDSP Resettlement 190.2w w - 438 Hunan Province 190.2 w r - - 439 Preparation 30 wi ir - 441 Execution 169.2 w 442 Huarong County 128.4 w 465 Junshan District - -7,w 483 Junshan Farm 131.6 w 502 Yunxi District 135.6 w- 523 Lioxiang City 160.2w - - - 546 HEuanggaihu Farm 73.6 wl 566 Jianxin Farm 54 wi, 578 Hubei Province 159.6w - - 579 Preparation 30 wi, 581 Execution 138.6w w _ 582 Jlngzhou Prefecture 128.4w w 605 Wuhan City 117.6w w 623 Erhou City 131.6 w ir 642 Huanggong City 135.6w - - -138-  Additional Annex No.: 13 YANGTZE DIKE STRENGTHENING PROJECT FINANCIAL MANAGEMENT I. Background This report is the result of a financial management review and analysis of the Project as conducted by Wu Ning, Consultant, in March 2000, supervised by Youhua Yu, Senior Disbursement Specialist, EACCF and further reviewed by Nancy Chen, Financial Management Specialist, EAPCO, to determine whether the Project has in place an adequate financial management system as required by the Bank OP/BP 10.02. The review was performed in accordance with the following: * Guide for Review and Design of Accounting and Reporting System for World Bank Projects (Prepared by Central Operational Services Unit, East Asia and Pacific Region, December 1997); * Review of Financial Management System as stipulated in Annex II of LACI Implementation Handbook; and * Project Financial Management Manual issued by the Loan Department, February 1999. The review consequently included procedures as were considered necessary and appropriate to the Project's circumstances, including site visits, discussions and observations. As a result, the task team has discussed and reviewed with Provincial Finance Bureaus, Water Conservancy Bureaus, Provincial Planning Commission and other implementing agencies the plans, procedures and guidelines for establishing a sound project financial management system, inter alia, accounting system, staffing and training programs, internal controls, project reporting, auditing and budgeting procedures. II. Organization of Project Financial Management This Project is a Central Government undertaking to be implemented by two provinces: Hubei and Hunan, and by Changjiang Water Resources Commission (CWRC), which is organized under the Ministry of Water Resources (MWR). A Central Project Coordination Office (CPCO) will be established under MWR to oversee Project implementation and provide coordination between the two participating provinces (See Attachment 1). The provinces have established Project Leading Groups (PPLG), which are chaired by the Vice-Governors. Under the PLGs Provincial Project Management Offices (PPMO) have been established to oversee the preparation of annual work programs, oversight the procurement and itnplementation progress, funds management and coordination between provincial agencies and the Bank. The PPMOs will also serve as the secretariat of the PLGs. The PPMOs have the following divisions: * Comprehensive affairs; * Finance and accounting; * Engineering; - 139 -  * Procurement; and * Environment and resettlement. Hubei Province The implementation of Project works will be entrusted to the owner organizations, which are the Dike Management Offices or in some cases the Water Resources Bureaus at local govermnent levels. Hunan Province Yueyang is the only project city and the Yueyang Project Management Office (YPMO) has been established to represent the Province as the owner for implementing Project works and be responsible for Project implementation, quality assurance and consolidation of Project accounts. For purpose of coordination of Project implementation, PMOs have been established at each city and county, respectively. The Provincial Finance Bureaus (PPFB) and the PPMOs in Hubei and Hunan Provinces, respectively, all have experience with implementing World Bank-financed projects (e.g. the Yangtze Basin Water Resources Project, the Yangtze Flood Emergency Rehabilitation Project) and therefore are familiar with the existing disbursement, procurement, financial reporting and auditing requirements. PFB has accumulated extensive experience with both the Bank and MOF's requirements in preparation and processing of withdrawal application and financial management of Bank-financed projects. However, additional training will be provided to Project staff at all levels (see Section VI: Staffmg and Training). See Attachments 2 and 3: Organization Chart for Hubei and Hunan, respectively. CWRC has established their Project Leading Group (CWRCPLG) for the River Modeling studies. Under CWRCPLG there is a Project Management Office (CWRCPMO) which is attached to Changjiang Science Institute. CWRCPMO consists of an Advisory Group and the following four (4) divisions: 3 Comprehensive affairs; i Planning, finance and accounting; e Scientific research and technology; i Engineering. m. Loan Disbursement Arrangements The Bank loan will be disbursed based on traditional disbursement techniques. The Project will not be using PMR-based disbursements, as agreed between the Bank and Ministry of Finance (MOF). In accordance with the Implementation Agreement reached between MOF, MWR and Project provinces, MOF will manage, monitor and maintain the Special Account (SA). MOF will reconcile the SA, check and monitor withdrawal applications and verify payment requests to meet Bank requirements. Applications for withdrawal of the proceeds of the loan and for replenishment of SA will be prepared and submitted to the Bank by MOF. For purposes of channeling funds from MOF to the County levels, each Province, City and County will use the Finance Bureaus. The County PMOs will verify the accuracy and validity of expenses submitted and progress reported, and prepare requests for payment. The applications will be further reviewed and approved by the County Finance Bureau before submitting to a higher level PMO for approval. Eventually the requests for payment will be