Chao Lake Environmental Rehabilitation Project (RRP PRC 44036)

INSTITUTIONAL ANALYSIS

A. Introduction

1. The institutional analysis describes and analyzes the institutional set up for the Anhui Chao Lake Environmental Rehabilitation project to be implemented by the Anhui Provincial Government (APG). The analysis aims to ensure that (i) the project is institutionally sound and adequate capacity exists for a successful implementation; and (ii) the institutional arrangements facilitate effective and sustainable operations and maintenance of the project facilities.

2. To ensure successful project implementation, ADB and APG need to agree on suitable institutional and project management arrangements. These arrangements need to provide for (i) ease of project preparation and approval by both ADB and relevant domestic authorities; (ii) a strong project management during the implementation by the Anhui Provincial Project Management Office (APMO) within Chao Lake Management Authority (CLMA); (iii) an assurance that the implementing agencies have the capability to effectively discharge their responsibilities for the implementation of the components for which they are responsible of; (iv) a clear definition of the implementing agencies’ responsibilities and their relationship with APMO and other agencies involved in project implementation; (v) an efficient future operation and management of the project facilities to ensure sustainability in terms of finance and service provision; and (vi) capacity building based on the specific features of the project and recognition of the newly established CLMA.

B. Institutional Arrangements in Anhui

3. Anhui is a provincial level government directly accountable to the State Council of the People’s Republic of (PRC) government. Although APG, through APMO, will oversee the project preparations and implementation and give provincial level support as needed, it is the APMO or the local project management offices (PMOs) and implementing agencies who will be primarily responsible for project implementation.

4. The Anhui Province Development and Reform Commission (APDRC) provided the PMO until 9 March 2012 when it was transferred to the CLMA.

1 C. Chao Lake Management Authority (CLMA)

5. CLMA is a vice-departmental administrative body at the provincial level that is responsible for the comprehensive management of the planning, water conservancy, environmental protection, fishery administration, shipping, and tourism affairs of Chao Lake, as well as the major control facilities in Chao Lake Basin, including Chao Lake control gate, Fenghuangjing, Xinqiao, and Yuxi rivers, and Tongcheng control gates. The CLMA office is located in the present City (county level).

6. For administrative purposes, CLMA is placed in the Municipal Government (HMG) and is headed by the HMG vice-mayor.

7. CLMA has 10 divisions including the General Office (Financial Office), Human Resource (HR), Land Planning, Water Conservancy, Transportation, Environmental Protection, Tourism Development, Agriculture, Forestry and Aquaculture, Headquarter and Party Construction, and Disciplinary Supervision, with a total of 150 employees. CLMA administers 19 public institutions with an authorized size of 480 employees and an actual staff of 460 employees.

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D. Project Management

8. Provincial PMO. Based on the instruction of the APG, the APMO has been set up within CLMA and its responsibilities are as follows:

(i) Coordinate with province and municipal departments for necessary support services; (ii) Ensure compliance of loan covenants; (iii) Resettlement Plans: confirm land acquisition requirements, monitor implementation of resettlement plans and the grievance redress system; (iv) Environmental Monitoring Plans (EMPs): coordinate with relevant environment bureaus and environment monitoring centers for the implementation of the EMPs; (v) Planning and Managing: (i) develop annual project work plans, staffing schedules, procurement budgets, operating and maintenance budgets; and (ii) prepare an overall Project Performance and Management System (PPMS) for the project and develop procedures for obtaining monitoring reports; (vi) Engineering: assure that implementing agencies have (i) prepared detailed designs, drawings, specifications, bills of quantities, cost estimates, tender documents, and associated contract documentation for procurement of civil works and goods; (ii) made arrangements for site supervision and construction quality control of civil works; and (iii) disbursements to contractors after ensuring correctness of the measurements and invoices; (vii) Procurement: prepare (i) standard bid documents and standard technical specifications of works; and (ii) evaluation of bids of contractors/suppliers including their post-qualification, wherever necessary; (viii) Implement Social Dimension Plans: (a) work with subproject PMOs and implementing agencies to implement the Social Action Plan, Gender Action Plan, and Consultation and Participation Plan; and (b) monitor performance and impact of the plans and where necessary, suggest adjustments in the programs and mechanisms; and (ix) Reporting: (i) prepare formats, procedures, and guidelines for reporting progress to ADB; and (ii) prepare project accounts and submit timely statements to ADB.

