Document of The World Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No: 55653 - CN
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
Public Disclosure Authorized IN THE AMOUNT OF US$80 MILLION
TO THE
PEOPLE'S REPUBLIC OF CHINA
FOR A
BAYANNAOER WATER AND ENVIRONMENT COMPREHENSIVE MANAGEMENT PROJECT
April 22, 2011
Public Disclosure Authorized
China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region
Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective October 18, 2010)
Currency Unit = Renminbi (RMB) or Yuan (Y) Y 1.00 = US$ 0.1503 US$ 1.00 = RMB 6.6541
FISCAL YEAR July 1 – June 30
ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank ICB International Competitive Bidding BOCAD Bayannaoer Office for IDA International Development Comprehensive Agricultural Association Development BMFB Bayannaoer Municipal Finance IMFD Inner Mongolia Finance Department Bureau BMG Bayannaoer Municipal Government MOF Ministry of Finance BWAG Bayannaoer Hetao Water Affairs MWR Ministry of Water Resources Group Co., Ltd. COD Chemical Oxygen Demand NCB National Competitive Bidding CPS Country Partnership Strategy NDRC National Development and Reform Commission PMO Project Management Office CQS Consultant Quality Selection PSP Private Sector Participation CY Calendar Year O&M Operations & Maintenance DBO Design-Build-Operation QCBS Quality and Cost Based Selection EA Environment Assessment PAP Project Affected Population EMP Environmental Management Plan RAP Resettlement Action Plan EPB Environmental Protection Bureau RMB Reminbi, Chinese currency EIRR Economic Internal Rate of Return SA Special Account FB Finance Bureau SOE Statement of Expenditures FM Financial Management TA Technical Assistance FMS Financial Management Specialist TOR Terms of Reference FIRR Financial Internal Rate of Return WLIDC Wuliangsuhai Lake Industrial Development Corporation FY Fiscal Year WREC Water Reclamation Plant GDP Gross Domestic Production WWIC Yellow River West Water Industrial Co., Ltd. IBRD International Bank for WWTP Wastewater Treatment Plant Reconstruction and Development
Vice President: James W. Adams, EAPVP Country Director: Klaus Rohland, EACCF Sector Director: John Roome, EASSD Sector Managers: Ede Jorge Ijjazs-Vasquez. EASCS, and Vijay Jagannathan, EASIN Task Team Leader: Shunong Hu, EASCS
CHINA Bayannaoer Water and Environment Comprehensive Management Project
CONTENTS
Page
I. STRATEGIC CONTEXT AND RATIONALE ...... 1 A. Country and Sector Issues ...... 1 B. Rationale for Bank Involvement ...... 1 C. Higher Level Objectives to Which the Project Contributes...... 2
II. PROJECT DESCRIPTION ...... 2 A. Lending Instrument ...... 2 B. Project Development Objective and Key Indicators ...... 2 C. Project Components and Project Costs ...... 2 D. Lessons Learned and Reflected in the Project Design ...... 3 E. Alternatives Considered and Reasons for Rejection ...... 4
III. IMPLEMENTATION ...... 4 A. Partnership Arrangements ...... 4 B. Institutional and Implementation Arrangements ...... 4 C. Monitoring and Evaluation of Results ...... 5 D. Sustainability...... 5 E. Critical Risks and Possible Controversial Aspects ...... 6 F. Loan/Credit Conditions and Covenants ...... 8
IV. APPRAISAL SUMMARY ...... 9 A. Economic and Financial Analyses ...... 9 B. Technical ...... 10 C. Fiduciary ...... 11 D. Social...... 11 E. Environment ...... 12 F. Safety of Dams ...... 13 G. Safeguard Policies ...... 13 H. Policy Exceptions and Readiness...... 13
Annex 1: Country and Sector or Program Background ...... 14
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 19
Annex 3: Results Framework and Monitoring ...... 21
Annex 4: Detailed Project Description ...... 24
Annex 5: Project Costs ...... 28
Annex 6: Implementation Arrangements ...... 30
Annex 7: Financial Management and Disbursement Arrangements ...... 35
Annex 8: Procurement Arrangements ...... 42
Annex 9: Economic and Financial Analysis ...... 48
Annex 10: Safeguard Policy Issues ...... 57
Annex 11: Project Preparation and Supervision ...... 63
Annex 12: Documents in the Project File ...... 64
Annex 13: Statement of Loans and Credits ...... 66
Annex 14: Country at a Glance ...... 71
Annex 15: Maps...... 74 IBRD 37979 AND IBRD 38272
CHINA
BAYANNAOER WATER AND ENVIRONMENT COMPREHENSIVE MANAGEMENT PROJECT
PROJECT APPRAISAL DOCUMENT
EAST ASIA AND PACIFIC
EASCS
Date: April 22, 2011 Team Leader: Shunong Hu Country Director: Klaus Rohland Sectors: General water, sanitation and flood Sector Managers: Ede Jorge Ijjazs-Vasquez, protection sector (55%); Water supply (45%) and Vijay Jagannathan Themes: Pollution management and Team Leader(s): Shunong Hu environmental health (53%); Water resource management (45%); Municipal governance and institution building (2%) Project ID: P115695 Environmental category: Full Assessment Lending Instrument: Specific Investment Loan Joint IFC: Joint Level:
Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others: Total Bank financing (US$m.): 80.00 Proposed terms: U.S. Dollar, variable spread loan with a maturity of 23 years, including a ten- year grace period, with repayment based on annuity, and a front-end fee of 1% subject to a 75 basis-point waiver. Financing Plan (US$ m) Source Local Foreign Total Borrower 75.2 9.3 84.5 International Bank for Reconstruction and 26.4 53.6 80.0 Development Total: 101.6 62.9 164.5 Borrower: The People's Republic of China Responsible Agency: Bayannaoer Hetao Water Affairs Group Co., Ltd. No. 1, Shuiyuan Road Linhe District, Bayannaoer City Inner Mongolia Autonomous Region China, 015000 Tel: (86-478) 898-8401 Fax: (86-478) 791-8423 [email protected]
Estimated disbursements (Bank FY/US$ m) FY 12 13 14 15 16 17 18 Annual 2 10 15 15 10 20 8 Cumulative 2 12 27 42 52 72 80 Project implementation period: Start: September 1, 2010; End: June 30, 2017 Expected effectiveness date: September 1, 2011 Expected closing date: December 31, 2017
Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No Ref. PAD I.C. Does the project require any exceptions from Bank policies? Ref. PAD IV.G. [ ]Yes [X] No Have these been approved by Bank management? []Yes [X] No Is approval for any policy exception sought from the Board? [ ]Yes [X ] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD III.E. Does the project meet the regional criteria for readiness for implementation? [X]Yes [ ] No Ref. PAD IV.G.
Project development objective Ref. PAD II.C. Technical Annex 3 The project development objective is to support the Bayannaoer Municipal Government to: (a) better utilize water resources to develop higher income activities for local residents without compromising the water use for irrigation, which would adversely affect the rural poor; and (b) improve the water environment of Wuliangsuhai Lake by reducing water pollution entering the lake. Project description] Ref. PAD II.D., Technical Annex 4 The project comprises four components: (a) reclaimed water supply to selected industrial areas (US$72.3million); (b) wastewater management in selected industrial estates (US$52.1 million); (c) constructed wetlands, non-point pollution control pilot and canalization of Wuliangsuhai Lake and pilot of non-point pollution control (US$33.4 million); and (d) technical assistance (US$2.7 million). Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Involuntary Resettlement (OP/BP 4.14) Safety of Dams (OP/BP 4.37) Significant, non-standard conditions, if any, for: Ref. PAD III.F.
Board presentation: N/A
Loan Effectiveness:
1. Subsidiary Agreement: The Bayannaoer Hetao Water Affairs Group Co., Ltd. (BWAG) and Bayannaoer Municipality shall enter into a subsidiary agreement to implement: (a) reclaimed water supply, wastewater management, and technical assistance components under loan terms; and (b) Wuliangsuhai Lake component under agency (non-reimbursable) terms satisfactory to the Bank.
Loan Disbursement Conditions: N/A
Covenants applicable to project implementation:
1. BWAG shall continue to monitor the quality of water extracted from the drainage canals on a quarterly basis.
2. BWAG shall continue to monitor the water quality of industrial and domestic waste water discharges on a quarterly basis.
3. BWAG and Yellow River West Water Industrial Co., Ltd. (WWIC) shall enter into an O&M contract, with terms satisfactory to the Bank, six months prior to commencement of operation of water reclamation and wastewater treatment facilities built under the project.
4. BWAG shall manage the water and waste water facilities and their operation in a way which makes them profitable by the end of 2016: for the water and waste water facilities in each of the industrial estates, the total revenue for 2016 shall be at least equal to the sum of total operating expenses, depreciation and interest, minus the accumulated profit/loss from the previous years of operation.
5. Reclaimed Water Supply and Wastewater Annual Financial Reporting: BWAG shall submit to the Bank by six months after the end of the fiscal year: (a) audited financial statements and (b) starting March 15, 2012, financial statements and projections for the following year, for the implemented reclaimed water supply and waste water components.
6. BWAG shall furnish the Bank for its review and comments: (a) final inspection and acceptance reports on the construction of remedial works of Yongming and Wangba Dams within one year after the completion of such remedial works, but no later than June 30, 2012; and (b) O&M Manual and Emergency Preparedness Plan of Yongming and Wangba Dams prior to December 31, 2012. BWAG shall carry out the operation and maintenance as set forth in the Manual.
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and Sector Issues
1. Since the start of the economic reform in the 1980s, poverty has been substantially reduced in China through rapid economic development. However, an uneven economic distribution, to the disadvantage of inland regions, remains a problem. Inner Mongolia is a region significantly lagging behind coastal provinces in terms of economic development, due to historical and geographic reasons, and due to limited availability of water resources for industrial development.
2. Bayannaoer is a poor municipality in Inner Mongolia with an economy heavily dependent on agriculture; an irrigated plain of 570,000 ha covers almost half of its territory. It is also rich in natural resources, especially in minerals, coal and non-ferrous metals. Some neighboring regions have seen rapid industrial development recently and Bayannaoer has also started developing some local industries, mainly in food processing. However, to protect the livelihoods of poor farmers in Bayannaoer, water allocations from the Yellow River may be used for agricultural purposes only, causing a lack of water resources for industry. As there is an extreme and increasing shortage of water in the Yellow River basin, this situation is unlikely to improve in the future. Groundwater is limited in supply and of high quality, and therefore its use for industries other than food processing is considered unsustainable. The Bayannaoer Municipal Government wants to wean off industries from the use of groundwater.
3. Currently 96% of fresh water used in Bayannaoer comes from the Yellow River, 3% from groundwater, and 1% from local surface runoff. Only very limited use is made of agricultural drainage water as a water source. Domestic and industrial uses account for about 4% of water consumption. In the coming decade, agricultural water demand is projected to decrease due to increased efficiency, but domestic and industrial water demand is projected to increase, resulting in a net increase in overall water demand by about 85 million m3 per year.
4. The main project area consists of five industrial estates which are located on the northern boundary of Bayannaoer municipality, outside the irrigation areas. The use of agricultural drainage water and domestic wastewater presents a possibility for local industry, as it is not subject to restrictions of use. Drainage water mixed with treated/untreated domestic and industrial waste water, is currently discharged into Wuliangsuhai Lake and then into the Yellow River. As drainage water contains a variety of pollutants, it needs to be treated before it can be used industrially.
5. In addition, increasing volumes of wastewater from local industries and urban populations also require treatment. Adequate safeguards should be established to ensure that toxic substances generated by industries are removed before being discharged.
B. Rationale for Bank Involvement
6. The World Bank has extensive experience with water supply, wastewater treatment and integrated water and wastewater management. In addition, the Bank has experience with the project area through the Northern Irrigation Project, which assisted the government in rehabilitating vast irrigation areas in 1988.
1 7. Extensive technical expertise and advice are necessary to effectively implement water reclamation projects, as well as constructed wetlands, in the cold weather of Northern China. The Borrower is looking to the Bank to leverage external assistance from Europe, USA and/or Japan on water reclamation, as technologies are still underdeveloped in China. Although the Bank and China lack direct experience with water reclamation, the Bank is particularly well positioned to enlist support from overseas external parties.
C. Higher Level Objectives to Which the Project Contributes
8. The project addresses two of the key pillars in the Bank‟s Country Partnership Strategy (CPS) for China (Report No. 35435): (a) to reduce poverty, inequality and social exclusion, by promoting urbanization and assisting in the transition from agriculture to industry; and (b) to manage resource scarcity and environmental challenges, by bringing improvements to water management and environment while stimulating development. The objectives of the project are expected to be consistent with the CPS for the period 2011-2015, currently under preparation, as well as China‟s 12th Five Year Plan, for the period 2011-2015.
II. PROJECT DESCRIPTION
A. Lending Instrument
9. The lending instrument is a Specific Investment Loan because the project consists of clearly identified and appraised physical and institutional development components. It will be a U.S. Dollar, variable-spread loan, with a maturity of 23 years, including a ten-year grace period, with repayment based on annuity, and a front-end fee of 1% subject to a 75 basis-point waiver.
B. Project Development Objective and Key Indicators
10. The project development objective is to support Bayannaoer Municipality to: (a) better utilize water resources to develop higher income activities for local residents without compromising the water use for irrigation, which would adversely affect the rural poor; and (b) improve the water environment of Wuliangsuhai Lake by reducing water pollution entering the lake.
11. Annex 3 contains the detailed results monitoring framework. BWAG will be responsible for collecting data and reporting to the Bank on the key project outcome indicators: (a) reduction in groundwater abstraction using private wells in the project areas; and (b) water quality at Wuliangsuhai Lake‟s outlet.
12. Key intermediate outcome indicators include: (a) water supply to industries and rate of water tariff collection for the reclaimed water supply component; (b) pollution load reduction for the wastewater management component; and (c) rate of pollution load reduction by the constructed wetlands and pilot zone, and annual reed production per mu.
C. Project Components and Project Costs
13. The project consists of 4 components as described below:
2 a) Component 1. Reclaimed Water Supply (US$72.3 million). Construction of water reclamation and distribution facilities, which will source their water from agricultural drainage water and treated domestic and industrial wastewater, including four water reclamation plants, raw water transmission mains, and distribution networks at the Wulatehouqi, Ganqimaodu, Hanjinhouqi and Wuyuan Industrial Estates.
b) Component 2. Wastewater Management (US$52.1 million). Construction of three waste water treatment plants in the Wulateqianqi, Ganqimaodu, and Wulatehouqi Industrial Estates, and secondary and tertiary treatment, and distribution networks for recycled water in Ganqimaodu and Wulateqianqi Industrial Estates.
c) Component 3. Constructed Wetlands, Non-point Pollution Control Pilot and Canalization of Wuliangsuhai Lake (US$33.4 million). (i) establishment of constructed wetlands to contribute to the natural reduction of pollutants from point and non-point sources entering Wuliangsuhai Lake; (ii) construction of canals in Wuliangsuhai Lake to improve the water circulation of the lake; and (iii) implementation of a pilot program to support and upgrade non-point pollution control measures for optimized application of chemical fertilizers to reduce nutrients discharge.
d) Component 4. Technical Assistance (US$2.7 million). Provision of technical assistance for: (i) assisting BWAG in finalizing the designs for water/wastewater processes and related bidding documents, managing contracts, and preparing project progress and monitoring reports; (ii) developing an adequate industrial clean production mechanism for pollution control in industrial processes; (iii) assisting BWAG in preparing its macro level strategic business development plan for BWAG; and (iv) training BWAG staff operations and financial management, and operation and maintenance of facilities and the wetland built under the project.
D. Lessons Learned and Reflected in the Project Design
14. The Bank has significant experience in assisting China to develop rural and urban infrastructure. Chinese and international experience with water reuse, have been incorporated in the project design. Key lessons incorporated include:
a) waste-water treatment must result in water quality that is suitable for the particular reuse application; b) guidelines must ensure the safety of water reuse; c) source control of contaminants is essential, particularly for industrial waste-water; d) institutional coordination between government authorities, civil society, and industries is essential; and e) environmental improvement of lakes usually requires a set of integrated measures rather than a single approach.
15. In addition, Bank experience with numerous water supply and waste water projects in China has repeatedly shown two problems which both amplify the estimated and actual budget requirements: oversizing and overestimating. In this project, initial proposals for water reclamation plants and waste water treatment plants were downsized by about 50%, based on more conservative demand projections,
3 and by phasing, i.e. planning for further investments to be made in later phases, once demand materializes. By insisting on the use of market prices, cost estimates were cut by well over 10% from initial estimates.
16. International experience shows that water reclamation is generally not carried out by individual industries due to safety considerations. Safeguards in treatment of reclaimed water are especially important. In addition, separate distribution networks are necessary to ensure that there are no cross connections between potable water and reclaimed water. Pipes for reclaimed water must be buried at different depths from those for drinking water and must be color coded to distinguish them from drinking water systems.
E. Alternatives Considered and Reasons for Rejection
17. Project components. During preparation, several proposals were considered and rejected. In the early identification stage, a river embankment component was proposed, which was rejected due to limited economic benefit. In particular, components were added to take a more comprehensive approach to the environmental problems of Wuliangsuhai Lake. The final set of components form an integrated design to serve the project objective of sustainable supply and responsible management of water in Bayannaoer: a clear and focused theme.
18. Dynamic hydraulic model. The initial design for canal dredging in Wuliangsuhai Lake to improve flow rates was a grid design that did not take lakebed formation into consideration and was suspected of sub-optimal performance. The project is one of the first to improve canal design by employing dynamic hydraulic computer modeling in its preparation. Computer modeling demonstrated that by taking the natural topography of the lake bed into consideration, flow rates can be increased for the entire lake, resulting in both significantly higher performance and lower cost.
19. Phasing of project to follow projected pace of development. Initial proposals were all based on highly optimistic projections of future development, leading to very large project investments. For many components, initial high projections were rejected in favor of more conservative projections. In addition, the final project design was modified to only include the first phase of many investments.
III. IMPLEMENTATION
A. Partnership Arrangements (if applicable)
20. The project is free-standing and does not rely on other international co-financing. However, construction of a number of additional treatment and reclamation plants is being considered, with parallel financing by the Bayannaoer Municipal Government (BMG) and KfW, the German development bank. Those projects are in an early state of preparation, and would be located in different municipal districts from those where the Bank-supported components are located.
B. Institutional and Implementation Arrangements
21. BMG has already established a Leading Group (LG) chaired by the mayor and comprising all relevant authorities.
4 22. Bayannaoer Hetao Water Affairs Group (BWAG), established in 2006, is the implementing agency of the project. It has established a World Bank Project Management Office (PMO), with divisions in charge of project procurement, contract management, and accounting and reporting of the project account, among other functions. A project management consultant will be engaged to assist BWAG in the design review, construction supervision, and environmental and social safeguards monitoring.
23. Counterpart funds for the project will be provided by the Bayannoer Municipal Finance Bureau (BMFB) and Bayannaoer Office for Comprehensive Agricultural Development (BOCAD). The BMFB will directly transfer counterpart funds to BWAG, while BOCAD will pay the contractors directly.
24. The project will be implemented over a period of 7 years. All waste water treatment plants and consulting services for project management will be procured prior to the signing of the legal documents of the project, using retroactive financing. The constructed wetlands will be completed in the third year of the project, while the last canal in Wuliangsuhai Lake will be finished in the sixth year of the project.
