China - Zhejiang Multicities Development Project

1LJuI.-u1lli~IL UL The World Bank FOR OFFICIAL USE ONLY DA~UI 1NU. LJA7 U-'Lr tse:"port TIN M o.: V Tu-T A IMPLEMENTATION COMPLETION REPORT (DA-24750) ON A CREDIT IN THE AMOUNT OF SDR 79.3 MILLION (US$ 110.0 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE ZHEJIANG MULTICITIES DEVELOPMENT PROJECT June 6, 2002 Urbui Develupiienit Sector uit East Asia & Pacific Region This document has a restricted distribution and may be used by recipients only in the performnance of their |official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CUJRRFNCY EUITVALENTS (Exchange Rate Effective April 1, 2002) Currency Unit = Yuan (Y) Y 1.00 = US$ 0.i2 US$ 1.00 = Y 8.30 FISCAL YEAR January l DLecember 'a31. ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy ERR Economic Rate of Return GIS Geographic Information System GOC Government of China LSWM Liquid and Solid Waste Management p-Rf Population and Human Resources Development (Grant frnm Japan) ZEF Zhejiang Environmental Fund ZEPB 1lng En rlcovir Prtin BIeau ZEP(O) Zhejiang Environment Project (Office) ZTuL,Ul_P ZL1Jid1ig UlUdli DevelUpImlent ProJect Office Vice President: Mr. Jemal-ud-din Kassum, EAP Country Director: Mr. Yukon Huang, EACCF Sector Director: Mr Keshav Vnrm a,FA51JR Task Team Leader: Mr. Wiebe Moes, EASUR  CHINA ZHEJIANG MULTICITIES DEVELOPMENT PROJECT CONTENTS Page MNo 1. Project Data I 2. Principal Performance Ratings 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 14 6. Sustainability 16 7. Bank and Borrower Perfor7ance ! 7 8. Lessons Learned 19 9. Partner Comments 20 10. Additional 'Information 20 Annex 1. Key Perfomzance Indicators/Log Frame Matrix 21 Annex 2. Proiect Costs and Financing 22 Annex 3. Economic Costs and Benefits 24 An,nex A I npu- T.... 26 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30   Project ID: P0U3473 Project Name: LHEJIANU MUL I ICi TiES |DEVELOPMENT PROJECT Team Leader-: Wiebe Moes I-IL Unit: EASUR ICR Type: Core ICR Report Date: June I I, 2002 1 Pr.mat nata Name: ZHE,JIANG MULTICITIES DEVELOPMENT LIC/TF Number: IDA-24750 PROJECT Country/Department: CHI]NA Region: East Asia and Pacific Region Sector/subsector: US ., Urban Environment; VP - Pollution Control / Waste Management KEY DATES Original Revised/Actual PCD: 02/03/87 Effective: 10/20/93 10/20/93 Appraisal: 10/17/9 1 MTR. Approval: 03125193 Closing: 0613 0/99 12/31/2001 Borrower/lImplemen ting Agency. People's Republic of China/ZHEJIANG PROVINCE Other sPartners CTAFF Curnent At Appraisal Vice President. Jemal-ud-din Kassurn Gautam S. Kaji C'ountrv M'vianager. Yukon Huang Shahid Javed Burki Sector IManager. Keshav Vanna Zafer Ecevit Team Leader at ICR. Wiebe Moes Herbert Boehm ICR Primary Author. Herbert Boehm 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U--Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN-Highly Unlikely. HU=Higlilv Unsatisfactory H=High; SU=Substantial, M=Modest. N=Negligible) Outcome: S Sustainability: HL LnasuucL1Lal Dfevelop.. ent T Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: s Project at Risk at Anv Time: Yes The proJect vas rated unsatisfactory fronm March 1007 to September 1998.  3. Assessment of Development Objective and Design, and of Quality at Entry 3. I Original Objective. Rapid urbanization, population growth and industriaiization between i98U and i990 in Zhejiang Province greatly outpaced urban service delivery, such as water supply, land development, urban transportation and environmental improvements. The objective of the Project was, therefore, to assist the Zhejiang provincial government and four of the largest municipalities (Iangzhou, Ningbo, Wenzhou and Shaoxing) to strengthen planning and delivery of urban services and to support their environmental policies. More specifically, the Project sought to: * imnrnve uirban servicps, in narticular watpr sqinnlv and land dpvpennmpnt and Petahlish the appropriate institutional framework needed to enhance the efficiency of the municipalities in the provision of these services; * assist in the developmeint of long-term environmental policies, strategies and programs in order to avoid environmental pollution; * introduce new methods in the design and implementation of land development schemes at the city level that will result in improved land use and transport efficiency, as well as cost recovery from beneficiaries; l improve Dublic transDort and traffic management in Hangzhou: * upgrrade overrrcrowdedA a,nd poorlyF servlcedn areas in the city cennter of Ningbo, including the provision of sewage interceptors, wastewater treatment, road improvement and substantial upgrading of l .