Technical Assistance Consultant’s Report

Project Number: 37641 July 2005

People’s Republic of : Flood Control Project {(Financed by the )}

Prepared by SOGREAH Consultants

For {Executing agency} {Implementing agency}

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. All the views expressed herein may not be incorporated into the proposed project’s design.

PEOPLE REPUBLIC OF CHINA ASIAN DEVELOPMENT BANK HUNAN WATER RESOURCES DEPARTMENT

HUNAN FLOOD MANAGEMENT PROJECT

TA 4324-PRC

FINAL REPORT

JULY 2005 13401501.R4

ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

PEOPLE’S REPUBLIC OF CHINA HUNAN WATER RESOURCES DEPARTMENT – ADB LOANS PROJECT MANAGEMENT OFFICE

ASIAN DEVELOPMENT BANK

HUNAN FLOOD MANAGEMENT PROJECT TA 4324-PRC

FINAL REPORT

IDENTIFICATION N°: 13401501.R4 DATE: 30TH JUNE 2005

This document has been produced by the SOGREAH Consultants as part of the ADB Project Preparation TA 4324-PRC (Job Number 13401501) This document has been prepared by the project team under the supervision of the Project Director following Quality Assurance Procedures of SOGREAH in compliance with ISO9001.

APPROVED BY INDEX DATE AUTHOR CHECKED BY PURPOSE OF MODIFICATION (PROJECT MANAGER)

A Final 30/6/05 ABH DC

INDEX CONTACT ADDRESS DISTRIBUTION LIST

PWRD-FLPMO (Mdm Li Kuangyun, Mr Zhu [email protected] ; [email protected]; 1 Jianrong, Mr Shen Honghui) [email protected] The Asian Development Bank (Ms Kay 3 [email protected] Cheong) [email protected], 4 SOGREAH (Head Office)

SOGREAH – JULY 2005 PAGE I ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE OF CONTENT

1. INTRODUCTION...... 19 1.1. BACKGROUND TO PROJECT PREPARATION ...... 19 1.2. APPROACH TO PROJECT PREPARATION...... 19 1.3. OVERVIEW OF THE PROJECT AREA...... 20 1.4. PROJECT PROPONENTS...... 23 1.5. PROJECT ANALYSIS ...... 24 1.6. PROJECT MODALITY...... 25 2. SECTOR CONTEXT AND RATIONALE...... 26 2.1. PHYSICAL SITUATION AND FLOOD CHARACTERISTICS ...... 26 2.2. SOCIO-ECONOMIC SITUATION AND IMPACT OF FLOODS ...... 29 2.2.1. SOCIO-ECONOMIC AND POVERTY CHARACTERISTICS OF THE PROJECT AREAS (PA)...... 29 2.2.2. IMPACT OF FLOODS...... 31 2.3. SECTOR STRATEGY, PLANS AND POLICIES ...... 32 2.3.1. FLOOD MANAGEMENT IN HUNAN ...... 33 2.4. PROJECT RATIONALE ...... 44 2.4.1. FLOOD SITUATION AND ECONOMIC IMPACTS ...... 44 2.4.2. CITY FLOOD PROTECTION ...... 45 3. THE PROPOSED PROJECT...... 49 3.1. OBJECTIVES ...... 49 3.1.1. PROJECT GOAL AND OBJECTIVES ...... 49 3.1.2. PROJECT SCOPE...... 50 3.1.3. HUNAN FLOOD MANAGEMENT PROJECT ...... 54 3.2. COMPONENTS AND OUTPUTS ...... 55 3.2.1. FLOOD MANAGEMENT SYSTEM...... 55 3.2.2. CITY AND COUNTY FLOOD PROTECTION WORKS...... 57 3.2.3. CAPACITY BUILDING AND PROJECT MANAGEMENT...... 59 3.2.4. STAKEHOLDER PARTICIPATION...... 61 3.3. COST ESTIMATES ...... 63 3.4. FINANCING PLAN...... 63 3.5. IMPLEMENTATION ARRANGEMENTS...... 64 3.5.1. PROJECT COORDINATION...... 64 3.5.2. SUBPROJECT SELECTION AND PREPARATION ...... 65 3.5.3. SCHEDULE...... 66 3.5.4. LAND ACQUISITION AND RESETTLEMENT ...... 66 3.5.5. PROCUREMENT - CIVIL WORKS AND EQUIPMENT...... 67

SOGREAH – JULY 2005 PAGE II ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.5.6. CONSULTING SERVICES ...... 68 3.5.7. TRAINING AND STUDY TOURS ...... 68 3.5.8. DISBURSEMENT ARRANGEMENTS ...... 68 3.5.9. ADVANCE PROCUREMENT ACTION...... 69 3.5.10. ACCOUNTING, AUDITING, AND REPORTING ...... 69 3.5.11. OPERATION AND MAINTENANCE ...... 70 3.5.12. GOVERNANCE AND ANTICORRUPTION...... 70 3.5.13. PROJECT PERFORMANCE MONITORING AND EVALUATION ...... 70 3.5.14. ANNUAL AND MIDTERM REVIEWS...... 71 3.5.15. CAPACITY BUILDING AND HUMAN RESOURCE DEVELOPMENT...... 72 3.6. ENVIRONMENT AND SOCIAL MEASURES ...... 72 3.6.1. ENVIRONMENTAL IMPACTS AND MITIGATIONS...... 73 3.7. RESETTLEMENT AND SOCIAL IMPACTS MITIGATION...... 77 4. PROJECT BENEFITS, IMPACTS, AND RISKS...... 79 4.1. BENEFITS ...... 79 4.1.1. PROJECT JUSTIFICATION...... 79 4.1.2. IMPROVED FLOOD PROTECTION...... 80 4.1.3. FINANCIAL AND ECONOMIC...... 80 4.1.4. SOCIAL AND POVERTY REDUCTION...... 80 4.2. IMPACTS...... 81 4.2.1. SOCIAL IMPACTS...... 81 4.2.2. FISCAL IMPACT AND SUSTAINABILITY...... 82 4.2.3. LAND ACQUISITION AND RESETTLEMENT ...... 82 4.2.4. ETHNIC MINORITIES...... 82 4.2.5. ENVIRONMENTAL IMPACTS ...... 83 4.3. RISKS AND MITIGATION MEASURES ...... 83

APPENDIX 1: FLOOD MANAGEMENT IN HUNAN 86 1. CURRENT SITUATION...... 86 1.1. FLOODS IN HUNAN ...... 86 1.2. RIVER SYSTEMS IN HUNAN...... 87 1.2.1. XIANGJIANG RIVER ...... 88 1.2.2. ZISHUI RIVER ...... 88 1.2.3. RIVER ...... 89 1.2.4. ...... 89 1.2.5. DONTING LAKE ...... 89 1.3. FLOODS IN THE FOUR RIVER BASINS ...... 90 1.3.1. XIANGJIANG FLOODS ...... 90 1.3.2. ZISHUI FLOODS...... 90 1.3.3. YUANSHUI FLOODS ...... 90 1.3.4. LISHUI FLOODS...... 90 1.4. MAIN FEATURES OF HISTORIC FLOODS ...... 91

SOGREAH – JULY 2005 PAGE III ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1.4.1. 1998 FLOOD...... 91 1.4.2. OTHER HISTORIC SIGNIFICANT FLOODS...... 92 2. GOVERNMENT PLANS, LEGAL AND INSTITUTIONAL FRAMEWORK ...... 94 2.1. RIVER BASIN PLANS...... 94 2.1.1. COMPREHENSIVE WATER RESOURCE MANAGEMENT PLANS FOR XIANG, ZI, YUAN AND BASINS 94 2.1.2. RIVER BASIN FLOOD CONTROL PLANS FOR XIANG, ZI, YUAN AND LI RIVERS...... 95 2.2. LEGAL AND REGULATORY FRAMEWORK FOR FLOOD MANAGEMENT...... 96 2.2.1. GENERAL 96 2.2.2. BRIEF INTRODUCTION OF LEGAL SYSTEM ...... 97 2.2.3. RELEVANT LAWS AND REGULATIONS...... 98 2.3. INSTITUTIONAL FRAMEWORK FOR FLOOD MANAGEMENT ...... 104 2.3.1. NATIONAL - MINISTRY OF WATER RESOURCES (MWR) ...... 104 2.3.2. NATIONAL - OFFICE OF STATE FLOOD CONTROL AND DROUGHT RELIEF (SOFCDR) ...... 105 2.3.3. BASIN - RIVER WATER RESOURCES COMMISSION (CWRC) ...... 105 2.3.4. Province - Hunan Provincial Water Resources Department (PWRD) and Hunan Hydro & Power Design Institute (HHPDI) ...... 106 2.3.5. MUNICIPAL / COUNTY - LOCAL DEPARTMENTS (MWRD, MHPDI AND CITY AUTHORITIES) ...... 107 2.3.6. 3.6. PROJECT - PROJECT MANAGEMENT OFFICE (PPMO) ...... 107 APPENDIX 2: PROJECT DEVELOPMENT AND MONITORING FRAMEWORK APPENDIX 3: EXTERNAL ASSISTANCE TO THE SECTOR APPENDIX 4: LESSONS LEARNED 1.OVERALL...... 117 2. SPECIFIC LESSONS LEARNED...... 118 2.1. COORDINATED MANAGEMENT AND MONITORING FOR PROJECT IMPLEMENTATION...... 118 2.2. APPLICATION OF DUE PROCESS ...... 118 2.3. FINANCIAL AFFORDABILITY ...... 119 2.4. ECONOMIC ANALYSIS ...... 119 2.5. ENVIRONMENTAL MANAGEMENT PLANS (EMP)...... 119 2.6. RESETTLEMENT AND LAND ACQUISITION...... 120 2.7. COORDINATION FOR NON-STRUCTURAL MEASURES ...... 120 APPENDIX 5: CORE PRIORITY SUBPROJECT SELECTION 121 APPENDIX 6: DESCRIPTION OF CORE SUBPROJECTS 127 APPENDIX 7: COST ESTIMATES AND PROJECT FINANCING 133 1. INTRODUCTION...... 133 2. PARAMETERS AND GENERAL ASSUMPTIONS ...... 134 APPENDIX 8: ORGANISATION CHART AND FLOW OF FUNDS 143 APPENDIX 9 : RESETTLEMENT FRAMEWORK AND SECTOR ARRANGEMENTS 144 1. BACKGROUND ...... 144

SOGREAH – JULY 2005 PAGE IV ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. RESETTLEMENT FRAMEWORK AND PROCEDURE GUIDELINES ...... 145 2.1. PROJECT IMPACT – LAND ACQUISITION, BUILDING DEMOLITION AND RESETTLEMENT ...... 145 2.2. RESETTLEMENT FRAMEWORK ...... 147 2.3. RESETTLEMENT AND REHABILITATION ...... 148 2.4. RESETTLEMENT FRAMEWORK AND RP PREPARATION...... 149 2.5. DISCLOSURE AND PUBLIC CONSULTATION ...... 149 2.6. INSTITUTIONAL RESPONSIBILITIES...... 149 2.7. GRIEVANCE PROCEDURES ...... 150 2.8. MONITORING AND EVALUATION ...... 150 APPENDIX 10: IMPLEMENTATION SCHEDULE 151 1. PROJECT PREPARATION ...... 151 2. CONSTRUCTION PROGRAM ...... 152 APPENDIX 11: INDICATIVE PROCUREMENT PACKAGES 156 APPENDIX 12: CONSULTING SERVICES, TRAINING AND STUDY TOURS 163 APPENDIX 13: ECONOMIC AND FINANCIAL ANALYSIS1 166 1. INTRODUCTION...... 166 2. ECONOMIC PRICING...... 168 3. CORE SUBPROJECTS...... 170 3.1. BENEFITS ...... 170 3.2. COSTS...... 172 3.3. ECONOMIC ANALYSIS ...... 173 3.3.1. ECONOMIC RETURNS ...... 173 4. SENSITIVITY ANALYSIS ...... 175 4.1. USER CHARGES ...... 176 APPENDIX 14: SOCIAL AND POVERTY IMPACT ASSESSMENT 179 1. GOVERNMENT POLICIES ON POVERTY REDUCTION...... 179 2. SOCIOECONOMIC CHARACTERISTICS OF THE PROJECT AREAS (PA) ...... 180 3. OVERVIEW OF SOCIAL BENEFITS ...... 185 4. PROJECT EMPLOYMENT IMPACT...... 187 5. DISTRIBUTION OF PROJECT BENEFITS ...... 188

SOGREAH – JULY 2005 PAGE V ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

LIST OF TABLES

Table 1: Features of the Project Area (2003)------29 Table 2: Poverty Conditions in the PA and the Four River Basins (2003) ------30 Table 3: Comparison of Costs for Large Floods in Hunan Province (actual year costs)------31 Table 4: Flood Damages among 4 River Basins in Hunan in Selected Years------32 Table 5: Hunan River Basin Plans Approval Status (April 2005) ------36 Table 6: Integrated Flood Control Program of Hunan Province------38 Table 7: Statistics on Hydrological Gauging Stations in Hunan Province ------40 Table 8: Damage and Loss Statistics for a Typical Year in the Four River Basins ------47 Table 9: Statistics and Analysis of Flood Prone Cities ------50 Table 10: Proposed City Flood Control Subprojects and their Key Features------52 Table 11: Cost Estimates------63 Table 12: Summary Financing Plan ------64 Table 1-1: Information on the River System of Hunan Province------88 Table 1-2: Precipitation in Hunan Province - 1998------92 Table 1-3: Data of Main Historic Floods in the 4 Main Rivers of Hunan Province------93 Table 1-4: Hunan Cities – Flood Control Standards ------96 Table 5-1: Selection of 8 Core Subprojects------126 Table 6-1: Summary Data Sheet on 36 Subprojects ------128 Table 6-2: Core Subprojects - Land Acquisition, Buildings Demolition and People Resettlement ---- 129 Table 6-3: Construction Works, Quantities, Land & Buildings Removal, and People to be Resettled 130 Table 6-4: Summary of Project and Project Protected Areas, and related Urban / Rural Population- 131 Table 6-5: Estimated Land Acquisition, Buildings Demolition and People Resettlement------132 Table 7.1: Project Cost Summary by Component------135 Table 7.2: Project Cost Summary by Expenditure Account------136 Table 7.3: Summary of Base Costs by Component by Year (in $’000s) ------137 Table 7.4: Summary of Base Costs by Expenditure Account by Year------138 Table 7.5: Financing Plan ------139 Table 7.6: Financing Plan by Year ------140 Table 7.6 (Continued) ------141 Table 7.6 (Continued) ------142 Table 9-1: Scope of Land Acquisition and Resettlement for up to 36 Subprojects------146 Table 9-2(1): Scope of Land Acquisition and Resettlement for 8 Core Subprojects ------147 Table 9-2(2): Scope of Land Acquisition and Resettlement for 8 Core Subprojects ------147 Table 10-1: Implementation Schedule for up to 36 City Urban Flood Control Projects ------155 Table 11-1: Indicative Procurement Packaging------158 Table 11-1: Indicative Procurement Packaging (cont’d) ------159 Table 11-1: Indicative Procurement Packaging (cont’d) ------160 Table 11-1: Indicative Procurement Packaging (cont’d) ------161 Table 11-1: Indicative Procurement Packaging (cont’d) ------162 Table 12-1: Estimate for PPMO Project Management, Training and Study Tour Costs ------165 Table 13-1: Annualized Economic Benefits for Core Subprojects------171 Table 13-2: Base Costs by Major Expenditure Account for Core Subprojects (CNY ten thousands)- 173 Table 13-3: Economic Analysis of Core Subprojects ------174 Table 13-4: Sensitivity Tests for Core Subprojects------175 Table 13-5: Sensitivity Indexes and Switching Values for Core Subprojects ------176 Table 13-6: Financial Status of Local Authorities Implementing Core Subprojects (2004) ------177 Table 13-7: Local Currency Financing, Loan Repayment Requirements------178 Table 14-1: Features of the Project Areas (million) ------181 Table 14-2: Poverty Conditions in the PA and the Four River Basins (2003) (million) ------181 Table 14-3: Poverty Conditions for 8 Core Subprojects ------183 Table 14-4: Flood Damages among Four River Basins in Hunan in Selected Years------184

SOGREAH – JULY 2005 PAGE VI ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

LIST OF FIGURES

Figure 1: Map of Hunan Province showing location of 36 proposed Subprojects------18 Figure 2: Yangtze River Basin – Major Water and Flood Management Systems ------27 Figure 3: Hunan Province River Basin Plans ------35

SOGREAH – JULY 2005 PAGE VII ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

CURRENCY EQUIVALENTS

(as of June 2005)

Currency Chinese – Unit RMB CNY – $0.121 1.00 $1.00 – RMB 8.27

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank CCO Chief Compliance Officer CNY Chinese Yuan DDC Design Drawing Collection DI Design Institute EA Executing Agency (Hunan Provincial Government) EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environment Management Plan ENPV Economic Net Present Value EPB Environmental Protection Bureau FMC Flood Control Management Committee FS Feasibility Study FSE Feasibility Study Estimates FSRs Feasibility Study Reports FX Foreign Exchange GDP Gross Domestic Product

SOGREAH – JULY 2005 PAGE VIII ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

GOC Government of China GIS Geographic Information System GPS Global Positioning System HFMP Hunan Flood Management Project HHB Hunan Hydrology Bureau HHPDI Hunan Hydro and Power Design Institute HPG Hunan Provincial Government IDI Interest During Implementation IRBM Integrated River Basin Management IEE Initial Environmental Examination JBIC Japan Bank for International Cooperation LB Left Bank LC Local Cost LIBOR London Interbank Overnight Rate LLG Local Leading Group LPMO Local (City) Project Management Office

MHPDI Municipal Hydro and Power Design Institute MWR Ministry of Water Resources, PRC NPV Net Present Value O&M Operation and Maintenance PFD Provincial Finance Department PDRC Provincial Development and Reform Committee PIU Project Implementation Unit PLG Project Leading Group PPA Project Protected Area PPMO Provincial Project Management Office PRO Project Resettlement Office PPTA Project Preparation Technical Assistance PRC People’s Republic of China PWRD Hunan Provincial Water Resource Department RB Right Bank RBM River Basin Management RMB Chinese Renminbi (Currency Yuan = CNY) RP Resettlement Plan RRP Report and Recommendation to the President SCF Standard Conversion Factor SDRC State Development and Reform Commission

SOGREAH – JULY 2005 PAGE IX ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

SEIA Subproject Environmental Impact Area SIA Social Impact Assessment SIEE Summary Initial Environmental Examination SPIA Social and Poverty Impact Assessment SS Suspended Solids SSA Subproject Study Area TA Technical Assistance TOR Terms of Reference US$ United States Dollar VAT Value Added Tax WB World Bank WL Water Level

Currency I US$ = 8.28 CNY [Yuan = RMB]

SOGREAH – JULY 2005 PAGE X ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Note: This report was prepared before Loan Fact Finding and finalised shortly thereafter. During Loan Fact Fining, the overall project costs had to be revised due to a late advisory on the definitive ceiling for the ADB Loan (FX) component. The initial project estimates contained under the draft of this report were $614 million overall, with $242 million FX. When the FX was reduced to $200 million, a rapid reassessment was done for the impact of this. It resulted in: 1. FX percentage for the whole project reduced from 40% to 33% 2. FX percentage for civil works reduced from 43% to 34%. 3. Project Management costs reduced from $58 million to $32 million, with reallocation to Civil works of $26 million. 4. Reduction in Financing charges from $43 million to $33 million, due to reduced IDI interest rate, which confirms why the original total cost drops from $614 million to $604 million. The net result of this revised costs structure is a deterioration in overall affordability of the project, and specifically for some subproject cities, who are responsible to provide the local currency contribution. The PPMO indicated that they would have a preference to reinstate the FX proportion for civil works from the indicated 34% hereunder to about 43%. Work continues to address this concern, and some overall project, and particular subproject re-scoping is being tested. Based on the rapid assessment at Loan Fact Finding, the overall project cost would need to be reduced to about $500 million for this to be achieved. PPMO have indicated they would therefore cancel one subproject () and reduce the scope of work in at least three other subprojects ( City, City and City). In undertaking this re-scoping, it is assumed that the planned work for the 8 Core subprojects will not be changed. Under Chinese policy, at feasibility study stage, physical and price contingency rates are set high. At preliminary design stage, these are reduced, as definition of the specific works is more accurate. At Contract Tender, actual costs for the work become known, and the applied unit rates for civil works are typically 10 to 20% lower than those used at feasibility study stage (when Chinese Government Quota based rates are used). Consequently, between feasibility study and actual Contracts award stages, there is a high probability that actual costs for the proposed projects would be in the order of 15 to20% lower than the estimates contained within this report. If this outcome is realised, whilst the current limitations on FX (the loan - $200 million) and the FX percentage applied to the overall project investment (about 40%) means that the overall project scope must be limited to about $500 million, then a net 20% reduction in overall project costs would mean that the actual planned work (up to 36 subpojects) could be completed within the available budgetary allocation of $500 million (i.e. 80% of $604 million = $485 million). Therefore, PPMO may not necessarily have to reduce the scope of the project works substantively in order to ensure overall affordability and retention of the FX proportion. However, the initial planning for the project must assume there is a significant restriction of available funding relative to current cost estimates, and that regular annual review and revisions will have to be made in order to verify the potential for all planned works to be successfully implemented within the overall project financing constraints. Figures presented throughout this report should therefore be considered as indicative and subject to change. Overall, it is anticipated the project investment will be limited to $500 million (or equivalent), with $200 million in proposed foreign exchange from an ADB Loan.

