China - Changchun water supply and environment project

 ICRR 10570 Report Number : ICRR10570 ICR Review Operations Evaluation Department 1. Project Data : Date Posted : 04/28/2000 PROJ ID : P003509 OEDID: OEDID : C2457 Appraisal Actual Project Name : Changchun water US$M ) Project Costs (US$M) 266.3 224.6 supply and environment project Country : China Loan /Credit (US$M) Loan/ US$M ) 120.0 83.3 Sector, Major Sect .: Urban Water Supply , US$M ) Cofinancing (US$M) 0 0 Water Supply & Sanitation L/C Number : C2457 FY ) Board Approval (FY) 93 Partners involved : None Closing Date 12/31/1998 06/30/1999 Prepared by : Reviewed by : Group Manager : Group : Klas B. Ringskog Laurie Effron Gregory K. Ingram OEDST 2. Project Objectives and Components a. Objectives (1) Improve water supply to meet urban domestic needs and to support industrial growth; (2) reduce industrial and domestic water pollution; and (3) create a demonstration project where the lessons learnt could be shared with other municipalities in China. b. Components (1) Construction of a raw water transmission line, construction of pumping stations, expansion and improvement of urban water treatment facilities, and expansion of the water distribution system; (2) construction of a trunk interceptor and a primary sewage treatment plant, and procurement of equipment for environmental quality monitoring and control; and (3) technical assistance for design and construction supervision, management support to the water and sewerage companies including staff training, and implementation of a hazardous waste study . c. Comments on Project Cost, Financing and Dates The final project cost of USD 224.6 million is lower than the appraisal estimate of USD 266.3 million in part because the planned sewage treatment was not financed by the Bank because of misprocurement . Another two contracts related to the raw water transmission line were also canceled with the effect that a total of USD 26.9 million were canceled because of misprocurement and another USD 10.7 million were canceled at the closing of the project, with the combined effect that IDA only financed USD 83.3 million compared to the appraisal estimate of USD 120.0 million. The project closed on June 30, 1999 with an extension of 6 months. 3. Achievement of Relevant Objectives : (1) The water supply was improved both for domestic and industrial consumers since coverage rose from 90% to 97% and since rationing was ended; (2) only the trunk interceptor was built while the sewage treatment plant remains unfinished, following the cancellation of the intended IDA financing . The sewage treatment is delayed at least four years which may well have caused the environmental situation in the receiving waters to deteriorate because of the higher consumption level . The intended institution building targets were not fully met and the planned implementation of domestic wastewater tariffs failed to materialize; and (3) the intended demonstration effect of positive lessons did not take place although there was a demonstration effect of negative lessons in the sense that several matters went wrong under the project . 4. Significant Outcomes /Impacts : Water supply coverage and service quality improved albeit at the expense of overbuilt treatment capacity . 5. Significant Shortcomings (including non -compliance with safeguard policies ): Water pollution in the Changchun Municipality and in the Yiton river system may well have deteriorated because of the delay in securing financing for the canceled IDA funding and the delay in building the wastewater treatment plant . Institutional development in the Changchun Water Supply Company was less than expected, and much less than expected in the Changchun Sewerage Company that failed to implement a domestic wastewater tariff . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev .: Partial Modest Sustainability : Likely Uncertain The sewage treatment plant is not yet built and the financial autonomy of the Changchun Sewerage Company is absent which makes the environmental benefits uncertain. Bank Performance : Deficient Unsatisfactory The ICR and OED ratings are equivalent . Borrower Perf .: Deficient Unsatisfactory Quality of ICR : Exemplary 7. Lessons of Broad Applicability : (1) Design and project management need to be handled by the best experts available . The reluctance of the Borrower to use "expensive" IDA funding for technical assistance proved "penny-wise but pound-foolish." (2) The financial and institutional arrangements and policies should have been analyzed and corrected before the project was approved and implemented; (3) More resources need to be devoted for supervision of large projects with first-time borrowers and particularly in the area of procurement; and (4) it is better to declare a project to have positive demonstration effects once the experience has been rated as positive . In the event, most of the project lessons turned out to be negative from which it is also possible to learn . 8. Audit Recommended? Yes No Why? The project shortcomings illustrate many of the systemic failures in China's water supply and wastewater sector such as inappropriate financial and institutional policies . An audit, preferably combined with other audits of water supply and wastewater projects in China, could provide valuable lessons for a more efficient and sustainable sector development policy, possibly supported by the World Bank group . 9. Comments on Quality of ICR : The ICR is professional and identifies succinctly and honestly the project shortcomings .