25. BWAG will outsource the operation and maintenance of the water reclamation plants and waste water treatment plants to the Yellow River West Water Industrial Co., Ltd. (WWIC) which is majority owned by BWAG. The constructed wetlands and canals in Wuliangsuhai Lake will be operated by the Inner Mongolia Wuliangsuhai Lake Industrial Development Corporation (WLIDC), which is a subsidiary of BWAG.
C. Monitoring and Evaluation of Results
26. Outcome indicators for the project are defined in Annex 3. BWAG will consolidate all data at the project level and produce semi-annual reports to monitor progress. Clear definition of all indicators and baselines for indicators were agreed during project preparation.
D. Sustainability
27. Governments at all levels have shown a strong dedication to the project and commitment to improve the management and environmental conditions of water resources. BMG has committed itself to raise all counterpart funds (50% of the project cost) from its fiscal revenue. The project is able to fully recover O&M and capital costs.
28. There will be minor cross-subsidization among the components in the industrial estates, but none between the new and existing services provided by BWAG. The operation of the project assets as a whole would remain profitable as water supply and waste water tariffs will be levied to cover the full costs.
29. For the constructed wetlands, reed cultivation will generate revenues for the managing company and substantial income for local farmers, which will encourage the ongoing controlled harvesting of reeds. Reduced pollutants in Wuliangsuhai Lake will help in the development of tourism, which will confer further economic benefits to the local population, and thus provide an additional incentive to adequately maintain and protect the wetlands.
5 E. Critical Risks and Possible Controversial Aspects
30. There are a number of potential risks associated with the project, related to project design, implementation, and management. A summary of these risks, as well as proposed mitigation measures, are given below.
Rating Rating Risks Before Mitigation After Mitigation Mitigation
Underutilization of Substantial - Conservative estimates of near-term Moderate project investments due demand. to fewer than expected - Phased project implementation industries moving in to responding to incremental demand. the industrial estates (due to adverse macroeconomic developments, failure to attract industries to Bayannaoer, etc).
Failure to convince High - Enforcement of closing of industrial Substantial industries to stop using private water wells. private wells. - Inclusion of monitoring indicator. - Inclusion of TA sub-component on cleaner production (with water conservation as one of its objectives).
Use of drainage water Substantial - Phased construction to provide Moderate and industrial waste additional and more accurate water water for reclamation quality data, which will ensure optimal requires sophisticated technical processes are selected. processes. Failure to - Training has been included for manage them well could management staff of the water lead to toxic discharges reclamation plants. which could severely affect water quality. - Careful monitoring of influent and discharges.
Industrial waste water Substantial - All industries will be contractually Moderate can be toxic, which required to comply with the standards could affect the and obtain relevant permits. Permits will performance of the only be issued to the most modern WWTP. processes, which minimize waste production. - In addition to self- monitoring, there will be third party checks by an agency from outside the municipality to ensure
6 Rating Rating Risks Before Mitigation After Mitigation Mitigation compliance with permit requirements.
Constructed wetlands Substantial - Involvement of experienced wetland Moderate fail to effectively professionals in wetland design, remove pollutants due to construction and management. poor design, - A test phase will precede the full scale construction or wetland construction to identify and management. rectify any potential problems. - Training on operation and maintenance and the development of a practical (easily understood) manual.
Limited financial Substantial - Close Bank supervision and strong Substantial capacity of Bayannaoer follow-up during implementation based resulting in a failure to on the detailed counterpart financing mobilize counterpart plan agreed at appraisal. funding in a timely - Encouraging the client to seek manner. alternative resources, such as industrial water users.
Failure to adequately Moderate - Set tariffs for water supply and Low finance O&M of project wastewater at a reasonable level. investments. - Monitoring indicator related to cost recovery from tariffs.
BWAG does not have Moderate - Provide training to financial staff of Low experience with BWAG. financial management - Streamline disbursement arrangements (FM) and disbursement for proper, efficient, and effective use of for Bank-financed project funds. projects. - Prepare and issue a well-designed project FM manual. - Early engagement of project management consultant.
Delays in procurement Substantial - Retain and engage staff who worked on Moderate due to limited capacity previous Bank projects and have at BWAG and slow knowledge about procurement issues. procurement preparation - Early engagement of a project and approval processes. management consultant to assist BWAG. - Training and development of model
7 Rating Rating Risks Before Mitigation After Mitigation Mitigation technical specifications - Conduct close and regular monitoring during supervision
Overall residual risk rating Moderate * Probability that an outcome will not be achieved: High >75%; Substantial >50%; Moderate >25%; Low <25%
F. Loan/Credit Conditions and Covenants
Board Presentation:
31. None
Loan Effectiveness:
32. Subsidiary Agreement: The Bayannaoer Hetao Water Affairs Group Co., Ltd. (BWAG) and Bayannaoer Municipality shall enter into a subsidiary agreement to implement: (a) reclaimed water supply, wastewater management, and technical assistance components under loan terms; and (b) Wuliangsuhai Lake component under agency (non-reimbursable) terms satisfactory to the Bank.
Loan Disbursement Conditions:
33. None.
Covenants applicable to project implementation:
34. BWAG shall continue to monitor the quality of water extracted from the drainage canals on a quarterly basis.
35. BWAG shall continue to monitor the water quality of industrial and domestic waste water discharges on a quarterly basis.
36. BWAG and Yellow River West Water Industrial Co., Ltd. (WWIC) shall enter into an O&M contract, with terms satisfactory to the Bank, six months prior to commencement of the operation of water reclamation and wastewater treatment facilities built under the project.
37. BWAG shall manage the water and waste water facilities and their operation in a way which makes them profitable by the end of 2016: for the water and waste water facilities in each of the industrial estates, the total revenue for 2016 shall be at least equal to the sum of total operating expenses, depreciation and interest, minus the accumulated profit/loss from the previous years of operation.
8 38. Reclaimed Water Supply and Wastewater Annual Financial Reporting: BWAG shall submit to the Bank by six months after the end of the fiscal year: (a) audited financial statements; and (b) starting 2012, financial statements and projections, for the implemented reclaimed water supply and waste water components.
39. BWAG shall furnish the Bank for its review and comments: (a) a final inspection and acceptance reports on the construction of remedial works of Yongming and Wangba Dams within one year after the completion of such remedial works, but no later than December 31, 2012; and (b) O&M Manual and Emergency Preparedness Plan of Yongming and Wangba Dams prior to June 30, 2012. BWAG shall carry out the operation and maintenance as set forth in the Manual.
IV. APPRAISAL SUMMARY
A. Economic and Financial Analyses
Economic Analysis
40. Economic analysis was performed for each of the water reclamation and waste water systems in each industrial estate. The EIRR of waste water systems varies from 4.8% to 5.4% with starting tariffs of RMB1.2/m3. For reclaimed water the EIRR obtained is 8% or more for the various sub-components. The economic rate of return for Wuliangsuhai Lake Component is estimated to be 11.6%.
41. Sensitivity analysis was performed for all project components for cost increases and for reduced tariffs. The analysis shows that tariffs have a large impact on the EIRR, but the results are still robust, with the cost of O&M fully recovered for water reclamation and waste water components. For Wuliangsuhai Lake Component, the result shows acceptable EIRR.
42. Least Cost Assessment. There are very few alternatives for treatment or reclamation for the various sites because of the limited availability of water sources. Water availability for each site was carefully reviewed and studied. Surface water is too limited to be a reliable source, and therefore only waste water and drainage water qualify as suitable water sources. Cost comparison of the WWTPs shows that the cost estimates are cost effective.
Financial Analysis
43. Financial analysis was carried out for the reclaimed water supply and waste water operations to be implemented in the industrial estates. The analysis indicates that for all investments, operation and maintenance will be financially sustainable with projected tariff revenues, proposed capital structure, and expected operational efficiency. See Annex 9 for details.
44. A willingness-to-pay analysis was conducted which demonstrates that the projected reclaimed water tariffs are in line with levels acceptable to industries in the industrial estates to be covered by the project.
9 Fiscal Analysis
45. Bayannaoer Municipal Finance Bureau will provide counterpart funds from its fiscal revenues for most project components. The assessment shows that counterpart funds for the project will be less than 4% of the administration‟s budget.
46. Counterpart funds for the constructed wetlands will be provided by BOCAD, which is responsible for the implementation of a national program aimed at upgrading the low- and medium- yield farmland in Bayannaoer. According to the approved financing plan, BOCAD‟s contribution to the project only accounts for a maximum of 5.3% of its annual budget in 2013.
B. Technical
47. All components have been prepared by reputable domestic design institutes, with extensive experience in the water and sanitation sector, as well as the environmental sector, in China.
48. Reclaimed Water Supply Component. The main function of water reclamation plants (WRECs) is the removal of salts through reverse osmosis (RO), typically preceded by coagulation/flocculation, sedimentation, rapid sand filtration and microfiltration (MF). The final effluent after RO is chlorinated. The four proposed WRECs at Wulatehouqi, Ganqimaodu, Hangjinhouqi, and Wuyuan will draw water from open drains and/or receive tertiary treated waste water from the water recycling plants effluent. After treatment, the water will be returned to the industries for reuse. In emergency situations the WRECs in Wulatehouqi, Hangjinhouqi and Wuyuan can draw additional groundwater; Wulatehouqi and Ganqimaodu can use reservoir/surface water as well. Concentration levels of three heavy metals exceeding standards have been observed (in very few instances), including mercury, lead and cadmium, and before detailed treatment options are considered, more monitoring will be undertaken. Jar tests have been done for the three chemicals and it is proposed to use poly aluminum chloride as the main precipitation agent.
49. Wastewater Management Component. The three new waste water treatment facilities in Wulatehouqi, Ganqimaodu, and Wulateqianqi will receive wastewater from both industrial and domestic sources, and generally feature two main components: (a) mechanical-biological water treatment to secondary treatment level; and (b) chemical-physical treatment as tertiary treatment to further improve water quality of WWTP effluents for recycling purposes (this tertiary treatment stage is hereafter referred to as “Tertiary Treatment Stage, or TTS”.
50. Wuliangsuhai Lake Component. The project will support investment in artificial wetlands (60.3 km2) to further reduce the pollutants entering Wuliangsuhai Lake via the Main Drain of the Hetao Irrigation District. It will be composed of a sedimentation pond, first stabilization pond, first reed bed zone, second stabilization pond and subsequent second reed bed zone. The constructed wetland will be located in a zone which is already a wetland, although with mainly stagnant water. The project, through the introduction of improved water flow and free water surfaces, will not only improve the lake‟s water quality, but will also reduce the potential risk of mosquito breeding and bad odors. It will also create grids/canals through reed fields to improve water circulation in Wuliangsuhai Lake. It will also help to sustain shipping on the lake, since the improved grid will always incorporate the main shipping lanes. Furthermore, the component will support the piloting of non-point control measures under
10 development by a parallel ongoing government program that is testing the reduction of chemical fertilizer by optimized application.
C. Fiduciary
51. Financial Management. Financial management assessment on the adequacy of the project financial management system was conducted on the basis of guidelines issued by the Financial Management Sector Board on March 1, 2010, and concluded that the project meets minimum Bank financial management requirements (stipulated in BP/OP 10.02). The assessment found that the financial management system established under BWAG could provide, with reasonable assurance, accurate and timely information on the status of the project in the format agreed with the Bank. Details of the assessment are given in Annex 7.
52. Procurement. The capacity of the implementing agency to carry out procurement for the project was assessed in July 2009 and updated in April 2010. The assessment reviewed the project organization structure and functions, past experience, staff skills, quality and adequacy of the supporting system and controls, and the legal and regulatory framework. The overall procurement risk is considered substantial, but can be minimized to moderate through implementation of the agreed risk mitigation measures. The detailed mitigating plan is in Annex 8.
D. Social
53. The project will result in significant social benefits as it supports the development of industrial estates that will provide more income opportunities to the local population. Additionally, improvement of Wuliangsuhai Lake will benefit local farmers and communities, especially families under the poverty line. Local communities and farmers have voiced strong support for industrial development and better water quality. Public consultation and participatory process undertaken during preparation enables the project to address the needs of vulnerable groups. However, at the same time, the project will have adverse impacts as it will entail land acquisition and involuntary resettlement.
54. Social Assessment. Two social assessments were conducted: one to screen for vulnerability of the Chinese Mongol ethnic minorities in the project area, and another to ensure beneficiary communities‟ inclusion and participation in the project, focusing on inclusion of local community needs in the project design. The social assessment team drafted and proposed the “Policy Guidance on Participation, Poverty Alleviation and Development”, for adoptaion by the municipality.
55. Resettlement Plan. A Resettlement Plan (RP) was prepared in accordance with relevant Chinese laws and regulations, as well as Bank Operational Policy OP4.12. BWAG will lead resettlement practices under the oversight of the Leading Group, and be the project implementation agency to manage resettlement operations. The project will affect four villages and two state-owned factories by permanent land acquisition. five rural households are affected by collective farm land acquisition, and one ethnic Mongol woman (who joined a Han family through marriage) will be affected by permanent land acquisition. No structures will be affected.
56. Indigenous People. The initial social screening identified that the Chinese Mongol ethnic minority groups, in terms of both cultural and socio-economic development, are not marginalized and
11 they are not expected to become vulnerable to any disadvantageous situations under the project. They are part of mainstream society and are anticipated to benefit as much from the project as other groups, such as the Han (Chinese) communities. They do not have customary economic, social, or political institutions separate from the dominant society. Their collective attachment in the project area is not located to geographically distinct habitats or ancestral territories. The Chinese Mongol communities in the project areas therefore do not fall under the definition of Indigenous Peoples as per OP 4.10, and the policy is not triggered.
57. Information Dissemination. All affected households and villages have been identified through the census survey. The RAP and social assessment report have been advertised in the Bayannaoer Daily, available for free reading in Bayannaoer Library and BWAG. Relevant project information has been provided to the affected villages through newspaper reports, posters and public meetings. A resettlement information booklet, providing details regarding compensation rates, other entitlement policies and grievance procedures, will be distributed to the displaced people prior to resettlement.
58. Participation Strategy. Focus group discussions and key informant interviews have been conducted with potential displaced persons. The preferences of these persons have been incorporated in the RP. The displaced persons agreed that resettlement and rehabilitation measures planned under the RP will adequately address any adverse impacts. In some cases, land compensation may be modified to further favor the displaced persons.
59. Affected communities will play a key role in determining and implementing their livelihood restoration programs. Both internal and independent monitoring of the resettlement program will be conducted regularly during project implementation.
E. Environment
60. Bank policy OP 4.01 Environmental Assessment is triggered and the project has been classified as Category A, according to the environmental screening of the proposed investments and their scale. An Environmental Impact Assessment (EIA) was carried out for the project components, and an associated environmental management plan (EMP) was prepared to determine the mitigation measures, environmental monitoring program, and the necessary institutional arrangements as well as capacity building. The documents have been prepared on the basis of Chinese legal and policy framework for environmental protection, master plans and environmental plans, as well as applicable Bank safeguard policies. Major findings of the EA and key points of the EMP are presented in Annex 10.
61. Environmental Benefit. The project will improve the water quality of Wuliangsuhai Lake through the proposed activities. The project is anticipated to cut the COD load to Wuliangsuhai Lake by over 23,508 t/a, TP load by about 458.04 t/a, NH3-N load by 1,220 t/a, and TN load by about 2,000 t/a , which will improve surface water quality in the drainage canals and Wuliangsuhai Lake to approach Class V. It will help alleviate the depression over the core areas of the conserved wetland and conserve groundwater of 73.654 million m3/a.
62. Public Consultations and Information Disclosure. Public consultations have been carried out during the EA process. Techniques used for public consultation included questionnaire surveys, focus group discussions, public meetings with key stakeholders, and interviews with some project affected persons. Issues raised during these consultations have been incorporated in the EIA and the EMP. The
12 EIA/EMP documents and other project related documents have been disclosed locally through various means (e.g., websites, newspapers, etc.), as required by national and Bank policies.
F. Safety of Dams
63. Two small reservoirs, i.e., the Yongming and the Wangba Dams (with heights of 2.5m and 1.5m respectively) will serve as back-up water sources during winter when there is insufficient water available in the drainage canals. Remedial works of these two dams were completed by BWAG in 2010. The design and construction of remedial works of both dams have been found to be acceptable to the Bank.
64. The Borrower has issued guidelines and regulations for dam safety management, including: Reservoir Dam Safety Management Regulation; Regulations on Reservoir Dam Safety Review; Guidelines for Dam Safety Review; Guidelines for Emergency Preparedness Plan; and Guidelines for Operation, Maintenance and Surveillance of Dams. O&M Manuals and EPPs of these two dams are under preparation and will be furnished to the Bank for review and comments upon their completion, but no later than December 31, 2012. During project implementation, the Bank and BWAG will monitor dam safety status, operation and maintenance procedures, and emergency preparedness, and supervise implementation of any remedial works to ensure that the project complies with OP4.37.
G. Safeguard Policies
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [X] [ ] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [X]
H. Policy Exceptions and Readiness
65. No policy exception is expected and the project is ready for implementation.
13 Annex 1: Country and Sector or Program Background CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Background and Project Area 1. China has done remarkably well in reducing poverty since the economic reforms of the 1980s. Unfortunately, much of this newly gained prosperity is unevenly distributed. Many rural areas still have a large number of poor people, including large parts of Inner Mongolia. In the absence of development of local industries and services, economic growth in rural areas mainly relies on the remittances of migrant workers.
2. Bayannaoer, the location of the project, is a poor municipality in Inner Mongolia with an economy heavily dependent on agriculture. It has a large irrigated plain area of about 8 million mu (570,000 ha), covering almost half of the municipality. It is an important grain production area, and although water resources are very scarce in Northern China, Bayannaoer is permitted to draw large amounts of water from the Yellow River for agricultural purposes, to support the national priority of food security. Bayannaoer is home to a large population of ethnic minorities, who live well below the poverty line.
3. Like many areas in Inner Mongolia, Bayannaoer is rich in natural resources, especially in minerals, coal and non-ferrous metals, which could be processed locally. Some neighboring municipalities, such as Ordos, bordering Bayannaoer to the south, are experiencing rapid industrial development coupled with economic growth and improved standards of living. Bayannaoer also has some local industries, mainly in food processing, such as corn and tomato products and milk processing. These food processing companies often pay a premium for quality agricultural produce and employ local residents.
4. However, limited water availability is restricting further industrial development in Bayannaoer. Mineral, non-ferrous metal and other industries require large amounts of water. Water allocated to Bayannaoer from the Yellow River is for agricultural purposes only. Although there are many ongoing efforts to increase agricultural water efficiency, those water savings may not be allocated to municipal or industrial use, but rather must be „returned‟ to the Yellow River (i.e., deducted from the agricultural allocation). This is because there is an extreme and increasing shortage of water in the Yellow River Basin due to increasing urban and industrial demand throughout the basin. Groundwater is limited in supply and is of high quality, and therefore its use for industries other than food processing is considered unsustainable. The Bayannaoer Municipal Government (BMG) wants to wean industries off the use of groundwater.
5. Currently 96% of fresh water used in Bayannaoer comes from the Yellow River, 3% from groundwater, and 1% from local surface runoff. Only very limited use is made of agricultural drainage water as a water source. Domestic and industrial uses account for about 4% of water consumption. In the coming decade, agricultural water demand is projected to decrease due to increased efficiency, but domestic and industrial water demand is projected to increase, resulting in a net increase in the overall water demand by about 85 million m3 per year.