SOGREAH – JULY 2005 PAGE 11 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

EXECUTIVE SUMMARY

Hunan Province and Floods Hunan Province touches the middle reaches of the Yangtze River to the north, while its east, west, and southern areas are mountainous. The northern area, which accounts for some 25% of the area of the province, consists of (covering about 7% of the province) and the low, flat floodplain of the Yangtze River. Hills in the central part of the province provide a transition zone between the surrounding mountains and the Yangtze floodplain. The Li, Xiang, Yuan, and Zi rivers, collectively termed the “mountain rivers,” flow northward to deliver runoff from the mountainous areas to Dongting Lake, which then drains water to the Yangtze River. The orographical uplift of warm and wet frontal airflows over the mountains results in frequent rainstorms from April to October, which cause storm instigated and flash floods in the areas around the mountain rivers. These Mountain Rivers generate short duration localized floods, characterized by a steady rise and fall of water levels in the river sections as a flood wave passes down the river. These elevated flood levels generally persist for no more than two or three days, except in the lower reaches where the period may extend to 5 days. Despite the mountainous conditions, tending to low hills in the middle catchment, the rivers generally have a shallow gradient, with substantive floodplains within the otherwise narrow valleys which characterize the river systems. So, Hunan is subject to two distinct types of floods: flooding in the northern part of the province caused by high flow in the Yangtze River constraining the outflow from Dongting Lake; and flash floods along the narrow strips of land of the steep mountain valleys. Hunan Province consists of 14 municipalities, has 66.3 million people (2003), and about 70% of the municipal and county-level cities are in mountainous areas. These cities are important centers of government, finance, business, education, transportation, agriculture, and manufacturing. They produce machinery, textiles, metals, chemicals, paper products, mineral products, medicine, and processed food. During the past 20 years, Hunan Province has experienced rapid economic growth and urban expansion. The steady increase of the urban population in the mountainous cities is projected to increase by one third from the present levels (about 22 million) by 2010. However, this growth and associated economic development is being constrained because of the frequent flood risk, and the attendant damage that comes from short term frequent and sudden flood flows in the main rivers and major , against which the cities currently have very little protection. Cities and rural enterprises in the mountainous area of the province have typically developed along the narrow bottom lands flanking the mountain rivers and are thus exposed to the dangers of flash flooding and the consequent damage and loss of life. By virtue of their location and dependence on agriculture, many are the poorest of the poor. Growth of the urban areas is also restricting the natural flood attenuation, leading to larger and more frequent floods and socio-economic losses on an annual basis, particularly as the existing flood protection (if any) is equivalent to an extremely low design standard (perhaps no better than protection against a 1 in 5 year return period event). Following the severe 1998 floods and frequent river basin floods since that time, Hunan has prioritised urgent flood protection measures for the more frequently and severely affected upper catchment cities in the four main river basins.

SOGREAH – JULY 2005 PAGE 12 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Hunan Province Flood Control Plans In accord with national policy to improve flood management and ease the social and economic burden on the affected people, Hunan Provincial Government now proposes to implement flood prevention measures for the most seriously affected municipal and county cities in the province. The Hunan Flood Management Project (initially Control Project) is a major step towards Hunan’s implementation of their Comprehensive River Basin and Flood Control Plans, which were prepared in the late 1990’s. This project is the first stage in addressing the urgent need to provide improved flood protection and mitigation measures in the rapidly developing regional cities, and mitigate socio-economic damage and losses. The project is a reflection of the changing demographic and economic characteristics of the province, where many rural people are now migrating to the cities as economic activity changes from a strong rural base to one with an increasing industrial and commercial base. The Hunan Provincial Government has requested, via China’s Ministry of Finance, for financial assistance, in the form of a $200 million plus loan, to implement the proposed works described in this report. Through this report, ADB will evaluate the loan request.

Project Goal, Purpose and Objectives The overall goal of the proposed Project is to reduce flooding and flood hazards in the mountainous area of Hunan Province by improving flood management within a context of integrated river basin management. The purpose of the proposed Project is to strengthen, improve and bring to a consistent standard the flood management measures in the four major Hunan river basins that are tributaries to Dongting Lake in Hunan Province.

The development objective of the proposed Project is to:

• improve urban flood control and to counteract natural calamities in the mountainous areas of Hunan Province;

• protect life and property and improve safety for the people; and,

• ensure social stability and advancement through reliable economic development. The Project will invest in flood management for the Xiangjiang, Zishui, Yuanjiang and Lishui River Basins, collectively termed the ‘Mountain Rivers’, which deliver runoff from the mountainous areas to Dongting Lake. The proposed Project contains up to thirty-six (36) subprojects 1 located in eight municipalities (Zhuzhou, , Hengyang, , , Chenzhou, and ); City which is the capital of Xiangxi ; and twenty-seven county level cities2. These cities are all located in either the eastern, southern and western mountainous regions, or in the central region which generally consists of low hills.

Project and Subproject Proponents The Hunan Provincial Government (HPG) will be the Executing Agency (EA) for the project. A Project Management Office at the provincial level (PPMO) has been established in the Provincial Water Resources Department (PWRD), and will be

1 The inclusion of these subprojects is subject to review under the Sector Loan modality, and subject to the affordability of the proposed works and availability of finance – counterpart funding and loan proceeds – sufficient to finance all agreed components. Further analysis may necessitate some re-scoping of some subprojects as updated FSRs are prepared. 2 The terms “county” and “municipality” are sometimes used interchangeably with the term “city” in the initial Chinese feasibility studies and in other Chinese Project-related documents. It should be understood that all subprojects are focused on specific and defined urban areas for which the generic term “city” is appropriate, regardless of whether this is referring to a prefecture-level, municipal-level or county-level city.

SOGREAH – JULY 2005 PAGE 13 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

responsible for overall project preparation, administration and coordination, and have overall responsibility to oversee and direct the related resettlement, environmental and financial management activities. The PPMO has a core of full time staff, with relevant skills and experience to deal with the civil works implementation, resettlement planning and implementation, environmental activities monitoring and the socio-economic and poverty impacts of the project. The PPMO will be the main point of contact between the project and the ADB, and will coordinate the project implementation of the individual subprojects at each of the flood prone cities outlined above. At each subproject, a local Subproject Management Office (LPMO) will be established for coordinating and administering the subproject in their jurisdiction. Each LPMO will have a similar structure to that of the PPMO, with key staff responsible to manage and direct the resettlement, environment and social/poverty activities for subproject implementation. The LPMO will be assisted by a Project Implementation Unit from within the local Water Resources Bureau to implement the planned civil works, and will work with other local level line agencies (Environment Protection Bureau, Civil Affairs, Land Management) to implement the various elements of the project in accordance with declared standards and guidelines.

Main Project Features The proposed project has three main components – civil works, flood management and project management. The major expenditure (92% of base costs) will be expended on the civil works for 36 distinctly separate city flood protection subprojects in the mountainous reached of the four main river basins in Hunan Province. Expenditure on local flood management measures (2%), which will be part of the overall river basin flood management system, will strengthen the flood warning and response capability of the local government, and mitigate potential damage and losses to the affected peoples. Project management (6%), to oversee the implementation of the civil works and flood management measures, will be provided on two levels, including overall management and coordination at the provincial level (1%) and specific subproject implementation management at the local government level (6%). a. Flood Management Flood Management measures will be undertaken primarily at the subproject city level, and will largely concentrate on the strengthening of the local hydrological and hydraulic data collection network (improvements to measurement stations, with new automated equipment and telemetry links to the flood control centres). Local governments will also strengthen their capability to monitor, forecast, warn and manage the flood situations, including improvements of the flood warning and response procedures, evacuation planning, and post flood reparations and assistance programs. Additionally, these improvements will be an integral part of the overall river basin flood monitoring, forecasting and warning systems operated by Hunan’s Hydrology Bureau (HHB) within the Provincial Water Resources Department (PWRD). HHB provides forecasts and warning information to the Hunan Flood Control and Drought Relief Headquarters, who in turn issue advice as necessary to the Municipal and County Flood Control Centres. The project will provide some limited assistance, via contributions through the concerned cities, to enable HHB to strengthen its overall data acquisition, forecasting and warning systems as part of an integrated approach to flood management within each river basin and for the whole province. Other non-structural interventions have been reviewed, and it is acknowledged that these are an integral part of the overall Comprehensive Flood Management Plan, to be implemented by 2020. This project is a first stage approach to the overall Comprehensive Plan, and is focused on urgent priorities to alleviate the worst of the frequent flood impacts. HPG, through its Development and Reform Committee, PWRD, and other line agencies have plans in progress to address other non-structural catchment management and flood alleviation measures, which when implemented will compliment and strengthen the urgent measures to be implemented under this project.

SOGREAH – JULY 2005 PAGE 14 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT b. Civil Works The civil works will address the need to protect against and mitigate floods, up to an established design standard, to alleviate frequent inundation of low lying urban and peri- urban areas in the selected priority cities that regularly experience disruption, damage and economic loss because of recurrent wet season flooding. The works will consist of strengthening or constructing dikes, drainage culverts, drainage pumping stations, river diversion works or drainage channels to either prevent inundation from high water levels in the rivers, or evacuate local stormwater drainage during flood periods. These works will require some land acquisition and resettlement of some residents and businesses that are currently located close to the river banks, though the designs are prepared so as to use mainly open farmland or wasteland. Resettlement plans, environmental management plans and baseline socio-economic surveys have been prepared to address environmental and social impacts of the subprojects. Particular attention has been given to assessing the poverty situation in the project affected areas, and also the potential impacts on local ethnic minorities. Specific actions to be taken aim to mitigate any negative impacts, and in general alleviate poverty and improve the social and environmental conditions along the river banks. Resettlement plans provide options so that affected people can choose between reallocation of land within their existing village, relocation to planned development areas out of the flood prone areas, or a cash payment. Due community consultation has been undertaken in preparing and promoting the proposed socio-environment related measures. c. Project Management The project will be managed at the provincial level, and 99% of the project expenditure, and responsibility for repayment of the loan, will rest with the municipal and county city governments, in accordance with Chinese policy. The overall project will be coordinated by the provincial project management office (PPMO) which has been set up under a project leading group, established by Hunan Provincial Government. The leading group will oversee and direct the PPMO, which will have day to day responsibility for project implementation and coordination with the leading group and ADB. PPMO includes representatives from the three main line agencies responsible for the project – Provincial Development and Reform Committee (PDRC), Provincial Finance Department (PFD) and Provincial Water Resources Department (PWRD). The PPMO operates from within the PWRD office in , and has primary responsibility to coordinate and direct the subproject implementation managed by LPMOs at the participating cities. PPMO is also responsible to oversee and direct all project preparatory activities, assist LPMOs to organise and plan their project works, set up and manage the financing arrangements, monitor the resettlement planning and environmental management activities, and establish the socio-economic baseline conditions to monitor project impacts, with particular emphasis on poverty alleviation, gender equity and ethnic minority equity. The PPMO will have responsibility to establish the project management framework, monitoring procedures and financial disbursement. The PPMO will also have responsibility to report to HPG and ADB on project progress, issues and actions that are proposed or have been taken to overcome any problems during implementation. PPMO will also be responsible to coordinate with LPMOs for all the prequalification, tender evaluations and award of contracts to implement civil works, supply equipment and provide technical and/or monitoring assistance. PPMO will also be responsible to secure relevant approvals, as may be required, from ADB for subprojects, contracts and subsequent project/subproject variations. PPMO will also be responsible to monitor subproject accounts, payments and replenishment requirements, and coordinate as necessary with ADB for loan funds disbursement and replenishment of project and subproject imprest accounts. LPMOs will be responsible to prepare relevant reports and manage their finances for their subproject, and to make the necessary requests for approval of expenditures, accounting for payments and replenishment of subproject imprest accounts.

SOGREAH – JULY 2005 PAGE 15 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Project Timeframe The project will be implemented between 2005 and 2011 (6 years), commencing about October 2005. The revised sector type project modality allows for further subproject preparation work to be completed, and even for adjustment of subproject scope, prior to approval. Subprojects can be approved in groups, with the first 8 core subprojects approved for implementation in the first year of project implementation, with loan effectiveness from early 2006. HPG anticipates that work on the 8 core subprojects will commence in about August 2005, but as loan approval may be late 2005/early 2006, then they would need to apply for retroactive financing if loan funds are required for any eligible core subproject activities that are undertaken in 2005. Individual subprojects will be implemented within the overall period, but the time required for their implementation varies between 2 and 5 years. The non-structural component activities would be implemented through the early years of the project, subject to commencement of the individual subprojects. The non-structural development activities at the provincial level, to be undertaken by the hydrology bureau, are expected to take place in the first three years of the overall project implementation.

Investment The overall investment for the project is currently estimated to be $604.23 million (CNY 5.003 billion equivalent), inclusive of financial charges during implementation 3. This is made up of the following base costs with $466.35 million (92% - CNY 3.861 billion equivalent) for flood control subprojects, $11.40 million (2% - CNY 0.094 billion equivalent) for flood management, and $31.87 million (6% - CNY 0.264 billion equivalent) for project management. Physical and price contingencies come to $61.34 million (12% - CNY 0.786 billion equivalent), making an overall Project Cost of $570.96 million (100% - CNY 5.005 billion equivalent). Financing charges, assumed to be financed through the loan, are estimated at $33.27 million (7% - CNY 0.290 billion equivalent). Detailed breakdown is provided in Supplementary Appendix E – Detailed Cost Estimates. This funding includes 29% foreign exchange, or $167.01 million (112% - CNY 1.471 billion equivalent) to cover the direct project costs and contingencies. When financing charges are taken into account, these figures increase to 33%, $200.29 million (119% - CNY 1.761 billion equivalent) out of a total overall project cost of $604.23 million (CNY 5.295 billion equivalent), on the basis that ADB provides financing charges through the loan.

Project Preparation Project preparation was implemented from September 2004 until June 2005. Originally scheduled for 6 months to end March 2005, the change in project modality (project to sector loan) necessitated revisions to the programme and scope of the activities, as discussed at the 1st Tripartite Meeting, and which were updated at the PPTA review meetings in March 2005. The unforeseen delays for ADB’s second PPTA review (delayed from January to March) and the change of project officer has also influenced completion of the PPTA services, but the more significant impact that has required additional time to fully address the key issues has been the switch in modality from a project loan to a sector loan. The implications of this change were not fully appreciated by all parties at the 1st tripartite, and the overall implications only became apparent once the 8 core subproject FSRs and associated RPs, IEES and SPIAs were nearing completion. However, the delay has been accommodated by the PPTA Consultant, and judicious adjustment to the PPTA program has enabled this more complete sector focused report to be prepared, without undue detrimental impact on the overall loan processing schedule.

3 The investment values are based on a revised assessment done during Loan Fact Finding, when it was confirmed the maximum loan would be $200 million. Subsequent to this, further revision was undertaken to assuage issues of subproject affordability, where the total project cost was scaled back to about $490 million (see ADB Loan Fact Finding MOU, dated 18th June 2005). The overall project costs details were still under review as this Final Report was concluded, and definitive values will be presented at Loan Appraisal.

SOGREAH – JULY 2005 PAGE 16 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Conclusion Much detailed review and analysis has been completed during the PPTA preparation period, with the production of 8 sets of detailed and updated FSRs, RPs, IEEs and SPIAs. Additionally, consolidated IEE, EMP and SPIA reports, an EMDP, EMDF and RF, and the completion of a flood management analysis which includes a sector analysis and a review and proposal for non-structural measures, plus a hydrology assessment and site inspections of the 28 non-core subprojects have been prepared. These are all presented in the Supplementary Appendix (A to G) to this Final Report. This work has substantially strengthened all parties knowledge and understanding of the project context, and how this is an integral part of Hunan’s Comprehensive, River Basin and City flood control and management plans. The economic analysis confirms that each of the 8 core subprojects is economically viable, although the variance in the EIRR between the subprojects is small, largely due to their similarity in scope and purpose. A more critical issue for many subprojects is affordability, as for some cities, the provision of capital, the funding of future operation and maintenance, and debt servicing may place an unduly large burden on their future financial resources. In determining the final subprojects to be implemented under the Sector Loan, the overall affordability will be a key selection criteria.

SOGREAH – JULY 2005 PAGE 17 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

FIGURE 1: MAP OF HUNAN PROVINCE SHOWING LOCATION OF 36 PROPOSED SUBPROJECTS IN 4 MAIN RIVER BASINS

SOGREAH – JULY 2005 PAGE 18 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1. INTRODUCTION

1.1. BACKGROUND TO PROJECT PREPARATION ADB is currently involved with a range of water resources management initiatives in the PRC, including assisting the Government with integrated flood management strategies for the and basin commissions, by strengthening their 4 forecasting and warning systems. ADB has also assisted the PRC Government to implement strategic planning for flood management, including a comprehensive review of both structural and nonstructural management measures and policies. During the 2003 ADB Country Programming Mission, the Government of the People’s Republic of China (PRC) requested the Asian Development Bank (ADB) to provide project preparatory technical assistance (PPTA)5 to help the Hunan Provincial Government (HPG) prepare a flood management project (the Project) for possible ADB financing. This Project will support HPG’s aim to reduce recurrent flood damage by improving flood mitigation measures, particularly in those frequently flood affected municipalities and counties in the mountainous areas of Hunan Province. The PPTA was included in the PRC country strategy and program for 2004. A fact finding mission visited the PRC in February 2004 to hold discussions with HPG staff, and to draw up the detailed objectives, scope, costs, implementation, and financing arrangements for the project preparation PPTA for the Hunan Flood Management Project (the proposed ADB Project). The PPTA services were tendered in June 2004, and Consultants were appointed in August. The PPTA team was mobilised in September.