-:ng CO-A:,:--- -Arl HV1iI lwuIuin, aJLu * improve the institutionai strengtn of the municipal authorities overseeing urban service delivery and pollution abatement; and to enhance the management and financial performance of the utilities and enterprises directly responsible for the provision of these services. Assessment. Because of the wide array of services to be delivered by municipalities to accommodate the needs of their population, institutions and business community, objectives for urban development projects are intrinsically difficult to define. However, after extensive World Bank and external consultants' sector work and detailed discussions with the State; nrovincial government and the four municipalities deemed to produce the highest replication effects, the Project succeeded in realistically identifying the highest priority rhort;ecdv nnarnh tnnrvntrhnt&n zr AM.1x -'W;cnn oxththn onnmtrf hn 'SUJCA.LVC.. 'JVII..MUC.IIJt, UM j11 L 'IVJbtAL 'C .LV, VVJ9.V I C.1 tuiiy CAJLLSO IIL WVILILCIC '.JL V C.LIhjIC.flIC V1 sI,IIIIU a (GOC) and the International Development Association's (IDA) urban sector strategy and Country AisaSt radL teIdLtegy (AS). In pduLuliar, the speclfic pruJect objectives corecuy aimed dL te mnost pressing issues: to develop specific and replicable examples and to strengthen institutional development. Despite the ProJect's complexity and the large number of institutions (e.g., one project office at the provincial level; five project offices at the municipal level), and the physical distance between the individual project sites, the project objectives were well within the competence level of the agencies involved . As almost all urban development, especially improvements in water supply and land development, results in increases in liquid and solid wastes, the Project was designed as the first part of a comprehensive two-stage program. The first stage was to support improvements in such areas as water supply, land development -2-  A r- _t- --- - - -: Tt.,- arndU t,raiC mana1dgetM1U1L. A ILILuIr sLU11U stag WUUIU Ub d compre ive en1V11Uir11nmrIL pIUJLt. Thie preparation of this second stage was supposed to be studied and thoroughly prepared under the Project and eventually result in a "Znejiang Urban Environment Project" (P06695D), which Is now in the FY03 World Bank lending program. Although the Bank would have preferred to combine the two phases into one project, the Chinese authorities objected to it as there was concern about the complexity of such a project and the sustainability of wastewater projects. 3.2 Revised Objective. The original objectives remained valid and pertinent during the whole project implementation period and therefore did not need to be revised. 3.3 Original Components. To support the above objectives, the project included the following components: Water Supply Improvements ($ 127.3 million) a Hangzhou: New water treatment plant for a capacity of 300,000 m3/day, including intake pumping station, treatment platnt, clear water transmission main, 8 km tunnel, booster pumping stations and network improvements Ningbo: Intake pumping stations with a capacity of 250,000 m3/d, transmission mains. booster pumping stations and reinforcements of the water distribution network * .Wenzhou: New treatment -!ant for a caparih, r,f 70, 0n m3./d inclu,dina n trsatment nlant a 2.7 km tunnel, intake and booster pumping stations and network improvements. Land Development in Shaoxiing ($47.9 million) * Development of 207 ha of formerly agricultural land into a comprehensive economic and residential urban zone to cater to the needs of an additional population of 35,000. The component comprised roads and bridges, water supply, sewerage, drainage, electricity, public lighting and telecommunications. Urban Environmental Management and Protection ($6.1 million) * Preparation of a Liquid and Solid Waste Management Study (LSWM) to provide the sectoral underpinning for the proDosed Zheiiang Urban Environment Proiect * Extensive support to the Zhejiang Environment Protection Bureau (ZEPB), including the establishment of an Environ-mental Inform.ation Center e Preparation of the proposed Zhejiang Urban Environment Project. Technical Assistance ($7.5 million) * Urban planning systems to initiate improvements in the urban planning process * institutional development * Traffic management in Hangzhou. Basic Urban Services Upgrading in Ningbo ($37.2 million) * T Upr,adin- th 4- v ar ea ofra l rrrninr rnoad in'the rcntor nf Nrj,non including provision of water supply, power, gas, and telephone; sewerage reticulation primary treatment and night soil disposal; reatilgnmient ariu reconstruction of roau works; triil ccritrol andU rIianageriment; and landscaping * Demolition and reconstruction of housing and resettlement of about 5,000 households - 3 -  * Reconstruction and preservation of culturallv important structures. such as the historic district of Laitang Island and the Moon Lake. Zhejiang Environmental Fund ($5.0 million) i2.