14 6. Fortunately, there is another important potential source of water in Bayannaoer, which is not subject to these restrictions. Due to extensive agricultural activity in the area, large amounts of agricultural drainage water could be treated and used by local industries. Currently, the drainage water flows through the drainage canals of the irrigation schemes into a local lake (Wuliangsuhai Lake) and subsequently back into the Yellow River. Water discharged from existing municipal waste water treatment plants can also be reclaimed for industrial use.
7. Before agricultural drainage water can be used for industry, it needs to be treated. It contains salinity from the fields, as well as nitrogen and phosphates from fertilizer and pesticide use. Drainage water also contains some untreated municipal and industrial waste water discharges, which are currently not managed properly. Almost all drainage water now flows back into the Yellow River, adversely affecting the water quality downstream.
8. To halt further deterioration of the water environment in Bayannaoer, investments are also needed to treat the growing amounts of waste water from local industries and the urban population. Adequate safeguards need to be put in place to ensure that toxic substances generated are recycled within the industries before being discharged. The main project area consist of five industrial estates which are located on the fringes of the northern boundary of the municipality, outside the irrigation areas.
Water Resources and Water Demand
9. Bayannaoer is one of the few areas of Inner Mongolia that extracts a large quantity of Yellow River water. At present, water resources stand at a total of 4,950 million cubic meters, of which 94% comes from the Yellow River, 3% from groundwater, 1% from local surface runoff from rainfall and 1% from drainage water. This large amount of irrigation water also allows for the lowering of soil salinity in the Bayanaoer irrigated area, which is an important area for grain production in North China. Yellow River water allocated to Bayannaoer is intended to service local minorities for irrigation and rural industries, mainly food processing. BMG is continuing to invest in improved efficiency of irrigation canals and drains. Demand for water in 2008 was 4,885 million m3, of which 96% was from agriculture, 2% from industry and 2% from domestic demand. The Bayannaoer Hetao Water Affairs Group Co., Ltd. projected that by 2015, overall demand is not expected to increase: as domestic and industrial demand will increase, but agricultural demand will decrease by the same amount. By 2020, overall demand will have increased by 85 million m3 to 4,970 million m3, as a combined result of irrigation demand decreasing due to efficiency gains, while industrial and domestic demands both increase.
10. BMG has decided to reserve deep groundwater for potable water and for food processing industries, and wants to wean other industries off of their use of groundwater. Hence, shortages are developing in industries and the only way to meet demand is by water reclamation from irrigation drainage water and waste water from domestic and industrial water. Industrial waste water is pre- treated by factories for removal of heavy metals, synthetic organic materials, and ammonia mixed with organics, then collected by interceptor, which take it to a municipal waste treatment plant that also handles domestic sewage. Industrial waste water plants are not managed very effectively, continue to release organic and mineral pollutants, and need better external monitoring.
11. Table 1 shows projections for the sources of the water supply for the coming decade.
15 Table 1. Project Water Sources in Bayannaoer (million m3) Sources of Water 2008 2015 2020 Yellow River water 467.0 451.3 442.3 Surface water 6.5 9.1 15.0 Ground water 15.0 15.0 15.0 Reclaimed water 14.0 24.7 Total 488.5 489.4 497.0
12. Water reclamation has been experimented with in Southern California since the 1980s and by early 2000, it was used widely there. Presently, out of a demand of 907 million m3 per year for Los Angeles County, as much as 300 million m3 comes from reclaimed, recycled and desalinated water, of which about 60% is reclaimed water. Reclaimed water is widely used in the drier parts of the West Coast of the USA for industrial, agricultural and environmental purposes. Water reclamation is new in China, but it may be the only way to meet the demands for water in a major portion of the country, such as the North China Plain in Inner Mongolia, where there are no other alternative sources of water.
Pollution Control
13. Present pollution into the drainage canals comes mainly from domestic waste and industrial waste. Most of the industrial waste is treated, but since there are no municipal plants, the effluent from the pre-treated waste water is dumped into drains with the municipal waste water from townships and villages. The main objective of the Bayannaoer Municipal Water Affairs Bureau is to have all waste water collected and treated or reclaimed. Bayannaoer is aiming for a similar approach as in the National Pollution Discharge Elimination System (NPDES) of the US Environmental Protection Agency. At present, however, all waste water except in a few areas is dumped into the drainage canals and pollution ends up in Wuliangsuhai Lake. The lake is presently overgrown with weeds and highly eutrophied, but still has a lot of small fish and other freshwater ecology and is a huge bird sanctuary. Past surveys have indicated that there were about 70 different types of fish, and 130 types of birds visit the lake.
14. Even with waste water treatment there will be effluent from waste water treatment plants with a COD of 50 mg/l and non-point pollution entering the lake. The plan is to use constructed wetlands to further reduce the pollutants entering the lake and to create canals through the reed fields in the lake to improve circulation of water. Preliminary studies have shown that with a 76,000 mu of constructed wetland, it is possible to remove 78% of the COD load, 75% of nitrogen, and about 78% of phosphates, which are the key nutrients for eutrophication of the lake. In addition, an ecological canal system is proposed to deepen the lake to improve circulation. Constructed wetlands are expected to improve the lake water quality from Class V to Class III.
Key Development Issues
15. Two key issues affect the sustainability of regional development. First, there is the existing deterioration of the water environment within the municipality due to poor management of the wastewater generated from townships and industrial estates. Most of the wastewater from these townships is not treated and therefore the quality of water in the drains has significantly deteriorated. In addition, poor management of the saline drainage flows, mixed with excessive fertilizer, leads to low quality water returning to the Yellow River, this adversely affects the water resources of the Yellow River reaching downstream provinces.
16
16. The second challenge is posed by the projected increase in waste water. To prevent the water environment from deteriorating further, industrial wastewater management is required to make industrial processes less polluting and to ensure the collection and treatment of waste water. Therefore, adequate safeguards must be put in place to ensure that all toxic substances generated are recycled within the industries before being discharged into the municipal wast ewater treatment facility. It is also necessary to ensure that domestic waste water will be treated to standards that will protect water resources that may be reclaimed for industrial use.
Rationale for Bank Involvement
17. The World Bank has, since the 1980‟s, invested in numerous environmental projects, including projects in water supply, wastewater treatment and integrated water and waste water management. In addition, the project area is well known to the Bank through the Northern Irrigation Project, where it assisted the government in rehabilitating vast irrigation areas in 1988. In addition, experience gained from the project may support further innovations in lake management projects undertaken by the Bank in other parts of China.
18. The Bank has not been involved in water reclamation in its operations. The Chinese are looking to the Bank to enlist external support from Europe, USA and/or Japan.
19. China‟s 11th Five Year Plan (as well as drafts of the upcoming 12th Five Year Plan) calls for further expansion of water supply and environmental protection, and the Bank is able to play a significant role by introducing international experience and innovation in domestic wastewater reclamation for industrial water supply. Two of the reclamation plants are to reclaim water from domestic waste water plants. Advice to develop well-designed treatment and distribution systems is also critical.
20. The Bank will also draw on international assistance and experience for the Wuliangsuhai Lake component, the use of constructed wetlands to remove nutrients, and for salinity reduction of drainage water.
International Experience and Lessons Learned
21. The Bank has significant experience in China in both rural and urban infrastructure investments. In the water and sanitation sector, lessons and international experience in dealing with water reuse are:
(a) Wastewater treatment must result in water quality that is suitable for the particular reuse application; (b) Guidelines linked to reuse must ensure the safety of water reuse; (c) Source control of contaminants is essential, particularly for industrial wastewater; (d) Institutional coordination is essential between government authorities, civil society, and industries; and (e) Improvement of lake environment usually requires a set of integrated measures rather than a single approach.
17 22. Bank experience with numerous waste supply and waste water projects in China has repeatedly shown two problems, which both amplify the estimated and actual budget requirements: oversizing and overestimating. Oversizing refers to highly optimistic projections of future growth in demand, leading to very large sizing of investments, which in turn may lead to under-utilization of constructed facilities, poor economic performance and technical complications. Overestimating costs is a result of local design institutes applying officially listed prices rather than market prices. This has frequently resulted in loan savings in previous projects in China.
23. International experience shows that water reclamation is generally not carried out by individual industries due to safety considerations. Safeguards in treatment of all reclaimed water are especially important. In addition, separate distribution networks are necessary to ensure that there are no possibilities of cross connections between potable water and reclaimed water. Pipes for reclaimed water are buried at different depths and are color-coded so as to clearly distinguish them from pipes for potable water.
18 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Latest ISR Raings Project Sector Issue Board Date DO IP Bank Financed China – Chongqing Small Cities Infrastructure service delivery and rapid 21-Jun-05 S MS Infrastructure Improvement (Cr urban growth 47940) China – GEF Ningbo Water and Quality of water and wastewater services, 29-Jun-06 S S Environment Management (TF- public health protection 56692) China – Guangdong/PRD Urban Rationalization of environmental service 8-Jun-04 MS MS Environment (Cr 47420) delivery in the regional plan
China – Guangxi Integrated Forestry Biodiversity, environmental policies and 14-Dec-06 S S Development and Conservation institutions Project (Cr 48440)
China – Guangxi Urban Environment Water resource management, waterway 16-Jun-98 S S Project (Cr 43480) management, pollution management and environmental health China – Hai Basin Integrated Water Water resource management and pollution 15-Apr-04 S S and Environment management (GEF) control
China – Hebei Urban Environment Environmental degradation of water and 27-Jun-00 S S (Cr 45690) land resources, safe water supply China – Hunan Urban Development Flood protection, wastewater and air 16-Sep-04 U U (Cr 47510) pollution
China – Inland Waterways Project IV Rural services and infrastructure and 25-Mar-04 S MS (Cr 47280) water resource management
China – Ningbo Water and Quality of water and wastewater services, 17-Mar-05 S S Environment Management (Cr 47700) public health protection
China – Poor Rural Communities Livelihood security, and rural poor 21-Jun-05 MU MU Development (Cr 73100) participation
China – Rural Water IV (Cr 44850) Safe water supply, sanitation and health 3-Jun-99 S S behaviors in poor rural areas
China – Sustainable Coastal Water resource management 19-May-98 S S Resources Development Project (Cr 43220) China – Tai Basin Urban Environment Water resources degradation and urban 3-Aug-04 S S (Cr 47480) environment improvement
19 China – Tarim Basin II (Cr 30930) Irrigation, water resource and land 9-Jun-98 HS HS management
China – Water Conservation (Cr Irrigation, water resource management 19-Dec-00 HS HS 45890) and farmer incomes
Other MDBs and Agencies Guangxi Nanning Urban Infrastructure Development N/A N/A N/A Environmental Upgrading (ADB)
Nanning – Langdong WWTP, Phase I Infrastructure Development N/A N/A N/A (French Government)
Henan Wastewater Management and Wastewater management and water N/A N/A N/A Water Supply Project (ADB) supply for public health and urban environment Private Sector Water Supply Project Safe water supply to urban residents N/A N/A N/A in China (ADB)
Guangxi Water Supply Project (JBIC) Water supply, Infrastructure Development N/A N/A N/A
Water and Agricultural Management Water resources management in N/A N/A N/A in Hebei Project (AUSAID) agriculture
ISR - Implementation Status Report S - Satisfactory MS - Moderately Satisfactory U - Unsatisfactory MU - Moderately Unsatisfactory DO - Development Objective IP - Implementation Progress N/A - Not Available
20 Annex 3: Results Framework and Monitoring CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Results Framework
PDO Project Outcome Indicators Use of Project Outcome Information The project development objective Reduction in groundwater To help BMG further align is to support Bayannaoer abstraction using private wells (as planning and implementation Municipality to: (a) better utilize % of total water use). of urban master development water resources to develop higher plans. income activities to local residents Water quality (COD Ton/a, TN without compromising the water Ton/a, TP Ton/a) at Wuliangsuhai use for irrigation, which would Lake outlet. adversely affect the rural poor; and (b) improve the water environment of Wuliangsuhai Lake by reducing water pollution entering such lake. Intermediate Outcomes Intermediate Outcome Use of Intermediate Indicators Outcome Monitoring Reclaimed Water Supply Component Improve the utilization of water Actual water supply volume/ To help BMG improve the resources through investment in Design water supply capacity (%). water supply management water reclamation facilities to system. reclaim drainage water from Rate of water tariff collection (%). irrigated farmlands and treated waste water. % of full costs of owning and operating the facilities covered by tariffs (combining reclamation and waste water cost recovery). Wastewater Management Component Improve quality of drainage water. Pollution load removed by To help BMG improve the WWTP & Tertiary Treatment existing wastewater Stage (TTS) [to COD ton/a], [to management system. NH3-N ton/a], and [to TP ton/a]. Wuliangsuhai Lake Component Further reduce pollutants from Pollution load removed by To help BMG develop a long- point and non-point sources Constructed Wetlands [to COD term strategy for water quality entering Wuliangsuhai Lake. ton/a], [to TN ton/a], and [to TP improvement in Wuliangsuhai ton/a]. Lake.
Annual total reed production in the wetland (Ton/a).
Reduced rate of fertilization (N, P) in pilot zone (%).
21 Arrangements for Results Monitoring
Target Values Data Collection and Reporting Project Outcome Baseline 2011 2012 2013 2014 2015 2016 2017 Frequency Data Responsibility Indicators (2010) and Reports Collection for Data Instruments Collection Reduction rate of 24 33 43 52 62 71 81 90 Annually Resources BWAG groundwater Bulletin abstraction from self-wells (%)
Water quality (COD ton/a, TN ton/a, TP ton/a ) of Wuliangsuhai Lake‟s outlet [to COD ton/a] 85 85 85 85 85 78 70 60 Bi-monthly Experiments BWAG [to TN ton/a] 3.8 3.8 3.8 3.8 3.8 3.6 3.3 3.0 Bi-monthly Experiments [to TP ton/a] 0.23 0.23 0.23 0.23 0.23 0.22 0.21 0.20 Bi-monthly Experiments Intermediate Outcome Indicators Actual water supply volume/ 0 50 55 60 Semi Annual Yearly Report BWAG Design water supply capacity (%) Rate of water tariff 0 70 75 80 Quarterly Yearly Report BWAG collection (%) % of full costs of 0 100 100 Annual Yearly Report BWAG owning and operating the facilities covered by tariffs* Pollution load removed by
22 Target Values Data Collection and Reporting Project Outcome Baseline 2011 2012 2013 2014 2015 2016 2017 Frequency Data Responsibility Indicators (2010) and Reports Collection for Data Instruments Collection WWTP &Tertiary Treatment Stage (TTS) Bayannaoer [to COD ton/a] 0 0 0 400 500 600 800 1000 Bi-monthly Experiments Institution of [to NH3-N ton/a] 0 0 0 280 350 420 560 700 Bi-monthly Experiments Water [to TP ton /a] 0 0 0 30 40 50 65 85 Bi-monthly Experiments Resources Pollution load removed by Constructed Wetlands [to COD ton/a] 0 0 0 0 0 3,850 6,200 7,700 Bi-monthly Experiments Bayannaoer [to TN ton/a] 0 0 0 0 0 680 1,100 1,350 Bi-monthly Experiments Institution of [to TP ton/a] 0 0 0 0 0 95 150 190 Bi-monthly Experiments Water Resources
Annual total reed 36,000 36,000 36,000 36,000 36,000 41,000 46,000 52,000 Annually Yearly Report Bayannaoer production in the Institution of wetland [Ton/a] Water Resources Reduced rate of fertilization in pilot zone (N. P) (%) [N] 0 0 0 0 0 3 6 10 Annually Monitor Bayannaoer [P] 0 0 0 0 0 3 6 10 Annually Monitor Institution of Water Resources * Definition: Full cost recovery tariffs are defined as the level of tariffs to cover the cost of operation, maintenance, interest payments and the larger of depreciation and debt service from reclamation and wastewater. The target value is 100% accumulated cost recovery from 2016 onwards.
23 Annex 4: Detailed Project Description CHINA: Bayannaoer Water and Environment Comprehensive Management Project
1. The project comprises four components: (a) Reclaimed Water Supply to selected Industrial Estates; (b) Waste water Management in selected Industrial Estates; (c) Constructed Wetlands at discharge points to Wuliangsuhai Lake and Pilot of Non-point Pollution Control; and (d) Technical Assistance. The following gives details of each project component.
Project Component 1: Reclaimed Water Supply to Selected Industrial Estates (US$72.3 million)
2. Component 1 includes the following sub-components: (a) WRECs in Hangjinhouqi, Ganqimaodu, Wuyuan and Wulatehouqi with a total output capacity of 115,000 m3/d; (b) raw water pipes from WWTPs, drains, groundwater wells, water reservoirs to WRECs; and (c) water recycling mains and industrial water supply networks inside the industrial zones.
3. There will be a total recycled water design capacity of 155,000 m3/d in the project industrial estates, of which 115,000 m3/d originate from WRECs, and 40,000 m3/d from WWTPs. WREC technology is based upon existing water quality data from the various water sources on the one hand (all sources are too saline for industrial use:) and the requirements defined by industrial water use on the other hand. It includes chemical coagulation & flocculation, sedimentation, rapid sand filtration, Microfiltration & Reverse Osmosis (RO) and final disinfection. Sludge is mechanically thickened, dewatered in belt filter presses and disposed in a landfill.
4. In order to optimize the choice of RO membrane specifications, regular monitoring on influent will be needed during early stages of project implementation, as heavy metal removal must be performed on the brine of the reverse osmosis plant. Three heavy metals have been observed: cadmium, mercury and lead. Before the final designs are developed, the following steps will be taken:
(a) Water quality data must be collected and undergo complete testing for heavy metals, AOX and phenols. (If this data is not readily available, water samples should be taken over one week). (b) All inflow water will be treated without bypassing raw water so as to get treatment levels acceptable for industrial water quality. Over 90% of the water after treatment must meet quality standards for TDS and other elements. (c) Each water reclamation plant should have a treatment process for removal of heavy metal from the brine. The types and dosage of precipitation chemical, coagulation agent and flocculation agent must be determined to effectively precipitate/flocculate and coagulate the heavy metals out.
24 (d) Removal of heavy metallic ions is much higher at higher pH (9 or 10), and therefore it will be necessary to determine the process of raising the pH; (e) Jar test verification with pH correction needs will have to be determined on each of the stages of testing to ensure that each of the steps do work. (f) A feasibility-level layout for heavy metal removal from brine and sizing of the mixing tanks, sedimentation tanks and sludge disposal systems needs to be shown at feasibility level studies.
Project Component 2: Waste water Management in Selected Industrial Estates (US$52.5 million)
5. Component 2 includes three new waste water treatment plants in Wulateqianqi, Ganqimaodu and Wulatehouqi with a total design capacity of 80,000 m3/d. The required sewer collection systems will form part of the project as well, but are financed by the industrial estates.
6. The proposed waste water treatment is based upon conventional mechanical- biological waste water treatment plants (WWTPs) for primary and secondary treatment, followed by a tertiary treatment stage (TTS). The WWTPs will use the A2O process, comprising screening, grit chambers, balancing tanks, aeration tanks (A2O-process), and final sedimentation tanks. Sludge will be mechanically thickened, dewatered in belt filter presses and disposed in a landfill. The WWTPs include: (a) large balancing tanks at their inlet to flatten hazardous peak inflows; and (b) nutrient dosage (e.g., urea) for a proper functioning of the biological stage. A strict program will be installed to monitor industrial discharges through various institutions (industry, BWAG, EPB, independent monitoring) complete with enforcement conditions and a pollution load control plan, all of which form part of the contractual agreements between BWAG and industries. To ensure that the standards for reuse are met, TA has been included for project management and clean production, as well as for staff training.