1.2. APPROACH TO PROJECT PREPARATION Initially, the project preparation program was prepared on the basis that this would be a standard project loan, where all proposed 36 subprojects would have to be reviewed and their feasibility studies revised and strengthened to meet particular ADB study and investment objectives. The work was to be implemented in three stages – inception, subproject preparation and evaluation, and then overall formulation and evaluation of an investment project. The Consultants had a six month program to review the proposed 36 subprojects for each of 9 municipal and 27 county cities, prepare updated feasibility study reports, and prepare an overall investment project. The feasibility study reports were to include stand alone resettlement plans (RP), initial environmental examinations (IEE) and social and poverty impact assessment (SPIA) reports. It was premised on the Hunan Project Management Office (PPMO) having all 36 subproject feasibility study reports prepared in English at the commencement of the PPTA services. However, these reports were not finalised and delivered to the Consultants until almost 6 weeks into the services. Thus the initial start up of the services was compromised and outputs delivery (intended to be an Inception Report and the initial four updated feasibility study reports for priority subprojects) was delayed by about three weeks, at which time only the Inception Report was finalized.. During the inception stage, it became apparent that the scope of work required to review and update the proposed 36 subprojects was far larger than originally anticipated. Additionally, there was a clear need to more specifically review and confirm that the

4 ADB. 2001. Report and Recommnedation of the President for the Yellow River Flood Mitigation Sector Project. Manila; ADB. 2002 Report and Recommendation of the President for the Songhua River Flood Management Project. Manila. 5 The PPTA was first listed in ADB Business Opportunities on 4 August 2003

SOGREAH – JULY 2005 PAGE 19 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

proposed subprojects were an integral part of Hunan Province’s overall flood management plans, and that the proposed measures – structural and non-structural – were complimentary and cost effective. As a result, a more detailed review and updating of the subprojects was undertaken, in parallel with a more detailed review of the Hunan Flood Control Plans and the associated non-structural measures. The overall PPTA objectives and scope of work were reviewed at the Inception Tripartite in November 2004. It was concluded that the proposed project would be more appropriate if implemented as a sector loan. To do this, there needed to be a more detailed assessment of how the proposed project and subprojects fit within the national policy and strategy for flood management, and also within the provinces own flood control plans, policy and strategy. An assessment was therefore made of the general approach to flood management at the national, river basin (Yangtze) and provincial levels (see Supplementary Appendix A). In general, the finding is that proposed new measures, though strongly focused on immediately beneficial structural measures, do fit with the national, Yangtze and provincial strategies to protect ‘at risk’ communities against flood, but which would over time also be complemented with strategically balanced non- structural measures to mitigate floods throughout the river basins. A more detailed assessment was made of planned non-structural measures, to ensure these complimentary measures were included within the overall flood management plans for implementation during successive stages of the long term flood control (management) plan. The findings were positive, with some activities confirmed as being in progress, whilst others are planned for future implementation with funding from alternative sources. Further strengthening of coordination between concerned agencies would be beneficial for effective measures to be implemented as early as possible. With the changed project modality, it was agreed that the PPTA team would prepare eight (8) core subproject feasibility studies, complete with resettlement plans, environmental assessments and social and poverty impact assessments. The PPTA team initiated social surveys for the 8 core subprojects – Yongzhou, Wugang, Loudi, , Chenxi, Huaihua Xinhua and Sangzhi – which identified the social and economic issues prevalent in those subproject cities, and the community acceptance and willingness to pay for the proposed flood protection measures. The selection criteria for these 8 core subproject cities are presented in Appendix 5. Particular consideration was given to the prevalence of rural and urban poverty, and to the situation for ethnic minorities within the proposed development plans. For Sangzhi, a separate Ethnic Minority Development Plan has been prepared, and an Ethnic Minority Development Framework has been prepared as a reference guide for other subproject plans where significant ethnic minorities are present.. The findings from the 8 Core subprojects have been used as a basis to summarily assess the other subprojects and prepare an overall project investment plan. All the subprojects have been costed, with updated and detailed review of the 8 core subprojects, and utilisation of the key information presented in the Design Institute feasibility studies and other available supporting documents and publications. An inspection and investigation of the situation at the other 28 non-core subproject sites is currently in progress, and a summary report on findings (an updated baseline for future subproject preparation, implementation and monitoring) will be included with the PPTA Final Report.

1.3. OVERVIEW OF THE PROJECT AREA I8. Hunan Province touches the middle reaches of the Yangtze River to the north, while its east, west, and southern areas are mountainous. The northern area, which accounts for some 25% of the area of the province, consists of Dongting Lake (covering about 7% of the province) and the low, flat floodplain of the Yangtze River. Hills in the central part of the province provide a transition zone between the surrounding mountains and the Yangtze floodplain. The Li, Xiang, Yuan, and Zi rivers, collectively termed the “mountain rivers,” flow northward to deliver runoff from the mountainous areas to Dongting Lake, which then drains water to the Yangtze River.

SOGREAH – JULY 2005 PAGE 20 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The orographical uplift of warm and wet frontal airflows over the mountains results in frequent rainstorms from April to October, which cause flash floods in the areas around the mountain rivers, so Hunan is subject to two distinct types of floods: (i) Yangtze River floods prolonged flooding in the northern part of the province caused by high flow in the Yangtze River constraining the outflow from Dongting Lake; and (ii) Flash floods along the narrow strips of land of the steep mountain valleys. Cities and rural enterprises in the mountainous area of the province have typically developed along the narrow bottom lands flanking the mountain rivers and are thus exposed to the dangers of sudden flooding and the consequent damage and loss of life. Unlike the slowly rising inundation in the Dongting Lake area, the rapidly developing floods of the mountainous areas require immediate and effective protection mechanisms, and a quick response to flood warnings and emergency activities. Mountain river floods have been difficult to manage because the rapid onset of flooding does not provide much time for flood warning and response activities; high flood levels exacerbate flood hazard and damage, and curtail emergency transport operations. Hunan Province, which consists of 14 municipalities, has 66.3 million people (2003), and about 70% of the municipal and county-level cities are in mountainous areas. These cities are important centers of government, finance, business, education, transportation, agriculture, and manufacturing. They produce machinery, textiles, metals, chemicals, paper products, mineral products, medicine, and processed food. During the past 20 years, Hunan Province has experienced rapid economic growth and urban expansion. The steady increase of the urban population in the mountainous cities is projected to increase by one third from the present levels (about 22 million) by 2010. However, this growth and associated economic development is being constrained because of the frequent flood risk, and the attendant damage that comes from short term frequent and sudden flood flows in the main rivers and major tributaries, against which the cities currently have very little protection. Growth of the urban areas is also restricting the natural flood attenuation, leading to larger and more frequent floods and socio-economic losses on an annual basis, particularly as the existing flood protection (if any) is equivalent to an extremely low design standard (perhaps no better than protection against a 1 in 5 year return period event). In recent years, the Yangtze River and mountainous rivers have caused enormous loss of life and damage in Hunan Province because of sudden and/or protracted floods. During the 1998 Yangtze River flood, 145 flood protection dikes failed, forcing more than 1 million people to live along the remaining dikes for several months, and it resulted in direct economic losses of over $1.2 billion. International development agencies paid a lot of attention to the plight of the Yangtze River communities when devastated by floods (The Yangtze River flood management is under the jurisdiction of the Yangtze River Basin Commission (CWRC)). Several internationally funded flood management projects have been undertaken in Hunan, but these have been predominantly directed toward flood management in and around the Dongting Lake Area.6 During the 1990’s, many sudden and locally serious floods occurred in the mountainous areas of Hunan, notably in 1991, 1993, 1994, 1995, 1996, 1998, 1999, and 2002. The flood damage valued at $92 million in 1991, $229 million in 1993, and $373 million in

6 The Japan Bank for International Cooperation is funding flood control improvements at 23 urban centers around Dongting Lake ($200 million). The World Bank is funding a project to strengthen 142 kilometers of dikes along the Yangtze River in Hunan Province and resettle 11,000 families ($27 million), and is supporting research into flood control and waterlogging in Dongting Lake to improve early warning of impending floods and facilitate post-flood drainage ($3 million). The Government of the Netherlands is funding a dredging project in Donting Lake to improve water flow into and out of the lake for flood control ($25 million, in two tranches). Australian Agency for International Development is funding the Yangtze River Flood Control and Management Project ($12 million), which will improve flood forecasting, flood warning, and the operation of flood detention basins along the middle reaches of the Yangtze, including 24 detention basins (up to 300 square kilometers in area) around Dongting Lake. The Canadian International Development Agency has recently completed a major hydraulic modeling study to improve flood forecasting for Donting Lake.

SOGREAH – JULY 2005 PAGE 21 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1994 was recorded, whilst direct losses due to floods amounted to $1.2 billion in 1995, $2.4 billion in 1996, and $1.3 billion in 1998. During the 1996 flood, 130 people lost their lives, and each year, sudden floods in the mountainous rivers adversely affect over a million people throughout the province, either because of inundation from floodwater or because of poor drainage during and following the floods. The sudden influx of water and prolonged inundation due to poor drainage causes socio-economic damage and disruption that is equally detrimental to the local communities as the damage and disruption caused around the Dongting Lake Area by Yangtze River floods. So far, the only projects in the mountainous areas of Hunan Province that have been internationally funded have involved the construction of multipurpose reservoirs for hydroelectric power generation (under HPG)7 which also provide a degree of flood management capability for certain parts of the river network. However, funding for the management and protection against mountain river floods has been extremely limited, placing a severe constraint on opportunities for effective economic development. As a consequence, the lives and property of residents continue to be endangered, and the more remote regions of the province lag behind the general economic growth of the province. HPG has instituted various flood control measures, as part of its overall Hunan Province Flood Control Program.8 This provides a comprehensive framework for managing and mitigating floods along the four Mountain Rivers and around Dongting Lake, and it incorporates improvements for flood emergency management and other non-structural measures which include an improved data acquisition system to monitor rainfall and river levels; improved communication and computer systems to facilitate flood warning and the management of flood emergencies; the development of a decision support system to more rapidly and reliably assess flood management options; and a review of policies, laws, and regulations relating to flood and floodplain management. Under the Hunan Flood Control Program, HPG will invest $626 million of local funds during the current (10th) Five-Year Plan (2001–2005) to improve flood protection in cities across the province: $476 million (76%) is allocated for cities in the Donting Lake area and $150 million (24%) for cities in the mountainous areas ($110 million for municipal cities and $40 million for county-level cities). Flood control investments for the 11th Five-Year Plan (2006–2010) will be devoted solely to improving flood protection for cities in the mountainous areas, based on a comprehensive assessment and analysis of the flood-prone areas undertaken by HPG in 2003. The assessment recommended the early implementation of flood protection measures for 36 of the 94 flood prone municipal and county-level cities on a priority basis, weighted by extent of the flooded areas, frequency of occurrence, numbers of affected peoples and value of the recurrent damage and losses. It was concluded that the most immediate impact to mitigate flooding could best be achieved by implementing structural measures, and the HPG has prepared initial designs and preliminary cost estimates for the proposed measures, as presented in the feasibility studies prepared by the Hunan Hydro and Power Design Institute and its affiliate organisations at the municipal level. In conjunction with the PPTA services, HPG has also commenced a broad review of the overall river basin flood management, with a view to developing a range of non-structural measures to mitigate the onset of floods in the middle and upper reaches of the mountainous rivers. The objective will be to identify a cost-effective balance of structural and nonstructural measures, and determine where nonstructural measures can be used to complement any necessary structural flood protection measures within the mountainous catchment areas, and particularly for the more densely populated and vulnerable cities in the narrow river valleys.

7 The World Bank funded the recently completed Jiangya Multi-purpose Project on the Loushui River, a tributary of the Lishui River ($97 million). The governments of Austria, Canada, and Belgium, together with several private organizations, are funding seven hydropower projects in the mountainous areas of the province ($116 million in total), which involve the construction of relatively low dams (25–30 m high) that will provide some flood control capacity. 8 Formulated throughout the late 1990’s, and finalised in 1999, it was submitted to the Ministry of Water Resources and National Development Reform Committee in 2001, for inclusion in the provincial development and investment program under the 11th Five-Year Plan (2001–2005).

SOGREAH – JULY 2005 PAGE 22 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The PRC Government has issued laws and regulations to promote integrated river basin management in the PRC, including the revised 1988 Water Law (completed in 2002) and the Flood Control Law (1997). The laws and regulations are framed to balance the use of natural resources in the river basin, and to provide a sound basis for effective flood management and mitigation. The Flood Control Law (1997) outlines ways to identify the cause of floods, and ways to prepare and implement remedial measures to mitigate the damaging impacts of unchecked floods on unprotected communities and property. The law includes major concepts for sustainable soil and water conservation, dike strengthening, and the use of non-structural measures (e.g. limiting development in flood detention areas, land-use controls, and floodplain zoning). HPG’s Flood Control Program adheres to PRC Government policies, and this proposed Project sits logically within the overall flood management framework for Hunan, and complements other internationally funded flood management projects. The proposed Hunan Flood Management Project is a logical part of ADB’s country strategy, and supports the PRC Government’s objectives to improve flood management as a sub-sector within the water sector. The overall objectives will be to (i) strengthen integrated river basin and flood management, incorporating a balanced mix of appropriate structural and nonstructural measures; (ii) strengthen the overall Hunan and River Basins Flood Control Programs); (iii) promote and support the development and application of cost-effective flood management measures, including flood zoning and protection to provide for future urban expansion; and (iv) strengthen the capability of the provincial and local government flood management agencies to plan for, manage and respond to floods in their area. HPG has confirmed the urgent need to strengthen flood protection for 36 priority cities in the mountainous area of the province, and the PPTA has assisted by preparing 8 core subprojects, and developing overall management frameworks for implementation, monitoring and management, so that the proposed project can be implemented successfully. Assessment of the projects success will include a quantifiable reduction in the occurrence and risk of floods occurring, and a reduction in the number of people who are regularly at risk and therefore less able to establish and maintain sustainable economic growth.

1.4. PROJECT PROPONENTS The Executing Agency (EA) for the project is the Hunan Provincial Government (HPG), which has established a Project Leading Group (PLG) comprised of senior representatives from provincial line agencies – Development and Reform Committee (PDRC), Water Resources Department (PWRD) and Finance Department (PFD). This leading group has in turn set up a Provincial Project Management Office (PPMO) within the PWRD office, which has full time staff from PWRD, and part time staff from PDRC and PFD. The PPMO has overall responsibility for the day-to-day operations, coordination and management of the project, and has been responsible to plan and manage the project preparation activities. ADB appointed a PPTA Consultant to work with the PPMO in order to formulate the overall investment project, to be supported with the proposed ADB loan. The PPMO has been assisted for the project preparation by staff from PWRD and the Hunan Hydro and Power Design Institute (HHPDI), which is one of the premier water resources, hydrology and hydraulic design institutes in China. HHPDI has had primary responsibility, in conjunction with municipal design institutes, to prepare the feasibility studies for the 36 city flood control subprojects. The project financing will be undertaken by the respective city local governments. They have established their own subproject leading group, involving the equivalent local government line agencies to those at the provincial level, and a similarly structured Local Project Management Office (LPMO). The LPMO is responsible to coordinate and manage the subproject preparation, resettlement planning, environmental management and socio- economic impact monitoring, together with the overall implementation of the subproject as planned and approved by the HPG through its PLG and the PPMO. The PPMO is responsible to ensure that all necessary permits and approvals are applied for at national and provincial levels, and secured for the subprojects to proceed as planned. The LPMO

SOGREAH – JULY 2005 PAGE 23 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

will utilise a Project Implementation Unit from the local Water Resources Bureau to mange the implementation of the physical works. HPG has requested ADB to support the implementation of HFMP through the provision of a loan, to be provided through the provincial government to the relevant local governments, for implementation of the priority subproject works. ADB has financed a project preparatory technical assistance (PPTA) to assist HPG, by working with its PPMO, to prepare the project in accordance with Chinese and ADB practice, with particular adherence to essential social, environmental and resettlement guidelines, and to ensure the overall investment is fully quantified and structured in readiness for implementation.

1.5. PROJECT ANALYSIS The PPTA has prepared model reports as a basis for PPMO, with PWRD and HHPDI, to prepare the remaining 28 core subprojects. The early HHPDI FSRs were strong on the hydrology, structures and costing aspects of the subprojects, but had less emphasis on the compliance issues for resettlement planning and implementation, environment examination assessment of the social and poverty impacts, and economic evaluation. The PPTA Consultant has worked with staff from PWRD and HHPDI, as well as the key management staff from PPMO, to formulate and prepare examples of the needed analysis in the non-engineering aspects of project preparation, and ensure that relevant Chinese personnel are conversant with the necessary approach and preparation requirements to ensure compliance, and that they can now implement the necessary socio-economic baseline surveys and economic analyses for each subproject. The PPTA Consultant has also implemented training for resettlement policy and implementation, and for economic analyses. Extensive work was also undertaken to prepare the non-structural measures review, and this resulted in the preparation of a proposal for the implementation of selected measures under the project. This included examining a broad range of potential non-structural measures, beyond the normally assumed data acquisition, forecasting and warning aspects. It became clear after further examination of Hunan’s Flood Control Plans, that all potential options are acknowledged, but that those that require broader line agency involvement are less easy to organise and implement, and are therefore seen as options for inclusion under future projects. This project can assist Hunan in moving towards its longer term flood management goals by strengthening the awareness of alternative and/or complimentary non-structural measures, and supporting the promotion of such measures as part of China’s national flood management policy. Such measures have been emphasised within the Flood Management Analysis presented in Supplementary Appendix A. The project economic analysis has focused on the specific viability of the 8 core subprojects. In general, the costs preparation has been good, but the identification and definition of the subproject benefits has required further analysis and quantification. Additional data had to be gathered, and extensive discussion was needed with the subproject proponents in order to fully identify the relevant benefits, and evaluate them to a consistent basis. The methods adopted have been presented to the HHPDI staff responsible for the economic evaluation, and following a short training course, they are now able to implement more detailed analysis for the other non-core subprojects to be included under the project. The training also included learning the use of costabs, which has enabled all the costs data to be prepared to a consistent format. Overall, the 8 core subprojects were found to be economically viable, with an EIRR in excess of 12%. Given the nature of the projects as protective for public good against natural hazard, it is considered reasonable that these subprojects are perhaps no more than marginal in economic terms. They provide similar benefits for the participating cities, as the types of measures are of a similar general form and purpose. However, concern remains that the fiscal capacity for some cities to finance and manage the capital investment, future operation and maintenance, and loan repayments from within their current and projected future financial base may be difficult.

SOGREAH – JULY 2005 PAGE 24 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1.6. PROJECT MODALITY During the initial stage of the PPTA implementation, it was agreed that the project modality should be revised, and that the project be restructured as a Sector Type project. This decision was confirmed six weeks into the PPTA services, and involved a reorganisation of the PPTA work program and significant change to the scope of works. The specific need to review and prepare feasibility studies (FSRs - with associated RPs, IEEs and SPIAs) for the proposed 36 subprojects was revised so that this work would now be completed on 8 core subprojects – but that these 8 core subproject FSRs would be more substantive improved FSRs to provide PPMO with model documents for the later upgrading of the 28 non-core subprojects. Additionally, a much more detailed review and preparation of the Sector assessment was required, and the Consultants work plan and inputs were modified to facilitate these changes. An issue that made the change and implementation of the PPTA more difficult than expected was the fact that the project had originally been formulated with a strong focus on the planned structural flood control measures required for each of the selected cities, and PPMO was engaged with the cities on this basis. A shift of emphasis towards that of flood management policy and strategy, and towards more holistic river basin flood management interventions, though relevant within the context of Hunan’s Flood Control Plans, was not so easily adopted by PPMO, as the whole project focus has been for implementation of the subprojects. The Consultant undertook research and prepared reports to confirm the current status of development plans for flood management as an overall sector and for each river basin. Hunan’s existing flood control and management plans were reviewed as the basis for preparing the Flood Management Analysis and the Non-Structural Measures Review presented in Supplementary Appendix A. It is clear that the planned subproject developments are identified as integral parts of the larger provincial and river basin flood management plans. PPMO has also revised its proposed project implementation strategy such that work on the core subprojects would start in late 2005, ahead of the works planned for the non-core subprojects, which would proceed from late 2006. This will enable findings from the PPTA to be reviewed and for the other 28 subproject FSRs to be revised – particularly the key aspects of resettlement planning, environmental management planning and monitoring, and the updating of the socio-economic baseline for each subproject county and project protected area, so that overall project impacts can be monitored in the future.

