China - Hebei Earthquake Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 22216-CHA IMPLEMENTATION COMPLETION REPORT (IDA-30780) ON A CREDIT IN THE AMOUNT OF SDR 21.1 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A HEBEI EARTHQUAKE REHABILITATION PROJECT June 26, 2001 Urban Development Unit East Asia and Pacific Region- This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2000) Currency Unit = Yuan Yl.00 = US$ 0.12 USS 1 = Y8.3 METRIC SYSTEM FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS AusAid Australian Bilateral Assistance CAS Country Assistance Strategy DCA Development Credit Agreement HP Hebei Province HPG Hebei Provincial Government IRR Internal Rate of Return MOF Ministry of Finance PMO Project Management Office QAG Quality Assessment Group ZFB Zhangiiakou Finance Bureau ZM Zhangiakou Municipality ZMG Zhangjiakou Municipal Government Vice President: Mr. Jemal-ud-din Kassum, EAPVP Country Manager/Director: Mr. Yukon Huang, EACCF Sector Manager/Director: Mr. Keshav Varma, EASUR Task Team Leader/Task Manager: Mr. Wiebe Moes, EASUR  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT CIIINA: HEBEI EARTHQUAKE REHABILITATION PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Perfornance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 7 6. Sustainability 8 7. Bank and Borrower Perforrnance 9 8. Lessons Learmed 12 9. Partner Conunents 13 10. Additional Infornation 14 Annex 1. Key Performance Indicators/Log Frame Matrix 15 Annex 2. Project Costs and Financing 17 Annex 3. Economic Costs and Benefits 19 Annex 4. Bank Inputs 21 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 22 Annex 6. Ratings of Bank and Borrower Performnance 23 Annex 7. List of Supporting Documents 24 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   Project ID: P056491 Project Name: HEBEI EARTHQUAKE REHABILITATION PROJECT Team Leader: Wiebe Moes TL Unit: EASUR ICR Type: Core ICR Report Date: June 26, 2001 1. Project Data Name: HEBEI EARTHQUAKE REHABILITATION L/C/TF Number: IDA-30780 PROJECT Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: UY - Other Urban Development KEY DATES Original Revised/Actual PCD: 01/30/98 Effective: 09/10/98 Appraisal: 04/01/98 MTR: Approval: 05/29/98 Closing: 12/31/2000 Borrower/lImplementing Agency: PRC/HEBEI PROVINCE Other Partners. STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Jean-Michel Severino Country Manager: Yukon Huang Yukon Huang Sector Manager: Keshav Varma Keshav Varma Team Leader at ICR: Wiebe Moes Wiebe Moes ICR Primary Author: Elisabetta Capannelli 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN-Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: HS Sustainability.- HL Institutional Development Impact: SU Bank Performance: HS Borrower Performance: HS QAG (if available) ICR Quality at Entry: HS Project at Risk at Any Time: No No qutality at entry study was performed.  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Background. On January 10, 1998 an earthquake of magnitude 6.2 on the Richter scale occurred on the Ba Shang plateau in Hebei Province. The quake caused extensive damage to a rural area of some 2,600 sq. Iam, with a population of some 470,000 people living in 37 townships and 2,400 villages. Forty-nine deaths and 11,439 injuries were recorded, and some 44,000 were left homeless. Furthermore a total of 136,000 rooms collapsed and an additional 264,000 rooms were damaged. This loss of adequate shelter during Hebei's severe winter weather took a heavy toll on the population. The area affected by the earthquake was Zhangjiakou (ZJK) municipality, located in north-west Hebei province, and consists of four counties: Zhangbei, Wanquan, Kangbao and Shangyi. The epicenter of the earthquake was on the border of Zhangbei and Shangyi counties. The altitude of the Ba Shang plateau varies from 1,300 - 1,600 meters above sea level. Average annual temperature on the plateau is 2.6 C, and the lowest recorded temperature is -35 C. Water resources are scarce and the area support dry land agriculture, with limited areas of irrigation using ground water. Soil conditions are poor and the economic base is very weak, with annual household incomes of the order of RMB 4,000 (US$500). The total direct economic loss was estimated at US$300 million, of which rural housing losses were valued at US$200 million. Project Objectives. The primary objective was to assist in the restoration of economic and social activities following an earthquake in northwest Hebei Province, through the restoration of social and economic infrastructure. A second objective was to strengthen the socio-economic situation in the area through enhancement of productive activities which would alleviate extreme poverty. Evaluation of Objectives: The project objectives were clear, realistic, important. IDA's assistance focused on short-term recovery and reconstruction to meet the needs of the population that was suffering hardship from the severe winter weather. The project was consistent with the CAS objectives through its emphasis on poverty alleviation by providing income-generating assets and protecting well-being. This broader objective of fostering economic growth in an impoverished part of the region and restoring or providing additional sources of income to a vulnerable population, was very relevant and important for the borrower. 