Table 4.1: Components 1 & 2 - Key Capacity Characteristics of the various treatment works Component 2 Component 1 LOCATION WWTP & Design WREC Input Output MAXIMUM TTS Capacity Capacity Capacity RECYCLED WATER (nr) (m3/d) (nr) (nr) (m3/d) (m3/d) Wulatehouqi 1 (new) 20,000 1 (new) 1 (new) 35,000 35,000 Ganqimaodu 1 (new) 30,000 1 (new) 1 (new) 40,000 60,000 * Wulateqianqi 1 (new) 30,000 ------20,000 * Hangjinhouqi 1 (existing) (20,000) 1 (new) 1 (new) 20,000 20,000 Wuyuan 1 (existing) (20,000) 1 (new) 1 (new) 20,000 20,000 TOTAL PROJECT 3 80,000 4 4 115,000 155,000
* … in addition to WREC output another 20.000 m3/d are recycled from WWTP.
25 Project Component 3: Constructed Wetlands at Discharge Points to Wuliangsuhai Lake and Pilot of Non-Point Pollution Control (US$33.4 million)
7. Component 3 includes the following sub-components: (a) free water surface constructed wetlands where the main drain enters Wuliangsuhai Lake; (b) creating and dredging of canals in Wuliangsuhai Lake; and (c) pilot of non-point pollution control measures.
8. The total area of the proposed wetland is 60.3 km2, composed of a sedimentation pond, 1st stabilization pond, 1st reed bed zone, 2nd stabilization pond and subsequent 2nd reed bed zone. The constructed wetland will be located in a zone, which currently already is a wetland, although mainly with stagnant water. The project, through the introduction of water flow and free water surfaces, will reduce the potential risk of mosquito breeding and bad odors. This component will also create grids/canals through reed fields in the lake to improve water circulation in Wuliangsuhai Lake, thereby reducing the size of stagnant water zones by about 40 km2, i.e., from about 180 km2 down to about 140 km2, to reactivate the biological treatment potential of these zones. The main canal will be dredged 45 m wide, and secondary canals shall be 10 m wide. The component will support the piloting of non-point control measures that are under development by a parallel government program. It will test the reduction in the use of chemical fertilizer by optimized application so that it is more efficiently absorbed by the field crops.
9. Component 3 will lead to a reduction of incoming pollutants of drain waters through the treatment effect in the constructed wetland (CW) system in the order of about 80% COD removal, about 70% TN removal, and about 80% TP removal in summer. In winter, when the water surface is frozen, removal rates will drop to about 30% for COD, 15% for TN, and 10% for TP. Average annual removal rates will be about 70% for COD, and 60% for TN and TP. Such removal rates match experience under similar environments, but due to the specific conditions of Wuliangsu Lake, certain variations from other CWs are not unexpected. In particular, the relatively low influent concentrations of N and P (as compared to the wastewater influent of many other CWs), promote higher removal percentages of these nutrients. In any case, the overall impact is a significant improvement of lake water quality and its effluent. While currently water quality in the lake is generally in class V for COD and TN, and in class III-V for TP, after project implementation about 50% / 15% of the lake area will be in class IV for COD / TN respectively. While currently only about 5-20% are in class III for TP, in future summers this class would be reached in almost 90% of the lake area; in winter nearly 50% will be within class III for TP.
Project Component 4: Technical Assistance (US$2.7 million)
10. Component 4 includes four sub-components: (a) project management; (b) clean production; (c) BWAG‟s Business Development Plan; and (d) training.
11. Project Management. Under this sub-component, BWAG will engage a consulting firm to assist it in finalizing the preliminary design of water/wastewater
26 processes and related bidding documents, and construction drawings; advising construction supervisors in contract management, especially in handling contract variations; preparing semi-annual project progress reports, mid-term review, and implementation completion report; developing a plan for integrated information management system; and conducting the external EA and RAP monitoring.
12. Clean Production. The consultant will help BWAG to develop a guideline or manual to introduce a clean production mechanism that will help industries to reduce the generation of pollutants in their production process under the current legal framework. The consultant will: review the current legal framework and clean production practices; consult with sample industries and review their production process; discuss with authorities, including the Economic Development Committee, DRC, and EPB etc.; and introduce international best practices in clean production.
13. BWAG’s Business Development Plan. The consultant will assist the BWAG to develop a macro level strategic business development plan that will help BWAG to transition from a government entity to a market oriented corporation.
14. Training. Under this sub-component, BWAG will conduct staff training through workshops, and domestic and overseas study tours to help to strengthen institutional capacity.
27 Annex 5: Project Costs CHINA: Bayannaoer Water and Environment Comprehensive Management Project
1. The total cost of the project is US$164.5 million. The following tables present the detailed costs of the project by component and expenditures.
People's Republic of China Bayannaoer Water and Environment Comprehensive Management Project Components Project Cost Summary
% % Total (RMB Million) (US$ Million) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs Reclaimed Water Supply 247.0 202.1 449.1 37.1 30.4 67.5 45 45 Wastew ater Management 248.1 76.9 325.0 37.3 11.6 48.8 24 33 Artificial Wetland, Wuliangsu Lake, Non-point Pollution Control 150.4 54.2 204.6 22.6 8.1 30.7 26 21 Technical Assistance 0.7 17.6 18.2 0.1 2.6 2.7 96 2 Total BASELINE COSTS 646.1 350.8 996.9 97.1 52.7 149.8 35 100 Physical Contingencies 30.2 14.9 45.1 4.5 2.2 6.8 33 5 Price Contingencies 19.7 6.5 26.2 3.0 1.0 3.9 25 3 Total PROJECT COSTS 696.0 372.1 1,068.2 104.6 55.9 160.5 35 107 Interest During Implementation - 25.0 25.0 - 3.8 3.8 100 5 Front-end fees - 1.3 1.3 - 0.2 0.2 100 - Total Costs to be Financed 696.0 398.5 1,094.5 104.6 59.9 164.5 38 112
People's Republic of China Bayannaoer Water and Environment Comprehensive Management Project Expenditure Accounts Project Cost Summary
% % Total (RMB Million) (US$ Million) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs I. Investment Costs Land Acquisition and Resettlement 34.0 - 34.0 5.1 - 5.1 - 3 Civil Works 475.1 223.6 698.6 71.4 33.6 105.0 32 70 Equipment 1.7 2.4 4.0 0.2 0.4 0.6 59 - Supply and Installation 32.7 106.8 139.5 4.9 16.1 21.0 77 14 Consultants' Services 0.7 11.7 12.3 0.1 1.8 1.9 95 1 Training, Workshop, and Study Tour 1.1 6.4 7.5 0.2 1.0 1.1 85 1 Survey, Investigation, Design, and Mapping 101.0 - 101.0 15.2 - 15.2 - 10 Total BASELINE COSTS 646.1 350.8 996.9 97.1 52.7 149.8 35 100 Physical Contingencies 30.2 14.9 45.1 4.5 2.2 6.8 33 5 Price Contingencies 19.7 6.5 26.2 3.0 1.0 3.9 25 3 Total PROJECT COSTS 696.0 372.1 1,068.2 104.6 55.9 160.5 35 107 Interest During Implementation - 25.0 25.0 - 3.8 3.8 100 5 Front-end fees - 1.3 1.3 - 0.2 0.2 100 - Total Costs to be Financed 696.0 398.5 1,094.5 104.6 59.9 164.5 38 112
2. The identifiable taxes and duties are US$12.3 million, and the total project cost, net of taxes, is US$152.2 million. Therefore, the share of project cost net of taxes is about 92.5%.
28
3. The following table presents the contributions of different sources of financing.
People's Republic of China Bayannaoer Water and Environment Comprehensive Management Project Financing Plan
(US$ Million) (RMB Million) Foreign Local Total Percent Foreign Local Total Percent The Government 7.1 70.3 77.4 47.1 47.1 468.0 515.1 47.1 World Bank 53.5 26.4 80.0 48.6 356.3 176.0 532.3 48.6 Bayannaoer Office for Comprehensive Agricultural Development 2.3 4.8 7.1 4.3 15.2 31.7 46.9 4.3 Institute of Agricultural Environment and Sustainable Development 0.0 0.0 0.0 0.0 0.1 0.2 0.2 0.0 Total 62.9 101.6 164.5 100.0 418.7 675.9 1,094.5 100.0
29 Annex 6: Implementation Arrangements CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Institutional Arrangements
1. Bayannaoer Municipal Government (BMG) has established a Leading Group (LG) for the coordination of the project, chaired by the Mayor. Members of the LG comprise the directors of all relevant government authorities such as Bayannaoer Municipal Development and Reform Commission, Bayannaoer Municipal Finance Bureau, Bayannaoer Municipal Water Affairs Bureau, and Bayannaoer Municipal Environment Protection Bureau, as well as the directors of the counties where the project is located. During project implementation, LG will meet every six months to supervise project progress and resolve any issues.
2. Bayannaoer Hetao Water Affairs Group Co., Ltd. (BWAG) is the implementing agency of the project, under the supervision of the LG. BWAG was established by the Hetao Irrigation Area Management General Bureau in 2006 for the management of water for agriculture. BWAG was authorized by a BMG decree to manage water for non- agricultural uses.
3. BWAG has set up a World Bank Project Management Office (PMO) with six divisions: (a) General Division; (b) Finance Division; (c) Engineering Division; (d) Procurement Division; (e) Environment and Resettlement Division; and (f) Monitoring and Evaluation Division.
O&M
4. BWAG will outsource the operation and maintenance of the water reclamation plants and waste water treatment plants to Yellow River West Water Industrial Company (WWIC) after the construction of each plant. BWAG will collect tariff charges from users in the industrial estates and pay the costs of O&M to WWIC. BWAG will be responsible for the debt service of the water reclamation plants and the wastewater treatment plants.
5. BWAG will delegate the responsibilities for operation and maintenance of constructed wetlands and canals in Wuliangsuhai Lake to Inter Mongolia Wuliangsuhai Lake Industrial Corporation, a subsidiary of BWAG, specialized in developing the resources of Wuliangsuhai Lake, such as fishery, reed harvesting, and tourism. BMFB will be responsible for debt service of the constructed wetlands and canals in Wuliangsuhai Lake.
6. Appendix 2 to this Annex summarizes the institutional responsibilities for implementing and operating the project.
30
Project Schedule
7. The project will be implemented in seven years. All wastewater treatment plants will be procured prior to the signing of the legal documents of the project and construction will be completed in the third year of the project. Water reclamation plants and main trunks will have their design, bidding documents, and the bids finalized in the first year of the project. Construction of the three water reclamation plants will be completed in the third year, and the fourth water reclamation plant will be completed in the fourth year.
8. Implementation of the constructed wetlands and canals in Wuliangsuhai Lake will start in the second year and continue to the seventh year.
31 Appendix 1
Diagram of Institutional Arrangments and their Functions
Inner Mongolia Autonomous Regional Finance Department
Disbursement of Withdrawal of World Bank Loan World Bank Loan Leading Group for Bayannaoer Water Reclamation and Environment Protection Project Bayannaoer Municipal Finance Bureau Bayannaoer Hetao Water Affairs Group
Disbursement of Reimbursement World Bank Loan and from Finance Division Engineering Division Procurement Division Gov't Counterpart Funds World Bank Loan
Contract Contract Signing Payment Management Contracts
Contractors / Suppliers / Consultants
32 Appendix 2
Institutional and Implementation Arrangement
Component Sub-component Implementing Agency O&M Agency Asset Owner Reclaimed Water Construction of: Bayannaoer Hetao Yellow River West Bayannaoer Hetao Supply to Selected (1) Wulatehouqi Water Water Affairs Group Water Industrial Co., Water Affairs Group Industrial Estates Reclamation Plant Co., Ltd. Ltd. Co., Ltd. (2) Ganqimaodu Water Reclamation Plant (3) Hangjinhouqi Water Reclamation Plant (4) Wuyuan Water Reclamation Plant Waste water Construction of: Bayannaoer Hetao Yellow River West Bayannaoer Hetao Management in (1) Wulatehouqi Waste Water Affairs Group Water Industrial Co., Water Affairs Group Selected Industrial Water Treatment Plant Co., Ltd. Ltd. Co., Ltd. Estates (2) Ganqimaodu Waste Water Treatment Plant (3) Wulateqianqi Waste Water Treatment Plant Construction of (1) Construction of Bayannaoer Hetao Inner Mongolia Bayannaoer Hetao Constructed Wetlands Constructed Wetlands Water Affairs Group Wuliangsuhai Lake Water Affairs Group at Discharge Points to (2) Construction of Co., Ltd. Industrial Development Co., Ltd. Wuliangsuhai Lake and Canals in Wuliangsuhai Corporation Pilot of Non-point Lake Pollution (3) Demonstration of Non-point Pollution Control Measures Technical Assistance (1) Project Bayannaoer Hetao N/A N/A
33 Institutional and Implementation Arrangement
Component Sub-component Implementing Agency O&M Agency Asset Owner Management Water Affairs Group (2) Development of Co., Ltd. Industrial Clean Production Mechanism (3) Development of Business Plan for BWAG (4) Training and Study Tours
34 Annex 7: Financial Management and Disbursement Arrangements CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Summary
1. The Financial Management Specialist (FMS) has conducted an assessment of the adequacy of the project financial management system. The assessment, based on guidelines issued by the Financial Management Sector Board on March 1, 2010, has concluded that the project meets the minimum Bank financial management requirements, as stipulated in BP/OP 10.02. In the FMS opinion, the project will maintain adequate financial management arrangements acceptable to the Bank, and as part of the overall arrangements that the borrower has in place for implementing the operation, provide reasonable assurance that the proceeds of the loan will be used for the purposes for which the loan is granted. The financial management risk is the risk that the Bank loan proceeds would not be used for the purposes intended and is a combination of country-, sector- and project-specific risk factors. Taking into account the risk mitigation measures proposed in this project, a “low” FM risk rating was assigned to the project at appraisal stage.
2. Funding sources for the project include the Bank loan and counterpart funds. The Bank loan proceeds will flow directly into a project designated account (DA) to be set up at and managed by the Inner Mongolia Autonomous Regional Finance Department (IMFD). The Bank loan agreement will be signed between the Bank and the People‟s Republic of China through its Ministry of Finance (MOF), and on-lending arrangements for the Bank loan will be signed between MOF and the Inner Mongolia Autonomous Region Government through its IMFD, and then between IMFD and Bayannaoer Municipal Government through its finance bureau. Finally, on-lending arrangements will be signed between Bayannaoer Municipal Finance Bureau (BMFB) and Bayannaoer Water Affairs Group Co., Ltd. (BWAG). Counterpart funds are comprised of local government appropriations and domestic financing.
Country Issues
3. To date, no CFAA has been carried out by the Bank and the Borrower. Our knowledge of the system is, however, fairly comprehensive, thanks to several studies carried out by the Borrower and others1. Based on the studies and material produced by others, our observations of developments in the areas of public expenditures, accounting and auditing, and Bank experience with projects in China over the past several years, the Bank has noted that substantial achievement in the aforementioned areas has been made and further improvements are expected in the next few years. This is a work in progress, and as the economic reform program further unfolds, the Borrower has come to realize the importance of establishing and maintaining an efficient and effective market mechanism to ensure transparency and accountability, as well as minimize the potential for fraud or corruption.
1China: Report on the Observance of Standards and Codes - Accounting & Auditing (World Bank 2009) Financial Management and Governance Issues in China (ADB 2000) Public Sector Management Issues in China (Christine Wong 2005) Government Budgeting and Accounting Reforms in China (Lou Jiwei 2001)
35 4. Due to the rather unique arrangement with the Borrower, funding (particularly Bank loans/grants) of Bank projects is controlled and monitored by MOF and its extension at the sub- national level (i.e., finance bureaus at provincial, municipal/prefecture and county levels). However, project activities are usually carried out by implementing entities of a specific industry or sector due to the level and complexity of expertise involved. While this segregation of duties provides added fiduciary assurance, the above arrangement usually requires more project coordination, as the multi- level management of the funding and implementation mechanisms can work to the detriment of smooth project implementation.
Audit Arrangements
5. The Bank requires that project financial statements 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 International Auditing Standards and the Government Auditing Standards of China. Inner Mongolia Autonomous Regional Audit Office (IMAO) has been identified as the auditor for the project. An annual audit report will be issued by IMAO. The Bank currently accepts audit reports issued by the China National Audit Office (CNAO), as well as provincial and regional audit offices for which CNAO is ultimately responsible.
6. The annual audit report of project financial statements will be due to the Bank within 6 months after the end of each calendar year. This requirement is stipulated in the loan agreement. The responsible agency and timing are summarized as follows:
Audit Reports Submitted by Due date Project financial statements BWAG June 30 of each calendar year
Risk Assessment and Mitigation
7. The following risks, with corresponding mitigating measures, have been identified during the assessment:
Risk Risk Incorporated Risk Risk Rating Conditions of Rating Before Mitigating Measures After Negotiations, Mitigating Mitigating Board or Measures Measures Effectiveness Inherent Risk Country Level Modest Continuous dialogue with related Modest N government entities and technical assistance from the Bank will help the government to improve its public sector financial management. In the short- term, annual audit requirements will reduce the risk of project funds not being used for their intended purposes. For those areas where the government system cannot be used, the Bank‟s
36 Risk Risk Incorporated Risk Risk Rating Conditions of Rating Before Mitigating Measures After Negotiations, Mitigating Mitigating Board or Measures Measures Effectiveness specific requirements will be embedded into the project financial management system. Entity Level Modest Although BWAG lacks experience with Low N Bank-financed projects, it is an existing commercial enterprise with regular enterprise financial management control and adequate capacity. Also, IMFD is experienced with Bank financed operations. Close monitoring and guidance from IMFD, as well as the Bank‟s regular supervision; (to some extent), can also mitigate the risk. Project Level Modest The project will be implemented in Low N Bayannaoer only by BWAG. Since BWAG is an existing commercial enterprise and has mature financial management procedures and controls, no specific project financial management manual is required for the project. Control Risk Budgeting Modest The procedures regarding budget Modest N preparation and execution have been agreed by the Bank and the government. The Bank will review their execution status during project implementation and help to improve any identified weak areas. Accounting Modest Accounting policies and procedures are Low N already in place. Circular #13 has been issued by MOF and adopted for all Bank financed projects. Such a circular will also be adopted and followed by BWAG. A well-designed training workshop will be provided for all financial staff before project initiation. Internal Control Substantial Detailed internal control procedures, Modest N including segregation of duties, review, approval and reporting procedures, as well as safeguard assets, have been established within BWAG. The Bank will review actual practice during project implementation. Funds Flow Modest The Bank loan proceeds will be Low N managed and monitored through IMFD and BMFB. All disbursement requests
37 Risk Risk Incorporated Risk Risk Rating Conditions of Rating Before Mitigating Measures After Negotiations, Mitigating Mitigating Board or Measures Measures Effectiveness will be subject to their substantive reviews. Funds flow arrangements are straight forward and the approval processes have been streamlined. Financial Modest The format and content of financial Low N Reporting statements have been stipulated by MOF. The loan agreement will specify the timing requirements for such financial reporting. Auditing Modest The external auditor, IMAO, has Low N extensive experience with previous Bank projects. Overall Modest Low
8. The overall FM risk-rating assigned to this project at the appraisal stage is low, provided the proposed mitigating measures are carried out. The FMS will monitor the effectiveness of the measures and project FM risk during project implementation.