SOGREAH – JULY 2005 PAGE 25 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. SECTOR CONTEXT AND RATIONALE

2.1. PHYSICAL SITUATION AND FLOOD CHARACTERISTICS Hunan Province lies to the south of the middle reach (Jinjiang) of the Yangtze River (Changjiang), 1,000 km to the west of , 1,200 km south of , and 500 km north-west of . The neighbouring provinces are Hubei (north), Municipality (north west), Guizhou (west), Guangxi (south west), Guangdong (south east) and (east). The province is enclosed by mountains and hills to the east, south and west, and drains naturally northwards to the Yangtze River. The mountains and hills occupy about 75% of the province, and the remaining low lying area (Donting Lake) is part of the Yangtze River floodplain. There are seven large river basins in China, of which the Yangtze River Basin is the largest and economically most important region, contributing about 40% of China’s GDP. The distribution of major flood control works in the Yangtze Basin is illustrated in Figure 2. From this, it can be seen that the major river basins in Hunan Province are a substantial part of the Yangtze river basin, and they join the Yangtze River main stem at the extremely flood prone middle reach, via Dongting Lake. Historically, floods in Hunan are also critical to effective Yangtze River flood management, and therefore the Yangtze River Water Resources Commission (CWRC) is an active stakeholder in the planning and investment for major water resource and flood management works in Hunan’s river basins. Following the major flood of 1998, increased attention has been given to flood management in the Yangtze middle reach, with particular emphasis on both structural and non-structural interventions (e.g. Yangtze River Main Dyke (WB), Urban Flood Control in Donting Lake Area (JBIC), Donting Lake Dredging Project (Dutch Bilateral Aid), and Flood Control and Drainage Research for Donting Lake (WB)). The latest principles for the development of both flood control and flood protection are now integral to the flood management planning for the Yangtze and Hunan river basins.9 Hunan has four main river basins – Xiangjiang, Zishui, Yuanjiang and Lishui - which are collectively known as the Mountain Rivers. They start in the mountainous border areas of Hunan Province (Xiangjiang and Yuanjiang actually start in the neighbouring provinces of Guanxi Autonomous Region and Guizhou respectively), and they flow towards Hunan Provinces northern floodplain (Donting Lake Area – a key region for Yangtze River flood management) in three defined stages – the upper mountainous reach which is steep and fast flowing; the middle reach which passes through rolling hills with narrow to wide valleys, and the lower reach which meanders through the wider floodplain zone, interspersed with fewer low hills. [see the map of Hunan Province in the Introduction, which illustrates the location of these four main river basins, and their connection to the Yangtze River. The overall watershed for these rivers has undergone substantial change in recent years as Hunan has .participated in China’s economic transformation. The cities have grown rapidly, with the conversion of much good agricultural land within the river floodplains to urban and industrial use, whilst agricultural production has expanded into the upper catchment areas as these have become more accessible. A combination of deforestation and intensified landuse has progressively changed the rainfall-runoff and river flood characteristics. Consequently, cities adjacent to the main rivers now experience more frequent and larger floods, and because city economies have grown, so have the annualised flood damage and related losses (e.g. in 1954, the estimated losses were about $250 million, whereas in 1998, the losses were estimated at about $4 billion for comparable sized floods)..

9 As highlighted during the Yangtze River Forum, 17-18 April, 2005, , PR China.

SOGREAH – JULY 2005 PAGE 26 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

FIGURE 2: YANGTZE RIVER BASIN – MAJOR WATER AND FLOOD MANAGEMENT ON MAIN STREAM AND KEY TRIBUTARY SYSTEMS

Zipin gpu Tingziko u Danjiangkou .Res. J i H Three Huayang Cho Gorge Detention Basin ngqi Y S

C Jingsh R Z R Boy ang Lak Flood

control

Lia W ofa i

R F Im e l po s o rt SOGREAH – JULY 2005 PAGE 27 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Hunan Provincial Government (HPG) now urgently seeks to mitigate these impacts through a combination of immediate structural protection and broader but long term improvements to river basin and flood management. Floodplain urbanisation is reducing the land available for flood mitigation (reducing temporary storage capacity for overbank spill and any retardation opportunity for rainfall-runoff coming from the mountains). Many cities on the main rivers and tributaries are now experiencing more frequent flooding in the low areas adjacent to the rivers – areas that tend to be the older and poorest parts of the cities. Although Hunan Province is predominantly an agricultural region, it is developing rapidly towards a more industrialised and commercial economy. The major cities are growing rapidly, especially as rural people are migrating to the cities in search of work, particularly in the booming construction industry, and in the new manufacturing enterprises. Hunan currently has 803 cities, of which 94 are located in areas that are now prone to flooding. Part of this is historical – early dependence on water borne transport meant that many towns and cities were founded on the flat and fertile plains adjacent to the rivers. This trend has continued throughout Hunan into the modern era, from the wide open plains of Donting Lakes through to the narrower and smaller flood plains adjacent to the major rivers in the upland and mountainous regions. Modernisation has brought added pressures – the key Municipal and County cities are growing rapidly even though suitable land for development is at a premium. Many of the upper river basin cities and towns are confined within the natural river valleys – and as new land is needed for development and expansion, the flat agricultural land adjacent to the rivers, upstream and downstream of the old city centres, has been developed. Many cities have developed at major ‘cross-roads’ within the river network, often where one or more large tributaries join the main river, and development has taken place on the alluvial flood plains adjacent to or astride the river confluence. The city development is intermixed with areas of agricultural production, though such land is being reduced, and therefore the natural overspill areas for the rivers when they are in flood is decreased. Simultaneously, upland catchment development has accelerated the rainfall-runoff process, with a resultant impact of increased flood frequency, and larger floods that bring more extensive and damaging inundation to the developed low lying city areas. Climatically, Hunan is located in a wet subtropical region, where a monsoon climate dominates during the summer months, with a hot and wet low latitude sea air mass that brings high temperatures and high humidity. In winter, the climate is influenced by the Siberian cold air mass, making it cold but generally dry. During spring and the beginning of summer, Hunan sits in a climatic transition zone, alternating between cold and hot air flows, where frontal surfaces and cyclones can be frequent, leading to the plum wet weather - cloudy and moist. July and August brings much rainfall due to the influence of strong tropical winds, with localized heavy storms. Rainfall in Hunan is mainly due to cyclones in April to June, and occasional typhoons in July and August. Rain occurs when a low atmospheric pressure system, such as the south-western low vortex, Jianghuai shear line or low channel, and a static cold front lead to a cyclonic wave or typhoon at ground level. Convection currents that form because of increased ground temperatures during mid -summer also bring localized heavy thunder storms. Because of the very changeable summer weather characteristics, Hunan is subjected to quite frequent flood inducing rains and prolonged droughts, which makes Hunan one of the most flood affected provinces in China. Historically, many large and severe floods have developed in Hunan Province. Statistics indicate that within the 20th century, a total of 42 province-wide floods occurred, and 18 of these have been classified as large scale province-wide floods. They were recorded in 1906, 1915, 1931, 1935, 1937, 1948, 1954, 1980, 1983, 1988, 1990, 1991, 1993, 1994, 1995, 1996, 1998, and 1999. The floods in 1954 and 1998 were particularly severe province-wide events, and considered the most damaging of all floods over the past 100 years. More details on these floods are provided in Appendix 1, Section I.

SOGREAH – JULY 2005 PAGE 28 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2.2. SOCIO-ECONOMIC SITUATION AND IMPACT OF FLOODS

2.2.1. SOCIO-ECONOMIC AND POVERTY CHARACTERISTICS OF THE PROJECT AREAS (PA) The Project involves four river basins - Xiangjiang, Zishui, Yuanjiang and Lishui - which account for 84% of the total land area, and 77% of the total population in Hunan. About 15.9 million people live in the urban areas, accounting for 31% of the total population in the river basin. The total gross domestic product (GDP) for the 4 river basins was CNY 347 billion in 2003, accounting for 75% of the whole province (CNY 463.87 billion). The per capita GDP was CNY 6,770 per person in the basins, which is slightly lower than the provincial average (CNY 6,963). Within these basins, 47 counties, including 19 urban districts, 24 counties and 4 county level cities, are defined as Project Area (PA). 10 In 2003, there were 7.18 million households and 25.08 million people in the PA, with 34% in urban areas, ranging from 22% in Lishui to 40% in Xiangjiang. The total GDP in the PA was CNY 157.37 billion in 2003, averaging CNY 6,274 per capita, which is 93% of the basin average, which ranges from CNY 8,180 in Xiangjiang to CNY 3,647 in Yuanjiang. The average per capita farmland in the PA was 1.14 mu per rural person, which is 12% less than the provincial average (1.3 mu). The average rural per capita income was CNY 2,358 (2003), which is about 5% lower than the provincial average. (Table 1).

TABLE 1: FEATURES OF THE PROJECT AREA (2003) Items Hunan Four River Project Percent of Poverty Percent Basins Areas River Counties of PA Basins in PA (PA) Number of Counties 122 99 47 47.5% 15 31.9% Total Population (million) 66.63 51.30 25.08 48.9% 9.56 38.1% Urban Population (million) 22.32 15.91 8.61 54.1% 1.86 21.6% Rural Population (million) 44.31 35.39 16.47 45.9% 7.70 46.8% ％ Urban Population 33.5% 31.0% 34.3% 19.5% Minority Population (million) 6.9 6.8 3.1 45.6% 2.4 77.4% % Minority Population 10.5% 13.3% 12.2% 27.10%

Total GDP (billion CNY) 463.9 347.3 157.4 45.3% 32.2 20.5%

Per Capita GDP (CNY) 6,963 6,770 6,274 92.7% 3,368 53.7% Area (1,000 km2) 211.83 178.69 73.22 41.0% 39.17 53.5%

Total Farmland (1,000 ha) 3,830.0 n.a. 1,248.3 516.0 41.3%

Per capita farmland (ha) 1.30 n.a. 1.14 1.01 88.6% Source: Hunan Provincial Statistical Yearbook 2004.

10 Disparity between the number of subprojects and the number of project counties is because some subprojects are located in prefecture level municipalities and often involve more than 1 urban district.

SOGREAH – JULY 2005 PAGE 29 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Compared with the provinces in the impoverished western region of China, much of Hunan is relatively well-off, and the number of people classified as in absolute rural poverty was 1.1 million or 2.5% of the provincial rural population (2003), which is less than the national average (3.4%). However, there is still many others who endure income poverty in the rural areas. Since 1993, under the National 8–7 Poverty Reduction Plan11, substantial progress has been made to reduce the incidence of poverty in Hunan. About 3 million rural poor (CNY 627) had their food and clothing problems resolved between 1990 and 2003, which has reduced the overall poverty incidence from 13% to just 2.5% of the population. However, this reduction has not been uniformly distributed throughout the province, as poverty is still more widespread in western Hunan as compared to other areas of the province. Under the new poverty line value of CNY 900 annual income per capita, it is stated that there are 4.1 million rural poor in Hunan (2003), which accounts for 9.3% of the rural population. Most of the poverty is concentrated in the western mountainous areas, which is characterized by poor infrastructure and a concentration of ethnic minorities. Of the 47 project counties, there are 15 poverty counties, accounting for 32% of the PA counties. A large portion of the rural poverty is concentrated in these poverty counties. For example, of the 1.76 million rural poor in the PA, which includes 2,371 poverty villages, 90% of the people and 83% of the poverty villages are located in the 15 poverty counties. The poverty incidence among the poverty counties was 20.6%, which is 2.8 times the average; and rural per capita income was only CNY 1,454 in the poverty counties or 62% of the PA average. (Table 2)

TABLE 2: POVERTY CONDITIONS IN THE PA AND THE FOUR RIVER BASINS (2003)

Percent Percent River Project Poverty Items Hunan Project Basins Areas of River Counties Basin Areas No. of Counties 122 99 47 47.5% 15 31.9% No. of Poverty Counties 38 35 15 42.9% 15 100.0% No. of Minority Counties 20 20 9 45.0% 8 88.9% Total Population (million) 66.63 51.30 25.08 48.9% 9.56 38.1% Urban Poverty Population 1.34 1.01 0.58 57.4% n.a. Urban Poverty Incidence (%) 6.0 6.3 6.7 Rural Poverty Population 4.10 n.a. 1.76 1.59 90.3% Rural Poverty Incidence 9.3% 10.7% 20.6% Rural Per Capita Income 2,474 n.a. 2358 1,454 61.7%. No. of Poverty Villages 5,497 5,009 2,371 47.3% 1,971 83.1% Source: Hunan Provincial Statistical Yearbook 2004. Since 2001, under a new national poverty strategy, the focus for provincial poverty alleviation has been changed from one of assisting poverty counties to one of targeting both income poverty and non-income poverty in 5,497 poverty villages in Hunan. As the proposed flood control works will be located in the urban area of PA cities and counties, the project beneficiaries (people in the project protected area (PPA)) may include few of the rural poor. According to the socio-economic analysis undertaken for the 8 core subprojects, the PPA will cover less than 1% of the total PA, and less than 10% of the PA population, which includes 3% of the rural population and 30% of the urban

11 The National 8-7 Poverty Reduction Plan refers to 7 years (1993-2000) that it took to solve the basic food and clothing problems for 80 million absolute rural poor in China.

SOGREAH – JULY 2005 PAGE 30 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

population.12 Among the 8 core subproject beneficiaries (593,393 people), 25% are classified as rural and 75% as urban, which contrasts with a PA population distribution in the project counties. Looking at the poverty incidence, there are 53,900 poor people in the PPA, which accounts for 9.1% of the total number of poor people in the PA. They include 46,068 urban poor (85%) and 7,840 rural poor (15%). The rural poverty incidence in the PPA is 5% and the urban poverty incidence rate is 10%. This means that the project beneficiaries include about 1.5% of the rural poor and 32% of the urban poor within the project counties.13

2.2.2. IMPACT OF FLOODS Due to a lack of investment in urban flood protection, most of the cities in the mountainous areas of the four river basins have a very low flood protection standard, and some poor counties do not have any protection at all. Table 3 provides and indication of how the impact of large floods has varied over the past 40 years, but how in general, the large floods of 1996 and 1998, in actual value terms, have multiplied significantly as compared to the 1954 flood, which is still considered to be the worst flood event over the past 100 years.

TABLE 3: COMPARISON OF COSTS FOR LARGE FLOODS IN HUNAN PROVINCE (ACTUAL YEAR COSTS) Year Inundated Area Casualties Economic Loss (104 Ha) (CNY 108)

1954 57.3 2,339 21.0

1983 31.0 286 1.9

1996 134.7 744 580.0

1998 124.9 616 329.0

1999 57.9 125 64.9

2002 137.2 156 146.4

Following the economic modernisation of the past decades, economic losses that occur due to floods aggregated over the four river basins have continued to grow, from CNY 0.48 billion in 1980 to CNY 23.4 billion by the end of 1990s; the area of inundated farmland and the numbers of flood affected people have also increased significantly during the same period, as shown in Table 4.14

12 Due to a lack of information on the project protected areas among the 28 non-core subprojects, the analysis of the poverty profile among the project beneficiaries has been based on data gathered for the 8 core subprojects. 13 Such a difference is to be expected since the villages in the PPA have a well developed infrastructure and easy access to markets. The small number of rural poor is mainly those vulnerable families who are unable to undertake labouring work or have limited to no skills, family members who have serious medical problems or are disabled, and many of the children of school age or below.

14 On average, each affected person shares about CNY 1,218 to CNY 1,419 of the flood loss in the basin, which is equivalent to about one years income for most poor families.

SOGREAH – JULY 2005 PAGE 31 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 4: FLOOD DAMAGES AMONG 4 RIVER BASINS IN HUNAN IN SELECTED YEARS Affected Population Inundated Farmland Flood Damages (CNY million) Year (million) (1,000 ha) Rural Urban Total 1980 437.7 340.3 139.0 479.3 4.45 1993 1,085.5 3,840.4 1,453.6 5,294.0 15.65 1996 1,322.2 25,176.9 13,419.1 38,596.0 27.2 1998 1,387.6 16,783.9 6,569.9 23,353.8 19.18 Source: Integrated Flood Management Sector Analysis – PPTA Report. These recurrent floods put a heavy financial burden on local communities, as notwithstanding the severity in those cases where lives are lost, the floods often wash away houses and people’s personal effects, inundate and damage the crops, interrupt and damage small business activity, necessitate short term factory closure, damage public facilities and interrupt government programs. For most of the affected rural and urban individuals, particularly for the vulnerable groups (unemployed, disabled, elderly, children), flood damage contributes directly to their impoverishment. In some cities and county towns, about one third of all urban poverty is due to disruption and damage to people’s lives and livelihood because of frequent floods. In fact, among the urban poor, serious illness, loss of jobs, single parenthood, and flood damage are assessed as the key factors that lead to poverty. By reducing flood impacts, the Project will protect and directly assist those in the PPA, including 30% of the urban residents, and many businesses, industrial facilities and government administrative units (see Appendix 16).

2.3. SECTOR STRATEGY, PLANS AND POLICIES National Strategy for River Basin and Flood ManagementIn the past, flood management has for the most part been seen as a synonym for flood control, and most human intervention to manage flood events has been premised on the need to control (and manage) rather than look for any alternatives that might: reduce the flow intensity; and mitigate runoff to the rivers. Storage reservoirs and dams have been developed, and some provide temporal storage for flood runoff, though most are multi-purpose. Today protection and warning is more important than direct control of the floods. People must live with floods, aware that interventions in one area within a river basin may be detrimental to other parts. With a protection policy, more has to be done to both mitigate the overall flood and to spread the risk of negative flood impacts amongst river basin communities.The policy must ensure any increase in flood risk to those areas where such risk is currently low is minimised. Many ideas have been considered – returning wetlands and floodplains to pre-development conditions so they can assist with flood management; relocating peoples and business away from flood affected areas; accepting and sharing risk through flood levies or insurance; enacting legislation and land use regulations as a means to ‘slow down’ runoff; or curb development in flood risk areas. Integrated flood management (IFM) shares the burden amongst all river basin communities, rather than making the most directly flood affected communities and/or Government accept the risks and costs. A fundamental constraint to effective IFM is institutional organization and cooperation. When one community benefits, it often means another group is disadvantaged – and therefore, the desire to cooperate in applying a new approach is low. All concerned parties (government, agencies, communities) must be willing to participate and cooperate in sharing the costs and benefits that flow from implementing structural and non structural measures to manage floods.