~dUL~1III~IL U d IUIILUIL, dULU1IU1lIUUZ, IUIIU Lu PIUVLUr bUbLd1IidU1 11 LbidUlI LU 111IdI1LLX * EstabliShInent of ad nopoi,atnr.u ud. rvdeassanber-cddmt i-c pollution control measures for small- and medium-sized industrial enterprises. Assessment. The design of these components was clearly related to the project objectives. The Credit was in line wlLh ute counturys ueveIopImenL strategy, i.e., to provide adequate urban public services iur the increasing population and the rapid economic growth of China's urban areas. The Credit further supported the policies of Zhejiang Province to carry out its economic modernization efforts. As China continued to focus on decentralization, the Province could not expect to receive financial assistance from the central government for the required improvements in urban development and management. Therefore, the Credit was a welcome vehicle for obtaining technical assistance and financial resources for these purposes. The project design benefited from extensive sector work and discussions at the central and provincial levels which started as far back as 1982. An urban sector study was prepared in 1987 to analyze the challenges of raDid urbanization in Zheiiang Province: this studv formed the foundation for the Proiect. Although the Project was the Bank's fifth urban development project in China, its design was influenced more by the dialogue with the hbrrownur and the fidings of the sector analysis than from actiual imnplmnntaionn experiences of the other projects, since the first urban development project (the Medium-Sized Cities Developnment+ D-o_ec -va- ---Ave only about .-v _ear bef-r +L.,, D_oJe_t -an little .r__plementatio .L LIUJ~.L/ vIaa aFfJfJvIuV uiiiyV atuuut LVVV YrOaIa L)CIuIU ulia~ I UJML. acUu IILUV 11iHCLaL1 experience was available at that point. The urban planning and systems conditionality of the Credit were derived from the outcome of the Bank's urban sector work in Zhejiang Province, and the environmental conditionality built on the Bank's environmental strategy paper on China. 3.4 Revised Components: The components were not revised, but the land development component in Shaoxing and the Ningbo urban coservic unprading rnmnnnont were ovnenrpar. de ithin tho and the Credit limits nf tho Prnion, aftor timely and successful completion of the original contracts in order to increase project benefits. Allocations ar-iong tie Credit proceeus were reviseU the fiLst tile Ul IVIdIMcI 1, LUUU, dIaU dagdil Un SJeptemUerI J, LUU 1, primarily to reflect increased needs in the Civil Works category and corresponding reductions in the Goods and Consultants' Services and Training categories. 3.5 Quality at En try: The project's quality at entry is rated satisfactory. As indicated, the Project fully supported the country's nrinr;fla -A ^Arlcln HnA n rA-1-cll -rrth0 R^nlr ^ r' A CZ to-,rq A+ tl, t ;nnA f ---.^rOl f-0-;} l;t, W , . l -_ - --- . ..i IVYJ Lil.L CAIA .J - *v *- Irinnj C LIl. C., VI.. I jJUJiUi3U ii- UO II , studies for all project components had been prepared. By effectiveness, final design work for most parts of the Project had either beecti UmpIleted or was making good progress. WitIh tle help of urban planinillng consultants and through their own superb efforts, Shaoxing and Ningbo project personnel got off to a flying start in project implementation. External proJect management consultants had been employed and the first one-year operational action plan prepared. The SAR was comprehensive and, particularly when considering the complexity of the Project, unusually detailed and informative in terms of project setting and description reflecting the length and intensity of project preparation. The advanced state of project preparation enabled particularly the Shaoxing and Ningbo components to complete their work well. within their projected time schedule.  PIrJJ%LL .isksa VVweIr acLUGrtely assressU, especitLy miiainagilltent ctrUi tsLlJlLa Uln thIe parI U 0f somel 01 Lilt; provincial and municipal authorities who had little prior experience with complex World Bank projects. Huwever, with Ltie neip of international project management consultants as well as local and overseas training, these risks were addressed during the early stages of project implementation. The additional risk that a follow-up environmental project may not come to fruition was also assessed properly as its preparation was delayed repeatedly during project implementation. However, the preparation of the Zhejiang Urban Environment Project is now underway and it is officially included in the Bank's lending program. The Bank's safeguard policies were fully taken into account at the project entry phase. A detailed report on the environmental impact of the Project was prepared and summarized in an annex to the SAR reflecting the findings of the Chinese environmental assessments