3.2 Revised Objective: n.a. 3.3 Original Components: The Hebei Earthquake Rehabilitation Project supported emergency reconstruction, repair and rehabilitation programs to be carried out in Hebei Province (HP). The components and costs follow. a) Housing (US$12.6 million): reconstruction and/or repair of about 15,000 to 20,000 houses; b) Health Care (US$1.6 million): reconstruction and/or repair of about 26 healthcare facilities, and purchase of equipment; c) Grain Storage (US$2.8 million): reconstruction of and/or repairs to about 25,600 m2 of grain storage facilities; d) Water Conservancy (US$5.4 million): (i) reconstruction of and/or repairs to 30 drinldng water facilities, - 2 -  including distribution networks; (ii) reconstruction of and/or repairs to water conservancy facilities, e.g., 730 wells, buildings, canals, bridges, aqueducts, etc.; and (iii) repairs to the Friendship reservoir; e) Education (US$10.4 million): reconstruction of about 600 schools and purchase of equipment; f) Irrigation Development (US$7.7 million): (i) installation of 4500 shallow stone weels, 300 large dug wells and 200 tube wells; and (ii) installation of some 500 small sprinkler irrigation systems; and g) Institutional Development (US$0.1 million): technical assistance, training and support to municipal, county and township level agencies, particularly for building standard development, project management and monitoring. Assessment of Design: The scope and design of the project were appropriate to meet the objectives of the project, and were clear and in line with other IDA emergency operations and in China. The design took into account lessons learned from other emergency earthquake relief interventions such as: (a) the importance of selectivity in determining which types of infrastructure to focus on (schools, housing, water conservancy) and which to exclude in the short term (roads and communications); (b) the importance of simplicity (the project was designed to be simple to implement); and (c) the importance of consulting with local communities. The assessed damage due to the earthquake was estimated at $300 million, including damage to private properties for an amount of $200 million. Despite reconstruction needs in a wide variety of subsectors, the project's design was rightly selective, and did not include the reconstruction of major infrastructure assets, such as highways, or the provision of assets and goods that could be re-built or reconstituted by the residents themselves, such as houses interiors. While additional components could have been added to achieve the reconstruction objectives, the selection was made taling into account the inexperience of the local counterparts and implementing agency with Bank-funded projects. Striking the right balance in project design was facilitated by several Bank staff who had worked on other earthquake rehabilitation programs in China. The close participation by the local agencies (at all levels of administration) during appraisal helped ensure that accurate designs and estimates were made, so only marginal adjustments to the project scope were made during implementation. 3.4 Revised Components: n.a. 3.5 Quality at Entry: There was no Quality at Entry assessment nor QAG analysis during the course of the project. The rating for quality at entry is highly satisfactory. The quality of project design was good. It was simple, hence ensuring that implementation would not be hampered by the need to deal with complex and different objectives. The project's objectives were consistent with the CAS and the borrower's priorities. The only applicable safeguard policy, namely environmental assessment, was satisfactorily adhered to. The project's simple design and focus on established priorities helped ensure its sustainability. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The Hebei Earthquake project achieved its objectives and reached or exceeded its expected outcome and is rated highly satisfactory. The project aimed at rebuilding the economic, social and physical assets that were destroyed by the earthquake, with a view of restoring essential facilities and services in the shortest possible - 3 -  time. These objectives were achieved in a rapid and consistent manner. The project helped restore economic, social, and physical assets destroyed by the earthquake and developed measures to reduce vulnerability to seismic damage. The project's contribution at the end of the reconstruction effort was substantial. It is estimated that the project contributed to 10% of the housing reconstruction, 100% of the hospital and 100% of the schools. The poverty alleviation component of the project also brought benefits and supplemental income to the local population beyond original expectations. 4.2 Outputs by components: Physical achievements: The physical achievements of the project are considered highly satisfactory. An evaluation of the infrastructure components indicates that the project has outperformed its targets. Restoration of all residential premises was completed before the start of the 1998/99 winter season. Entire villages in Zhangbei County, the area most affected by the earthquake, were rebuilt in a period of only seven months. This was a formidable task considering the diversity of the works, and the difficult logistics caused by the geographical dispersion of the various activities. The project was very successful in using local building contractors, mostly due to the simplified procurement arrangements adopted, which contributed to speedy implementation. The impact of the project on the rehabilitation of private houses, schools and hospital was very significant and physical targets exceeded appraisal estimates (see table below). A total of 26 health centers, clinic, hospitals were rebuilt to new and more appropriate standards. The components identified during appraisal were relevant and adequate, and crucial components, such as the reconstruction of housing, schools and hospital facilities, were implemented ahead of time (73% of the total reconstruction works were implemented during the first six month of project implementation). -4 -  Physical Improvements under the Credit Item Zhangbei Shangyi Wanquan Kangbao Total Housing - number of rooms rebuil 10,233 5,819 1,313 555 17,920 - number of rooms repaired 1,978 1,978 - number of beneficiares 15,649 12,494 5,641 1,400 35,184 Hospitals - m2 of rooms rebuilt 5,045 2,997 5,221 4,134 17,397 - No of hospital beds restored 80 75 60 68 283 - No of patients served by hospitals 76,000 6,800 62,000 73,000 217,800 Education facilities -number of schools improved 368 191 21 13 593 - m2 of schools rebuilt 83,330 69,170 10,048 2,611 165,159 - students retuming to school 32,447 23,647 3,256 8,200 67,550 Water Conservancy facilities - no. of wells repaired 58 42 24 124 - m. of irrigation canal repaired 2,800 8,996 33,204 45,000 - rno. of reservoir repaired 1 1 Grain Depots - m2 of depot space repaired 15,506 6,182 3,906 25,594 Note: the schools reconstructed include 50 middle-school, 367 primary and 176 (self-built) primary schools The hospitals reconstructed include 4 county-level hospitals and 22 villages and towns clinics The income-generating components included restoration of damaged water supply to rural villages and their expansion, when warranted; and irrigation schemes and provision of individual stone wells to farmers. These schemes helped increase available water to very dry areas. This allowed switching crop patterns to more lucrative production methods and substantially increased yields. The works at the dam of the Friendship Reservoir Dam, a rock/earthfill type dam with a crest length of about 280 meters and 40 meters high, was the single largest project component. There was some leakage through the dam, and hence a rehabilitation program was undertaken for the damaged structures. The program included spillway and spillway bridge repairs, core section and foundation grouting, impervious membrane to protect leakage through the dam, and rehabilitation of the intake structure. In addition, a comprehensive monitoring system using piezometers to measure water pressure in the dam as well as settlement was installed. The rehabilitation program was successfully completed in 1999. Institutional Development: Despite the fact that institutional development is not a key objective in an emergency operation, the project's institutional development component can be considered satisfactory. The - 5 -  main achievement was the introduction of better construction methods and cost effective earthquake-resilient measures. These new improved construction methods have been adopted for all future housing and public building construction. Substantial technical assistance was provided within the allocated funds and training courses were delivered to about 2,300 people, on earthquake resistant measures, new building standards, construction supervision, and project and financial management (see below). Number Tot When Location Trained Type of Training of Number Trainees of Days Directors and financial esperts Credit disbursemen responsible for the project in the fou and Mar-98 Zhangbei counties and of Zhangbei Industry procurementloans 68 7 Project Office, and Village &Town purchase and Project Office. payment knowledge Zhangbei Construction Wanquan Technical/engineer supervisor and technology, Apr-98 Shangyi Managers of Project Offce earthquake 1400 na KhangyiMngrsoarjetOfc resistand mentiods, Kangbao and supervision Entre staff of the countie's - Wanquan ProjectOffices, project manager in Project Wa-8Sanquan County Village & Town Management 330 5 Shangyi ProjectOffice, technical staff from Kangbao the constrution departments | Jun-98 |Zhangjiakou |Directors and financial managers of Financial 100 4 Jun_98 Zhangjiakou _ county's proiect office Management ____4 Directors and financial managers of Construction Mar-99 Zhangjiakou county's project office and staff in Regulation and 80 5 charge of construction for each Standards ________ ~~~county Diretorof ounies Prjec OficeProject monitoring,6 Jun-9 Sangi Diectr o Coutie' Pojec Oficesupervisions and 1506 Jun-99 Shangyi and construction managers surveying Whole staff of each county's Project Project Nov-99 Wanquan Office, responsible persons of management 180 7 Village & Town Project Office Total 2308 34 4.3 Net Present Value/Economic rate of return: The estimation of the economic benefits is not applicable for the project as it was an emergency recovery operation. The project had an important positive impact on beneficiaries deriving from both (a) the physical components, due to the rapid and adequate reconstruction of assets providing basic needs to the local population (shelter, water, medical facilities and schools), and (b) the income-generating component -6 -  (inigation). The project is estimated to have directy benefited 440,000 people, or 63% of the resident population in the four counties which were affected by the quake (See Annex 3 for more details). 4.4 Financial rate of return: n.a. 4.5 Institutional development impact: Although institutional development was not a key objective of this emergency operation, the project's institutional impact can be considered substantial. There were clear benefits for the agencies in their participation in the project, and staff involved in project implementation increased their capabilities through on-the-job training, dealings with IDA and application of new procedures and training. Two main features were introduced that contributed to capacity building of the local agencies and communities. These are: (a) new design for houses and schools, containing significant improvements in the building characteristics and standards (foundations, ring beams to hold walls together at the top, clay brick walls and more careful bonding); and (b) a skill training and building standard dissemination campaign. 