SOGREAH – JULY 2005 PAGE 32 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Since 2000, the Ministry of Water Resources (MWR), as per the revised Water law (2002), has promoted change, to modern integrated flood management within a whole river basin. Following the 1998 floods, the national government issued a “32 words” policy for flood management that states the following principles:- (A) Enclose the mountains by planting trees; (B) Convert arable land into forests; (C) Demolish polders to spread the floods; (D) Convert farmland into lakes; (E) Provide labour as a contribution to flood defence; (F) Move people to new towns, and away from the flood; (G) Strengthen the main river dikes; and (H) Dredge the river channel and lakes. This defines the government approach to future interventions, and confirms that substantive change is taking place in the national flood management approach. ADB is currently supporting a research program to determine additional ways for promoting flood management as part of a “National Flood Management Strategy”.15 Effective flood management: requires – i). The use of appropriate infrastructure to meet local flood defence standards and needs (e.g. reservoirs, dikes, retarding basins, detention basins); ii). An assessment of the likely impact of flood defence interventions on other river basin areas and development sectors; iii). Watershed management at both micro and macro levels; iv). Land use regulation; v). Soil conservation and reforestation; vi). Flood emergency management and actions; vii). Disaster management and preparedness; viii), Flood forecasting, issuance of warnings and their dissemination to stakeholders; ix) Modification to land use and cropping patterns; and x). Development and application of legislation for integrated flood management. Applying these aspects, some practical flood management objectives can be identified:- i). Balance between structural and non-structural measures, and ii). Assessment of the linkages (cause and effect) between different parts of the river basin, as a result of particular flood control and/or management interventions.

2.3.1. FLOOD MANAGEMENT IN HUNAN

2.3.1.1. Flood Control Plans

Hunan Government urgently needs to improve flood protection for the flood affected areas and their often poor communities. Flood control plans for various structural interventions have been prepared as an integral part of the overall Hunan River Basins Comprehensive Plan, as illustrated in Figure 3. The status of these plans (at April 2005) is indicated in Table 5. Prepared in the late 1990’s, approval of these plans is still pending (awaiting approval of the Yangtze River Basin Flood Management Plan), but they have been followed when implementing various urgent works in recent years. The Flood Control Plans include a comprehensive framework for flood forecasting, control and management in the four mountainous river basins – Xiangjiang, Zishui, Yuanjiang and Lishui – covering the development and installation of data acquisition, communication, warning and response systems and procedures. The framework supports effective decision making and application of flood management options, as per relevant laws, regulations and guidelines for flood and floodplain management. The majority of recent investment has been made for flood control and disaster mitigation in the lowlands surrounding Donting Lake (Yangtze Dikes Project (WB); 23 Cities Project (JBIC), Donting Lakes Project (WB)), wheras new investments are aimed at reducing flood risks for the upper mountainous catchment areas, and the major cities and infrastructure adjacent to the rivers in the upland areas. The flood control plans emphasise the use of ‘protective’ civil works (dikes, diversion channels, drainage culverts, pumping stations, embankment stabilisation, weir rehabilitation and dredging) to secure and protect economically important production centres and infrastructure. The development of the flood control plans started in 1986 (see Table 5), but as the overall flood management strategy has been modified (especially since 1998), more non-structural management approaches have been

15 National Flood Management Strategy, MWR, Beijing, October 2004 (ADB TAxxxx-PRC)

SOGREAH – JULY 2005 PAGE 33 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT considered. Though some updating of the various plans has been undertaken (to 1999), they have still to be approved, and therefore they could still be improved in accordance with the latest strategies for effective flood management using a balanced mix of structural and non-structural measures. As China has now revised its approach, whereby development costs are to be borne by the ‘user’, the flood control plans should be revised to reflect this new financing strategy. Flood protection should be positive for the concerned communities, helping to lift poor flood affected people out of the poverty induced by frequent flooding. However, it is these poor communities that can least afford to finance the required flood protection measures, and some supplementary support from provincial or national level is often needed. If government funding is limited, then more appropriate and affordable investments are needed. The selected flood protection measures should improve the long term living conditions, and provide assurance to the affected people that it is safe to invest in their community and their future development. The existing flood control plans should be reviewed in the light of changed economic conditions, and ensure that proposed measures are affordable for all concerned stakeholders. Hunan province has been listed by governments at various levels as a key economic region that needs protective measures against flood risk to ensure overall socioeconomic growth. As a major agricultural production region of the country, investment in the construction of flood control works is encouraged by the State, Provincial and local governments.

SOGREAH – JULY 2005 PAGE 34 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

FIGURE 3 : HUNAN PROVINCE RIVER BASIN PLANS

River Basin Comprehensive Plan

Flood Control Plans

Hydro and Power Irrigation Plan Flood Control Plan Navigation Plan Water Supply Plan

Plan

Professional Plans

River Basin Flood Flood Control Plan for Control Plans (6) Dongting Lake Area

City Flood Control Risky Reservoirs Water and Soil Non-structural Measures Flood Plan Reinforcement Plan Conservancy Plan Control Plan

SOGREAH – JULY 2005 PAGE 35 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 5: HUNAN RIVER BASIN PLANS APPROVAL STATUS (APRIL 2005) Date of Plan Type River Basin Plan Title (date prepared) Reviewed By Approved By Approval

Xiangjiang Comprehensive Plan (1986) PWRD HPG 1988

Zishui Comprehensive Plan (1995) MWR HPG 1998 Comprehensive Yuanjiang Comprehensive Plan (1989) MWR HPG 1990

Lishui Comprehensive Plan (1991) MWR NDRC 1992

Xiangjiang Flood Control Plan (1999) PWRD HPG pending

Zishui Flood Control Plan (1999) PWRD HPG pending

Yuanjiang Flood Control Plan (1999) PWRD HPG pending Flood Control Lishui Flood Control Plan (1999) PWRD HPG pending

Xinqiang Flood Control Plan (1999) PWRD HPG pending

Miluo Flood Control Plan (1999) PWRD HPG pending

All Hunan City Flood Control Plan (1999) PWRD HPG pending

All Hunan Risky Reservoir Reinforcement Plan (1999) PWRD HPG pending Professional All Hunan Soil and Water Conservation Plan (1999) PWRD HPG pending

All Hunan Non-structural Measures Flood Control Plan (1999) PWRD HPG pending

Legend: MWR = Ministry of Water Resources; HPG = Hunan Provincial Government; NDRC = National Development and Reform Committee; PWRD = Hunan Water Resources Department Source: Hunan Water Resources Department

SOGREAH – JULY 2005 PAGE 36 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Relevant agencies have produced the flood control and other related plans over the past 20 years, as shown in Figure 2 and detailed in Table 3. Up to 1999, flood control feasibility studies had been prepared for 44 municipalities and counties (near Donting Lake and in the lower reaches of the Yuanjiang and Lishui) and approved by the concerned agencies. Following revision of the Water Law (2002), new River Basin Management Plans, inclusive of Flood Control Measures, will have to be prepared by the River Basin Water Resource Commissions and be approved by Central Government. The Yangtze River Basin Plan has still to be approved before the Hunan River Basin plans can be formally approved and published. Despite this, the implementation of flood control, protection and management measures is progressing according to the ‘pending approval’ plans. Reassessment of recent floods suggests that economic losses incurred by the municipalities and counties might have been minimised if improved flood control and protection facilities had been in place. The loss values in 1996, 1998 and 1999 were respectively CNY 10 billion, CNY 10.2 billion and CNY 10.9 billion, which are substantive when compared to the provincial economy, so a clear incentive exists for HPG to improve overall flood management as soon as possible. A major initiative by HPG is their support for flood affected cities to invest in flood management and control within the current and future 5 year Provincial Investment Plans, by arranging foreign investment loans (e.g. WB, JBIC, ADB) to help them implement their flood management plans. The national flood management policy now focuses on applying integrated river basin management principles for new developments. The interaction between all development and management within a river basin is assessed and balanced in relation to environment, ecology and socio-economic development concerns and objectives. HPG follows these national principles, and is making progressive adjustments to its water resources and flood management policies. This includes changing its flood management focus from flood control to flood protection and mitigation, and adopting a stronger mix of non- structural measures with structural interventions. Hunan already has a mixture of structural and non-structural measures for flood management in the four main rivers and their tributaries. Structural measures include: dikes, reservoirs, flood detention basins, river channel management, and soil and water conservation. Non-structural measures includes: the Flood Control Commanding System (FCCS), reforestation, terracing and land use planning. Collectively, these form an Integrated Flood Control Program16 for each river basin, as shown in Table 6. The provincial integrated river basin management plans have several key elements within the Hunan Flood Control Program component of the plans, as follows:

(i) flood control and waterlogging prevention (drainage) in the Dongting Lake Area (DLA);

(ii) city flood control;

(iii) flood control reservoirs;

(iv) river channel regulation;

(v) rehabilitation of unsafe reservoirs;

(vi) flood control for farm land adjacent to the rivers;

(vii) flash flood disaster prevention and control;

(viii) soil and water conservation and ecological environment management; and

(ix) development and implementation of non-structural measures for flood control.

16 Hunan has individual basin water resource and flood control plans.

SOGREAH – JULY 2005 PAGE 37 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Currently, the flood control and waterlogging prevention program for the DLA is listed in the national plan for the management of large rivers (e.g. Yangtze). Some financial arrangements have been made, supported at the national and provincial levels, for the development, operation and maintenance of flood control reservoirs, river channel regulation, and the rehabilitation and upgrading of medium to large unsafe reservoirs.

TABLE 6: INTEGRATED FLOOD CONTROL PROGRAM OF HUNAN PROVINCE

Flood Control Scheme Other Flood Control Non-structural River Basin River (Structural Measures) Measures Measures Main Stream Dikes Xiaoshui Reservoirs, Dikes Leishui, Dikes u/s of Dongjiang Reservoir Leishui, Reservoirs, Dikes d/s of Dongjiang Reservoir Xiangjiang Hydrological Data Mishui, Chalinhe river reaches Reservoirs, Dikes Acquisition System, Mishui river, downstream of Chalin Dikes , upstream of Dikes Structures Data Shuifumiao Acquisition System, Lianshui river, downstream of Reservoirs, Dikes Shuifumiao Drought and Disaster River Reservoirs, Dikes Situation Monitoring River channel regulation System, Other minor tributaries Dikes works (including river Main stream, upstream of Zhexi channel obstacle Dikes Reservoir clearance, collapsed bank Computer Network treatment, bridge System, Zishui Main stream, downstream of Zhexi Reservoirs, Dikes extension, dredging etc.), Reservoir

Tributaries Dikes Flood Forecasting System, soil and water Main stream, upstream of Wuqiangxi Dikes conservation measures, Hydropower Station Flood Control Operation Main stream, downstream of System, Dikes, Reservoirs Wuqiangxi Hydropower Station flash flood prevention and fighting measures etc. Yuanjiang Youshui River, upstream of Fengtan Dikes Flood Warning System, Hydropower Station

Youshui River, downstream of Dikes, Reservoirs Fengtan Hydropower Station Disaster Situation Evaluation System, Other tributaries Dikes

Main stream, upstream of Cili Dikes Conference Consulting Main stream, downstream of Cili Dikes, Reservoirs System for Flood Prevention and Fighting Loushui river, downstream of Jiangya Dikes, Reservoirs Lishui Dam Dieshui river, downstream of Zaoshi Dikes, Reservoirs Project Other Tributaries Dikes Reservoirs, Dikes, Donting Lake Dongting Lake Flood Detention Basins Source: Hunan PWRD SOGREAH – JULY 2005 PAGE 38 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Under China’s financial reform program, the development of flood protection measures for flood affected cities is now a local government responsibility, but most local governments face funding constraints. Supplementary finance, if any, from national and provincial sources for implementation of approved measures is quite limited, and any provision, managed by PWRD’s Planning Division, depends requests lodged by local governments, and national and provincial priorities. However, continued rapid urban growth and development in key economic cities has intensified the need for flood protection works, and therefore many plans have been prepared for various structural and non-structural works to be implemented within these key cities jurisdictions. Following the new flood management policy, the cities flood protection plans must be fully assessed and confirmed as appropriate within the overall framework of an integrated river basin development and flood management plan. HPG’s PWRD is responsible to evaluate proposed city flood management plans and confirm that they comply.

2.3.1.2. Execution of Flood Control Plans

Immediate benefit and visible impact is assured by constructing flood control and protection works in the urban areas, but following international and national government initiatives, increased consideration is being given now to using non-structural measures – as a basis to manage the floods rather than control them. Non-structural approaches to flood mitigation (i.e. moderation of flood peaks by using natural catchment characteristics and detention areas) and damage limitation (i.e. increasing awareness of flood risk and limiting or reducing exposure to such risk) is now better understood. Primary non- structural considerations to improve flood management include i) improved data acquisition; ii) improved and faster flood forecasting; iii) better flood warning; and iv) strengthened response procedures which provide primary information and determine actions to avert significant direct and detrimental impacts upon people and property in flood risk areas. Additionally, more emphasis is being given to alternative measures, such as moving people away from the flood prone areas, rather than protecting them within those areas. However, the large population and limits to suitable land for new development necessitates finding an optimal balance between implementing direct structural control measures and using non-structural mitigation measures. In current flood management planning, it is understood that floods cannot be fully controlled, and that areas must be left undeveloped, or even returned to an undeveloped state, to provide scope for flood management and mitigation. By leaving low lying flood prone areas free of development, options remain for temporal storage to mitigate the impact of floods, both locally and at locations further downstream. The new national focus is to move people and development out of flood prone areas, as a first step towards reducing dependence upon structural flood control and protection measures. Other options include examining and testing specific measures to attenuate rainfall runoff from the catchment area, and mitigate the potential flood peak. Land use planning, including reforestation of the upland areas, terracing of the hills, development of localised detention ponds, and installation of small low cost check dams in upland gulleys can all help to reduce concentration of runoff into the river system, and therefore ease peak discharge within the main rivers. The following sections examine a range of alternative non- structural actions that can help to mitigate floods in a river basin.

a. Data Collection Hunan Hydrology Bureau (HHB) has 123 hydrological and/or water level gauging stations throughout the Province. Of these, 46 are national stations, 48 are provincial stations, 19 are general hydrological stations and 10 are general gauging stations. The hydrological stations are located on the large rivers, with the others more widely distributed to provide good regional representation. There are also 453 rainfall stations (excluding hydrological stations that also have a raingauge) managed by HHB. Hunan’s hydrological and gauging station network is summarised in Table 7.

SOGREAH – JULY 2005 PAGE 39 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7: STATISTICS ON HYDROLOGICAL GAUGING STATIONS IN HUNAN PROVINCE

4 Main Hunan Province Gan Zhu Item Rivers Dongting Total Lake Jiang Jiang Xiang Zi Yuan Li No. of Hydrological and Water Level Stns 53 19 31 13 6 0 1 123 Avg Catchment Area / Hydrological Stn 1,611 1,407 1,647 1,193 2,370 3,793 ll Stations 206 59 111 40 31 1 5 453 Avg Catchment Area / Rainfall Station 330 343 360 293

The overall density (stations/km2) of both the hydrological and rainfall stations is variable but generally quite low. HPG is proposing to upgrade and increase the density of these stations across the province, in response to a recent MWR nationwide survey. Improvements to the hydrological and rainfall station network in Hunan Province will meet recommendations of this survey by providing the required functional areal coverage for effective rainfall-runoff monitoring, flood forecasting and water resource management. The existing data collection systems are generally quite old and performance is variable due to the dependence on personnel involvement. However, in order to improve the overall flood forecasting capability, the installed data collection equipment and communication links need to be automated to support advanced and rapid flood forecasting procedures. Hunan Hydrology Bureau has already started to upgrade some key national and provincial hydrological stations throughout the province, most notably in the Xiangjiang basin (using a French loan), and in the Lishui basin (using local funding). Reservoir operating authorities have also developed improved hydrological monitoring systems in the Yuanjiang and Zishui basins for the operation of Wuqiangxi, Fengtan and Zhexi hydroelectric dams. However, overall automated coverage across the four river basins remains uneven and quite limited. In order to comply with the National Flood Control Command System (NFCCS), Hunan needs to continue the upgrading of its hydrological monitoring and data reporting systems, with the installation of new automated measurement and transmission systems, in order to provide assured real-time data for forecasting, warning and flood management decision support.

b. Flood Forecasting System Data is received at regional sub-centres and at Hunan’s Hydrology Bureau in Changsha, where the primary forecasting is done. HHB and the sub-centres need to establish more effective modelling systems that will rapidly process the incoming real-time data collected and transmitted from the hydrological and raingauge stations and produce real-time forecasts. A number of hydrologic and hydraulic models have been developed for the Donting Lake Area, and for the Yuanjiang and Zishui basins. However, despite continued development and improvement, the accuracy and reliability of these models is still below the required standard. HHB, with support from the subproject cities, plans to develop and strengthen it’s forecasting systems, following the principles established by the NFCCS for improving China’s overall flood management capabilities.

c. Geographic Information System To facilitate improved data management and presentation of flood imformation to concerned decision makers and the general public, Hunan PWRD and its Hydrology Bureau (HHB) have continued to develop a Geographic Information System as a platform for improved flood management and presentation of information. The current system is not particularly user friendly and still needs further improvement to strengthen its usefulness for effective flood management. The future objective will be to strengthen the underlying geo-database, including critical linkages to the hydrological database, the water works database, the social and economic database, the water resources spatial database, and the water administration resources database. By linking these with all the existing and improving data sources, it is expected that a more effective river basin flood

SOGREAH – JULY 2005 PAGE 40 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

control and management system, based on an open information exchange platform, will greatly enhance information flow and enable all stakeholders to participate in the flood management process. The improved system would be operated by a designated institution assigned to operate, maintain and provide the necessary data and informational support for flood management. However, details for the advanced application of a GIS and its future operation for flood management support as well as other provincial planning and management activities still have to be developed as part of the 11th five year plan.

d. Computer Network System Hunan PWRD’s flood information computer network is linked to the water resource and flood information centre’s of MWR, the Yangtze River Water Resources Commission, and all relevant provincial flood management authorities (municipal, county or region). The network is also linked to other provincial government agencies, such as the provincial meteorological observatory division, the provincial hydrology bureau and the flood management offices in 14 municipal cities, 9 hydrological bureau branch offices and the flood management offices of some county-level cities. However, the full effectiveness of such a broad information and data processing network has still to be realised. Full functionality is still constrained by limitations for data transmission speed and general network stability issues. Continued development is required to strengthen and expand the data and information communications network tp meet expectations as defined by the NFCCS for improved flood forecasting, warning and emergency response to mitigate the severity of damage and impacts upon the flood affected people at all government levels.

e. Decision Support System At present, Hunan doesn’t have a fully functional Decision Support System (DSS). The existing system is limited in general functionality and performance, and an upgraded system, using the latest available technology (i.e. numerical flood forecasting models, analytical software, a disaster (damage and losses) evaluation system, or an expert decision support system) is foreseen as a priority requirement to strengthen Hunan’s flood management capability. An improved flood management DSS is needed to facilitate fast and effective decision making by the PFCDRHQ and/or the local FCDRHQ when floods threaten. Even when the system integrates all the available information sources – hydrology, meteorology, , forecasts, operational status, resources and disaster monitoring – within a logical information management system, there is still a need to interpret that information quickly, and provide guidance to the decision makers on the options available for ‘best solution’ flood management at any given time. The DSS is really the key to an effective flood management system, which must help formulate flood management responses based on and utilising the improved data acquisition, telecommunications, computer network and model simulation systems. The development of an effective DDS is a long term goal as part of strengthening and improving Hunan’s overall flood management capability. HPG and PFCDRHQ plans to develop an expert analytical decision support engine, based on past experience, and with the flexibility to accommodate new developments in the future. The HFMP non-structural measures will contribute to underlying information base for the DSS.