Fund Flow and Disbursement Arrangements
9. Four disbursement methods are available for the project: advance, reimbursement, direct payment and special commitments. Supporting documents required for Bank disbursements under different disbursement methods will be documented in the Disbursement Letter.
Applications will be supported by:
. For reporting eligible expenditures paid from the Designated Account (DA) for requesting for reimbursement:
(a) List of payments against contracts, with evidence of eligible expenditures (e.g., copies of receipts, supplier invoices) for the contracts subject to the Bank‟s prior review indicated in the table below;
Expenditure Category Contracts Equivalent or More than US$ Civil Works 5,000,000 Goods 500,000 Firm Consultant 100,000
(b) Statement of Expenditure in the form detailed in the Disbursement Letter for all other expenditures/contracts not subject to the Bank‟s prior review.
. For requests for direct payment: evidence of eligible expenditures, e.g., copies of receipts, supplier invoices.
38
10. The Bank loan would be disbursed against eligible expenditures (taxes inclusive) as in the following table:
IBRD Loan Category Percentage of Expenditures to be Allocated Amount Financed Civil Works 54,500,000 49 Goods 22,300,000 Consultants‟ Services 1,900,000 100 Training. Workshops, and Study Tours 1,100,000 Front-end Fee 200,000 Total 80,000,000
11. Retroactive financing will be applied after July 29, 2010 for the construction of 3 WWTPs in Wulatehouqi, Ganqimaodu, and Wulateqianqi, as well as consulting services for project management and domestic training activities. The estimated expenditures of these WWTPs are about US$36.0 million and the amount eligible for retroactive financing is about US$8.0 million. BWAG is aware that payments made in expectation of retroactive financing are at its own risk, and do not commit the Bank to making a loan for the project or the financing of such payments.
12. One segregated designated account (DA) in US dollars will be opened at a commercial bank acceptable to the Bank and will be managed by IMFD. The ceiling of the DA is documented in the Disbursement Letter.
13. IMFD will be directly responsible for the management, maintenance and reconciliation of the DA. Supporting documents required for Bank disbursements will be prepared and submitted by BWAG, through BMFB, for approval and verification before sending to IMFD for further disbursement processing. The proposed flow of funds and withdrawal applications (WAs) are shown in the chart below.
World Bank DA managed BMFB BWAG Contractors/ by IMFD Suppliers
WAs Flow Funds Flow
Financial Management and Reporting Arrangements
14. Strengths. IMFD has accumulated extensive experience in project financial management and disbursement, which will benefit the implementation of this project.
39 15. Weaknesses and Action Plan. The following weakness and action plan for addressing the weakness has been identified:
Significant Actions Responsible Person Completion weaknesses Date BWAG is new to Bank disbursement procedures and requirement- IMFD and WB Before project start of Bank-financed related training should be provided to all project if needed implementation projects. financial staff.
16. Implementing Agency. The Bayannaoer Municipal Government has established a Leading Group (LG) chaired by the mayor and comprising all relevant authorities. BWAG is responsible for project management, coordination, planning, implementation, monitoring and reporting, and financial management. A description of the institutional arrangement is in Annex 6.
17. Budgeting. BWAG will prepare the annual project implementation plan including the funding budget. The counterpart funds budget committed by local governments will be reviewed and approved by the local People‟s Congress at each level and will be included in the sectoral budget. Based on the approved budget and implementation progress, the related finance bureaus will provide government appropriations to the project. Budget variance analysis will be conducted regularly by BWAG, and necessary actions will be taken to make sure that the project is implemented as planned. The Bank will work with BWAG and supervise the project budgeting system in order to enhance budget preparation and execution during project implementation.
18. Accounting. The administration, accounting and reporting of the project will be set up in accordance with Circular #13: “Accounting Regulations for World Bank Financed Projects” issued by MOF in January 2000. The circular provides instructions on the accounting treatment of project activities and covers the following:
Chart of account Detailed accounting instructions for each project account Standard set of project financial statements Instructions on the preparation of project financial statements
19. The standard set of project financial statements mentioned above has been agreed by the Bank and MOF. It applies to all Bank-financed projects appraised after July 1, 1998 and includes the following:
Balance sheet of the project Statement of sources and uses of funds by project components Statement of implementation of loan agreement Statement of designated account Notes to the financial statements
40 20. BWAG will manage, monitor and maintain the project accounting records. Original supporting documents for project activities will be retained by BWAG. BWAG will prepare project financial statements and submit to the Bank for review and comment on a regular basis.
21. Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform is one of the factors critical to successful project financial management. Based on discussions, observation and review of the educational background and work experience of the staff identified for financial and accounting positions in BWAG, the task team noted that they are qualified and are appropriate for the work they are expected to assume. Well-designed training sessions will be provided for all project financial staff before the start of project implementation to familiarize them with the Bank‟s financial management requirements and disbursement procedures. Their capacities will be further strengthened through Bank review and supervision of the financial work during project implementation.
22. BWAG will record and maintain the project accounting books and records. The Bank will monitor the accounting process, especially during the initial stage, to ensure that complete and accurate financial information will be provided in a timely manner.
23. Internal Control and Internal Auditing. The related accounting policy, procedures and regulations have been issued by MOF. BWAG, as an existing commercial company, has its existing regular financial management procedures and controls.
24. There is no formal independent internal audit department for the project. However, this will not impact the project‟s financial management as withdrawal applications will be reviewed by various levels of finance bureaus, and an annual external audit of the project will serve as the mechanism to ensure that the financial management controls of the project are functioning appropriately.
25. Financial Reporting. The format and content of the project financial reports have been agreed between the Bank, BWAG and IMFD. Interim financial reports will be prepared and submitted to the Bank for review on a semi-annual basis.
26. BWAG will prepare the project financial statements and submit them to the Bank regularly for review and comment. The unaudited semi-annual interim project financial statements should be prepared and submitted to the Bank by BWAG no later than March 15 and September 15 after the end of each calendar semester, in form and substance satisfactory to the Bank.
27. Financial Covenants. No specific financial management covenants are applicable to the project except for the standard financial covenants, such as project audit and interim financial reports.
28. Supervision Plan. The supervision strategy for this project is based on its FM risk rating, which will be evaluated on a regular basis by the FMS, in consultation with the task team leader.
41 Annex 8: Procurement Arrangements CHINA: Bayannaoer Water and Environment Comprehensive Management Project
A. General
1. Procurement for the proposed project would be carried out in accordance with the World Bank‟s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, and revised in October 2006 and May 2010; “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and revised in October 2006 and May 2010; and the provisions stipulated in the legal agreement. The description of various items under different expenditure categories is presented below. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for prequalification, the estimated costs, prior review requirements, and the time frame would be agreed between the Borrower and the Bank project team in the procurement plan.
2. Procurement of Works, including Supply and Installation of Waste Water Treatment Plants and Reclamation Water Plants. Reclamation water treatment plants, water transmission mains and distribution networks for reclaimed water would be required under Component 1: Reclaimed Water Supply to Selected Industrial Estates. Wastewater treatment plants and distribution networks would be required under Component 2: Wastewater Management in Selected Industrial Estates. Construction of wetland, pumping station and rubber dams under artificial wetland, construction grids/canals in Wuliangsuhai Lake and construction of demonstration stations, including garage and maintenance facilities for non-point pollution control, would be required under Component 3: Construction of Artificial Wetlands at Discharge Points to the Wuliangsuhai Lake and Pilot Non-Point Pollution Control. Procurement will use the Bank‟s Standard Bidding Documents (SBD) for ICB and Model Bidding Documents (MBD) for NCB agreed with the Bank. A total of about US$112.2 million would be required under procurement of works, including supply and installation of wastewater treatment plants and reclamation water plants.
3. International Competitive Bidding. (ICB). Construction of works, including supply and installation of waste water treatment plants and reclamation water treatment plants, estimated to cost US$20 million equivalent or more, would be procured under ICB procedures specified in the Procurement Guidelines. Procurement notices for ICB shall be advertised in the websites of UNDB, as well as in China Daily Newspaper.
4. National Competitive Bidding. (NCB). Contracts estimated to cost less than US$20 million equivalent may be awarded under NCB procedures acceptable to the Bank. All procurement notices for NCB works contracts would be advertised in China Economic Herald. Procedures to be followed for National Competitive Bidding shall be those set forth in the Law on Tendering and Bidding of the People's Republic of China, promulgated by Order No. 21 of the President of the People's Republic of China on August 30, 1999, with a number of clarifications agreed with the Bank for compliance with the Guidelines.
42 5. Shopping. Small works estimated to cost less than US$100,000 equivalent per contract would be awarded through shopping procedures as specified in paragraph 3.5 of the Procurement Guidelines. These works would be suitable for lump sum and fixed-price contracts awarded on the basis of quotations obtained from at least three local contractors. The contract would be on an output basis.
6. Procurement of Goods. A total of about US$22.3 million of goods would be required under the Project. Goods would include membrane treatment equipment for reclamation water plants, water quality monitoring equipment, wetland maintenance equipment, specialized machinery for non-point pollution control; equipment for capacity building; and other equipment required under the project. Procurement will be based on using the Bank‟s Standard Bidding Documents for all ICB and the Chinese Model Bidding Documents (MBD) for NCB agreed with the Bank.
7. International Competitive Bidding (ICB). Contract for goods estimated to cost US$1 million equivalent or more would be procured under ICB procedures specified in the Procurement Guidelines.
8. National Competitive Bidding (NCB). NCB procedures would be used for procurement of goods costing less than US$1 million equivalent per contract. Procurement notices for NCB contracts would be advertised in the China Economic Herald.
9. Shopping. Other small value goods, including printing of guidelines and manuals, would be procured through shopping procedures for contracts under US$100,000 equivalent per contract.
10. Selection of Consultants. A total of about US$1.9 million of consultant services would be required. Consulting services include project management and design review, clean production mechanism for industries and business plan development for BWAG. Consultants would be selected in accordance with the following procedures:
11. Selection of Consulting Firms. Consulting contracts expected to cost more than US$200,000 equivalent per contract will use quality- and cost-based selection (QCBS) or quality-based selection (QBS) in conformity with paragraphs 2.1 through 3.4 of the Guidelines. Most consulting services are estimated under US$200,000 equivalent per contract and selection-based on consultants qualifications (CQS) would be used for these contracts. Chinese university, design and research institutes can be shortlisted if they comply with para. 1.11 of the Guidelines. In such cases, QBS or CQS would be used instead of QCBS. Short lists of consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Under the circumstances described in paragraph 3.10 of the Consultant Guidelines, consultants may be selected and awarded on a single- source basis, subject to the Bank‟s prior approval.
12. Selection of Individual Consultants. Individual consultants would be selected and contracts awarded in accordance with the provisions of paragraphs 5.2 through 5.3 of the Consultant Guidelines. Under the circumstances described in paragraph 5.4 of the Consultant Guidelines, individual consultants may be selected and awarded on a sole-source basis, subject to the Bank‟s prior approval.
43 13. Training and Workshops. A total of about US$1.1 million of training and workshops would be required. Detailed programs will be developed by PMO during project implementation and included in the project annual work plan for Bank review. Actual expenditures incurred in accordance with the approved detailed programs will be used as the basis for reimbursement.
14. Non-Bank Financing. A total of about US$23.0 million of other costs would be required for the project. These costs are largely related to power supply outside plants, design and supervision, resettlement, environment protection, procurement agent fee, monitoring and evaluation, and project management. These costs would be financed from counterpart funds.
B. Assessment of the Agency’s Capacity to Implement Procurement and Mitigation Action Plan
15. Procurement activities would be carried out by Bayannaoer Water Group through its established PMO. Procurement agents would be employed to assist in conducting ICB and NCB procurement. Design institutes and contract supervision firms would be selected through competition to carry out preliminary and detailed designs and supervise construction of works. Procurement capacity assessment was conducted in July 2009 and updated in April 2010. The assessment reviewed the project organizational structure and functions, past experience, staff skills, quality and adequacy of supporting and control systems, and the legal and regulatory framework. The risk for procurement is rated as substantial. To address the weakness in capacity, a detailed mitigating plan has been discussed and agreed.
16. The agreed mitigating measures are presented as follows:
Item Assessed Major Weaknesses Measures Agreed
A. Institutional Arrangement and Capacity 1.1 Procurement Undefined procurement Procurement unit in PMO is responsible for procurement. Its roles and functions. roles and functions. roles and functions have been defined in the Project Management Regulation.
1.2 Procurement Insufficient experience All four procurement officers were on board at loan staff. in Bank procurement. negotiation. First procurement training was organized for procurement officers before loan negotiation. Job description of procurement officers would be defined in the Project Management Regulation. Procurement training has been included in the overall project training program.
44 1.3 Technical Weak capacity in Qualified design institute would be selected through capacity preparation of technical competitive selection to carry out preliminary design and specifications and detailed design. bidding documents. A qualified procurement agent would be selected to assist in Excessive contract carrying out procurement. variation and cost A qualified consulting firm would be selected and financed overruns. by the Bank loan to provide assistance in review of design and bidding documents/bid evaluation reports, and advice on contract administration and supervision. Use of detailed design for bidding. B. Procurement Procedures 2. 1 Procurement Lack of proper PMO is responsible for the preparation and updating of planning. procurement planning. procurement plan. The procurement plan was approved by the Bank before loan negotiation. The procurement plan should be updated annually to reflect project needs during project implementation. The procurement plan would be available in the PMO. 2.2 Procurement Different procurement Bank procurement procedures are used for procurement of procedures. procedures. contracts to be financed by the Bank loan. NCB procurement provisions would be included in the legal agreement to reconcile the differences between the Bank guidelines and local procedures. 2.3 Promotion of No mandatory Procurement notices for ICB would be published in China transparency requirement for Daily, a national newspaper, and the UNDB website. advertising of Procurement notices for NCB would be published in the procurement China Economic Herald, a national newspaper. opportunities. All procurement notices would be available on the Bayannaoer Water Group website (www.hetaosw.com). 2.4 Disclosure of No public disclosure Publication of contract award for ICB, direct contracting and procurement result. mechanism for award of consultant services, would be in accordance with the Bank contracts established. guidelines. NCB contract award would be published on China.bidding.com.
2.5 Handling of No formal complaint Procedures for handling complaints provided in the Chinese complaints. handling procedures. Government Procurement Law would be followed under this project. Complaint hot line would be established in the PMO. C. Recordkeeping 3.1 Procurement Procurement filing system Procurement records and files would be maintained in the filing. needs to be set up. PMO.
3.2 Procurement Supervision mission Bank will carry out ex-post review at least once every six supervision months during project implementation.
C. Procurement Plan
17. The Borrower has developed an overall procurement plan for project implementation, which provides the basis for the procurement methods. The plan was reviewed and agreed at appraisal. The
45 procurement plan would be available in the project‟s database and on the Bank‟s external website. The procurement plan will be updated in agreement with the project team annually, or as required, to reflect project implementation needs and improvements in institutional capacity.
D. World Bank Prior Review
18. All contracts in excess of US$500,000 for goods and US$5 million for works, for consultant services in excess of US$100,000 for firms, and all contracts awarded under single source selection for firm and sole-source selection for individual consultant would be subject to prior review by the Bank. All other contracts would be subject to ex-post review by supervision missions; the post review sampling ratio would be one out of five contracts.
E. Frequency of Procurement Supervision
19. In addition to the prior review to be carried out by the Bank, the capacity assessment of the implementing agency has recommended one procurement mission every six months to carry out procurement supervision and post-review of procurement actions.
46 Table 8.1: Total Project Costs by Expenditure Category (US$ thousands)
Expenditure Category Total costs
1. Works 112.2 2. Goods 22.3 3. Consultant Services 1.9 4. Training and Workshops 1.1
5. Non Bank Financing 23.0 Total 160.5
Table 8.2: Thresholds for Procurement Methods and Prior Review
Prior Review Expenditure Procurement Threshold Procurement Threshold (US$ Category (US$ thousands) Method thousands) 1. Civil works, 20,000 ICB All including supply and <20,000 NCB 5,000 installation <100 Shopping NA
2. Goods 1,000 ICB All <1,000 NCB 500 <100 Shopping NA
3. Consultant services 200 QCBS 100 <200 CQS 100 Single/Sole source All selection Individual consultants NA
47 Annex 9: Economic and Financial Analysis CHINA: Bayannaoer Water and Environment Comprehensive Management Project
ECONOMIC ANALYSIS
1. Economic analysis was performed for each of the water reclamation systems and waste water systems in each industrial estate. During this process tariff increases needed to get a reasonable EIRR were calculated. Costs were based on the costs for investments and O&M estimated by design institutes. Replacement costs of key elements over 8 years were also considered. Investment costs are based on market prices of existing contracts in the region excluding taxes, duties and transfer payments. Market prices of construction are close to the economic costs, because all subsidies for materials, labor and other costs have been removed.
2. Direct economic benefits for the mineral industry from the supply of reclaimed water could not be computed without a detailed study of the industry using input/output analysis and programming models of the entire industrial sector. Since this was not feasible, the tariff paid for reclaimed water has been used as a proxy for benefits, even though it is understood that tariffs underestimate the benefits. Economic benefits of water and waste water were calculated using the tariff rates times the quantity of water supplied/treated. Losses in initial years have been also accounted for. In addition, it is assumed that collection rates for water and sewerage grow from 60% to 85-90% over the first three years.
3. Table 9.1 below summarizes the EIRR with the required tariff increases. The tariffs for 2012 are assumed startup values and the tariffs are assumed to remain stable in real terms beyond 2015.
Table 9.1 Economic Internal Rates of Return for Waste water Treatment and Cost Recovery Achieved Wastewater Tariff (Y per cum) % of O&M % of Capital Cost EIRR Treatment 2012 2015 Covered Covered Wulatehouqi 4.8% 1.2 1.8 100 74 Ganqimaodu 5.4% 1.2 1.6 100 76 Wulateqianqi 5.4% 1.2 1.4 100 77
4. Table 9.1 shows that EIRR for the base case varies from 4.8% to 5.4% with starting tariffs of Y1.2/m3. Tariffs are raised to Y1.4/m3 to 1.8/m3 by 2015 for sewerage treatment to ensure that an EIRR of close to 5% is obtained, which ensures that there is 100% O&M recovery and a substantial portion (75%) of capital cost recovery.
5. For reclaimed water, the EIRR obtained is 8% or more for the various sub-projects. In all cases, O&M and capital cost recovery requirements are met. Table 9.2 shows the EIRR and cost recovery for the water reclamation projects. Starting tariffs are about Y3.3/m3 for reclaimed water and depending on the site, the tariffs are increased to meet the cost recovery requirements. Table 9.2 shows the base case analysis.
48 Table 9.2 Base Case Analysis for Reclaimed Water Projects Wastewater Tariff (Y per cum) % of O&M % of Capital Cost EIRR Treatment 2012 2015 Covered Covered Wulatehouqi 8% 3.3 4.3 100 100 Ganqimaodu 8% 3.3 3.5 100 100 Wulateqianqi 18% 3.3 3.3 100 100 Hangjinhouqi 9% 3.3 3.63 100 100 Wuyuan 9% 3.3 4.29 100 100
6. Wuliangsuhai Lake rehabilitation will generate direct economic benefits and will also benefit the Yellow River downstream by reducing pollution. COD load reduction will be almost 18,000 tons per year. The N reduction is almost 2,000 tons/year, and P reduction is about 300 tons/year. These reductions will significantly improve water quality and thereby increase the fish stock in the lake. It will also generate reed, which has many uses.