5. Major Factors Affecting Implementation and Outcome S.1 Factors outside the control of government or implementing agency: Major factors outside govemment or implement agency control are: (a) the severe cold and dry climate, and (b) the dire poverty of the people in the area. The residents needed to be provided with shelter quickly, and to remain in their villages, close to their land and only source of income (farmland agriculture). These factors determined several of the choices that were made in the project design and imposed a very tight reconstruction schedule. While rapid reconstruction was a desirable outcome, it also limited thorough supervision of the application of the earthquake resilient measures in the whole area. Some construction quality problems could have been avoided had reconstruction taken place less quickly. 5.2 Factors generally subject to government control: One of the most positive factors in project success was the level of commitment of the Hebei Finance Bureau, the Zhangjiakou Municipal Govemment, the Governors of the affected counties, and the dedication of the project management office (PMO) director and his team and their willingness to ensure the success of the project and outperform their own targets. Additionally, staff with a variety of expertise were appointed at all level of govemment to contribute to the project. Sound arrangements were made for coordination among the parties and for liaising with IDA. Counterpart funds were also adequate and timely. 5.3 Factors generally subject to implementing agency control: The agency appointed to implement the project was the Zhangjiakou Finance Bureau and a dedicated PMO was created to coordinate and supervise the project. While there are other projects in the Province, the PMO benefited from the excellent guidance by the Hebei Finance Burea and its provincial project office. The PMO was new to both the Bank and other donors activities and was inexperienced in Bank's procedures and reporting. Despite this inexperience, the PMO was able to provide good supervision to the counties offices resulting in achievement of the project objectives. This close coordination and continuous dialogue had a positive impact on the project, as they helped in the rapid implementation of the project and in taking corrective actions as soon as needed. -7 -  5.4 Costs andfinancing. The total project costs were estimated at US$41.1 million and the proposed Credit amount was SDR 21.1 million (or $28.4 million equivalent). The average cost of the various project components remained very similar to appraisal estimates. This was mainly due to the speed at which the project was implemented, which implied that there were no price variations in material or labor. Also no major changes to the project's scope were made. No extension was needed beyond the project closing date of December 31, 2000. Total accumulated expenses amounted to $40.6 million, equivalent to 95% of the total project investment. Disbursements stand at SDR2 1.0 million (US$28.9 million) or 99.53% of the Credit amount. Due to the fact that the project was implemented very quickly, there were only minimal changes in project scope. The completion of the original project scope was achieved with a saving of $800,000 (due to a favorable US$/SDR exchange rate) and the project office requested that these funds be utilized to repair some 300 houses in Wanquan County, which were damaged (though not too seriously) in the earthquake. Apparently the success of the introduction of the earthquake-resistant repair methods led the residents of this County to request that similar repairs be carried out on their own houses. 6. Sustainability 6.1 Rationalefor sustainability rating: Sustainability of the project is considered highly likely. The project components have been completed and the objectives met. The long-term sustainability for an emergency operation, however, mainly depends on (a) introducing practices that allow the relevant agencies to better organize relief and improve their response to similar emergencies; and (b) reducing the likelihood of damage in the future through more resilient construction methods. The project did not address the first issue as the response received to the earthquake by the central government and local agencies was already quick and efficient. Related to the latter, the project insisted that newly introduced local building codes be followed and appropriate techniques for strengthening structures be utilized during reconstruction. Details and drawings on how buildings had been reinforced, based on the improved standards have been provided by the PMO. New construction standards were issued by the Zhangjiakou construction commission at the end of 1997, requesting the adoption of earthquake-resistant construction methods. Apparently these building codes were adopted for the reconstruction of all damaged buildings, not only for those financed through the Credit. The supervision missions were also able to verify that, at least for private dwellings, the residents realized the advantage of using better construction methods for their houses. For example, even without considering the improved living conditions offered by brick construction (as opposed to the previously used mud and stone construction), even the significant price differential (Y6,000 for a room built under the new standards versus Y2,500-3,000 for a new room using traditional construction method) did not entice local residents to switch back to the old mud and stone construction methods. Sustainability of the irrigation and poverty alleviation components is also likely. There was strong competition among villagers to be the beneficiaries of this assistance. The criteria for selection of the villages were, however, strict to ensure that the maximum benefits would be derived from the investments and attention was given by the local irrigation and rural offices to avoid over-exploitation of the limited and fragile water resources in the area. There is high demand for the product cultivated in the area and prices are on the rise. Irrigated