2.3.1.3. Towards a New Flood Strategy and Interventions

Hunan already has some infrastructure established for the management of low level floods – typically in the range of 1 in 2 to 1 in 20 year return period, subject to the size and importance of the related community and infrastructure to be protected. Some works have also been implemented in key cities (e.g. Changsha, Zhuzhou, Xiangtan) for flood management of critical infrastructure and communications protection. However, to be fully effective, it is recommended that an holistic river basin approach is needed for better flood management. The following main targets should be embodied in the flood control plans and subsequent progressive developments:

SOGREAH – JULY 2005 PAGE 41 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

a. Future general targets: Ensure moderate floods (up to design standard 1 in x year return) do not disrupt economic activity and social life; and Minimise the economic and social impact of large floods, and secure the long-term provincial development and stability program.

b. Specific targets: Strengthen/unify the river basin flood management systems, so that impacts can be handled by professional flood fighting teams;

Establish a legal framework for flood management operations in each river basin; and Define a rapid response emergency flood management program for each river basin, to ensure relief operations are mobilised quickly and coordinated between all stakeholders. To realize the above targets, the following national strategic interventions and actions have been promoted, and the status for their adoption in Hunan is as follows:

2.3.1.4. Public Awareness for Flood Prevention and Disaster Reduction

Government is the primary flood manager, and all flood management staff should have a good understanding of their flood management and response responsibilities. One of the pivotal responsibilities is to ensure there is strong public support for flood management activities, and this is achieved by communication with the public, strengthening public awareness of risk and the necessary responses when floods threaten and occur. Hunan implements this responsibility through its establish flood control headquarters, promoting information and decisions through public broadcasting and other community communications networks.

2.3.1.5. River Basin and Flood Control Plans with Land Use Planning

Given the progressive change from flood control to flood prevention, and the adoption of an integrated river basin and flood management strategy, it is likely that flood control plans will need to be reviewed and updated. In particular, the increased emphasis on the use of non-structural measures suggests that the existing plans need to incorporate options to mitigate floods, through watershed management, land use planning and other runoff containment measures, or by adopting policies and actions that reduce the communities risk from potential flood hazard. Many of these aspects are discussed in the “National Flood Management Strategy”17, currently under preparation by MWR in Beijing, with support from ADB. This strategy examines many options for flood mitigation and management, and seeks to identify potential options that can be considered as alternatives to increased flood control and/or major structural protection measures. Hunan’s flood control plans were prepared during the 1990’s, ahead of the 1998, 1999 and 2002 floods, and therefore are heavily weighted in favour of structural ‘flood control’. Revision of these plans, in line with latest thinking for the Yangtze River Basin Flood Control Plan and recognition of updated laws and regulations, would be desirable.

2.3.1.6. Urban Flood Management

Most main municipal and county cities and towns have low lying areas adjacent to the rivers that are vulnerable to floods. Flooding has become more critical due to the onset of rapid urbanization, especially in those mountainous valleys where prime (i.e. flat) development land is in limited supply. Changed catchment and climate conditions and unregulated development now means that about 60% of the cities adjacent to major rivers now have a flood protection standard flood below a 1 in 20 year return period.

17 “National Flood Management Strategy”, ADB AOTA for MWR, 2004-2005.

SOGREAH – JULY 2005 PAGE 42 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

However, as the cities and towns grow and become more important to the regional and provincial economy, they need to have a higher level of protection to minimise future economic losses from floods. Importantly, future plans must take into account the existing development and prevailing flood risk, and landuse plans must be an integral part of the urban and flood management development plans for ‘at risk’ cities and towns. If the cities and towns are closely linked to the operation of a storage or detention basin, then their flood protection plan should be an integral part of the river basin integrated flood management system.

2.3.1.7. Scientific Research for Disaster Reduction

Research programs related to river basin and flood management that are to be implemented by one or more departments should be discussed between all potential stakeholders to assess whether the program might be more effectively implemented under a coordinated stakeholder approach. This would make better use of the available resources and financing, allowing the available science and technology from respective fields to be more effectively applied to develop appropriate flood management solutions. A typical example would be combined use of the available national level river basin commission and provincial department expertise within their river basin, as both parties have a joint need to develop reliable and effective flood management solutions.

2.3.1.8. Hunan Flood Management Organisation

The Hunan PFCDRHQ is responsible for flood management in Hunan province, but is also closely related to the larger Yangtze River Basin. PFCDRHQ is headed by a provincial vice governor, and its members come from the Provincial Water Resources Department (PWRD), the Meteorological Administration, the Civil Affairs Department, the Communication Department and other relevant provincial units/authorities. The office of PFCDRHQ is set up within PWRD. The operational principle for Hunan flood management is to ensure the safety of important areas and important flood control facilities, ensure the safety of people’s lives, and minimize damage and losses that arise because of floods and waterlogging. To do this, HPG has established a hierarchy of operational regulations for flood management and operation of the Xiangjiang, Zishui, Yuanjiang and Lishui rivers, and for the Dongting Lake. Detailed measures and management schemes have been defined for managing large and extremely large scale floods, whereby the specific responsibilities of the PFCDRHQ and other agency members are explicitly stated. The municipal and county governments also have a local FCDR office within their local water resource department, in which the membership mirrors that established at the provincial level. The office is headed by a deputy mayor, and the LFCDRHQ membership is made up from representatives from the local government level line agency offices. Their responsibilities are similar to those of their provincial counterparts, but with specific variations in line with the particular city/county flood characteristics and concerns. During flood events, they would be advised on flood status by the Hunan Hydrology Bureau through the PFCDRHQ, and they would have bidirectional communications with PFCDRHQ during any emergency. Their specific responsibility will be to look after the citizens and stakeholders under their jurisdiction, and keep the provincial authorities advised of developments, and if necessary respond to any directives issued by the PFCDRHQ.

SOGREAH – JULY 2005 PAGE 43 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2.3.1.9. Non-Traditional Non-Structural Measures

The need for data acquisition, forecasting and flood management decision making have been considered as part of the specific non-structural measures for the project. They generally involve a direct approach to assessing and managing a flood situation as it develops and passes through the river basin, relying on established or new structural works, together with early warning and advice to the flood managers as a means of mitigating potential adverse impacts. However, new considerations to these options for flood management include what are now typically classed as “non-traditional” non- structural measures. These focus on more non-specific longer term means that can be used to mitigate the rainfall-runoff characteristics of a catchment, or that provide river basin communities with information and procedures that will enable them to live with floods, whilst minimising the worst of the damaging impacts. These “non-traditional” measures focus on watershed management, land use planning and improving community awareness about floods and the actions they can take to minimise impact and losses. These broad approaches (e.g. upper watershed afforestation, adjusted cropping practices, development of local rainfall detention facilities, improved land use planning and development control) are designed to slow down the concentration rainfall into overland runoff to the river system, and therefore moderate the discharge and water level peaks in the rivers. Coupled with increased awareness and early warning of floods, flood prone communities can also initiate pre-flood actions to minimise risk to themselves and their property, and generally be prepared to respond as planned in the event of floods. HPG is generally promoting the appropriate initiatives in keeping with the national flood management interventions described in Section C.2.iii. above. The initiatives are complimentary to the proposed structural measures under this project, and will progress through other provincial agencies in parallel with the planned structural and non-structural flood forecasting and management activities.

2.4. PROJECT RATIONALE

2.4.1. FLOOD SITUATION AND ECONOMIC IMPACTS The Hunan economy is growing rapidly as the trend away from agriculture and more towards urbanisation and industrialisation gains momentum. Many of the regional and district (county) cities are expanding rapidly with migration of rural people to the cities for work and improved economic security, which enables many to lift themselves out of poverty. Most of the major developing cities are adjacent to the four main rivers or their major tributaries, with the older sections of the cities occupying the generally flat and flood prone areas adjacent to the rivers. In some cities, some limited measures have been implemented previously to protect the urban communities, but the installed works provide only a low standard of protection, due to poor financing and construction quality. Consequently, as broader overall catchment development continues, and as the river regimes change due to erosion and sediment deposition, the incidence of flooding in the cities has tended to increase, and the costs associated with personal loss and economic damage is increasing. Given the general economic developments in the province, HPG now proposes to support the cities where flooding is a major problem, and encourage them to implement appropriate protection works. A central tenet for Hunan’s economic development is that the population and property, especially in cities, must be protected as much as possible from natural hazards. When floods occur, it is the cities that incur the greatest loss (generally because people and assets are concentrated), sometimes with severe disruption to economic development and public order. The cities are well endowed with manpower and material resources, and they also provide the main resources for flood control throughout their administrative regions. If floods occur in the cities, then it becomes much more difficult to provide disaster relief within the cities, and for other affected areas in their region. Any delays to providing relief can have substantial flow on effects to the economic production and living standards of the peoples in the cities and neighbouring areas.

SOGREAH – JULY 2005 PAGE 44 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

At present, the urban flood control standard in the Project area is very low, and floods happen regularly. According to the historical record, major floods happened in 1954, 1955, 1980, 1981, 1983 and since 1988, significant floods have been recorded in most years. The actual cost of damage due to floods has been rising in recent years, and since 1990, higher flood levels have been observed, with increased detrimental impact on the ecology within the river and lakes systems. Extraordinary floods occurred in 1991, 1994, 1995, 1996, 1998 and 1999 and many cities experienced inundation to varying degree, with attendant varied levels of damage. Overall flood losses in Hunan have been estimated over recent years as follows:

Year 1991 1993 1994 1995 1996 1998 1999

Flood losses (CNY Billion) 0.76 1.87 3.09 5.00 5.61 10.9 5.97

Source: Hunan Statistical Year Book; values in actual year costs.

The population of the provincial cities is growing rapidly with the migration of rural people’s to the cities in search of work and new socioeconomic opportunities. It is foreseen that this growth will lead to an increase in future economic losses as flood prone areas become more densely developed and occupied. Any increase in socio-economic losses due to floods will hinder the on-going development and growth of the cities, and also impact upon the growth of the province. Continued risk for the safety and security of the city residents, their property and the overall economy will undermine confidence for the future. Therefore, HPG considers it essential that increased flood protection be provided through the provision of improved flood control engineering measures and other non-structural flood forecast and management measures. In general, improved management and control of flood events is considered to be urgent to secure the on- going momentum for economic development in Hunan. In accordance with the provincial river basin plans (see Section C.3.i), HPG proposes to implement a range of flood control and protection measures for the 36 most flood prone cities in the mountainous areas of the four main Hunan river basins. The objective is to raise the overall flood protection level from the current low 1 in 2 to 5 year levels for most cities up to 1 in 20 year for county cities and up to 1 in 50 or 1 in 100 year for municipal cities. It is projected that once the proposed measures are completed, annual recurrent economic losses as a result of floods will be substantially reduced in the high value city areas, and the affected communities will be provided with increased security and protection. This will engender confidence so that the people can build their business and lift themselves above the poverty level.

2.4.2. CITY FLOOD PROTECTION There are 102 cities at County or higher level in Hunan Province. 94 of these cities are flood prone, lying as they do at major confluences and/or adjacent to the main stream or major tributaries of the four main rivers in Hunan. On-going construction to improve city flood protection is slow, and because of constrained financing, past measures have been done to a low standard. The flood protection standard in many cities is quite low – often below 1 in 5 year return period. Additionally, the cities also suffer from poor drainage, especially during flood periods, and the existing (waterlogging) drainage standard is also quite low. In fact, many of the more remote mountainous cities have extremely low to zero flood defense against the fast forming, short duration mountainous torrents.

SOGREAH – JULY 2005 PAGE 45 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The main prevailing flood management issues for the mountainous cities are:

• A low standard (minimal) of flood protection and limited drainage capacity, which is inadequate given the rapid social and economic change occurring in the cities;

• Existing dikes (if any) that are small, partially completed and/or weak (poor construction quality), therefore providing very limited protection;

• Many cities have no direct form (e.g. dikes) of protection for flood prone areas;

• Existing pump stations have old equipment with insufficient capacity;

• Many cities have no drainage facilities to alleviate short term inundation;

• Seepage is prevalent in many existing dikes, to varying degree, and river banks and/or dike foundations are prone to scour from aggressive river and/or drainage flows;

• Existing sluice gates are old, and cannot reliably provide essential security against flood inundation; and

• Many river channels are unstable due to meandering and sedimentation, which tends to impede discharge capacity and raise water levels, especially when rainfall-runoff relationships for the catchment are modified due to broader catchment development activities. The above issues, whether individual or combined, are factors related to the deteriorating flood situation for many of the mountainous cities. With intensified catchment development, the increased frequency and magnitude of floods, and on-going economic development in most of the mountain cities, the annual cost of flood damage and losses year on year is increasing, as shown in Table 8 for each of the main river basins over the past 20 years.

SOGREAH – JULY 2005 PAGE 46 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 8: DAMAGE AND LOSS STATISTICS FOR A TYPICAL YEAR IN THE FOUR RIVER BASINS 4 Flooded Damages and Losses (10 yuan) Affected River Flood Farmland Population Basin year 4 (104) Rural Urban Total (10 ) 1980 97.23 7,461.55 1,950.13 9,411.68 64.50 1983 165.40 24,364.13 15,375.28 39,739.41 122.74 1990 423.53 21,592.79 34,982.47 56,575.26 185.98 Xiangjiang 1993 658.95 204,497.10 68,032.39 272,529.45 608.38 1994 774.46 621,532.50 199,767.80 821,300.30 959.80 1996 539.56 461,535.80 151,400.60 612,936.35 983.39 1998 784.59 531,614.50 152,115.60 683,730.06 606.06 1981 81.50 7,980.00 2,520.00 10,500.00 35.95 1993 308.96 35,207.60 12,858.60 48,066.20 384.73 Zishui 1994 324.69 174,553.80 88,177.70 262,731.50 598.41 1996 483.05 863,412.50 675,826.90 1,539,239.40 931.25 1998 300.97 228,318.30 77,275.72 3,055,940.00 487.00 1980 392.30 13,472.00 5,773.00 19,245.00 275.68 1983 209.13 5,615.40 2,406.60 8,022.00 68.15 1988 353.33 36,469.60 15,629.40 52,099.00 423.10 Yuanjiang 1990 312.68 31,126.20 13,339.80 44,466.00 425.71 1993 399.52 82,951.40 35,550.60 118,502.00 425.60 1996 699.01 1,162,086.00 498,037.00 1,660,123.00 598.34 1998 676.14 390,464.50 138,770.50 529,235.00 563.63 1980 85.46 5,117.78 3,658.02 8,775.80 68.56 1983 226.15 29,263.35 16,948.34 46,211.69 178.19 1989 184.60 14,319.39 15,291.61 29,611.00 151.39 Lishui 1991 207.35 24,549.47 26,089.53 50,639.00 132.40 1993 260.80 61,379.25 28,915.75 90,295.00 146.32 1995 261.71 30,645.04 16,928.96 47,574.00 206.70 1998 355.65 527,995.90 288,828.50 816,824.40 261.33

Source: Hunan PWRD An examination of the statistics for several large-scale floods over the past 20 years indicates that damage and losses in the major cities has been between 27.5 to 40.0% of the overall losses for the province in any given year. Damage and losses in the Xiangjiang basin has ranged from 20.72 to 61.83%, in the Zishui basin from 24.0 to 43.91%, in the Yuanjiang basin from 26.2 to 30.1%, and in the Lishui basin from 32.0 to 51.7%. The major cities are the regional political, economic and cultural centres, which have a high population and developed property and infrastructure density, so when they are flooded, the damage and losses tends to be substantial. When this occurs frequently, as happened through the 1990’s, then the damage and economic loss will impact heavily upon the provincial and national economy. Regular flooding also discourages future investment and development in the cities, even though they may have plenty of human and material resources. Such constraint on further effective development will not only affect the city but it will also impact on the

SOGREAH – JULY 2005 PAGE 47 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT regional economy, to the detriment of the people whose lives and property are linked to the growth of the city. Besides any risk that continued floods will keep many people in poverty, continued inaction to protect the people and their property from floods will undermine the city resident’s trust in their city leadership. Therefore, to ensure stability and belief in the future well being of the city and its residents, it is important that the City government is seen to take appropriate action to deal with the continued flood risk, and generally improve flood management for the future. The range of options available to the City government for the management of floods encompasses both structural and non-structural measures as discussed in Section C. The City is constrained to some degree in that the measures it can implement are local to its administrative area. However, whereas physical infrastructure (dikes, culverts, pump stations, dredging and river bank protection are highly visible measures, many of the non- structural measures are not visible, and sometimes more critically, would be implemented more remotely from the city (e.g. upper watershed measures). For such non-structural measures, especially those related to an integrated river basin management approach, there will need to be more cooperation between many cities and counties in the catchment, and this will need to be coordinated by the provincial authorities. However, the proposed project is primarily focused on implementing measures at the municipal and county level, and therefore the majority of the proposed measures to be adopted under the project will be those which the municipal and county governments are able to finance and implement.

SOGREAH – JULY 2005 PAGE 48 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3. THE PROPOSED PROJECT

3.1. OBJECTIVES

3.1.1. PROJECT GOAL AND OBJECTIVES The overall goal of the Project is to sustainably reduce the economic, social and environmental impacts of floods along the middle and upper reaches of the Province's four mountain river basins. The objective is to improve flood warning, protection and management systems for priority growth centers along the four mountain river basins. The project will provide protection to the urban and rural communities who live and work in the flood prone areas of up to 36 selected cities in the mountainous regions of the four major Hunan river basins – Xiangjiang, Zishui, Yuanjiang and Lishui. The project will construct structural works to control and guide floods through the cities and non-structural works to forewarn and monitor flood development and its passage. Both measures will prevent or mitigate the inundation of low lying flood prone areas from the river at high stage, and structural measures will also evacuate natural local drainage from the cities during high stage in the river. The works will ensure less physical and social damage due to floods, and protect the lives, property and livelihood of affected people. It will ease also the unpredictable burden for flood fighting and flood compensation that has to be borne by the City Government on an unpredictable and infrequent basis. It will also facilitate improved city resource and infrastructure management, and enable the City Government to provide more reliable services and protection to the city and its people. This added security is expected to improve the Cities ability to attract further investment in the future, creating more jobs and overall prosperity, especially for the flood prone poor communities. In general, the flood protection measures are expected to enhance the Cities trade and commerce, and provide a safer and reliable environment for future generations. In accordance with the national Flood Control Standard of China, construction standards for city flood control are stated in the Integrated Flood Control Plan for Hunan Province. These vary according to the size of the city. For Municipal cities, the flood control standard should be 1 in 50 to 1 in 100 year return flood, whereas for County cities, the flood control standard should be a 1 in 20 year return flood.

The primary objectives of the Hunan Flood Management Project are:

• For 27 County cities: raise the flood control standard (protection) from the current 1 in 2 to 5 year return period to a 1 in 20 year return period flood (P5%);

• For 3 key Municipal cities (Xiangtan, Zhuzhou and Hengyang): raise the flood control standard (protection) from the current 1 in 5 year return period to a 1 in 100 year return flood (P1%); and

• For 6 Municipal cities (Chenzhou, Yongzhou, Loudi, Shaoyang, Huaihua and Jishou): raise the flood control standard (protection) from the current 1 in 10 year return period to a 1 in 50 year return flood. Increasing the standard of protection for the flood prone areas of these flood affected cities will decrease the annual flood damage and losses, provide the affected people with increased security and certainty, and enable the overall economic development of the city to proceed with less hindrance.

SOGREAH – JULY 2005 PAGE 49 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The impact of the proposed works for limited but economically valuable city areas should be assessed for the whole river basin, especially if the localised works exacerbates flood risks for other communities and land users upstream or downstream of the cities. The Sector Analysis in Supplementary Appendix B presents a more detailed appreciation of how the current national and provincial policies have been framed to ensure proposed developments will be broadly positive for all river basin communities.