submitted by MOF to the Bank. See Attachment 2A and 2B: Flowchart of Withdrawal -140 -  Applications and Project Funding for Hubei and Hunan, respectively. Original invoices and backup documentation will be retained at points of initiation. MOF will retain copies of withdrawal applications and copies of supporting documents. IV. Financial and Accounting System From July 1, 1998, according to MOF's documentation, the Bank-financed Projects in the People's Republic of China will follow the "Accounting Procedures for World Bank-Financed Projects" issued by MOF as a basis for bookkeeping and preparation of financial statements and Project reports. These procedures dictate the format of financial statements, Chart of Accounts and related instructions which would therefore affect Project accounting and reporting requirements. Accrual accounting and double entry basis will be adopted. Project accounts will be maintained by County PMOs, consolidated by City PMOs and further consolidated and submitted by PPMOs on a semi-annual basis to the Bank, by October 1 and April 10 covering the first and second half of the year, respectively. As accounting software has been developed under the supervision of MOF and the Bank's Beijing's Country office, Hubei's Provincial Finance Bureau (PFB) and CWRCPMO agreed to adopt this software for accounting purposes. However, because of limited computer skills in the Project's city and county PMOs, Hunan's PFB decided to use the traditional way of bookkeeping. V. Internal Controls A well designed internal control system is one of the key elements critical to the success of a project. Financial management manuals (the Manuals) are jointly prepared by the PPMOs and PFBs, and by CWRCPMO, respectively. The objective of the Manuals is to document the operational procedures and guidelines for Project financial management, encompassing all levels of Project management. The scope of the Manual will encompass the following key elements: 3 Project financial management structure and staffing (e.g. job descriptions); 3 Identification of the accounting standards to be used by the Project and all the participating agencies (e.g. tailored Chart of Accounts to project specifics and sample accounting treatments); i Key internal control features such as a system of authorization, verification, reconciliation and Project reporting to provide adequate control over Project costs, cash and asset management and segregation of incompatible duties; * Reporting formats tailored to Project specifics; * Procedures for procurement, disbursement and counterpart fund management; * Budgetary procedures; and * Auditing arrangements The final draft Manuals have been reviewed by the Bank and have been finalized prior to Loan negotiations in Washington. In accordance with BP 10.02 paragraph 6, the task team reviewed the status of compliance by the Borrower and Project implementing entities with audit covenants in existing Bank-financed Projects. The major findings of the audits were: * Hunan Project Area - no areas of significant non-compliance or material weaknesses came to the auditors' attention. * Hubei Project Area - the auditors noted a series of unsupported costs and material - 141 -  control weaknesses. A letter addressing the Hubei audit issues was sent and the task team responded during the October 1999 supervision mission that the irregularities will be corrected. Although the audited projects were appraised before July 1998, managed by a different task team and the implementing agencies different from that of the current Project, the leadership structure is similar: both projects involve the Ministry of Water Resources and Provincial Planning Commission. The issues raised in the audit report present a risk that similar issues could repeat themselves. It is important to take appropriate preventive measures so that such risks can be mitigated. Therefore, this issue was discussed with the Hubei PMOs during appraisal and a strong message was sent that the Bank is serious about financial management and that mis-use of Project funds is prohibited. VI. Staffing and Training The PMOs at all levels have been established and are fully staffed. In order to have sound financial management of the Project, the staff of each lower level PMO (both at the City and County level) includes at least one Project accountant who has overall responsibility for maintaining the Project accounts and preparing financial statements, and one cashier who processes cash receipts and expenditures. CVs for the accountants and cashiers of PMOs at all levels were provided for review by the Bank. The institutional arrangements for Project management and implementation have been established and staff assigned. The names of key financial staff at various levels have been provided to the Bank for review. The task team has recommended that well designed and focused training be provided by the PFB and PPMO during the Project Launch Workshop, to ensure that staff understands the Project's financial management system and requirements. This training should include the following features: * Bank procedures and the Project's financial management procedures for withdrawal of Bank funds; * Overview of the Project's financial statement formats; * Review of the Project's Financial Management System Manual; * Procurement procedures; and * Project audit requirements. PFBs intend to hold separate workshops focusing on the accounting procedures and the use of accounting software. VII. Project Reporting Requirements The format and content of the following Project financial statements represent the standard project reporting package agreed between the Bank and MOF. These formats have been discussed and agreed with all parties concerned. The Project financial statements will be submitted to the Bank by MOF on a semi-annual basis, February I and August 1 of each year, and include the following