7. Direct benefits generated will be from increased fisheries, reed harvesting, and tourism in and by the lake. Indirect benefits are due to improved water quality into the Yellow River, which will reduce the cost of treatment and also reduce economic losses due to a reduced pollution load. Annual average economic benefits generated after all the works in the lake are completed (constructed wetlands and canals) are expected to be about Y32 million in 2016 and will rise to Y37 million in 2020. The economic internal rate of return for the Wuliangsuhai Lake component is 11.6%.
Sensitivity Analysis
8. Sensitivity analysis was performed for cost increases and lower tariffs. Tariffs have a large impact on the EIRR. Risk assessment was therefore performed using a likely 10% lower tariffs and 20% higher costs. For waste water treatment plants the net impact is shown in Table 9.3 (20% higher costs) and Table 9.4 for 10% lower tariff.
Table 9.3 Sensitivity for 20% Increase in Costs of Waste water Treatment Plants Waste water Tariff (Y per cum) % of O&M % of Capital Cost EIRR Treatment 2012 2015 Covered Covered Wulatehouqi 3.0% 1.2 1.8 100 62 Ganqimaodu 3.8% 1.2 1.6 100 63 Wulateqianqi 3.7% 1.2 1.4 100 64
Table 9.4 Sensitivity for 10% Decrease in Tariff for Water Reclamation Plants Waste water Tariff (Y per cum) % of O&M % of Capital Cost EIRR Treatment 2012 2015 Covered Covered Wulatehouqi -4% 1.2 1.6 100 30 Ganqimaodu 1% 1.2 1.3 100 48 Wulateqianqi 0% 1.2 1.2 100 46
49 9. Cost increases do lower the EIRR, but still allow for O&M recovery of 100%. Similarly, a 10% decrease in tariffs does have a significant impact on the EIRR, but cost recovery of O&M is not affected.
10. Similar sensitivity analysis was performed for the water reclamation projects for cost increases of 20% and for reduced tariffs of 10%. These results are shown in Table 9.5 for the cost increases and Table 9.6 for reduced tariffs. In both cases, O&M is covered fully.
Table 9.5 Sensitivity for 20% Increase in Cost of Water Reclamation Plants Tariff (Y per cum) % of O&M % of Capital Cost EIRR 2012 2015 Covered Covered Wulatehouqi 6.1% 3.3 4.3 100 84 Ganqimaodu 6% 3.3 3.465 100 86 Wulateqianqi 15% 3.3 3.3 100 164 Hangjinhouqi 7% 3.3 3.63 100 92 Wuyuan 7% 3.3 4.29 100 91
Table 9.6 Sensitivity for 10% Decreased in Tariff for Water Reclamation Plants Tariff (Y per cum) % of O&M % of Capital Cost EIRR 2012 2015 Covered Covered Wulatehouqi -8.2% 3.3 3.6 100 14 Ganqimaodu 0% 3.3 2.97 100 57 Wulateqianqi 15% 3.3 2.97 100 158 Hangjinhouqi 0% 3.3 2.97 100 53 Wuyuan -5% 3.3 3.3 100 51
11. Sensitivity analysis was performed for increases in cost and decline in benefits for the Wuliangsuhai Lake Component. Cost increases of 20% and 20% decline in reed harvesting and tourism as well as 50% decline in fisheries were considered. EIRRs for the various cases and combinations of cases were also computed and are shown in Table 9.8 below.
Table 9.7 Wulangsuhai Lake Component Sensitivity Analysis Option Case +/- EIRR Base Base Cases 11.6% 1 Capital Cost Increase 20% 9.4% 2 Fisheries Estimate -50% 9.8% 3 Reed Harvesting -20% 11.3% 4 Tourism -20% 10.4% Combined Cases 5 1+2 7.8% 6 2+4 8.5% 7 3+4 10.1% 8 1+4 8.4%
12. All cases show a reasonable rate of return from 11.6% down to 7.8%. For an environmental project of this nature these EIRRs are reasonable.
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Least-Cost Assessment
13. There are very few alternatives to treatment or reclamation for the various sites because of the limited availability of water sources. The cost of the three WWTPs, including their Tertiary Treatment Stage (TTS), was compared to international cost ranges. The figure below presents average investment costs for nutrient removal in WWTPs in developing and transitional countries. It shows that the project WWTPs are near or below the cost range. It should be noted that the project WWTP costs include the cost for tertiary treatment stage, which is not included in the international cost curve. Costs for the project three WWTPs, without TTS, would be about 20-30% lower than the indicated overall values.
WWTP investment cost, compared with international cost WWTP cost trend worldwide WWTP+TTS Wulatehouqi WWTP+TTS Ganqimaodu WWTP+TTS Wulateqianqi 1400
1200
1000
800
600
400
200
Specific investment (USD/m3/d) investment Specific 0 0 10000 20000 30000 40000 50000 60000 Daily flow rate (m3/d)
FINANCIAL ANALYSIS
14. Financial analysis was conducted to: (a) identify the most appropriate project financing strategy, taking into account that counterpart funding will be based solely on loans, and that full costs will have to be recovered through tariffs; (b) estimate the necessary full cost recovery tariff levels and project necessary tariff increases to ensure financial sustainability of the project; (c) demonstrate that companies will be willing to pay the required tariffs; (d) show that Bayannaoer will have sufficient financial resources to meet counterpart funding requirements under the Bank project; and (e) examine the availability and certainty of counterpart funds for the project.
Institutional and Financial Background
15. The components are located in industrial estates in five counties. Two of the industrial estates, Hangjinhouqi and Wuyuan, are within the county towns urban area, while the other three estates, Wulatehouqi, Ganqimaodu and Wulateqianqi, are situated in rural areas.
51 16. Water Supply. All the estates at present have a piped water supply of limited capacity, provided by companies within BWAG. Most of the water supply is currently provided by industries‟ own wells. The new components will add substantial capacity to the piped water supply and will be able to cater for industrial development in the years to come. Along with the implementation of the component, the existing private self-supply wells will be closed.
17. Waste water Service. At present waste water treatment service is provided for the two industrial estates located in the county towns - Hangjinhouqi and Wuyuan. These waste water treatment plants are owned and operated by a private operator in each county town. The project will establish waste water treatment capacity in the other three industrial estates.
18. Implementation, Ownership, Operation and Maintenance. All components will be implemented and owned by BWAG, with operation and maintenance outsourced to WWIC. WWIC is a subsidiary of BWAG, and currently operates the water supply and wastewater service in Linhe District. WWIC will have its documented costs of service reimbursed by BWAG. Proceeds from the collection of water and waste water charges will be transferred to BWAG to cover the costs of financing, as well as the costs of service provided by WWIC. A legal agreement between BWAG and WWIC will stipulate the terms on which the companies cooperate and should be satisfactory to the Bank.
19. Project Financing and On-lending. The financial objective of the project is to ensure the financialyl sustainable operation of the components based on feasible tariff levels. Debt repayment responsibility rests with BWAG, with a Subsidiary Agreement signed between Bayannaoer Municipality and BWAG. Counterpart funding will be provided on an interest free basis by Bayannaoer Municipal Finance Bureau. Repayment terms for the Bank loan will be a maturity of thirty years, including a grace period of seven years. Repayment terms for the government contribution are repayment over seven years, with the two years of grace.
Water Supply and Wastewater Tariffs in Industrial Estates
20. Water Supply Tariffs. The current industrial water supply tariffs in Linhe District and project counties range from RMB2.50/ m3 (RMB1.50/ m3 for reclaimed water) in Wulateqianqi to RMB3.60/ m3 in Hangjinhouqi. For Linhe District, which the capital of Bayannaoer, the industrial water supply tariff is RMB3.20/m3. The industrial water supply tariffs are slightly higher than comparable tariffs for the residential population, which range from RMB1.85/ m3 in Wulateqianqi to RMB3.05/ m3 in Hangjinhouqi. Linhe District charges its residents RMB2.70/ m3 for water supplied. Tariffs for other consumer segments are higher than the tariffs for industries, with up to RMB12.00/m3 for special commercial activities in Linhe. Industries in the industrial estates have to some extent been charged individual, and lower, tariffs than the tariff levels in urban areas.
21. Wastewater Tariffs. Waste water tariff has just recently been introduced in Linhe District along with the plans transferring the waste water treatment plant from the municipal government to BWAG with WWIC taking on the responsibility of operating the facilities. The waste water tariff ranges from RMB0.70/m3 for residential households to RMB0.95m3 for other customer segments, including industries. Ganqimaodu has introduced a wastewater tariff of RMB1.40/m3. Other urban
52 areas and industrial estates, including the estates covered by the project, have so far not introduced a waste water tariff. Two of the industrial estates are in the process of applying for waste water tariff.
Future Reclaimed Water Supply and Waste water Tariffs in Project Industrial Estates
22. New tariffs in the project industrial estates will be implemented along with the project. In particular new waste water tariffs will be introduced along with the revised water supply tariffs. The tariffs will cover the full costs of operation. The full costs tariffs as well as proposed new tariffs are presented in the table below.
Table 9.8 Existing and proposed industrial tariffs for water and wastewater (RMB/m3) Proposed tariff to be Projected theoretical Current charged industrial Unit production O&M levied based on a tariffs covering the full water and waste water tariffs costs feasible level for waste cost of operation water tariff* Potabl Reclaime Reclaime Reclaime Reclaime e d Wastewat d Wastewat d Wastewat d Wastewat Industrial water water er water er water er water er estates supply supply supply supply supply Wulatehouqi 2.50 1.50 - 0.60 0.75 1.48 1.86 3.30 (1.91) 1.20 Ganqimaodu 3.20*2 - - 1.71 0.87* 2.59 1.51 3.30 (2.76) 1.20 Wulateqianqi 3.00 - - * 0.91* 1.55 1.60 3.30 (2.31) 1.20 Hangjinhouqi 3.60 - -*4 1.53 NA 3.32 NA 1.00 *3 3.30 (3.32) Wuyuan*3 3.65 - -*5 1.67 NA 3.56 NA 3.30 (3.56) 1.05 Linhe District 3.20 - 0.95 * The wastewater tariff is kept at fixed lower rate than the reclaimed water tariff. The reclaimed water tariff in brackets is the theoretical water tariff to make the tariffs cover the full costs when charging a wastewater tariff at RMB 1.2. * The approved tariff is at RMB3.50 2 * The industrial estates are located within the county town and are adopting the towns‟ tariffs 3 * A wastewater tariff at RMB3.50 has been applied for. The expected level is RMB1.00 /m3, to be effective from October 4 2010 * A wastewater tariff at RMB1.05 has been applied for and is the expected to effective from October 2010 5
23. A willingness-to-pay analysis for reclaimed water tariffs was conducted, which demonstrates that the projected reclaimed water tariffs are in line with levels acceptable to industries in the industrial estates to be covered by the project.
24. Tariff Collection. The current water supply tariffs in the project areas are billed and collected by the local Water Supply Companies, which for most of the areas is WWIC. The collection rate is close to 100%. Supply from the new components will similarly be billed and collected by WWIC, which is to operate the new supply.
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Financial Sustainability of Reclaimed Water and Wastewater Operations
Financial Performance
25. Reclaimed water supply operations in the industrial estates would be financially sustainable under the project, based on projections of tariff revenues, capital structure, and operational efficiency. There will be a minor cross-subsidization between the components in the industrial estates, but none with the other water and waste water services provided within BWAG. The operation of the implemented components as a whole would independently remain profitable, as the reclaimed water supply tariff and wastewater tariffs will be established to cover full costs. Projections of income statements, balance sheets and cash flow statements for the components implemented are available in the project files.
26. Although BWAG would continue to carry debt obligations from the past, the Bank loan and the facility provided by the municipal government, its capital structure will remain sound. During the construction period, funds from operations will only provide a marginal contribution. Proceeds from the Bank loan and the loan from the government will meet the requirements for investments in reclaimed water and wastewater plants. The government will provide the bridge-funding for retroactive financing. BWAG‟s solvency (defined as the ratio of equity to total debts and equity) will remain strong at above 70% throughout the years due to the high level of intangible assets from other businesses, assets which BWAG does not currently depreciate. The financial internal rate of return on the project investment is above 5%.
27. Financial projections for BWAG have been made based on the results for 2009, as well as the budget for 2010. All projections are in constant 2010 prices.
Monitoring of Financial Performance
28. During the project implementation period, BWAG will prepare, before August 31 each year, annual financial projections for the subsequent years. Cost recovery from tariff collection is included in the intermediate outcome indicators.
Availability of Counterpart Funds
29. BMFB‟s fiscal revenue comprises tax revenue, non-tax revenue, transfer payments from higher level governments, and others. Table below shows the actual and budgeted BMFB fiscal revenue from 2005 to 2010:
54 Bayannaoer Municipal Finance Bureau's Fiscal Situation from 2005 to 2010 Actual Budget (RMB million) -5 -4 -3 -2 -1 0 2005 2006 2007 2008 2009 2010 Tax Revenue 34.72 28.73 12.47 43.51 23.44 41.80 Non-tax Revenue 74.42 125.35 215.16 247.91 277.00 248.20 Transfer Payment 763.67 1,278.35 1,492.82 2,094.09 2,700.68 3,135.00 Others 121.84 125.44 466.73 470.55 648.46 755.00 Total Revenue 994.65 1,557.87 2,187.18 2,856.06 3,649.58 4,180.00
30. Tax revenue accounted for 2% of the total revenue, while non-tax revenue accounted for 8% on average. The average increase of total revenue was about 39% per year over the period of 2005 to 2010. Based on these trends, tax revenue and non-tax revenue are projected to account for 7% of total revenue, and the annual increase of total revenue is projected at 15%. Table below presents the projected fiscal revenue for the next 6 years, and BMFB contribution to the project compared with fiscal revenues.
Comparison of BMFB's Input to its Fiscal Revenue Budget Projection (RMB million) 0 1 2 3 4 5 6 2010 2011 2012 2013 2014 2015 2016 Fiscal Revenue 290.00 335.13 383.83 439.62 503.51 576.69 660.50 Transfer Payments and others 3,890.00 4,452.38 5,099.48 5,840.63 6,689.49 7,661.72 8,775.25 Total Fiscal Revenue 4,180.00 4,787.51 5,483.31 6,280.24 7,193.00 8,238.41 9,435.75
Input to the Project 46.71 154.68 164.05 87.98 51.67 26.01 15.32 % of Sum of City Revenue 1% 3.2% 3.0% 1.4% 0.7% 0.3% 0.2%
31. The projection indicates that counterpart funds provided by BMFB to the project will, at its peak, be less than 4% of the budget.
32. BOCAD has entered into an agreement with BWAG to provide counterpart funds for the construction of constructed wetlands. BOCAD is responsible for the implementation of a national program to upgrade low- and medium-yield farmland in Bayannaoer Municipality, and the location of the Constructed Wetlands Component overlaps with the national program.
33. To implement the national program, the State Office for Comprehensive Agricultural Development will appropriate funds to Bayannaoer Municipal Office for Comprehensive Agricultural Development from the central fiscal budget. The Inner Mongolia Autonomous Regional Government, Bayannaoer Municipal Government, and county governments will also provide counterpart funds. The following table shows the approved financial plan for the national program.
55 Government Funds for Upgrading Low- and Medium-Yield Farmland from 2008 to 2017 RMB million Actual Budget Projection Government 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Central Government 151 151 151 166 183 201 221 243 268 294 Regional Government 60 95 139 167 200 240 288 346 415 498 Municipal Government 15 27 34 41 49 59 71 85 102 122 County Government 15 27 34 41 49 59 71 85 102 122 Total 241 300 358 415 481 559 651 759 887 1,036 Input to the Project - - 15 30 5 - - % of Total Government Funds 0.0% 0.0% 3.1% 5.4% 0.8% 0.0% 0.0%
34. BOCAD‟s highest contribution to the project (in 2013) only accounts for 5.4% of its total funds.
56 Annex 10: Safeguard Policy Issues CHINA: Bayannaoer Water and Environment Comprehensive Management Project
OP4.01 - Environmental Assessment
1. Bank policy OP 4.01 Environmental Assessment is triggered and the project has been classified as Category A according to environmental screening based on the proposed investments and their scale. An Environmental Impact Assessment (EIA) was carried out for the project components, and an associated environmental management plan (EMP) was prepared to determine the mitigation measures, environmental monitoring program and the necessary institutional arrangements, as well as capacity development. These documents have been prepared on the basis of Chinese legal and policy framework for environmental protection, master plans and environmental plans, as well as applicable Bank safeguard policies.
2. Project Description. Details are in Annex 4 of the PAD.
3. Baseline Environmental Conditions. Bayannaoer is far away from the sea and located in the plateau. Its climate is characterized by distinct seasons: spring is dry and windy, summer is hot with less rainfall, autumn is mild and cool, and winter is cold with some snow. It has a continental monsoon climate in the temperate zone. The average annual temperature is 3.7-7.6 ; average annual evaporation is 2.0-3.2 mm; average annual rainfall is 188 mm. In the Hetao Irrigation District, the frost-free period is 145-160 days, while the soil freezing period is about 180 days.
4. Bayannaoer is divided into two river systems by the watershed formed by the Yinshan Mountain, the Yellow River system in the south and the inland river system in the north. Average annual runoff in the city is 331 million m3, of which 237 million m3 is in the Yellow River system, accounting for 71.6% of total runoff, while 94 million m3 is in the inland river system, accounting for 28.4% of the total.
5. Wuliangsuhai Lake is a large shallow lake with its water intake mainly from the drainage canals in the irrigation districts, as well as a mountain stream from the south of Wolf Mountain and the north of Ural Mountain. Each year, about 0.5 billion m3 of wastewater from agricultural irrigation and 33 million m3 industrial and domestic wastewater in the Hetao area are discharged into Wuliangsuhai Lake, which also brings 288,000 tons of chemical fertilizers and other nutrient salts. As a result, the lake has become eutrophic with TP and TN being a primary concern. Wuliangsuhai Lake has been designated by the State Forestry Ministry as a waterfowl conservation demonstration wetland and a nature reserve protected at provincial level. It is also listed in the Inventory of International Important Wetlands.
6. Expected Environmental Benefits. The project will improve the water quality of Wuliangsuhai Lake through the proposed activities, by cutting the COD load by 23,578.19 t/a; the TP load by 458.38 t/a; the NH3-N load by 1,221.29 t/a; and the TN load by 1,990.57 t/a. It will also improve surface water quality in the drainage canals and Wuliangsuhai Lake to approach Class V.
57
7. Impact Assessment and Mitigation Measures. In the construction phase, adverse impacts include wastewater discharge from construction camps, airborne dust, noise, traffic disruption and disposal of spoiled materials. An environmental management plan (EMP) has been developed as part of the environmental safeguard document for each component. The EMP includes mitigation measures, monitoring plans, institutional arrangements, capacity building and the estimated budget of the mitigation measures and monitoring programs for both the construction and operation phases. Contractors are required to water construction sites during dry and windy seasons, develop careful plans to mitigate noisy construction activities and avoid/ban night time construction, maintain equipment in good operating conditions, develop temporary traffic plans to detour traffic around construction sites, etc. Project progress reports furnished by BWAG will include a section for EMP implementation and related environmental monitoring reports.
8. Analysis of Alternatives. During project development and preparation, various alternatives were screened and compared with technical, economic and environmental criteria. In terms of the environmental assessment of alternatives, the primary objective was to identify and adopt solutions with the least adverse environmental impacts. Details of the alternative analysis are in the EA documents.