land also allows more flexibility in crop pattems and reduces the vulnerability of farmers to climatic conditions and other shocks. - 8 -  6.2 Transition arrangement to regular operations: Reconstruction or rehabilitation included private housing and public buildings such as schools and a hospital, which were immediately returned to the local agencies that were previously operating them. In some cases, sustainability of services may have been impaired by lack of school and hospitals materials, equipment and consumables. This is because the Borrower favored the utilization of the limited project funds to address the most urgent issues (physical reconstruction) with the expectations that the rest of the assistance would be provided over time by the local governments and by beneficiaries themselves. However, the project was able to attract other donors to the area (AusAid). Also, efforts are underway to attract Japanese assistance (through the Japanese Social Development Fund) for the provision of equipment and consumables for schools and health clinics, increasing the likelihood of project sustainability. 7. Bank and Borrower Performance Bank 7.1 Lending: IDA's performance in identification is rated highly satisfactory. The Government requested IDA's intervention immediately following the earthquake, and IDA was able to field an identification/preparation mission from the Beijing Office within ten days of the quake. The team identified an emergency relief operation that was fully consistent with both the CAS and with the borrower's priorities of restoring basic infrastructure before the following winter. The team's skills included an engineer, a transport specialist, a financial analyst and a procurement specialist. The team adequately addressed the inexperience of the borrower by keeping the project's design and objectives simple. Simplified procurement procedures allowed for national shopping and some force account instead of requiring works through NCB. These simpler procedures did not overburden the borrower, and thus accelerated implementation. The only safeguard policy applicable was for environmental assessment, where the project's reconstruction investmnents made it a category "B" project. IDA's performance in preparation and appraisal is also rated highly satisfactory. A combined preparation and appraisal mission took place less than two months after the quake and was composed of eight staff members, with an excellent skill mix (see annex 4). Of particular importance was that most of the team members had extensive expenence from implementing previous earthquake emergency relief operations in China. This experience allowed lessons learned from those operations to be incorporated into the design of the Hebei Earthquake Rehabilitation Project. Appraisal recommendations were consistent with the needs expressed by the client and did reflect the close participation of the beneficiaries in the project design. Project costs were accurately appraised. Consistent with CAS objectives of poverty alleviations, some income-generating components were also added to ensure that the livelihoods of the residents in these poor counties could also be maintained. As stated above, lessons leamed were accurately reflected in the design of this operation. One shortcoming was that performance indicators defined at appraisal mainly focused on physical targets and on reconstruction indicators, while it would have been preferable to also include indicators on the direct impact of the project on beneficiaries and quantification of the outcome in terms of beneficiary satisfaction, etc. 7.2 Supervision: IDA's performance in supervision is rated highly satisfactory. Due to the very short construction season (only five months) only one supervision mission was scheduled per year, towards the end of the construction season. This was considered the most effective timning. During winter and spring, IDA and the borrower conducted extensive consultations to agree on the implementation schedule and targets for the -9-  upcoming construction season. This collaborative approach was very effective. IDA supervision mission members included staff with engineering, disbursement, procurement, and economic skills. Continuity in the IDA team was maintained from preparation, through supervision to completion. This was important considering the speed of implementation, the fragmentation of the project sites and components, and the importance of meeting the targets for the project beneficiaries. Each mission undertook field visits to the different counties and visited various project components (hospitals, grain storage facilities, water conservation storages and irrigation, etc.). This was very helpful to control progress of works as well as check on the quality of construction and construction materials. Because of this close supervision, remedial actions could be taken for certain works which were not built with appropriate materials or care. The technical advice provided to the PMO during these missions, was well appreciated by the client and allowed better quality construction and supervision of future works. Project progress was adequately reported. Back-to-office reports were complete with thorough aide-memoires and follow-up letters. Project status reports gave realistic and consistent performance ratings throughout implementation. The project did not deviate from any IDA policies or procedures. 