four statements: * Balance Sheet; * Summary of Sources and Uses of Funds by Project Component; * Statement of Implementation of Loan Agreement; and * Statement of Special Account - 142 -  VIII. Audit Arrangements The Bank requires the Project financial statements to be audited in accordance with standards acceptable to the Bank. In line with other Bank financed Projects in China, the Project will be audited in accordance with Government Auditing Standards of the People's Republic of China (1997 edition). The National Audit Office (NAO) will be the auditor of the Project. NAO will entrust Hunan and Hubei Provincial Audit Offices to audit the implementation of the project in their provinces, respectively. The Representative Office of NAO in Wuhan will audit CWRCPMO. NAO will audit the SA and the financial statements consolidated by MOF. The audit including opinions on financial statements, Special Account and Statement of Expenditures will be scheduled for submission to the Bank by MOF within 6 months after the end of the calendar year. IX. Budgeting The Project's budget will be prepared annually by the PMOs based on submissions prepared by the implementing agencies. The budget prepared at each government level will be submitted to the Finance Bureau for approval at the same level. PPMOs will consolidate budgets approved and submit for the Bank review and approval by April 1 of each year. All counterpart funds will be channeled to the PMOs and implementing agencies through local the Finance Bureaus. Details of budget preparation and approval procedures are to be given in the Manual, which are to serve as guidance for all parties involved. X. Conclusion The task team has determined that the Project satisfies the Bank's financial management requirements as stipulated in OP/BP 10.02. In the team's opinion, the Project will have in place an adequate Project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of Project implementation through reporting formats agreed with the Project management office and as required by the Bank. Training of the Project's designated financial staff on topics indicated in Attachment I below will be carried out during the Project Launch Workshop. Authorization for MOF to open the Special Account (SA) for the Project will be obtained by Loan effectiveness. - 143 -  Attachment I China: Yangtze Dike Strengthening Project Proposed Action Plan (March 2000) Description Responsibilty Target Date A. Project Financial Management System Manual 1. Establish ajoint working group for the PPMO/PBF Pre -appraisal (Completed) preparation of the Manual 2 Draft Manual Teviewed by the Bank PPMOIPBFIBank Post Appraisal (Completed) 3. The Manual finalized, including the PPMOlPBF/Bank Negotiations tailored Project financial statements (Completed for both provinces) provided to the Bank for fwutber review. 4. The Manual distnbuted to all relevant PPMO/PBF Board staff (nanual discussed at provincial level. Please note that these two provinces have prepared several manuals for several of .__ ___ ___ ___ ___ ______ _the Bank projects) B.Staffing & Internal Controls CVs of accountants to be hired by the PPMO/Bank Post Appraisal city/county PMOs provided to the Bank for review. (Completed All CV's at PPMO level and many of the counties. Alnost all the lower and higher level departmnents have been established and staff are in place) 2 Inform Hubei PMOs about the issues BanldPMO Post Appraisal identified in a different project in Hubei (Completed-However the issue of and emphasize the importance of mismanagement occurred over a very financial management small componen, for which procedures .____________________________ _____________________________ were not clearly established) C. Training l Project Launch workshop to all-related PPMO/PBF/Bank Board staff on: a. Bank and the Project financial management requirements including withdrawal of Bank fends b. Project financial statements formiats c. Project Financial Management Systems Manual d. Project audit requirements e. Procurement procedures D. Special Account Obtain domestic clearances for opening PFB By effectiveness of SA 2. Authorized signatures sent to MOF and PFB/MOF By effectiveness Bank 3 First withdrawal application sent to the PBF After effectiveness Bank for initial deposit Attachments: 2. Organization Chart 3. Flowchart of Bank Withdrawal Applications and Project Funding -144 -  YANGTZE DIKE STRENGTHENING PROJECT Flowchart of Bank Withdrawal Applications and Project Funding Hubei Province CENTRAL GOVERNMENT (SDP::> fOFf M-YtR)WORLD BANR. (SPC MO, MWR) Ministry of Water I Resources MinisUy of Finanoe ,. I - ,___ ProvincialProject Legend: Leading Group . Cash Flow, including Bank IF r Loan and Counterpart Provincial Project Provincial Funding Management Of fice -' F;ina=ccBureau . ... ......... ..... ... Document Flow of Request for Payment Docurnent Flow of City Project Approved Request for Leading Group Payment Leading Role Ct Project City Finance Bureau s Management Office .......... ... ............- ..... ............... . . . t CountProject 6 Lai Group f L t County ProJect ib County f:inance Ma agernent Offlee \ _Bureau I I ,.................................... ........... .. .............................. - 145 -  YANGTZE DIKE STRENGTHENING PROJECT Flowchart of Bank Withdrawal Applications and Project Funding Hunan Province f t0:09 b llr~~~~~~~~~Cash Flow,'; including Ban. T! g' e 1, > r f ,?,,,eques.for aymen t 0 000000 000f L;4dv7tgDocument Flow of : e ~~~~~~~~~~~e ; iCasFlwinuding Role .f._.__I _ _ Yuya r Reqes fe aytn t....... . ............. ....... ......... ............... ... ..... ... Co_it Payment FinanceaigRl ........ .. ...... ... .... ................... ........................................ .... . ... I~ ~~~~-4 -.  IBRD 30696 CHINA / YANGTZE DIKE STRENGTHENING PROJECT r PROJECT LOCATION 52 PROJECT AREA CULVERT GATES v S BASIN BOUNDARIES - BRIDGES