on the various components and the views of the appraisal mission. In addition, the preparation of (i) a study of strategic planning and policy issues in envir.nmental nrotection an management at the nrovinria! leve!; and (i) nreliminary engineerin6 and identification of future priority environmental investments at the municipal level of the four PaOL1ic.pat111r prUJVA ciles1, Wiis palL 01 the, IIUJCL.t. MVLUlreVer, LILt L11d1%hez LrUIiIsInv m Ldl FLUIIn Wda added to the Project to mitigate industrial pollution in the Province although its funding base was too small to make a significant impact beyond a demonstration or piiot, facility. Primarily as a result of the Ningbo urban infrastructure upgrading component and the Shaoxing land development component, resettlement and, if necessary, reemployment of about 20,000 people were expected under the Project. As part of project preparation, IDA, with the assistance of external consultants, worked intensively with the four project cities to have acceptable resettlement programs in place by the time of the appraisal. By the time of effectiveness, each city had detailed resettlement plans in effect to implement the actual resettlement programs. In hindsight, assumptions underlying the nroiect were sufficientlv reasonable. Variahles; such as population growth, economic development forecasts, traffic volumes, and demand for water, improved land fnr hniicinf anrd industri!n deve;Dlnnment tirndl out to hb rsvuistic ar.d therefnre did not hve, to t e aNmnded during project implementation. 4. Ar'hivoem.nt nf Objehctiwve and Outputs 4.1 Outcome/achievement of objective. The Project achieved all its rnajor objectives and in some aspects -- particularly with respect to the quality of the water treatment plants, the successful urban service upgrading of Ningbo and the most impressive Shaoxing land development -- exceeded its original expectations. The only shortcoming was the delay in the preparation of the follow-up Zhejiang Urban Environment Project and the failure of the Zhejiang Environmental Fund. The preparation of the follow-up project is now in full swing and has been included in the FY03 lending programr. The environmental fund was only a pilot operation with a portfolio of less than $5 million. of which about half was successfully conmmitted. The Proiect is given a 'satisfactory" rating as a few shortcomings did subtract from the Project's otherwise excellent performance. The Project's development impact was significant as it met the water supply needs of the Province's rapidly growing population. its burgeoning economv and the unabatedlv risino tourism industry. Tt also significantly improved water quality and security for a large segment of the population. In addition, the nrior t csushtantiall.y imnrnovd u,rban connrtionn in tho cities of Ningbo -nd Shaoxing. 'T'h0s imnrn,o-..nt- entailed the upgrading of dilapidated housing, sewage disposal and stormwater. A conservation program in - 5 -  Ningbo preserved historic buildings and monuments and became an example for inner-citv cultural preservation in other Chinese urban redevelopment efforts. The Project further achieved systemic imnrnv_m_ nt. in urhbn nlnning and traffic mnnagement and significant policy changep in water tqriffq anri land prices to ensure adequate returns to investments in water supply and land development. The latter apeclw- confs.Ibutee to- fuhe lon-te.ll sutl-b'iiP fth -roe LUI1UUUL~ U~ Ufl~6-LUfl~Iil OUaLCUIOUIhL.y VI LIIC I I UJ ~L. The oujectives of the Project as defined in 1993 remained consistent witn tne latest CAS Memorandum of May 1998 which formally supported "China's efforts to meet the challenges of urban development." Almost all elements covered in the Project are explicitly highlighted in the GAS Memorandum, such as urban planning, funding and operation of urban infrastructure and services, protection of the urban environment, urban transport, and land and labor markets. The new CAS Memorandum currently under discussion with the Chinese government is expected to continue to focus on the 'rural - urban transition", and support the strengthening of urban services and the reduction of urban pollution. 4.2 Outpu ts by components: The Project consisted of eight components: Water Supply Improvements ($ 127.3 million SAR - including contingencies, $114.6 million actual) Hangzhou ($54.1 million SAR, $5 1.5 million actual) The new 300,000 m3/d water treatment plant was not only the city's first infrastructure project funded by the World Bank, but also used the turnkey procurement method for the first time in an urbarn development project in China. This component also included three pumping stations, transmission mains, an 8 km tunnel, ar.dU ,.