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Document of The World Bank Public Disclosure Authorized Report No: 26359-CHA FOR OFFICIAL USE ONLY Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$133 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR Public Disclosure Authorized ZHEJIANG URBAN ENVIRONMENT PROJECT December 18.2003 Urban Development Sector Unit China Country Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective July 31, 2003) Currency Unit = Renminbi Yuan (RMB Y) Y 1 = US$0.12 US$1 = Y 8.28 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS AIC Average Incremental Cost NGO Non-governmental organization AIEC Average Incremental Economic Cost NMG Ningbo Municipal Government AIFC Average Incremental Financial Cost NSCL Ningbo Sewage Company Limited CAAB City Appearance Administration Bureau NTWC Ningbo Municipal Tap Water General Company CACDCC Cicheng Ancient County Development and NUIDO Ningbo Urban Infrastructure Development Office Construction Co., Ltd. CIF Cost, Insurance, Freight PIP Project Implementation Plan CITC China International Tendering Company PIU Project Implementation Unit CMP Catchment Management Plan PMO Project Management Office DLIDC Dongqian Lake Investment and Development Company PRC People's Republic of China DLMC Dongqian Lake Management Commission PV Present Value DRA Design Review Advisory QBS Quality-Based Selection EA Environmental Assessment QCBS Quality and Cost-Based Selection EAP Environmental Action Plan RAP Resettlement Action Plan EMP Environmental Management Programs SBD Standard Bidding Documents EOCC Economic Opportunity Cost of Capital SMG Shaoxing Municipal Government EPB Environmental Pollution Bureau SPMO Shaoxing Project Management Office FMS Financial Management System SWM Solid Waste Management FRR Financial Rate of Return TA Technical Assistance GDP Gross Domestic Product TOR Terms of Reference GPN General Procurement Notice UCMF Urban Construction Maintenance Funds HMG Hangzhou Municipal Government UFMD Urban Facilities Management Division HPCMO Historic Precinct Conservation Management Office UMB Urban Management Bureau (Shaoxing) HSWC Hangzhou Solid Waste Company, Ltd. UNDB United Nations Development Business IA Implementing Agencies WACC Weighted Average Cost of Capital ICB International Competitive Bidding WWTP Wastewater Treatment Plant IPCAP Industrial Pollution Control Action Plan ZFB Zhejiang-- Finance Bureau JBIC Japanese Bank for International Cooperation ZHPCMC Zhejiang Provincial Construction Management Commission MBD Model Bidding Documents ZMCDP Zhejiang Multicities Development Project MEAAB Municipal Engineering and Appearance Administration ZPCB Zhejiang Provincial Construction Bureau Bureau MFB Municipal Finance Bureau ZPG Zhejiang Provincial Government MOF Ministry of Finance ZUDPO Zhejiang Urban Development Project Office NCB National Competitive Bidding ZUEP Zhejiang Urban Environment Project NERC Ningbo Economic Research Center Vice President: Jemal-ud-din Kassum Country Managermirector: Yukon Huang Sector ManagerDirector: Keshav Varma Task Team Leader/Task Manager: Wiebe Moes FOR OFFICIAL USE ONLY CHINA ZHEJIANG URBAN ENVIRONMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 3 B. Strategic Context 1, Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 5 C. Project Description Summary 1, Project components 5 2. Key policy and institutional reforms supported by the project 6 3. Benefits and target population 8 4. Institutional and implementation arrangements 10 D. Project Rationale 1. Project alternatives considered and reasons for rejection 11 2. Major related projects financed by the Bank and/or other development agencies 12 3. Lessons learned and reflected in the project design 13 4. Indications of borrower commitment and ownership 14 5. Value added of Bank support in this project 14 E. Summary Project Analysis 1. Economic 15 2. Financial 17 3. Technical 18 4. Institutional 21 5. Environmental 22 6. Social 24 7. Safeguard Policies 25 F. Sustainability and Risks 1. Sustainability 25 2. Critical risks 26 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed [without World Bank authorization, 3. Possible controversial aspects 27 G. Main Conditions 1. Effectiveness Condition 28 2. Other 28 H. Readiness for Implementation 30 I.Compliance with Bank Policies 30 Annexes Annex 1: Project Design Summary 31 Annex 2: Detailed Project Description 34 Annex 3: Estimated Project