7.3 Overall Bankperformance: IDA's performance is rated highly satisfactory. IDA was able to react promptly to the borrower's request, adequately prepare and appraise the project, and arrange for Board approval in just over four months. It maintained close supervision and continuous interaction with the client. It also helped catalyze additional funding from bilateral donors to supplement parts of the projects or complementary activities. Borrower 7.4 Preparation: The Borrower's performance during project preparation is rated highly satisfactory. The Govemment quickly recognized the extent of the damage following the earthquake and the importance of moving quickly given the severity of the climate, and immediately called for IDA's assistance. Furthermore, the Govemment was able to mobilize a large team of experts, officials and staff at all level of govemment who participated in the definition of the project concept. 7.5 Government implementation performance: The Government's implementation performance is rated highly satisfactory. Strategic choices made for the reconstruction of the area, including the part covered by the project proved very effective. Counterpart funds were adequate and timely. The implementation arrangements proposed by the local agencies were very satisfactory. The provincial and city governments promptly established a leading group to give policy guidance on earthquake emergency relief and reconstruction efforts; similar arrangements were made at the county level. The Provincial PMO (that is in charge of overseeing other IDA projects in the province) was assigned the task of facilitating communication with IDA and of advising the local implementing offices. A city PMO was formed to be responsible for all key activities for project preparation and implementation and to oversee and advise similar PMOs that were created at the county level and to support these, in the areas where they had limited capabilities. Arrangements made during preparation were maintained and reinforced during the implementation, thus providing continuity. Zhangjiakou Municipal Government established a Project Management Office, reporting directly to the Zhangjiakou Vice Mayor, staffed by employees from the various concemed government agencies. The - 10 -  Provincial Government provided essential assistance on financial management, procurement and disbursement through its provincial project office. The four counties and the 32 townships have set up local project offices to manage and monitor the implementation of project, and the 217 village representatives have been appointed to manage the construction in their respective areas. Some 300 persons from county and township project offices have been trained by the Zhangjiakou Construction Commissions on the approved earthquake resilient housing reconstruction methods. These persons have worked in the villages to assist and monitor the implementation of the new construction standards. The only area where Government supervision was inadequate was in the application of the financial arrangements, particularly for the on-lending ternns and cost recovery arrangements. Indeed while certain repayment terms had been agreed upon in the Development Credit Agreement (DCA), these were not correctly reflected in the subsidiary agreements and the terms of the on-lending agreement were modified. In particular, the repayment period was shortened. The on-lending terms agreed to under the Credit required that the Credit proceeds be passed on from the City to the beneficiaries on the same terms and conditions as these were received by the province (13 years of which 4 years of grace). However, these were shortened without IDA's prior approval for the City of Zhangjiakou to the three Counties, to 10 years of which 3 years of grace; and for the Counties Government to the Villages, to 7 years of which 2 years of grace. The reasons for these changes were apparently due to a desire to reduce the risk of defaulting or delayed repayment from the Counties and villages, which would expose the City to the burden of repayment of the Credit. Subsidiary agreements have now been satisfactorily revised and amended to follow the DCA. As no repayment of the Credit from the counties to the municipal and provincial governments has yet started, this had no practical effect. Also the auditing of the project accounts showed that an informal agreement seemed to be in place, whereby the City of Zhangjiakou intended to charge an interest rate of 2% on the Credit proceeds, rather than the 0.75% service fee indicated in the DCA. This decision was also corrected by the local government. As no repayment had been made and no interest has been charged, this also had no effect. The PMO agreed that this was incorrect and has subsequently reversed this decision. It should also be noted that, it took four months to declare the project effective, which earned the project a" flag" for a long effectiveness delay (according to QAG standards, emergency reconstruction operations, should take a maximum of three months to become effective). -This had no impact on the implementation of this very successful project, as the Borrower had already begun reconstruction efforts under retro-active financing arrangements long before the actual effectiveness date in order not to lose the 1998 construction season. 7.6 Implementing Agency: The performance of the implementing agency is rated highly satisfactory. The speed of project implementation was impressive compared to the targets agreed at negotiations. The already ambitious targets of reconstructing all housing in 1998 was achieved on schedule and reconstruction of other damaged facilities (school, hospitals, etc.) was completed substantially ahead of schedule. Seventy percent of the IDA Credit was spent during the first year of project implementation against a seemingly optimistic target of 50%. These achievement were obtained due to the strong commitment of the PMO and the project implementing units and their dedication to ensuring that the local population would have adequate shelter and the necessary facilities before winter began. The Implementing Agency focused its efforts mainly on achieving physical results and had a good