-prover.ents tU the Wdateir Udisbution neI.work. ITIh UIUvei turiy pIUrLUCIICHlL plUcUeUrte clearly required substantial input by the external management consultants as well as by the local engineers and the Chinese procurement agency. However, iDA's insistence on this method, despite some concerns about this bidding method expressed by the Chinese, in the end resulted in high-quality construction of a facility with an advanced treatment process. Although the bid preparation process was protracted, the plant was completed on June 15, 1999, i.e., shortly before the original Closing Date June 30, 1999). The local project management acknowledged that the learning process working with international contractors was very positive and clearly would help them in their future project work. Nevertheless, they claim that this method favors international contractors since local firms have little expertise in responding to performance bids. While thev have been pleased with the work of the selected international contractor. in general they have complained about the potentially higher risks of employing international contractors compnrerd tn Inrnl comnanisc anrd intencsel disike- their evnsnivet design fees. ITh hiughly dULUitIdLCU PipieL UtJiodUUn1 eri,uIes loW proUUUctLII LUcL stlU a gificrllIiLy rdUULtc idipL IIIUULce pollution. The Hangzhou municipal government has pursued a reasonable water tariff policy in line with the financial Credit covenants. Provided the city continues this policy in the future and the plant is operated and maintained properly, the financial situation of this component should remain strong. The impact of the component on a large part of the Hangzhou's population has been significant as it substantially increased the supply of high quality water to meet the needs of households and industry, even during periods of high turbidity intrusion into the Qiantang River. This component is thus rated satisfactory. Wenzhou ($29.1 million SAR, $27.3 million actual) -6 -  This component includes a new water treatment plant with i capacirtyf 100nn0 m3/d (increased with IDA approval from the 70,000 m3/d in the SAR), a pumping station, pipelines, a 3 km tunnel, and rinfomeIUILUt UL UWe waCIt UdiUsrULIbu1 IICoWUI. ilte WdLaI Uter 1LtLet t pjellat was also ploCUe Uln d tU.1nkey basis. Similar to Hangzhou, the local project office initially was reluctant to use this procedure, but did provide extensive and constructive input during the whole process. Having lost valuabie time during the bid preparation process, they pushed the international contractor hard to complete the project within the Project implementation period. While most of the intake water quality before the Project was very poor, the new water source from the Ou River and the modern technologies used in the new facilities enabled a significant improvement in water quality and water pressure fully meeting the city's additional water needs. Wenzhou, which in the past suffered from lack of urban services despite its thriving economy, rightfully prides itself on now possessing one of China's foremost water treatment plants. The Project prompted the city to improve its urban planning systems by taking a long-term view of its population growth. its economic develonmenti and the resultant urban services needs. The institutional development gained from the planning process as well as from the design and implemenntation phase wxiith internafionnl consultants and contractort will undoubtdAly help the municipality in the Long-term as it tackles other urban projects. Also, the component's economic and social 1nitILb Care sUUbstantial. VWaler shortages have bUeen elir.inaeteU andU Ihlealtil bUenefI,.s are considered substantial, albeit difficult to quantify. Modern plant controls and more efficient technologies reuuceu chemical usage and staff requirements. in audition, the irnproved network, better inspection equipment and improved laboratories contribute to the financial well-being of the utility. Provided water tariff poiicies remain reasonable, the water utility should not experience financial constraints. The city insisted on building the plant in a downtown location with limited space for expansion. IDA foresaw this capacity limitation and recommended the plant be built close to the point of abstraction. The city authorities in hindsight agree that their insistence has caused some minor construction delays and possible future exoansion ccnstraints. Nevertheless, this comoonent overall is rated satisfactorv. Ningbo ($44.0 million SAR $35.7 million actial) TO rnn .. .1 t To cope with pressures from the State-mandated development program-~ an.d to realize ifs arrbitious modernization goals, Ningbo needed to upgrade its urban services. This component focused on an increase o )f Z5,000 ,,,3/d abtacir L.--Lg quali'y raw -water frm he Xiazhe -an _to._ aepupn UI LiuU,uU 111/U dUlJldLLUU1l U Lliigil k4IUd1~lt W IIUIII ii Ule ILiOULAiell