9. Municipality and County PMOs. Nine local PMOs at municipal and county levels have been established. The PMOs will report directly to its respective project leading group (PLG) on policy matters and to the director of provincial PMO on project implementation matters. The primary functions of these subproject PMOs are to: (i) supervise and coordinate overall subproject implementation; (ii) liaise with other agencies in their respective municipality or counties; (iii) review, refine, and confirm procedures for safeguards implementation within their respective municipalities or counties; (iv) supervise resettlement plan and EMP implementation within their respective municipality or county; (v) ensure the provision of counterpart funding; (vi) verify withdrawal applications; (vii) engage the project’s environmental and social safeguard design institutes; and (viii) serve as the secretariat of the municipal or county PLG. The director of each PMO is either a director or vice-director of the municipal or county development and reform commission (DRC). Professional staff for each PMO includes representatives from various municipal or county agencies. Table 1 shows the relation of various PMOs and implementing agencies.

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Table 1: Local Project Management Offices (PMOs) Subproject PMO Subprojects Local PMOs for H2 and H3 for H4 Hefei municipality H1 - H12 for H5 for H10 and H12 Chaohu County for H7, H8, and H9 Lu’an municipality L1 Lu’an Municipality HS1 Hanshan County Wuwei county WW1 Wuwei County Note: Subproject PMOs are essentially project implementation units. PMO = project management office. Source: Asian Development Bank estimates.

10. Implementing agencies. A total of 13 implementing agencies will implement the 15 subprojects as shown in Table 2. The implementing agencies are responsible for designing and constructing the relevant facilities. The responsibility for subsequent operation and maintenance (O&M) over the long term is shown in Table 3. For those implementing agencies not responsible for O&M, they will transfer the completed assets to relevant government agencies.

11. Eleven out of the 13 implementing agencies are socially owned enterprises (SOEs) except CLMA, which is a newly established governmental department, and the Lujiang County Government. The Lu’an City Drainage Company (for subproject L1) and Chao Lake Construction Management Bureau (for subproject H6) possess experiences in undertaking World Bank (WB) and ADB funded projects before. Although other implementing agencies do not have any donor-funded project experiences, they have experience in infrastructure-related construction funded by the government. They are fully operational and report directly to local construction or another department of their respective municipality or county governments.

Table 2: Subproject Implementing Agencies Number Subproject Implementing Agency H1 Hefei City Binhuxin District Beilaowei Hefei City Binhuxin District Construction Environment Improvement Investment Co., Ltd (Hefei Binhu

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Construction Headquarters) H2 Feidong County Chao Lake Basin (Chaolin River Region) Water Environment Integrated Hefei Changning Investment Co., Ltd Improvement H3 Feidong County Chao Lake Basin (Cuo Town Region) Water Environment Integrated Hefei Cuo Cheng Investment Improvement Construction Co., Ltd

H4 Feixi County Environment Integrated Feixi County Urban and Rural Improvement for Rivers Flowing into Chao Lake Construction Investment Co., Ltd

H5 Banqiao River Upstream Water Environment Hefei Beicheng Construction Investment Integrated Improvement (Corporation) Co., Ltd

H6 Hefei City Chao Lake Bank Water Environment Chao Lake Construction Management Improvement and Ecological Rehabilitation Bureau (under Hefei City Water Authority) H7 Estuary Wetland Ecological System Rehabilitation of Rivers Flowing Into Chao Lake Chaohu (County) Urban in Rural Area (Zhegao River and Tongyang Construction and Investment Co., Ltd River)

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Number Subproject Implementing Agency H8 Water Environment Rehabilitation of Zhegao River and Tongyang River H9 Huatang River Estuary Ecological Wetland Project H10 Rehabilitation of Xian River and Its Tributaries Lujiang County Urban Construction and in Lujiang County Investment Co., Ltd