system for monitoring physical targets. However, the same cannot be said for the monitoring and evaluation of the project's social and financial outcomes and its impact on the beneficiaries. Financial management and - 11 -  project progress reporting were two areas were the PMO's performance was somewhat below standard. The financial management system was relatively rudimentary, but despite IDA's insistence during supervision missions, the PMO did not put into place adequate personmel and/or invest the necessary funds to address these issues. The PMO could not establish the capabilities that would have ensured higher level management of these two aspects. Report submissions were delayed, and the reports were not very comprehensive; IDA requested clarifications often. Reporting to IDA was also very simple and rudimentary (including for the ICR, which IDA had suggested be prepared by consultants). The poor reporting often necessitated multiple follow-ups from IDA to seek data and infonnation. While better reporting would have reduced the burden of supervision for IDA, it did not have a negative affect on the development outcome of the project. The benefits of the project and the close involvement of the beneficiaries in implementation are self-evident, if rather poorly documented. All physical targets set at appraisal were met or exceeded, and site visits by the supervision missions or by the project office generally confirmed the satisfactory implementation of the construction works. When quality of construction was identified as inadequate, remedial actions were quickly implemented. In cases were dwellings had to be completely rebuilt, larger houses and of better quality than those destroyed by the earthquake were provided and earthquake resistant measures introduced. All beneficiaries expressed satisfaction with the new dwellings and increased living spaces. The quality control of some of the construction works, especially in more remote areas, was found to be deficient in some cases. However, the PMO was always keen to undertake quick remedial actions and improve performance in the remaining works. In sum, while the implementing agency may have had limited capacity, it always showed strong drive for results and focused its attention on achieving the project objectives. 7.7 Overall Borrower performance: Based on the above the Borrower's performance is rated as highly satisfactory. The Borrower's commitment to the project's objectives remained strong during implementation. One of the most likely risks was delay in implementation because the activities were small and widely dispersed in remote areas. However, the Borrower minimized this risk by forming project offices at all level of governments. Several of the components were implemented with great urgency and ahead of scheduled completion. The Borrower was quick to address the potential risks of the project. 8. Lessons Learned Key lessons learned from implementation of the project include: * Replicability: Lessons quoted in the appraisal documentation (need for strong local leadership, attention to Borrower's view, fast tracking of project processing and minimization of cash flow bottlenecks), were all taken into account in designing the project and developing the implementation arrangements. The participation of staff who had extensive expertise in earthquake rehabilitation and who were familiar with the local and country conditions should be taken into account while forming preparation and supervision teams. At the same time some of the general suggestions/guidelines utilized in emergency operations (for example that implementation period should be three years and possibly longer) were, correctly, discarded by the project team in this specific case. * Attention given to project preparation and simplicity in design paid off: The project was very well prepared so no changes in the project objectives and costs and only minor changes in the project components resulted. One of its main features was simplicity of design, which avoided overburdening the - 12 -  reconstruction effort with too many non-reconstruction components, conditionalities, studies and surveys. The project scope was relevant and focused, and tried to avoid including too many or too sophisticated components. The selection of the components centered around the life of the communities in the villages and townships, i.e., the reconstruction of the basic services and support to their livelihood. This helped make the project relevant to them and increased their commitment and responsiveness. * Procurement methods: Flexible procurement methods, such as force account to construct small works in remote areas and national shopping for local materials and many small civil works, were allowed in the DCA. This made it possible for the project to be carried out effectively and quickly. This is an important lesson learned and could be extended to other emergency projects. The number of conditionalities in the DCA was also kept to a minimum, which helped the client focus on achieving the main development outcome. * Sustainability: A key element for sustainability is the introduction of seismic-resistant construction methods, and training and dissemination of these practices. The type of design and construction methods were also adequate to the local conditions and utilized appropriate reconstruction material and practices. These solutions were locally generated, adapted and affordable, hence they quickly became popular among the residents who demanded that these better practices be utilized in the construction of their dwellings. * Participation by beneficiaries: Close consultation was maintained with the beneficiaries for both the reconstruction and poverty alleviation components. The implementation arrangements were designed in such a way to ensure that the smallest village or community would be represented in the project or would have a referent to go to with its demands. This greatly helped in the speed of implementation and increased social acceptability. * Income generation: Economic rehabilitation can be considered an integral part of the reconstruction process in extremely poor areas. The provision of new water supply and irrigation systems helped reduce vulnerability of the local population and strengthened social and organizational capacity. 