9. Public Consultations and Information Disclosure. In accordance with Bank policies, public consultation and information disclosure were conducted at least twice during the preparation of the environmental assessment. Three forms of public consultation have taken place, including public consultation meetings, interviews with project affected people, and questionnaire surveys. Sub-project EIAs provide information on public consultation, and include a copy of the questionnaire and a summary of the results. These activities were conducted in the project affected areas from September 2009 to February 2010.
10. In accordance with the requirements of EA Law in China and the Bank, on November 26, 2009 information for this project was disclosed at Inner Mongolia Channel of Xinhua News website, Bayannaoer Daily, website of BWAG, and other channels. Draft EA documents of each component were made available at BWAG on July 2, 2010. The English language CEA report was disclosed through the Bank‟s InfoShop on July 8, 2010.
OP/BP4.12 - Involuntary Resettlement
11. The project has significant social benefits as it supports the development of industrial estates which will provide better income opportunities for local households. The project will also provide reclaimed water to the public and improve water quality in Wuliangsuhai Lake. Local communities and farmers have shown strong support for the development of industries and better water quality. Public consultation and the participatory process undertaken during project preparation enable the project to address the community needs of vulnerable groups. At the same time, the project will have adverse impacts related to the need for land acquisition and involuntary resettlement. No family would lose all of their farming land. In some cases affected families viewed the land acquisition as an opportunity to create new family income sources and significantly improve their livelihood.
58
12. Resettlement Plan. A Resettlement Plan (RP) was prepared in accordance with relevant Chinese laws and regulations, as well as Bank Operational Policy OP4.12. BWAG will lead resettlement activities under the oversight of the Project Leading Group and be the project owner to manage resettlement operations. A summary of the project‟s land acquisition and resettlement impacts is given below. These are detailed in the RAP.
Land Subproject Acquisition Remarks (hectares) Water reclamation plant in 6 Collective unused land Wulatehouqi Wastewater treatment plant in 7 Collective unused land Wulatehouqi Water reclamation plant in 10.5 State owned unused land Ganquimaodu Wastewater treatment plant in 11 State owned unused land Ganqimaodu Water reclamation plant in Collective cultivated land acquisition affecting 5 2.5 Hangjinghouqi households with 21 rural populations Water reclamation plant in Wuyuan 2.5 Collective unused land Wastewater treatment plant in 11 State owned unused land Wulateqianqi
13. The compensation and resettlement budget is US$5.3 million, which includes compensation for permanent land acquisition and temporary land use, young crops and trees, management and monitoring costs, contingencies as well as relevant taxes. Resettlement would be financed entirely through counterpart funds.
14. The project will affect 4 villages by permanent land acquisition in 4 towns or townships; one state owned farming factory and one state owned stock factory in Bayannaoer. Construction of waste water treatment plants will require permanent land acquisition of 758 mu (50.5 hectares) of land, including 38 mu of collective farming land (2.5 hectares), 232.5mu of collective unused land (15.5 hectares), and 487.5mu state of owned land (32.5 hectares). A total of 5 rural households, including one ethnic Mongolian woman (who is married into a Han family) will be affected by permanent land acquisition. No structures will be affected.
15. Indigenous People. Social assessment conducted for the project screened for vulnerability of the Chinese Mongol ethnic minorities in the project area and the application of Bank Indigenous People OP 4.12. Some project activities would likely be in areas inhabited by the Chinese Mongol ethnic minority groups. Project interventions are unlikely to have any direct adverse impacts on those communities, as the ethnic minority in the project areas is the target beneficiary group of the project. The initial social screening identified that the minority groups, in terms of both cultural and socio- economic development, are not marginalized and are not expected to become vulnerable to any disadvantageous situations under the project. They are a part of mainstream society and are anticipated to benefit as much from the project as the Han (Chinese) communities. They do not have customary economic, social, or political institutions separated from the dominant society. Their collective
59 attachment in the project areas is not focused on geographically distinct habitats or ancestral territories. Chinese Mongol communities in the project areas therefore do not fall under the definition of Indigenous Peoples as per OP 4.10, and the policy is not triggered.
16. Social Assessment. The project conducted two social assessments: one for screening ethnic minorities living in the project areas and their indicative characteristics of vulnerability; and the other to identify critical issues that cause poverty, and to provide guidance for enhancing participation, poverty alleviation and development impacts through experience sharing and institutional capacity building.
17. Participatory Approach. All affected households and villages were identified through the census survey. The RAP and the social assessment report were advertised in Bayannaoer Daily, the major local newspaper, on May 27, 2010, and were publicly available in Bayannaoer Library and BWAG free of charge. Relevant project information was provided to the affected villages through newspaper reports, posters and public meetings. A resettlement information booklet, with details regarding compensation rates, other entitlement policies and grievance procedures, will be distributed to the displaced people prior to resettlement implementation.
18. Focus group discussions and key informant interviews were used to consult with potential displaced persons, and obtain their views and preferences regarding resettlement impacts and mitigation measures, including livelihood rehabilitation measures. These views and preferences were taken into account during RP revision, and displaced persons confirm that the resettlement and rehabilitation measures planned under the RP would be adequate to address and mitigate any adverse impacts.
19. Affected communities will play a key role in determining and implementing their livelihood restoration programs. Each village committee will determine how land compensation can best be used to restore (and perhaps improve) local income-earning potential. BWAG will supervise resettlement implementation, and resettlement will be monitored by an experienced independent monitoring institute. Internal monitoring, as well as independent monitoring of the resettlement program, would be conducted regularly during project implementation.
OP/BP4.37 - Safety of Dams
20. The project does not finance the construction of dams, but some of the water supply systems to be constructed under the project would draw directly from reservoirs controlled by existing dam, and therefore OP4.37 Safety of Dams is triggered. Two existing upstream dams provide emergency water sources for the water reclamation component: Yongming Dam and Wangba Dam. The two dams are Class C dams and are being remedied, with remedial works planned to be completed by the end of 2010 (see Table 10.1). Designs for these works were reviewed and found to be acceptable. The Operation and Maintenance (O&M) arrangements of the two dams were also reviewed and also found to be acceptable. Emergency Preparedness Plans (EPP) for these two dams are under preparation.
21. The Borrower has issued guidelines and regulations for dam safety management, including Reservoir Dam Safety Management Regulation; Regulations on Reservoir Dam Safety Review;
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Guidelines for Dam Safety Review; Guidelines for Emergency Preparedness Plan; and Guidelines for Operation, Maintenance and Surveillance of Dams. O&M Manuals and EPPs of these two dams are under preparation and will be furnished to the Bank for review and comments upon their completion, but no later than December 31, 2012. During project implementation, the Borrower will provide the Bank information concerning the safety of the two dams and arrange for site visits to the dams. The Bank and BWAG will monitor dam safety status, operations and maintenance procedures, and emergency preparedness, and supervise implementation of remedial works to ensure that the project complies with OP4.37.
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b Safety Total Latest Status Year of Height Remedial Action Govt Agency in No Name Location Capacity Type of Dam Review (Class Operator Owner Completion (m) Plan Plan Charge (m m3) Date I, II, or III) 1 Wangba Wulateqianqi 1984 2.5 m 3.77 Homogeneous April III Remedial Remedial Wangba General Bayannoer Municipal Reservoir earth dam 2007 work is work is Reservoir Bureau of Water Bureau ongoing planned Management Hetao to be Station Irrigation 2 Yongming Hangjinhouqi 1977 1.5 m 1.24 Homogeneous June III completed Yongming Area Reservoir earth dam 2007 by the end Reservoir Management. of 2010. Management Station.
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Annex 11: Project Preparation and Supervision CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Planned Actual PCN review July 10, 2009 November 11, 2009 Initial PID to PIC July 24. 2009 December 22, 2009 Initial ISDS to PIC July 24. 2009 January 11, 2010 Appraisal January 12, 2010 July 29, 2010 Negotiations March 10, 2011 Board/RVP approval April , 2011 Planned date of effectiveness August 1, 2011 Planned date of mid-term review October 2014 Planned closing date December 31, 2017
Key institutions responsible for preparation of the project:
Bayannaoer Water Affairs Group Co., Ltd.
Bank staff and consultants who worked on the project included:
Name Title Unit Shunong Hu Task Team Leader EASCS Sun Chongwu Sr. Environmental Specialist EASCS Zhefu Liu Sr. Social Specialist EASCS Jinan Shi Sr. Procurement Specialist EASCO Haixia Li Financial Management Specialist EAPCO Marta Elena Molares-Halberg Lead Counsel LEGES Ximing Zhang Dam Safety Specialist EASCS Julia Bucknall* Lead Natural Resources Management Specialist MNS-MNA Masood Ahmad* Lead Water Resources Specialist SASDA Ronald N. Hoffer* Lead Environment Specialist ECSSD Takao Ikegami* Sr. Sanitary Engineer EASIN Xin Chen Program Assistant EACCF Xuemei Guo Program Assistant EACCF Dan Xie Program Assistant EACCF Vellet Fernandes Program Assistant EASIN Daniel Gunaratnam Economic Specialist Consultant Edouard Motte Urban Specialist Consultant Konrad Buchauer Wastewater Specialist Consultant Knud Lauritzen Financial Analyst Consultant Wu Ning Institutional Specialist Consultant Li Zhi Water Resource Specialist Consultant Dimitri de Boer Economist Consultant Note: Person with “*” mark are peer reviewers.
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Annex 12: Documents in the Project File CHINA: Bayannaoer Water and Environment Comprehensive Management Project
I. Government and Consultant reports
Feasibility Study Reports:
1. Consolidated Feasibility Study Report on Bayannaoer Water Reclamation and Environment Protection Project (English and Chinese)
2. Feasibility Study Report on Qipaigan Reclaimed Water Supply Component (Chinese)
3. Feasibility Study Report on Drain 3 Reclaimed Water Supply Project Component (Chinese)
4. Feasibility Study Report on Wulateqianqi Processing Zone Wastewater Treatment and Reuse Component (Chinese)
5. Feasibility Study Report on Urad Back Banner Processing Zone Regenerated Water Supply Component (Chinese)
6. Feasibility Study Report on Uratrear Banner (Hoh Town) Processing Park Sewage Treatment Plant Component (Chinese)
7. Feasibility Study Report on Wuliangsu Lake Wetland Restoration Component (Chinese)
8. Feasibility Study Report on Wuliangsu Lake Grid Channel System Project Component (Chinese)
9. Feasibility Study Report on Ganqimaodu Industrial Zone (Delingshan Town) Wastewater Treatment and Reuse Component (Chinese)
10. Feasibility Study Report on Ganqimaodu Port Processing Zone Reclaimed Water Supply Component (Chinese)
Environmental Impact Assessments in English and Chinese:
11. Qipaigan Reclaimed Water Supply Component
12. Drain 3 Reclaimed Water Supply Project Component
13. Wulateqianqi Processing Zone Wastewater Treatment and Reuse Component
14. Urad Back Banner Processing Zone Regenerated Water Supply Component
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15. Uratrear Banner (Hoh Town) Processing Park Sewage Treatment Plant Component
16. Wuliangsu Lake Wetland Restoration Component
17. Wuliangsu Lake Grid Channel System Project Component
18. Ganqimaodu Industrial Zone (Delingshan Town) Wastewater Treatment and Reuse Component
19. Ganqimaodu Port Processing Zone Reclaimed Water Supply Component
20. Environmental Assessment Summary Report (English and Chinese)
21. Environmental Assessment Report (English and Chinese)
22. Environmental Management Plan (English and Chinese)
23. Resettlement Action Plan (English and Chinese)
24. Social Assessment Report (English and Chinese)
25. Consolidated Water Environment Treatment Project Resettlement Action Plan and Social Assessment Summary Report (English and Chinese)
26. Public Participation Poverty Alleviation and Development Act for Wuliangsuhai lake Comprehensive Treatment Program (English and Chinese)
II. Bank Staff Assessments
1. Pre-Identification Mission Aide Memoire: March 2009 2. Identification Mission Aide Memoire: June 2009 3. Preparation Mission 1 Aide Memoire: November 2009 4. Preparation Mission 2 Aide Memoire: January 2010 5. Pre-Appraisal Mission Aide Memoire: April 2010 6. Appraisal Mission Aide Memoire: July 2010 7. Financial Management Capacity Assessment Report, June 2010 8. Procurement Capacity Assessment Report, October 2010 9. Financial Projections for Project Companies, August 2010
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Annex 13: Statement of Loans and Credits CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev‟d P105872 2011 CN-Integrated Forestry Development 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P086446 2010 CN-Chongqing Urban-Rural Integration 84.00 0.00 0.00 0.00 0.00 84.00 0.00 0.00 Pro P096920 2010 CN-Ningxia Highway 250.00 0.00 0.00 0.00 0.00 250.00 0.00 0.00 P099751 2010 CN-Sustainable Dev. in Poor Rural Areas 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P100455 2010 CN-Henan Ecological Livestock Project 80.00 0.00 0.00 0.00 0.00 80.00 0.00 0.00 P081615 2010 CN-Taiyuan Urban Transport Project 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00 P101716 2010 CN-Jilin Food Safety 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P112838 2010 CN-Wuhan Second Urban Transport 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P112759 2010 Shandong Ecological Afforestation 60.00 0.00 0.00 0.00 0.00 60.00 0.00 0.00 P113766 2010 CN-Energy Efficiency Financing II 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P111421 2010 CN-Anhui Medium Cities Urban Transport 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P111163 2010 CN-Xinjiang Water Conservation Project 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P108627 2010 CN - Nanning Urban Environment 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 P106956 2010 CN - Ningbo New Countryside 50.00 0.00 0.00 0.00 0.00 50.00 0.00 0.00 Development P117107 2010 CN-Tech Vocational Ed 40.00 0.00 0.00 0.00 0.00 40.00 0.00 0.00 P096707 2009 CN - GD Tech&Vocational ED and 20.00 0.00 0.00 0.00 0.00 17.25 -0.45 0.00 Training P096556 2009 CN-Eco-Farming 120.00 0.00 0.00 0.00 0.00 107.85 13.15 0.00 P091950 2009 CN-Guizhou Cultural and Natural Heritage 60.00 0.00 0.00 0.00 0.00 59.85 5.00 0.00 P096812 2009 CN-Yunnan Urban Env 150.00 0.00 0.00 0.00 0.00 145.78 -4.00 0.00 P114107 2009 CN-Wenchuan Earthquake Recovery 710.00 0.00 0.00 0.00 0.00 648.00 138.00 0.00 Project P096923 2009 CN-Shanghai APL III 200.00 0.00 0.00 0.00 0.00 199.50 3.44 0.00 P096926 2009 CN-Jiangsu Water and Wastewater Project 130.00 0.00 0.00 0.00 0.00 113.91 4.23 0.00 P112359 2009 CN-NanGuang Railway 300.00 0.00 0.00 0.00 0.00 299.25 0.02 0.00 P100968 2009 CN-Shanxi Coal Bed Methane 80.00 0.00 0.00 0.00 0.00 79.80 9.20 0.00 Development P101258 2009 CN-Hubei Yiba Highway 150.00 0.00 0.00 0.00 0.00 148.63 -1.00 0.00 P101829 2009 CN Xining Flood and Watershed Mgmt 100.00 0.00 0.00 0.00 0.00 89.75 4.00 0.00 P107559 2009 CN-Guizhou-Guangzhou Railway 300.00 0.00 0.00 0.00 0.00 299.25 5.00 0.00 P101988 2009 CN-Jiangxi Shihutang Navi & 100.00 0.00 0.00 0.00 0.00 72.35 38.38 0.00 Hydropower P093963 2008 CN-Guiyang Transport 100.00 0.00 0.00 0.00 0.00 44.54 5.15 0.00 P084874 2008 CN- Energy Efficiency Financing 200.00 0.00 0.00 0.00 0.00 150.07 40.32 0.00 P093882 2008 CN-Shandong Flue Gas Desulfurization 50.00 0.00 0.00 0.00 0.00 33.95 24.47 0.00 P092631 2008 CN-Xi'an Sustainable Urban Transport 150.00 0.00 0.00 0.00 0.00 130.24 -19.36 0.64 P084437 2008 CN-Rural Health 50.00 0.00 0.00 0.00 0.00 40.89 -6.48 0.00 P085376 2008 CN-Migrant Skills Dev. and Employment 50.00 0.00 0.00 0.00 0.00 47.45 4.57 0.00 P091949 2008 CN-Gansu Cultural & Natural Heritage 38.40 0.00 0.00 0.00 0.00 28.20 -0.50 0.00