H11 Chao Lake Management Authority Institutional Capacity Building Chao Lake Management Authority

H12 Pilot Project for Chao Lake Agricultural Non-point Source Pollution Control Lujiang County Government

L1 Chao Lake Basin Lu'an Eastern New Town District Water Environment Improvement Lu’an City Drainage Company

HS1 Hanshan County Qingxi River Water Hanshan County Urban Development Environment Integrated Improvement and Investment Co., Ltd

WW1 Wucheng Water Environment Rehabilitation in Wuwei County Urban Development and Wuwei County Investment Co., Ltd

Source: Asian Development Bank estimates.

12. Each implementing agency will assemble a dedicated project team to implement its respective subproject, consisting of internal personnel resources and in certain cases, staff deployments from town and township government agencies. Personnel will have specific responsibilities relating to e.g., engineering management, procurement, budgeting, financial management, and environmental and resettlement activities.

13. Based on the institutional assessment conducted, the implementing agencies which do not have WB or ADB project experiences lack sufficient capability in overall project planning, financial management, procurement management, and construction management. Therefore, a capacity building and institutional development program has been designed to strengthen their capability to ensure the successful implementation of the project.

14. Once construction is completed, the majority of the completed assets will be transferred to other government departments for operations (Table 3). For the wastewater collection and treatment components in municipalities or counties that already have wastewater treatment plant or company, that company will operate and maintain the subproject’s wastewater collection and treatment systems over the long term, concurrent with establishing and/or developing tariff mechanisms within the coverage areas. Being fully responsible for the efficient operation of the systems, the implementing agencies will, (i) maintain wastewater collection and treatment facilities, including asset inventories, inspection, monitoring and reporting programs, routine maintenance and repair, and emergency response procedures for system deficiencies; (ii) operate and maintain wastewater treatment plants (WWTPs), including the operation of mechanical equipment and control of treatment processes; (iii) sludge disposal; (iv) effluent quality monitoring, laboratory testing, and reporting; (v) wastewater tariff and subsidy implementation; (vi) health and safety procedures; and (vii) overall coordination and communication with municipal and county and town, and township government agencies and other stakeholders.

15. For wastewater collection and treatment components, implementing agencies which have no wastewater collection and treatment business before, they will either set up a new 5 wastewater company or outsource the operations. Regarding river and wetland components, the constructed subprojects will be transferred from the implementing agencies to the relevant water resources departments or other government agencies to operate and maintain.

16. As a loan covenant, it is required to establish the O&M agency at least one year before commissioning or completing the works to enable the agency to prepare to undertake the operations responsibility once the components are built.

Table 3: Operating and Maintenance Agencies No. Component Sub-Component Name Dredging & Embankment To be determined

Hefei City Binhuxin District WW Collection To be determined H1 Beilaowei Environment WW Treatment To be determined Improvement Wetlands To be determined

Hefei Changning Dredging & Embankment Feidong County Chao Lake Investment Co., Ltd Basin (Chaolin River Region) H2 Water Environment Integrated Solid Waste Improvement

Dredging & Embankment Feidong County Chao Lake Basin (Cuo Town Region) Water WW Collection Hefei Cuo Cheng H3 Environment Integrated Investment Construction Improvement Wetlands Co., Ltd

Dredging & Embankment To be determined Feixi County Environment WW Collection To be determined H4 Integrated Improvement for Rivers Flowing into Chao Lake WW Treatment To be determined

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Dredging & Embankment To be determined Banqiao River Upstream Water H5 Environment Integrated Improvement WW Collection To be determined

Dredging Chao Lake Construction Hefei City Chao Lake Bank Management Bureau Water Environment Improvement H6 (under Hefei City Water and Ecological Rehabilitation Wetlands Authority)

Dredging & Embankment To be determined Estuary Wetland Ecological System Rehabilitation of Rivers WW Collection

H7 Flowing Into Chao Lake in Rural Area (Zhegao River and Tongyang River) WW Treatment To be determined

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No. Component Sub-Component Name H8 Water Environment Dredging & Embankment To be determined Rehabilitation of Zhegao River and Tongyang River WW Collection To be determined