9. Partner Comments (a) Borrower/implementing agency: 1. Comments: By the efforts and close co-operation made by both World Bank and Borrower, the implementation of Hebei earthquake rehabilitation project is very successful and the cooperation made by both parts is also pleasure. After three years efforts, both of us have got great achievement on various sectors, so we comment as follows: a. Reflect fairly a pleasure co-operation between two parts during the period of the implementation of the project and the efforts and the good perfornance made by both parts for the success of project. b. Objectively appraised various work and hard efforts made by borrower's govemment, PMO and all the staffs involved in the project for the success of the project as well as the benefits from both economic and social after the project. c. Overall outline the conditions happened from the time of beginning of 1998, after the earthquake World Bank send its teams for project identification, appraisal, to the end of 2000, the project to be totally completed. Also valuable documentation have been provide for borrower to conduct the other World Bank project in the future. - 13-  d. Sincerity raised the problems, shortcoming of borrower existed during the implementation of the project and it is good for the borrower to improve themselves in the future's World Bank project and try their best to make all of the work to meet the requirement of World Bank as well as create condition to co-operate with World Bank in the future. 2. Suggestion for revise As to 19 of the draft ICR, the actual remained money (US $ 0.60 million because of the change of the exchange rate) to be used in Wanquan is not only to repair 300 rooms, the actual data is rebuild 480 rooms; and repair 1978 rooms. 3. Suggestion: a After the completion of the project, WB should also make further communication with borrower to make understanding well and to provide funds or more information to seek other source of fund to help the borrower to complete the remained work need to be done for the poor people and enable WB project create more economic and social benefits. b. Simplify as much as possible the application procedure to get WB loan and the formalities to use the money. (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10. Additional Information - 14 -  Annex 1. Key Performance Indicators/Log Frame Matrix Performance Indicators by Component and by County (% of expenditures) Component Target Achieved Target Achieved Target Achieved 1998 1998 1999 1999 2000 2000 Housing 100 100 0 0 8 Zhangbei 100 100 0 0 - Shangyi 100 100 0 0 - Wanquan 100 100 0 0 175 Kangbao 100 100 0 0 - Health Care 35 66 50 34 15 Zhangbei 20 50 30 Shangyi 0 100 0 Wanquan 60 40 0 Kangbao 100 0 0 Grain Storage 20 25 50 75 30 Zhangbei 20 50 30 Shangyi 0 50 50 Kangbao 55 45 0 Water 20 45 50 55 30 Zhangbei 20 50 30 Shangyi 0 45 55 Wanquan 40 60 0 Kangbao 20 50 30 Schools 40 100 40 - 20 - Zhangbei 20 50 30 Shangyi 55 35 10 Wanquan 100 0 0 Kangbao 100 0 0 Irrigation 15 40 50 60 35 Zhangbei 20 50 30 Shangyi 0 50 50 Kangbao 20 50 30 Institutional 50 50 30 50 20 - Total Project 50 73 30 27 20 3 Notes: In year 2000 additional house repair/reconstruction was carried out in Wanquan county with savings from the credit. - 15 -  Summary Achievements of the Project during 1998 -2000 ('000 US $) Project Category 1998 1999 2000 TOTAL Housing 12,600 92% - 1,045 8% 13,645 Schools 10,370 100% - - 10,370 Hospitals 1,050 66% 530 34% - 1,580 Grain Depots 740 26% 2,130 74% - 2,870 Water con. 1,840 35% 3,390 65% - 5,230 Include: Friendship 670 1,020 Irrigation 3,080 40% 4,630 60% - 7,710 Tech. Assistance - Total 29,680 72% 10,760 26% 1,045 3% 41,405 - 16 -  Annex 2. Project Costs and Financing Project Cost Summary by Component Appraisal ICR Appraisal ICR Y Million Y Million $ million $ million Housing Zhangbei 61.4 61.4 7.4 7.5 Shangyi 34.9 34.9 4.2 4.2 Wanquan 5.0 5.0 0.6 0.6 Kangbao 3.3 3.3 0.4 0.4 Sub Total 104.6 104.6 12.6 12.7 Health Care Zhangbei 5.8 5.5 0.7 0.7 Shangyi 2.5 2.8 0.3 0.3 Wanquan 2.5 2.6 0.3 0.3 Kangbao 2.5 2.2 0.3 0.3 Sub Total 13.3 13.1 1.6 1.6 Grain Storage Zhangbei 12.5 13.0 1.5 1.6 Shangyi 7.5 6.9 0.9 0.8 Kangbao 3.3 3.9 0.4 0.5 Sub Total 23.2 23.8 2.8 2.9 Reconstruction of Water facilities Zhangbei 8.3 8.3 1.0 1.0 Shangyi 8.3 8.0 1.0 1.0 Wanquan (*) 21.6 7.6 2.6 0.9 Kangbao 6.6 6.5 0.8 0.8 ZJK Water Conservancy Bureau 14.0 1.7 (Friendship Reservoir) Sub Total 44.8 44.4 5.4 5.4 Education Zhangbei 43.2 42.3 5.2 5.1 Shangyi 37.4 37.2 4.5 4.5 Wanquan 5.0 5.0 0.6 0.6 Kangbao 0.8 1.3 0.1 0.2 Sub Total 86.3 85.9 10.4 10.4 Irrigation Zhangbei 39.0 34.7 4.7 4.2 Shangyi 17.4 16.1 2.1 2.0 Kangbao 7.5 6.3 0.9 0.8 ZJK Water Conservancy Bureau 6.7 0.8 (50 Pumped wells) Zhanjiakou Water Bureau Institutional Development 0.8 0.9 0.1 0.1 Total Project (Base) 337.0 336.6 40.6 40.9 Notes: Wanquan reservoir accounted for separately at ICR - 17-  Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) Expenditu re Ca Procurement Mt99 Bd 1. Works 0.00 0.00 20.50 3.40 23.90 (0.00) (0.00) (17.40) (0.00) (17.40) 2. Goods 0.00 0.00 12.80 0.00 12.80 (0.00) (0.00) (10.90) (0.00) (10.90) 3. Services 0.00 0.00 0.10 0.00 0.10 (0.00) (0.00) (0. 10 ) (0.00) (0. 1 0) 4. Miscellaneous 0.00 0.00 0.00 3.70 3.70 Admin. & Project Mgmt. (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00)