Costs 45 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 49 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 61 Annex 6: (A) Procurement Arrangements 74 (B) Financial Management and Disbursement Arrangements 83 Annex 7: Project Processing Schedule 89 Annex 8: Documents in the Project File 90 Annex 9: Statement of Loans and Credits 91 Annex 10: Country at a Glance 95 Annex 11: Safeguard Issues 97 Annex 12: Heritage Conservation and Tourism in Historic City-center Upgrading 113 MAP(S) CN328 9 8 CN32901 CHINA Zhejiang Urban Environment Project Project Appraisal Document East Asia and Pacific Region EASUR Date: December 18,2003 Team Leader: Wiebe Moes Sector Managermirector: Keshav Varma Sector(s): Sewerage (35%), Roads and highways (25%), Country ManagerDirector: Yukon Huang Other social services (25%), Solid waste management Project ID: PO66955 (1 O%), Water supply (5%) Lending Instrument: Specific Investment Loan (SIL) Theme(s): Municipal govemance and institution building (P), Pollution management and environmental health (P), Access to urban services for the poor (P), Infrastructure services for private sector development (S), Other urban development (S) [XI Loan [ J Credit [ J Grant [ J Guarantee [ ]Other: For LoanslCreditslOthers: Loan Currency: United States Dollar Amount (US$m): 133 Borrower Rationale for Choice of Loan Terms Available on File: Yes Proposed Terms (IBRD): Variable-Spread Loan (VSL) Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75% Front end fee (FEF) on Bank loan: 1.00% Pavment for FEF: Capitalize from Loan Proceeds BORROWER 201.32 0.00 201.32 IBRD 13.78 119.22 133.00 Total: 215.10 1 19.22 334.32 Borrower: PEOPLE’S REPUBLIC OF CHINA Responsible agency: ZHEJIANG PROVINCIAL GOVERNMENT Zhejiang Urban Development Project Office (ZUDPO) Address: F9, 138 Tianrnushan Road, Hangzhou, Zhejiang, PRC Contact Person: Mr. Zhou Weiqun, Director Tel: 0571 87053002 Fax: 0571 88390232 Email: [email protected] .cn Other Agency(ies): Ningbo PMO Address: F25, 208 South Jiefang Road, Ningbo, Zhejiang, PRC 315010 Contact Person: Mr. Zhu Guoping, Director Tel: 0574 87191087 Fax: 0574 87197348 Email: [email protected] .cn Shaoxing PMO Address: 248 West Renrnin Road, Shaoxing, Zhejiang,PRC 3 12000 Contact Person: Mr. Wang Xiaojun, Director Tel: 0575 5129105 Fax: 0575 5143812 Email: [email protected] Hangzhou PMO Address: 252 Tiyuchng Road, Hangzhou, Zhejiang, PRC 3 10003 Contact Person: Mr. Chen Wei Tel: 0571 85172754 Fax: 0571 85102638 Email: hmb@163 .com Istimated Disbursements ( Bank FY/US$m): Project implementation period: 2003 - 2010 Expected effectiveness date: 07/15/2004 Expected closing date: 06/30/2010 s P+L Form R,” M. bl am -2- A. Project Development Objective 1. Project development objective: (see Annex 1) The objective ofthe Zhejiang Urban Environment Project (ZUEP) is to enhance the efficiency and equity of waste management in Ningbo and Hangzhou municipalities and the redevelopment of the historic inner city in Shaoxing and Cicheng, and thereby facilitating the sustainable development ofthese cities and establishing a model for conservation ofcultural heritage in other Chinese cities. The project will support measures to increase the utilization ofwaste treatment facilities, increase sewerage services in underserved areas including the fast-growing suburban areas and satellite towns in Ningbo; and to improve waste management institutions and finances through implementation ofutility reform measures. Redevelopment ofthe historic inner-city and conservation ofbuilt heritage in Shaoxing and Cicheng is a top priority ofthe municipal governments and the project will contribute to improving the quality of life of their citizens, sustain their cultural and historic nature through tourism development, upgrade their housing stock and safeguard environmental conditions. 2. Key performance indicators: (see Annex 1) Key performance indicators would include quantified targets for reduced water pollution from the urban areas into rivers, reduced water pollution from the industrial sector, expanded safe solid waste disposal, improved living conditions in inner cities, reduced level of subsidies for investments in urban environmental infrastructure, enhanced cultural heritage conservation, enhanced tourism development, and improved awareness, management and control in urban planning and environmental protection. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by