3.1.2. PROJECT SCOPE There are 94 cities (municipal or county) in Hunan province that are affected by floods, due to their location on or in close proximity to the major rivers and their tributaries. The need to address the flood risk for these cities varies in terms of priority, and it is assessed that up to 36 cities should be classified as of urgent priority, based on a risk assessment, as per Table 9. The priority for these cities, where each is classified as a subproject, was confirmed following extensive data collection and analysis undertaken by the city authorities, guided by HPG’s PWRD and the Hunan Hydro & Power Design Institute (HHPDI), who have prior experience in assessing and quantifying these types of subprojects.

TABLE 9: STATISTICS AND ANALYSIS OF FLOOD PRONE CITIES Current Degree of Protected Financial City River Population Flood Risk Values Status Remarks Basin (104) H M L H M L H M L Xiangtan City Xiang 69.21 ● ● ● Zhuzhou City Xiang 74.85 ● ● ● Hengyang City Xiang 75.42 ● ● ● Yongzhou City Xiang 30.84 ● ● ● Chenzhou City Xiang 30.00 ● ● ● Loudi City Xiang 27.82 ● ● ● Zhuzhou Xiang 5.50 ● ● ● County City Xiang 15.30 ● ● ● Youxian County Xiang 4.78 ● ● ● Hengyang Xiang 9.08 ● ● ● County Leiyang Xiang 23.27 ● ● ● Jianghua Xiang 6.60 ● ● ● Jiangyong Xiang 2.50 ● ● ● Xintian Xiang 4.00 ● ● ● Xiang 10.30 ● ● ● Ningyuan Xiang 4.20 ● ● ● Shuangfeng Xiang 7.60 ● ● ● Xiang 10.10 ● ● ● Shaoyang City Zi 60.61 ● ● ● Wugang City Zi 12.56 ● ● ● Longhui City Zi 9.55 ● ● ● Zi 13.45 ● ● ● County

SOGREAH – JULY 2005 PAGE 50 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Current Degree of Protected Financial City River Population Flood Risk Values Status Remarks Basin (104) H M L H M L H M L Zi 11.90 ● ● ● Zi 13.70 ● ● ● Anhua County Zi 3.30 ● ● ● Huaihua City Yuan 33.57 ● ● ● Jishou City Yuan 15.20 ● ● ● Chexi County Yuan 5.60 ● ● ● Zhongfang Yuan 1.80 ● ● ● Xupu Yuan 10.68 ● ● ● Xinhuang Yuan 6.00 ● ● ● Fenghuang Yuan 4.50 ● ● ● Baojing Yuan 3.70 ● ● ● Sangzhi Li 4.25 ● ● ● Cili Li 8.45 ● ● ● Shimen Li 13.16 ● ● ● Totals 643.35 Legend: H = High or Good; M = Medium or Average; L = Low or Poor Source: Hunan PWRD Subproject selection was based on the following considerations: i. City location: the cities are of critical importance to further rapid economic development in the mountainous areas of Hunan, and the population and the current economic contribution of the city must be significant for the continued economic development of the province. ii. Urgency of demand: the people and the local government must be willing to support the construction of flood control facilities, with a broader intention to alleviate poverty within the city and its environs. iii. Risks of flood: the city is prone to substantial recurrent flood risk, whilst areas to be protected are of significant economic value. iv. Economics: upon completion of the subproject, the implemented measures will enhance overall conditions for increased economic development. v. Financial Capability: the city must have the capacity and capability to provide the necessary finance for the subproject, and the capacity to repay the loan in the future. The proposed 36 subprojects include 9 municipal cities and 27 county level cities as indicated in Table 10. These cities are the political, economic and cultural centres of their respective mountainous region within the four main river basins of Hunan Province. Specific selection criteria for 8 Core subprojects prepared as part of the PPTA are presented in Appendix 5. Table 10 summarise the main quantities of the primary protection works required for each subproject. These are in two groups – i). the initial 8 Core subprojects, for which the details have been reviewed and confirmed in updated feasibility study reports; and ii). another 28 non-core subprojects, for which details are based on the existing feasibility studies prepared by Hunan’s HHPDI and/or comparable institutions from the municipal cities. These subprojects are distributed throughout the middle and upper reaches of the four main river basins as indicated in both Tables 9 and 10, and as illustrated in Figure 1. The distribution by river basin and between municipal and county levels is summarised at the end of Table 10.

SOGREAH – JULY 2005 PAGE 51 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 10: PROPOSED CITY FLOOD CONTROL SUBPROJECTS AND THEIR KEY FEATURES N Name City Type River Earth Floodwal Culverts Pumping o Basin Dikes l Dikes (No.) Stations (Km) (Km) (No.) 8 Core Subprojects to start in Year 0 (2005) 1 Yongzhou M X 21.50 23.37 16 6 2 Wugang C Z 5.47 10.76 14 4 3 Loudi M X 30.91 5.89 19 2 4 Leiyang C X 11.29 1.05 5 0 5 Chengxi C Y 0.00 0.73 3 1 6 Huaihua M Y 13.39 9.64 10 4 7 Xinhua C Z 12.25 0.00 4 2 8 Sangzhi C L 0.00 7.29 7 2 8 Core Subprojects - Sub 94.81 58.73 78 21 Totals

SOGREAH – JULY 2005 PAGE 52 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Proposed 27 Non-Core Subprojects^^ to start in Years 1 to 4 (2006 to 2009) 9 Hengyang ** M X 39.21 18.30 88 31 10 Chenzhou M X 23.30 23.80 39 0 11 Shaoyong M Z 1.60 7.40 9 8 12 Jishou M Y 0.00 22.40 27 0 13 Zhuzhou ** C X 8.66 0.00 18 7 14 Youxian C X 10.90 1.40 15 4 15 Hengyang C X 14.60 0.34 6 4 16 Longhui C Z 4.50 3.60 5 3 17 Jiangyong C X 4.43 2.61 4 0 18 Xintian C X 11.70 7.52 3 3 19 Ningyuan C X 4.80 8.30 4 0 20 Zhongfang C Y 5.62 0.50 3 2 21 Xupu C Y 5.71 2.57 5 2 22 Lianyuan C X 4.07 13.10 17 0 23 Shuangfeng C X 4.40 5.41 12 2 24 Cili C L 11.99 5.70 5 1 25 Zhuzhou M X 24.50 8.50 7 14 26 Xiangtan M X 12.90 0.00 5 2 27 Qiyang C X 9.70 5.40 10 3 28 Lilling C X 3.49 7.90 5 4 29 Shimen C L 12.95 0.00 7 2 30 Shaodong C Z 11.10 0.54 7 4 31 Jianghua C X 2.87 0.74 3 3 32 Xinhuang C Y 0.00 6.35 4 3 33 Lengshuijiang C Z 5.40 1.69 9 3 34 Fenghuang C Y 0.00 5.15 0 0 35 Baojing C Y 1.30 3.65 6 0 27 Non-Core Subproject Sub-Totals 239.70 162.87 323 105 35 Subproject Totals 334.50 221.61 401 126 Rivers (Subprojects) – Xiangjiang (18), Zijiang (7), Yuanjiang (8), and Lishui (3) City Type (Subprojects) – Municipal (9) or County (27) Note: For flood management, all the cities depend on non-structural measures (data acquisition, flood forecasting, flood warning and flood response procedures), and therefore varying activities will be undertaken at each city to strengthen these non-structural activities, coordinated by the Provincial Water Resource Department. ^^ Anhua City subproject has been cancelled (July 2005). ** Hengyang City’s Yanfeng Circle and Zhuzhou City’s Qingxiangtian Circle are also proposed for cancellation but have not been deleted from the above Table (July 2005)

SOGREAH – JULY 2005 PAGE 53 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.1.3. HUNAN FLOOD MANAGEMENT PROJECT The primary focus of the Hunan Flood Management Project is to provide physical protection measures for low lying areas in up to 36 cities adjacent to the main stream or major tributaries of the four main river basins in Hunan. It will involve the implementation of various structural and non-structural works to either prevent or mitigate floods in some or all of these 36 cities. Plans for these works have been reviewed under a PPTA, as part of preparing an investment programme for the implementation of approved measures with support from ADB. The current estimate18 for the investment is about US$ 604 million (CNY 5.0 Billion), based on a detailed assessment of 8 core subprojects and a review of the remaining non-core subprojects. Part of the investment is set aside for project management, and a further part is assigned to non-structural flood management measures. The proposed 36 subprojects will involve 47 counties, which are defined as the Project Area (PA) for the Project.19 In 2003, there were 7.18 million households and 25.08 million people living in the PA, with 66% in rural areas, ranging from 78% in Lishui to 60% in Xiangjiang. About 6.4 million people currently live in the flood affected city areas. Of these, based on the detailed analysis for the 8 core subprojects, up to about 1,400,000 urban and 620,000 rural people live in the project protected areas and are directly affected by floods of a 1 in 50 year return frequency (municipal cities) or 1 in 20 year return frequency (county cities). The civil works constitute the main component of the project, at 92% of the proposed investment. This will involve the construction, rehabilitation or strengthening of flood control dikes (earth embankments and concrete or masonry flood walls), drainage channels and sluice gated culverts, drainage pumping stations, drainage and/or river/stream diversion channels, and other related works where needed (e.g. dredging of river channels, widening of bridges, removal of low level weirs, construction of a dam to facilitate flood diversion, provision of access gates for traffic, or flow control gates to manage to passage of floods and drainage). Table 10 summarised civil works data for the proposed 36 city subprojects to be implemented under the project. The full scope of the physical construction works are presented in Section III, B, 2. The type of dikes to be used will vary according to the available space for their construction. Though earth embankments are cheap to construct, they require more space than a compact floodwall (reinforced concrete or grouted masonry). The flood walls will be used where land is at a premium and resettlement costs prohibit the use of wide based earth embankments. River dredging and other ancilliary works will be used to mitigate any impact on river water levels because the dikes have constricted the river section, and also as a means of providing suitable aggregate material for construction. The proposed works for each subproject will take from 18 to 60 months to be completed (see Appendix 10). The works construction will necessitate some land resumption and resettlement of affected peoples as described in Section IV and detailed in the Resettlement Plans (RPs) that have been prepared. The detailed works, timetable and costs have been quantified for the 8 core subprojects as shown in Supplementary Appendix C, but details for the non-core subprojects have only been summarised (see Appendix 7) based on the HHPDI feasibility studies. Additionally, each municipality or county city will adopt a range of non-structural flood control and management measures to support their future flood management needs, and contribute to the overall river basin flood management. These measures will include improved data acquisition and communications from upgraded hydrological and raingauge stations within the city or county area, local data management and processing

18 Estimate in June 2005, pre-Loan fact Finding Completion, when Loan was confirmed at $200 million, and before adjustment was made for subproject affordability and FX proportion contribution to civil works. Overall project scope was subsequently reduced from 36 subprojects to 35 subprojects when Anhua was cancelled 19 Disparity between the number of subprojects and the number of project counties occurs because subprojects located in prefecture level municipalities often involve more than 1 urban district.

SOGREAH – JULY 2005 PAGE 54 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

to support local flood forecasting and management (early warning and decision making when floods threaten). These flood management measures will be integral to the overall river basin flood forecasting, warning and decision making process operated by PFCDRHQ, supported by HHB, and will be part of the National Flood Command System. By being part of this development, the concerned cities will be an active stakeholder and will be more able to participate with and support HHB to provide earlier flood warnings and manage their local flood response actions and conditions.

3.2. COMPONENTS AND OUTPUTS

3.2.1. FLOOD MANAGEMENT SYSTEM The flood management component encompasses examining and determining affordable alternative measures to minimise the need for civil protection works, as well as providing more detailed information for early warning and management of flood conditions. As a part of the integrated flood management strategy for the four river basins in Hunan Province, the project will support non-structural measures that will include some physical measures and equipment for hydrological and meteorological stations upgrading at selected city sites, and the improvement of the data management, flood forecasting and decision support systems for overall flood management. These measures will be implemented at each subproject by the city LPMOs, under the guidance and supervision of the Hunan Hydrology Bureau (HHB), as well as strengthening of the central flood forecasting capability within HHB. Additionally, the project will identify and prioritise other non-physical actions in the interests of strengthening the coordination and institutional cooperation for the future adoption of selected non-structural activities, such as afforestation, land management, flood zoning, water proofing of infrastructure and promotion of national and provincial flood policies and practice. This would include strengthening and expanding the intent of the existing flood control and management plans for Hunan and the respective river basins. This will be part of Hunan’s on-going integrated flood management policy, as embodied in the river basin and flood management plans. Objectives and priorities are outlined in the Non-Structural Measures in Supplementary Appendix A. The PPMO have examined their options for financing an integrated non-structural component at the provincial level, using aggregated funds from the 36 cities previously outlined for non-structural works (mainly hydrological station upgrading, communications links, local City water resource bureau flood forecasting and institutional capacity strengthening for flood management) to be implemented in conjunction with each cities structural component. The priority in this case is that each City needs to have its own improved flood management, warning and response capacity to provide all necessary flood advice and support to its citizens. This need remains, and can be fully supported under the project, but it was agreed that flood forecasting was really dependent upon a river basin wide integrated flood forecasting system, using improved hardware and software systems technology which would be more effective if operated at the river basin or provincial level. The PPMO has indicated that measures at the provincial level will be developed in parallel with activities at the LPMO level, but most funding for this would be provided though other channels. Therefore, a clear need exists for the provincial level agency (PWRD’s HHB) to plan, install (with the respective cities) and develop the necessary upgraded systems for data acquisition and forecasting for the whole river basins, which would be integral with the local work to be undertaken at the city level. HPG’s PPMO confirmed that for those aspects of the integrated system that cannot be financed through the planned loan arrangements for the project (predominantly at the city level), then these would be supported eventually under other programs. The overall principles for future improved river basins flood forecasting and decision support systems are presented in the Non- Structural Measures in Supplementary Appendix A. However, a particular issue that will need to be resolved for future sustainability of any improved systems will the definition of who owns the systems, and who has responsibility for their long term operation and SOGREAH – JULY 2005 PAGE 55 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

maintenance. The provision of critical information and services to the cities is generally the responsibility of the Hunan Hydrology Bureau and the Provincial Water Resources Department, but the responsibility for most non-structural works implemented under the project will remain with the cities, including the repayment of loan used for the non- structural component. Further details on the overall project Sector Analysis and the Non-Structural Measures are presented in Appendix 1 and in Supplementary Appendix A – Flood Management. Following the relevant national policies and regulations of Hunan province, the provincial non-structural measures will be implemented in conjunction with similar national activities, and these non-stuctural measures will be complimentary enhancements to the major structural construction works for overall flood management. The development of non- structural measures is an important element in all new water projects. During the proposal, design and financing stages of water projects, attention has to be given to incorporating relevant non-structural measures, so the Hunan Flood Management Project will incorporate appropriate flood management systems elements within prevailing physical, financial and administrative limitations, in order to mitigate the extent and scale of the required structural works. The non-structural measures are also an important component of the integrated flood management strategy for Hunan’s flood control program as outlined in the respective water resource and flood control plans (still to be formally approved), and the development of these measures must conform with the national flood management plans. To support and ensure the effectiveness of non-structural measures, the State Government and Hunan Provincial Government are responsible for the development of the provincial center (flood control commanding headquarters), a trunk computer network, the hydrological station network, automated hydrological measuring and data transmission systems, the flood forecasting system, and the decision-making support system. The municipal or county-level governments are responsible for the development of flood control commanding center/headquarters at their administrative level, with all necessary associated facilities. The non-structural measures for Hunan Flood Management Project will cover the following components: a. Command System The flood control and waterlogging prevention command system for each subproject will consist of four subsystems - data acquisition, communications, computer network and data processing subsystems. Data acquisition subsystem – will acquire and transmit hydrological and physical works condition data to the relevant sub-centres. Rainfall and river discharge/level data will come from established and some new monitoring stations in the river basin above the urban areas, and this data would likely be transmitted simultaneously to the city and/or regional sub-centres, as well as to the provincial flood management center (Hydrology Bureau)). The structural works status data will include information on the operations and condition of the flood control infrastructure (dikes, reservoirs, sluice gates, pumping stations, drains etc.), on the implementation of any new and or emergency works, including evacuation/relocation of people and flood control operation commands, provision of flood relief materials, and developments with any flood relief activities. Telephone communications will be used to issue flood management commands and dispatch materials and resources for emergency flood relief and reparations. This would mainly be via the public telecom networks such as GSM mobile telecom network and program-controlled exchange network. Backup facilities, plus direct links to in-field commanders and monitoring staff may include VHF radio and/or satellite links. The computer network will mainly be used for the State Public Information Platform, facilitating the movement, processing, display and presentation of flood control information between the flood control centres and the provincial and/or State management command centers. Each city would be connected to this system, and then be able to monitor the development and status of a particular flood event. The system would also connect the hydrological and meteorological departments/institutions, the city

SOGREAH – JULY 2005 PAGE 56 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

flood control and management divisions, and the dike management offices to facilitate bi- directional communication of information and commands. Though a network system already exists, it needs much more development before it can become fully effective at all levels in the flood management service.

b. Flood Forecasting and Warning System Though Hunan Hydrology Bureau and the PFCDRHQ have and operate a number of hydrological and hydraulic models, these are not particularly well developed or reliable for accurate and timely forecasting. Additionally, access to these models is currently limited to the Hydrology Bureau, and therefore this limits the opportunities for local authorities to test any potential management options for their future reference. There is therefore a need to enhance the overall flood forecasting capability, by adopting and developing additional models, ideally linked to a GIS platform and data management system. There is also a need to broaden the access to and use of these models to the specific river basin and/or city authorities, so that they can strengthen their own capacity and understanding for forecasting, and response systems based on available lead time. This has to be a long term goal, which may be only partially supported under this project, but those aspects of the flood monitoring and management systems that are to be developed should be planned and implemented with the broader long term goal in mind. However, in conjunction with the upgrading and strengthening of flood management capability at the city level, consideration must be given to establishing a flood forecast model suitable for the local conditions, so that the cities can obtain some initial benefit from their investment in flood monitoring and data processing systems, and obtain improved real time flood forecasts. Once they have the supporting system or capacity to produce appropriate local forecasts, then the city can issue necessary commands and warnings via a wireless mobile alarming, warning and command network, in association with the local community broadcast services - television and radio, to provide a complete flood management and warning system.

c. Decision-Making Support System In setting up a decision support system, various scenarios, options and alternatives need to be developed that are relevant to the local city situation, to build the expert information database for the decision support system. It will be compiled on the basis of historical records, which would in turn be used to calibrate hydrological and hydraulic models, and the testing of various different scenarios for reference in relation to a future ‘real’ situation. Decision makers would then have the ability to review pre-run scenarios against the prevailing flood development, in order to quickly identify relevant operational options that can or should be taken to mitigate the potential impacts of the developing flood. To this end, timely dat acquisition and analysis is essential to ensure relevant and ‘best option’ decisions are enacted. It is suggested that any local decision support system should be integrated with and supplementary to an overall river basin flood forecast, decision and management system, but that at the local level, more detailed considerations might be added where scope exists for local actions that in themselves may not be unduly detrimental to other parts of the river basin. Such variations would need to be assessed and approved by the PFCDRHQ.

3.2.2. CITY AND COUNTY FLOOD PROTECTION WORKS This main component of the project will provide physical protection works to defined Chinese standards for up to 36 flood prone cities in the mountainous regions of four river basins. These works will prevent flood overspill entering the low lying developed and rural areas adjacent to the rivers and small tributary streams from the rivers during floods up to the design standard. The scale of these floods – discharge and river water level – are determined by hydrologic and hydraulic analysis of the available data for the rivers and catchments at the respective cities. In general, most of the cities have between 30 and 50 years of recorded data so that good estimates can be prepared for the design standard return period discharge and water levels.