WW Treatment To be determined

Chaohu (County) Urban Huatang River Estuary H9 Wetlands Construction and Ecological Wetland Investment Co., Ltd

Dredging & Embankment Rehabilitation of Xian River and H10 Its Tributaries in Lujiang County WW Collection

Chao Lake Management H11 Not applicable Authority

Chao Lake Basin Lu’an Eastern WW Collection Lu’an City Drainage Co., L1 New Town District Water WW Treatment Ltd Environment Improvement

Dredging & Embankment Hanshan County Qingxi River Hanshan County Urban HS1 Water Environment Integrated WW Collection Development and Improvement Investment Co., Ltd WW Treatment

WW Collection Establish a division within Wucheng Water Environment WW1 the Wuwei County Water Rehabilitation in Wuwei County WW Treatment Supply Company Source: Asian Development Bank estimates.

17. Figure 1 illustrates the organizational arrangements of the PMO, Leading Group, and implementing agencies.

E. Institutional Capacity Building Project for CLMA

18. Many institutional and management challenges remain to be overcome to successfully implement the project. The CLMA as a new agency in the existing government framework needs to: (i) develop a clear vision of what it wants to achieve (codify its objectives); (ii) decide how it will achieve its vision and what measures need to be taken to facilitate this strategy; (iii) decide if its structure needs to be reorganized to facilitate strategy implementation; and (iv) develop the administrative tools (guidelines, procedures, standards, regulations), human resources (job descriptions and training), and procure the facilities and equipment needed to implement its strategy.

19. ADB proposed to UNESCO-IHE a technical assistance for Capacity Building for Chao Lake Management Authority during the period June 2012–May 2013. The objectives of the capacity building are to: (i) facilitate the development of a pilot institutional framework for the CLMA, which clarifies its internal structure and jurisdiction in relation to existing provincial agencies; (ii) assess the technical and managerial training needs of CLMA staff; (iii) develop 7 the understanding and capacity of CLMA staff to apply the principles of integrated water resources management (IWRM); and (iv) establish links between the CLMA and lake and river basin management authorities in other places in the PRC and globally, to facilitate exchange of management experiences and knowledge.

20. The project will be accomplished over a 12-month period (September 2012–August 2013) and implemented through three sequential on-site activities: (i) problem identification and training needs assessment; (ii) preparation and organization of a training course for IWRM; and (iii) preparation and organization of a workshop to introduce a pilot institutional structure. Ideally, this revised institutional structure would be piloted over the following months, coinciding with the loan effectiveness in March 2013. Upon completion of this 12-month project, a follow-up project consisting of training in IWRM for selected CLMA staff at the UNESCO-IHE headquarters in the Netherlands may be considered.

21. Subproject H11 provides equipment, training, and management systems. US$5 million of the ADB loan will fund procurement of office automation equipment, training of staff, studies for major functional areas of CLMA, and development of a water quality monitoring system.

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Figure 1: Organization of Chao Lake Environmental Rehabilitation Project

F. Project Management Consulting Service and Training

22. APMO will engage consultants to assist in project implementation and management, as well as provide training to Anhui PMO, CLMA, municipal or county PMOs, and implementing agencies.

23. The consulting services will involve international and national experts, with an international team leader and national deputy team leader. The consultants will assist the Anhui PMO, CLMA, municipal and county PMOs, and implementing agencies in the following: (i) liaising and coordinating with ADB; (ii) establishing project performance and monitoring system (PPMS) procedures and preparing quarterly reports to ADB; (iii) monitoring using the project’s design and monitoring framework; (iv) implementing the Social Action Plan, resettlement plans, and EMPs; and (v) promoting the adoption of international standard practices for project management and monitoring systems. Capacity building and training activities will be provided to strengthen the Anhui PMO, municipal and county PMOs, and implementing agencies’ design and supervision, and O&M procedures.

24. The capacity building will include both formal and informal training. Workshops, seminars, study tours, and on-the-job training will be provided directly by the specialist consultants, under locally arranged training contracts, or through approved in-country or overseas study activities.