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Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev‟d P096925 2008 CN- Bengbu Integrated Environment 100.00 0.00 0.00 0.00 0.00 90.93 11.18 0.00 Improv P099062 2008 CN-ShiZheng Railway 300.00 0.00 0.00 0.00 0.00 255.04 -4.21 0.00 P099112 2008 CN-Anhui Highway Rehab & 200.00 0.00 0.00 0.00 0.00 74.78 -72.72 0.00 Improvement P099224 2008 CN-Liaoning Med. Cities (LMC) III 191.00 0.00 0.00 0.00 0.00 164.16 43.64 0.00 P087224 2008 CN-Han River Urban Environment 84.00 0.00 0.00 0.00 0.00 76.32 28.42 0.00 P083322 2007 CN-SICHUAN URBAN DEV 180.00 0.00 0.00 0.00 0.00 101.96 83.96 0.00 P077752 2007 CN-SHANDONG ENVMT 2 147.00 0.00 0.00 0.00 0.00 68.63 -23.37 0.00 P081776 2007 CN-GUANGDONG/PRD2 96.00 0.00 0.00 0.00 0.00 76.31 21.31 0.00 P075613 2007 CN-Shaanxi Ankang Road Development 300.00 0.00 0.00 0.00 0.00 34.63 -86.36 0.00 P096285 2007 CN-MSE Finance 100.00 0.00 0.00 0.00 0.00 5.00 5.00 0.00 P095315 2007 CN-W. Region Rural Water & Sanitation 25.00 0.00 0.00 0.00 0.00 13.50 -0.94 0.00 P088964 2007 CN-Guangxi Integrated Forestry Dev 100.00 0.00 0.00 0.00 0.00 23.18 -37.32 0.00 P086515 2007 CN-3rd National Railway 200.00 0.00 0.00 0.00 0.00 52.45 -15.12 0.00 P092618 2007 CN-LIAONING MED CITIES INFRAS 2 173.00 0.00 0.00 0.00 0.00 137.52 25.36 0.00 P091020 2007 CN-Fujian Highway Sector Investment 320.00 0.00 0.00 0.00 0.00 17.10 -87.10 0.00 P081348 2006 CN-HENAN TOWNS WATER 150.00 0.00 0.00 0.00 0.00 110.54 58.04 0.00 P081255 2006 CN-Changjiang/Pearl River Watershed 100.00 0.00 0.00 0.00 0.00 66.34 36.34 -5.14 Reha P075732 2006 CN-SHANGHAI URBAN APL2 180.00 0.00 0.00 0.00 0.00 74.61 44.61 0.00 P086629 2006 CN-Heilongjiang Dairy 100.00 0.00 0.00 0.00 0.00 59.64 59.14 0.00 P070519 2006 CN-Fuzhou Nantai Island Peri-Urban Dev 100.00 0.00 0.00 0.00 0.00 51.37 26.37 -3.66 P099992 2006 CN-Liaoning Medium Cities Infrastructure 218.00 0.00 0.00 0.00 0.00 126.36 43.36 0.00 P096158 2006 CN-Renewable Energy II (CRESP II) 86.33 0.00 0.00 0.00 1.65 38.02 39.67 0.00 P085333 2006 CN-5th Inland Waterways 100.00 0.00 0.00 0.00 0.00 4.27 4.27 0.00 P085124 2006 CN-Ecnomic Reform Implementation 20.00 0.00 0.00 0.00 0.00 14.18 18.18 0.00 P093906 2006 CN-3rd Jiangxi Hwy 200.00 0.00 0.00 0.00 0.00 10.33 5.33 0.00 P086505 2005 CN-NINGBO WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 0.61 -3.39 0.00 P071094 2005 CN - Poor Rural Communities 100.00 0.00 0.00 0.00 0.00 14.17 14.17 0.00 Development P069862 2005 CN - Agricultural Technology Transfer 100.00 0.00 0.00 0.00 0.00 27.79 26.69 0.00 P081346 2005 CN-LIUZHOU ENVIRONMENT MGMT 100.00 0.00 0.00 0.00 0.00 19.34 14.14 0.00 P081161 2005 CN-CHONGQING SMALL CITIES 180.00 0.00 0.00 0.00 0.00 52.48 36.58 0.00 P075730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 104.21 87.21 0.00 P066955 2004 CN-ZHEJIANG URBAN ENVMT 133.00 0.00 0.00 0.00 0.00 37.99 37.99 7.00 P075728 2004 CN-GUANGDONG/PRD UR ENVMT 128.00 0.00 0.00 0.00 0.64 60.65 61.29 17.74 P077137 2004 CN-4th Inland Waterways 91.00 0.00 0.00 0.00 0.46 1.84 2.29 1.84 P068058 2003 CN-Yixing Pumped Storage Project 145.00 0.00 0.00 0.00 10.00 20.28 30.28 0.00 P040599 2003 CN-TIANJIN URB DEV II 150.00 0.00 0.00 0.00 0.00 72.20 72.20 43.44 Total: 9,771.73 0.00 0.00 0.00 12.75 6,429.24 869.63 61.86
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CHINA STATEMENT OF IFC‟s Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 2006 ASIMCO 0.00 0.00 4.12 0.00 0.00 0.00 3.61 0.00 2005 BCCB 0.00 59.21 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 12.04 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.14 0.00 0.00 0.00 8.14 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 Babei Necktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 2005 BioChina 0.00 3.70 0.00 0.00 0.00 3.13 0.00 0.00 2002 CDH China Fund 0.00 2.02 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China II 0.00 17.99 0.00 0.00 0.00 11.38 0.00 0.00 2006 CDH Venture 0.00 20.00 0.00 0.00 0.00 0.51 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 10.53 0.00 0.00 0.00 0.00 0.00 0.00 2006 Capital Today 0.00 25.00 0.00 0.00 0.00 0.32 0.00 0.00 2005 Changyu Group 0.00 18.07 0.00 0.00 0.00 18.07 0.00 0.00 1998 Chengdu Huarong 3.36 3.20 0.00 3.13 3.36 3.20 0.00 3.13 2004 China Green Ener 20.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 2004 China Re Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 10.00 0.00 2004 Colony China 0.00 15.31 0.00 0.00 0.00 9.29 0.00 0.00 2004 Colony China GP 0.00 0.84 0.00 0.00 0.00 0.49 0.00 0.00 2006 Conch 81.50 40.93 0.00 0.00 81.50 0.00 0.00 0.00 2006 Dagang NewSpring 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Darong 10.00 0.24 0.00 8.00 6.67 0.24 0.00 5.33 2006 Deqingyuan 0.00 2.85 0.00 0.00 0.00 2.85 0.00 0.00 1994 Dynamic Fund 0.00 2.21 0.00 0.00 0.00 2.01 0.00 0.00 2007 Epure 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Fenglin 17.64 0.00 6.00 13.47 13.64 0.00 6.00 12.53 2006 Fenglin HJ MDF 0.23 0.00 0.00 3.27 0.00 0.00 0.00 0.00 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.85 0.00 0.00 0.00 50.85 0.00 0.00 0.00 2003 Great Infotech 0.00 1.73 0.00 0.00 0.00 1.03 0.00 0.00 2006 Hangzhou RCB 0.00 10.85 0.00 0.00 0.00 0.00 0.00 0.00 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00
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Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2006 HiSoft Tech 0.00 4.34 0.00 0.00 0.00 1.74 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 Jiangxi Chenming 40.00 12.90 0.00 18.76 40.00 12.90 0.00 18.76 2006 Launch Tech 0.00 8.35 0.00 0.00 0.00 8.33 0.00 0.00 2001 Maanshan Carbon 5.25 2.00 0.00 0.00 5.25 2.00 0.00 0.00 2005 Maanshan Carbon 11.00 1.00 0.00 0.00 5.00 1.00 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2006 Minsheng & IB 25.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 Minsheng Bank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 1996 Nanjing Kumho 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 Nanjing Kumho 31.38 2.23 0.00 0.00 31.38 2.23 0.00 0.00 2006 Neophotonics 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2001 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 1995 Newbridge Inv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00 2005 North Andre 8.00 6.74 0.00 0.00 0.00 4.25 0.00 0.00 2003 PSAM 0.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 RAK China 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 Renaissance Sec 0.00 0.00 20.04 0.00 0.00 0.00 0.00 0.00 2006 Rongde 0.00 35.00 0.00 0.00 0.00 31.38 0.00 0.00 SAC HK Holding 0.00 1.60 0.00 0.00 0.00 1.00 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2006 SBCVC 0.00 20.00 0.00 0.00 0.00 2.00 0.00 0.00 2000 SEAF SSIF 0.00 3.74 0.00 0.00 0.00 3.37 0.00 0.00 SH Keji IT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 SHCT 38.18 0.00 0.00 28.64 29.04 0.00 0.00 21.78 2004 SIBFI 0.14 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 Shanghai Krupp 19.25 0.00 0.00 36.75 19.25 0.00 0.00 36.75 2006 Shanshui Group 50.00 5.50 2.20 0.00 50.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 SinoSpring 0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 Stora Enso 20.83 0.00 0.00 4.17 11.00 0.00 0.00 0.00 2005 Stora Enso 29.17 0.00 0.00 20.83 0.00 0.00 0.00 0.00 2006 Stora Enso 50.00 0.00 0.00 175.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1.00 0.00 0.00 0.00 1.00 0.00 0.00 Wanjie High-Tech 9.89 0.00 0.00 0.00 9.89 0.00 0.00 0.00 2004 Wumart 0.00 1.62 0.00 0.00 0.00 1.62 0.00 0.00 2003 XACB 0.00 17.95 0.00 0.00 0.00 0.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2006 Zhejiang Glass 50.00 24.96 0.00 18.00 0.00 0.00 0.00 0.00
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Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2003 Zhengye-ADC 10.43 0.00 0.00 4.87 10.43 0.00 0.00 4.87 2002 Zhong Chen 0.00 4.78 0.00 0.00 0.00 4.78 0.00 0.00 2006 Zhongda_Yanjin 21.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 733.58 577.30 181.40 340.89 470.95 371.06 29.61 108.03
Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2007 Xinao CTC 0.04 0.01 0.00 0.14 2004 China Green 0.00 0.00 0.01 0.00 2006 Launch Tech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 Total pending commitment: 0.05 0.03 0.03 0.14
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Annex 14: Country at a Glance CHINA: Bayannaoer Water and Environment Comprehensive Management Project
East Lo wer- POVERTY and SOCIAL A sia & middle- Development diamond* C hina P acific inco me 2007 Population, mid-year (millions) 1,320.0 1,914 3,437 Life expectancy GNI per capita (Atlas method, US$) 2,360 2,180 1,887 GNI (Atlas method, US$ billions) 3,120.9 4,174 6,485 Average annual growth, 2001-07 Population (%) 0.6 0.8 1.1 GNI Gross Labor force (%) 0.9 1.2 1.5 per primary M ost recent estimate (latest year available, 2001-07) capita enrollment Poverty (% of population below national poverty line) ...... Urban population (% of total population) 42 43 42 Life expectancy at birth (years) 72 71 69 Infant mortality (per 1,000 live births) 20 24 41 Child malnutrition (% of children under 5) 7 13 25 Access to improved water source Access to an improved water source (% of population) 88 87 88 Literacy (% of population age 15+) .. 91 89 Gross primary enrollment (% of school-age population) 111 110 111 China M ale 112 111 112 Lower-middle-income group Female 111 109 109
KEY ECONOM IC RATIOS and LONG-TERM TRENDS 1987 1997 2006 2007 Economic ratios* GDP (US$ billions) 268.2 952.7 2,657.9 3,280.1 Gross capital formation/GDP 37.3 37.9 44.4 .. Trade Exports of goods and services/GDP 16.4 21.8 39.9 .. Gross domestic savings/GDP 37.3 42.4 52.3 .. Gross national savings/GDP 37.3 41.8 53.8 .. Current account balance/GDP 0.0 3.9 9.4 11.5 Domestic Capital Interest payments/GDP 0.4 0.6 0.1 .. savings formation Total debt/GDP 13.2 15.4 12.1 .. Total debt service/exports 8.5 8.5 2.4 .. Present value of debt/GDP .. .. 11.9 .. Present value of debt/exports .. .. 27.7 .. Indebtedness 1987-97 1997-07 2006 2007 2007-11 (average annual growth) GDP 10.3 9.5 11.6 11.9 10.4 China GDP per capita 8.9 8.7 11.0 11.2 9.7 Lower-middle-income group Exports of goods and services 10.8 22.7 23.3 22.8 15.8
STRUCTURE of the ECONOM Y Gro wth o f capital and GD P (%) 20 15 10 5 0 02 03 04 05 06 07
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1987 1997 2006 2007 Gro wth o f capital and GD P (%) (% of GDP) 20 Agriculture 26.8 18.1 11.7 .. Industry 43.9 47.5 48.1 .. 15 M anufacturing 34.7 33.2 .. .. 10 Services 29.3 34.4 40.2 .. 5 0 Household final consumption expenditure 48.7 43.4 33.5 .. 02 03 04 05 06 07 General gov't final consumption expenditure 14.0 14.2 14.2 .. GCF GDP Imports of goods and services 16.4 17.3 32.1 ..
1987-97 1997-07 2006 2007 Growth of exports and imports (%) (average annual growth) Agriculture 4.4 3.7 5.0 4.0 40 Industry 13.9 10.5 12.5 13.4 30 M anufacturing 13.1 10.3 .. .. 20 Services 9.4 10.2 12.4 12.2 10 Household final consumption expenditure 9.8 3.8 -2.5 .. 0 General gov't final consumption expenditure 10.6 9.5 10.9 .. 02 03 04 05 06 07 Gross capital formation 12.2 11.5 13.2 14.3 Exports Imports Imports of goods and services 13.0 19.1 14.3 18.2
Note: 2007 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.
China
PRICES and GOVERNMENT FINANCE 1987 1997 2006 2007 Inflation (%) Domestic prices (% change) 8 Consumer prices 7.3 2.8 1.5 4.6 6 Implicit GDP deflator 5.1 1.5 3.3 5.2 4 Government finance 2 (% of GDP, includes current grants) 0 Current revenue 0.0 11.0 18.3 19.4 -2 02 03 04 05 06 07 Current budget balance -16.7 -0.1 3.0 3.0 GDP deflator CPI Overall surplus/deficit -22.1 -1.7 -0.7 -0.9
TRADE 1987 1997 2006 2007 Export and import levels (US$ mill.) (US$ millions) Total exports (fob) 39,437 182,792 969,073 .. 1,500,000 Food 4,781 11,075 25,722 .. M ineral fuels, lubricants, and related materials 4,544 6,987 17,776 .. 1,000,000 M anufactures 26,206 158,839 916,147 .. Total imports (cif) 43,216 142,370 791,614 .. Food 2,443 4,304 9,997 .. 500,000 Fuel and energy 539 10,306 89,002 .. Capital goods 14,607 52,774 357,107 .. 0 01 02 03 04 05 06 07 Export price index (2000=100) 68 119 107 .. Import price index (2000=100) 84 103 124 .. Exports Imports Terms of trade (2000=100) 81 116 87 ..
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BALANCE of PAYMENTS 1987 1997 2006 2007 Current account balance to GDP (%) (US$ millions) Exports of goods and services 43,868 207,239 1,061,681 .. 15 Imports of goods and services 43,950 164,416 852,769 .. Resource balance -82 42,823 208,912 .. 10 Net income -215 -11,004 11,755 .. Net current transfers 224 5,143 29,200 .. 5 Current account balance -73 36,962 249,867 377,812
Financing items (net) 1,733 -1,105 -2,842 -20,000 0 Changes in net reserves -1,660 -35,857 -247,025 -357,812 01 02 03 04 05 06 07 M emo : Reserves including gold (US$ millions) 22,439 146,439 1,046,465 1,427,812 Conversion rate (DEC, local/US$) 4.5 8.3 8.0 7.6
EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 2006 2007 Composition of 2006 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 35,340 146,697 322,845 .. IBRD 1,427 8,239 11,415 11,762 A: 11,415 B: 9,997 IDA 1,330 7,830 9,997 10,151 D: 6,326 Total debt service 3,852 18,445 27,877 .. E: 27,612 IBRD 208 858 1,443 1,561 IDA 12 81 316 349 Composition of net resource flows G: Official grants 210 266 363 .. 173,377 Official creditors 626 4,315 901 .. F: 94,118 Private creditors 5,462 8,134 7,500 .. Foreign direct investment (net inflows) 2,314 44,237 78,095 .. Portfolio equity (net inflows) 0 5,657 42,861 .. World Bank program Commitments 1,306 2,425 1,154 1,361 A - IBRD E - Bilateral Disbursements 702 2,275 1,169 1,208 B - IDA D - Other multilateral F - Private Principal repayments 97 377 1,144 1,184 C - IM F G - Short-term Net flows 605 1,898 25 24 Interest payments 124 562 615 727 Net transfers 482 1,335 -590 -703
Note: This table was produced from the Development Economics LDB database. 9/24/08
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Annex 15: Maps CHINA: Bayannaoer Water and Environment Comprehensive Management Project
Map number: IBRD 37979 and IBRD38272
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IBRD 37979 CHINA Ganqimaodu Industrial Zone PROJECT EXISTING FUTURE BAYANNAOER WATER RECLAMATION AND WATER REUSE PLANT ENVIRONMENT IMPROVEMENT PROJECT WASTEWATER TREATMENT PLANT
MAIN DRAIN
8 SECONDARY DRAINS WuyuanWuyuan CCountyounty ProjectProject CConstructiononstruction ooff ndustrialnIndustrialdustrial ZZone Zoneone ArtificialArtificial WWetalndsWetlandsetalnds OTHER DRAINS Wulatehouqi 7 CANALS Industrial 6 Zone 5 8 HangjinhouqiHangjinhouqi IndustrialIndustrial ZZoneone 9 4 0101552025 Wuliangsuhai KILOMETERS 3 BayannaoerBayannaoer DemonstrationDemonstration aandnd PromotionPromotion ofof Non-PointNon-Point Lake EconomicEconomic DevelopmentDevelopment Yellow River This map was produced by the PollutionPollution ControlControl PProjectroject Map Design Unit of The World Bank. 2 ZoneZone 10 The boundaries, colors, See 38272 denominations and any other BAYANNAOERBAYANNAOER for detail information shown on this map do not 1 imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.
WulateqianqiWulateqianqi RUSSIAN IndustrialIndustrial FEDERATION ZoneZone
RUSSIAN Hailar FEDERATION Hulun Nur existing HEILONGJIANG Sanshenggong HEILONGJIANG MONGOLIA Intake MONGOLIA JILIN
GOLIA Sea of Ulanhot XINJIANG LIAONING Japan JAPAN ER MON D.P.R. OF 0 100 200 300 400 500 N BEIJING KOREA XINJIANG IN BEIJING KILOMETERS TIANJIN HEBEI REP. OF KOREA SHANXI Yellow SHANDONG Xilinhot Sea
Erenhot NINGXIA Tongliao JILIN QINGHAI GANSU JIANGS SHAANXI HENAN East INNER MONGOLIA ANHUI U China SHANGHAI Sea XIZANG NG HUBEI SICHUAN ZHEJIANG GANSU Area of R. Jining LIAONING CHONGQI w JIANGXI main map llo Bayannaoer HOHHOT HUNAN Ye GUIZHOU FUJIAN BEIJING National Capital DEM. PACIFIC Beijing Province YUNNAN TAIWAN PEOPLE’S Boundaries GUANGXI GUANGDONG OCEAN REP. OF International HONG KONG QINGHAI MYANMAR MACAO TIANJIN KOREA Boundaries SHANXI HEBEI LAO VIETNAM P.D.R. NINGXIA SHAANXI HAINAN PHILIPPINES FEBRUARY 2011 IBRD 38272
PROJECT WORKS: CHINA LAKE CHANNELIZATION BOTTOM SLUDGE PILING AREAS BAYANNAOER WATER RECLAMATION EXCAVATION DIRECTION AND ENVIRONMENT EXCAVATION ORDER NATURAL HABITAT AREA, TO BE IMPROVEMENT PROJECT UNDISTURBED NATURAL HABITAT BUFFER AREA WULIANGSUHAI LAKE POLLUTION CONSTRUCTED WETLANDS REMEDIAL ACTIONS TEMPORARY TERMINALS TO RECEIVE BOTTOM SLUDGE FROM DREDGERS ARTIFICIAL ISLANDS TO BE CONSTRUCTED MAIN DRAIN 8 SECONDARY DRAINS RUSSIAN OTHER DRAINS FEDERATION CANALS WATER FLOW DIRECTION 8 HEILONGJIANG PROTECTION WALLS MONGOLIA MARSH JILIN ADJACENT LOW-LYING AREAS Sea of XINJIANG GOLIA LIAONING JAPAN MON Japan ER D.P.R. OF N BEIJING KOREA IN BEIJING TIANJIN HEBEI REP. OF KOREA SHANXI Yellow SHANDONG Sea QINGHAI NINGXIA RUSSIAN GANSU JIANGSU 9 SHAANXI HENAN East FEDERATION ANHUI China SHANGHAI Sea XIZANG NG HUBEI SICHUAN ZHEJIANG
HONGQI C JIANGXI HUNAN
GUIZHOU FUJIAN National Capital Hailar PACIFIC Province YUNNAN TAIWAN Hulun Wuliangsuhai Nur Boundaries GUANGXI GUANGDONG OCEAN International HONG KONG MYANMAR MACAO Boundaries LAO VIETNAM P.D.R. HEILONGJIANG Lake HAINAN PHILIPPINES
Ulanhot
0 100 200 300 400 500 MONGOLIA
XINJIANG KILOMETERS
Xilinhot Erenhot Tongliao JILIN INNER MONGOLIA 015 234 KILOMETERS
See See main map for detail This map was produced by the GANSU IBRD 37979 R. Jining LIAONING Map Design Unit of The World Bank. w lo HOHHOT The boundaries, colors, for detail el Bayannaoer Y denominations and any other BEIJING information shown on this map do not DEM. imply, on the part of The World Bank Beijing Group, any judgment on the legal PEOPLE’S Lake outlet status of any territory, or any QINGHAI TIANJIN REP. OF endorsement or acceptance of such SHANXI HEBEI KOREA boundaries. NINGXIA SHAANXI FEBRUARY 2011