SOGREAH – JULY 2005 PAGE 57 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Structural measures for the proposed 36 subprojects will include new and strengthened earth embankments, flood control walls, dike slope protection and toe protection, dike foundation, dike seepage prevention, riverbank protection, building or renovating flood diversion channels, construction of new gravity discharge culvert sluices and electric pumping stations, dredging to improve river channel capacity, installation of traffic access gates, renovation or removal of river weirs, and the construction of flow management dams and/or control gates. The construction of these works will improve the flood control level of the county-level cities to a 1 in 20-year-return flood and the municipal cities to a 1 in 50 or 100-year-return flood, so that the lives and properties of 6.4 million people can be protected, and ensure the social and economic security for people living in flood prone project protected areas. The project structural works will mainly involve:

Construction of up to:

Earth embankment, including new and strengthened existing dikes 338 km

Flood control wall, including new and strengthened existing flood walls 232 km

Flood diversion channel, including new and rehabilitated existing diversion 87 km channels

Gravity flow culvert sluice 405 No.

Electric pump stations 126 No.

Earth-rock excavation 16,016,000 m3

River channel dredging 4,790,560 m3

Bridge modification 36

River dam modification or removal 12

Traffic gates through dike 12

Land Acquisition and Resettlement due to the project as follows:

Land occupied 892 ha

Relocated housing 1,002,000 m2

Resettlement 20,788 people

Further details on the specific civil works to be implemented for the 8 core subprojects are summarised in Table 7-4 of Appendix 7, and detailed in the respective Supplementary Appendix C on Core Subprojects. More complete details on the scope of works to be addressed for all subprojects, refer to Table 7-2 in Appendix 7 (details for the non-core subprojects have been extracted from the HHPDI feasibility studies). The primary objective for specific flood prone areas would be to ensure they are fully protected against floods up to the defined design standard, and that there would be some marginal additional protection available due to the in-built freeboard of the dikes. However, if floods in excess of the next level (greater than 1 in 50 year flood when the design standard is 1 in 20 year flood) occur, then there is a significant risk that much more severe flood inundation would occur. The major benefit though is that with the added structural protection, and improved non-structural flood warning, such events would be identified early enough for people and their personal effects to evacuate before the protected area actually floods under any exceptional event.

SOGREAH – JULY 2005 PAGE 58 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.2.3. CAPACITY BUILDING AND PROJECT MANAGEMENT

3.2.3.1. Capacity Building

a. Flood Management The current flood control and management institutions for mountainous area cities in Hunan are quite limited in resources and capability. For subproject implementation and long term operations, they will need to be strengthened (build up the human resource skills, procedures, facilities, and operational financing). The provincial government will aim to strengthen the coordination between the provincial agencies and the city (municipal or county) agencies, and coordinate their activities for project implementation and future operations under the established provincial and local government leading groups. These leading groups (see Appendix 8) have established an overall project provincial level project management office (PPMO) and local project management offices (LPMOs) for each city subproject. Each PMO is formulated from representatives of the three key stakeholder agencies at the respective levels – the Development and Reform Commission (xDRC – where x may be Provincial or Local), the Finance Department (xFD) and the Water Resources Department (xWRD). The LPMOs are responsible to act on behalf of the Local Leading Groups (LLG) for each subproject, and will be advised and guided by the PPMO for effective project implementation and utilisation of the ADB loan proceeds. Administratively, the LPMOs have limited experience in implementing major flood management works, primarily because many of the cities have not as yet undertaken major flood control and management projects. Hunan PPMOs have had prior experience of implementing World Bank and Japanese Bank for International Cooperation projects, and will be able to provide support and guidance to the newly established LPMOs and PIUs for the implementation of their subprojects. This will involve project activities to strengthen these new organisations, developing the necessary coordination linkages, building their resource capacity, and helping them to become fully organised and make the necessary arrangements to implement their projects, monitor progress and prepare the necessary reports and records on the project activities. The primary guideline for implementing the subprojects will be the Design Specifications for Dike Management (SL171-96), under which the following flood control and dike management capabilities must be established: • Hydrological observation facilities: for measurement of water levels and discharge; • Administrative signs: location markers and warning signs on the dikes; • Dike observation facilities: monitoring procedures and instrumentation for settlement, movement, seepage, scour and cracking; • Traffic and communication facilities: for traffic access, construction, maintenance, flood control, flood emergency response and flood relief. • Telecommunication facilities: for monitoring, reporting and management between agencies, offices and the field operations; • Management: for maintenance, routine inspections and flood emergencies; and • Support facilities: material and equipment storage, warehousing and workshops for effective operation and maintenance. b. Personnel Training Management of the constructed city flood control works and flood response actions requires well trained personnel, conversant with the necessary range of activities to be maintained through the subproject implementation and through future long term operations. Several improved technical and procedural measures will be introduced in

SOGREAH – JULY 2005 PAGE 59 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

parallel with the physical construction of the subproject civil works and development of the non-structural flood management facilities and procedures. To ensure these can be introduced, developed and used effectively, critical operational and managerial staff will be given specialist and on-the job training, to ensure they are conversant with the new developments and comfortable and confident to implement all necessary before, during and post construction operations. As the subproject is commissioned and moves into an operational phase, operatives will need to be trained for the operations and maintenance activities, particularly to ensure all will proceed smoothly during floods and with post-flood restoration and reconstruction. Most of the training will be subproject specific, so it is appropriate that this is implemented by domestic trainers, who will adopt an approach to strengthen the local subproject personnel capacity. Where foreseen as beneficial, some key management staff may undertake additional domestic or international training to enhance their overall managerial capability and understanding on management procedures that may be applicable for their local situation. The following training activities are proposed: • General training of PMO staff at all levels according to national standards and where appropriate ADB guidelines, for the application and adherence to national and provincial laws, legal regulations, policies and rules, using essential good management practice; • Management training: development of business (operational) skills, with personnel, equipment, material and financial management practice; and • Non-Structural measures: strengthen the knowledge and understanding of automated hydrological measurement and data transmission, flood forecasting, telecommunications, computer networks, and expert decision support systems. In particular, broaden the knowledge about world wide practice, and how modern technology and equipment can assist in improving procedures, accuracy and timeliness of flood management. Emphasis would be placed on strengthening the professional integrity and performance of the technical systems management personnel.

3.2.3.2. Project Management

a. Institutions HPG has established the Hunan Provincial Project Management Office (PPMO), with members from Hunan Provincial Development and Reform Commission (PDRC), Hunan Provincial Financial Department (PFD), and Hunan Provincial Water Resources Department (PWRD). The resident office of the PPMO is located in the PWRD office in Changsha. The PPMO will coordinate activities to be implemented at up to 36 separate cities. Each of the city subprojects will be a self contained subproject, managed at the city level by a local project management office (LPMO). The general organisation arrangements, for project management, implementation and financing are shown in Appendix 9. The implementation period for each subproject will vary from as little as 18 months up to 5 years. To oversee the physical implementation, the LPMO has set up a special purpose project implementation unit from within the Water Resource Bureau (WRB) to plan, manage and supervise all engineering and construction aspects of the project. This unit will be closely aligned with the cities River Course Management Institution (RCMI) that independently, under the WRB, has overall responsibility for the construction and management of all water resource and flood control works within the city. The RCMI is a bureau level institution, directly under the municipal and county government, but within the WRB. Overall, the city flood control subprojects will be divided up into about 121 protected areas, and each one of these will have a resident management office under the relevant RCMI. The PPMO and the LPMOs will have divisional units with specific responsibility for the coordination and monitoring of environment, resettlement and social and ethnic minority

SOGREAH – JULY 2005 PAGE 60 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

issues and impacts during the implementation phase, and subsequently for operation and maintenance. These staff will liaise with relevant local government and provincial government agencies on a regular basis, and provide internal reports to their respective management offices. They will ensure compliance with the various management plans, policies and regulations for environmental, resettlement and social issues which must be followed during project development.

b. Project Construction Management The Municipal / County Government’s Subproject Leading Groups have established Local Project Management Offices (LPMOs) which are staffed by personnel from the respective local development and reform committee (LDRC), local Finance Bureau (LFB) and the local Water Resource Bureau (WRB). The LPMO is responsible for the overall management and coordination of the subproject implementation, whilst the WRB has established a Project Implementation Unit (PIU), under the LPMO, to oversee all physical works development, supervise contractors, ensure project quality, and manage the day to day construction activities. The PPMO will supervise the overall project development and construction progress for all of the subprojects, including monitoring of actual implementation progress, reporting to ADB and the provincial government, maintaining and monitoring financial requirements, and ensuring compliance with agreed safeguards. The PPMO will also ensure adherence to the relevant laws, technical standards and regulations, and manage and account for the project finances.

3.2.4. STAKEHOLDER PARTICIPATION Stakeholders are those people or agencies that have an interest in the outcome of the planning and development processes, and particularly where the outcomes may affect their business or well-being, or have some impact on their personal safety or property. Stakeholders may include: • other government agencies with related management responsibilities; • enterprises which conduct business or undertake production in the planning area (the planning area is the area over which impacts from planning and implementation decisions may be felt); • individuals who live, work or use facilities in the planning area; or • special interest groups or non-government organizations whose interests extend into the planning area. Not all stakeholders should be ranked equally, as some may be vitally affected by project outcomes, while the impact on others may be slight. Ideally, all should be provided with an opportunity to participate at some level in the planning process, and this is best achieved through the provision of structured consultation mechanisms. The social surveys, resettlement plans and environmental management plans preparation provide opportunity for detailed consultation with affected stakeholders as a key element of the planning and appraisal process to quantify the scope and potential impacts of the subproject development. As well as enabling any representation on planning committees, the consultation process should include public meetings and information forums, mail- outs of information brochures or survey questionnaires to affected stakeholders, and open days when professionals are available for interview by appointment about flood management plans. Stakeholder participation is also encouraged by providing public access to planning information, including relevant project reports, plans and flood risk maps. The Internet provides an excellent channel for information access, but it should be appreciated that not everyone can enjoy this type of access, especially the poor and less fortunate rural residents. Consultation can take many forms, and can be demanding on time and

SOGREAH – JULY 2005 PAGE 61 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT resources. A major benefit of the consultation process is the enabling of two way communication that keeps the beneficiary informed of possible change and potential benefits, but also makes the planners and designers more aware of community concerns, to ensure the adequacy and value of the proposed solutions. Stakeholder participation in planning procedures will engender a sense of ownership, especially where the values and opinions of others are taken into account and shared amongst all stakeholders. This will also lead to general satisfaction with the final outcomes, and should lead to increased stakeholder commitment to ensure the project succeeds. Stakeholder participation must be part of the planning process at all levels, and consultation processes should be used in preparing, assessing, confirming and implementing subprojects. The composition of the participating stakeholders may be different, but the opportunity for them to participate should be provided wherever practical. For flood management and implementation of substantive structural measures, resettlement is one activity where community participation is of vital importance. The needs of individuals and communities are varied and numerous, and if those needs are not catered for wisely, and in agreement with the affected people, then resettlement can fail or breed resentment and dissatisfaction. Therefore, under the safeguards policy and guidelines, effective consultation and participation must be undertaken when preparing subprojects to both identify critical concerns and potential obstacles, and to develop appropriate action plans to ensure the subproject will be acceptable and will fulfil current and future needs. The PPMO will be responsible to ensure that all relevant safeguards are followed and favourable outcomes are achived and approve before any civil works commence for a particular subproject.

SOGREAH – JULY 2005 PAGE 62 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.3. COST ESTIMATES The total cost of the Hunan Flood Management Project is estimated at $604 million20 (equivalent to about CNY 5.29 billion). This comprises $200.3 million in foreign exchange (33.1%) and $404 million (CNY 3.53 billion equivalent) in local currency costs, including local taxes of $15.3 million equivalent. Physical and price contingencies amount to $61.3 million and financial charges during implementation – comprising interest during implementation, front-end fees, and commitment charges – are estimated at $33.3 million.21 Subproject costs are summarized in Table 11 below and detailed in Appendix 7.

TABLE 11: COST ESTIMATES ($ million) Foreign Local Total

A. Flood Control Subprojects 134.3 332.1 466.4 B. Flood Management 10.5 0.9 11.4 C. Project Management 1. Provincial Project Management 1.4 2.2 3.6 2. Local Project Management 2.6 25.7 28.3 Subtotal Project Management 4.0 27.8 31.9 Total BASELINE COSTS 148.8 360.8 509.6 Physical Contingencies 14.9 35.8 50.7 Price Contingencies 3.4 7.3 10.6 Total PROJECT COSTS 167.0 404.0 571.0 Financial Charges During Implementation 33.3 - 33.3 Total Costs to be Financed 200.3 404.0 604.2

Project costs are based on a six-year project implementation period starting in early 2006 with some retro-active financing of activities undertaken for initial works on Core subprojects planned for implementation in late 2005, following loan appraisal. The Project years are assumed to be calendar years, in line with the Chinese financial year.

3.4. FINANCING PLAN The PRC is requesting a loan of $200.3 million from ADB’s ordinary capital resources to finance the foreign exchange cost of the Hunan Flood Management Project. The loan will have a 26-year term, including a grace period of 6 years, an interest rate determined in

20 These values were produced during Loan Fact Finding, when the Loan was limited to $200 million. They do not reflect later changes made after affordability and any subprojects rescoping were considered. Revised cost estimates and financing plans are still under preparation, where the total Project investment would be limited to about $500 million. At that stage, FX % for civil works would be adjusted from about 34% to in excess of 40%. 21 Interest during implementation is estimated at 4.58% per year based on the US dollar 5-years swap rate for 12 June 2005 plus a spread of 40 points.

SOGREAH – JULY 2005 PAGE 63 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

accordance with ADB’s LIBOR-based lending facility, a commitment charge of 0.75 percent per annum, a front-end fee of 1.0 percent (the fee will be capitalized in the loan), conversion options that may be exercised in accordance with the terms of the draft Loan Agreement, the Loan Regulations, and ADB’s Conversion Guidelines, and such other terms and conditions set forth in the draft Loan Agreement. The summary of the financing plan is shown in Table 12, below, and details are provided in Appendix 7. The loan would be used to finance the foreign exchange cost of up to 36 flood control subprojects, associated non-structural works, and provincial and local project management, amounting to $200.3 million. This includes $14.9 million of physical contingencies, $3.4 million of price contingencies, and $33.3 million of financial charges during implementation. ADB financing is 33.1% of total project cost. Local currency costs for provincial project management, amounting to $2.2 million (equivalent to CNY 17.9 million), will be financed by the Hunan Provincial Government. This will cover the cost of incremental staff for the PPMO, office operating costs, maintenance of equipment and vehicles and part of the cost of equipment, vehicles, and domestic training and study tours. The remainder of local currency costs, amounting to $401.6 million (equivalent to CNY 3.52 billion) will be financed by those local authorities whose subprojects are included in the project through a combination of sources including the flood control security fund, the local quota for urban flood control works, and the urban maintenance and construction charge, sale and exploitation of land, and contributions from subproject beneficiaries.

TABLE 12: SUMMARY FINANCING PLAN ($ million) Foreign Local Total Percent ADB 200.3 - 200.3 33.1 Hunan Province - 2.4 2.4 0.4 Local Authorities - 401.5 401.5 66.5 Total 200.3 404.0 604.2 100.0

The PRC would onlend the proceeds of the ADB loan to the Hunan Provincial Government under the same terms and conditions of the original loan, including a 26- year loan term with a 6-year grace period and a 20-year loan repayment period. The interest rate would be at the same LIBOR-based rate paid by PRC and would be subject to the same terms and conditions as the PRC loan. The Hunan Provincial Government would relend the proceeds of the loan to the local authorities to finance the foreign exchange cost of the subprojects. Relending would be under the same terms and conditions as the onlending to Hunan Provincial Government, including a 26-year loan term with a 6-year grace period and a 20-year loan repayment period. The interest rate payable on the loan would be subject to the same LIBOR-based terms and conditions an the loan to the Hunan Provincial Government. The local authorities would bear the foreign exchange risk. As part of the financial analysis, the capacity of the local authorities responsible for the core subprojects to finance the local currency costs and repayment of the loan has been investigated.

3.5. IMPLEMENTATION ARRANGEMENTS

3.5.1. PROJECT COORDINATION A Provincial Project Management Office (PPMO) was established within the Provincial Water Resources Department (PWRD) in 2003. It is staffed by 7 qualified professionals, mainly from PWRD, though there are also participatory representatives from the Provincial Development and Reform Committee (PDRC) and the Provincial Finance

SOGREAH – JULY 2005 PAGE 64 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Bureau (PFB). The PPMO will be responsible for coordinating the project implementation between the central provincial agencies and the relevant local governments and their local project management offices (LPMOs). The project has been arranged to include flood control and management development activities for up to 36 subproject cities in the upper mountainous regions of Hunan’s four main river basins. These subprojects will involve the implementation of civil works, flood management measures and project management activities in up to 9 municipal cities and 27 county cities. The organisation of the respective provincial and local government agencies involved with implementation of the project is shown in Appendix 9. It also indicates that loan funds will be provided from ADB through the Ministry of Finance, firstly to the provincial Finance Department, who will then on-lend the funds to the local government Finance Bureau. The PPMO and LPMOs will be responsible to coordinate the establishment of contracts, monitor implementation progress, report to their own provincial and national agencies and to the ADB, and administer, in conjunction with the Finance Bureaux, the disbursement of funds for the project. The LPMOs and PPMO will also coordinate and monitor the arrangements and implementation of the resettlement plans, environmental activities and any related social and ethnic minority issues, in accordance with Chinese and ADB laws, regulations and guidelines. PPMO will have overall responsibility for preparing relevant reports for ADB.

3.5.2. SUBPROJECT SELECTION AND PREPARATION Hunan Provincial Government, through its key departments (Development and Reform Commission, Water Resources and Finance) has identified and selected 36 priority cities for which it proposes to implement urgent flood control and management works. This defines 36 cities that have areas with the highest risk of flooding on a regular basis, and for which socio-economic damage and losses are deemed to be unacceptably large and frequent. The common characteristics associated with these subprojects are: high flood risk; significant damage and loss due to frequent floods; substantial property, infrastructure and commercial asset value to be protected from floods; and areas where local government and the people are proactive to promote the subproject. Implementation of the subproject will promote continued local economic and social development for the city, and especially in the protected areas, there will be an improvement in the general living conditions and livelihood opportunities for those people most directly affected by floods. Such an outcome will help to alleviating poverty which is exacerbated by the floods for the less fortunate community residents, who by necessity have little choice but to reside and develop their livelihood in the more vulnerable areas of the city. Further details on the selection criteria for the subprojects are presented in Appendix 5. Under the direction of the PPMO, and in conjunction with the respective subproject city Bureaux, Hunan Hydro & Power Design Institute (HHPDI), assisted by the PWRD, other relevant municipal Hydro & Power Design Institutes, and the local WRB, has prepared feasibility study reports, including engineering geology and cost estimate reports for 36 subprojects (in Chinese and English; hard and electronic copy). These reports include basic information as prepared according to relevant Chinese specifications, codes and standards, giving a complete and detailed description of the engineering works (hydrology, hydraulics, engineering geology, structural works, electro-mechanical equipment and metal structures, construction plans, and cost estimates). The reports also include sections on project management, resettlement, soil and water conservation and project investments. However, they provide only limited detail (If any) on social assessment and impacts, ethnic minorities and economic analysis. The sections on project management, non-structural measures, environment and resettlement also require strengthening in order to meet the ADB compliance requirements. As the project modality was revised during PPTA implementation, PWRD, PPMO and HHPDI have provided information on the comprehensive river basin plans and the related flood control plans for river basins (Xiangjiang, Zishui, Yuanjiang and Lishui), the cities and the use of other non-structural measures. These have been reviewed as described in the Sector Analysis and Non-Structural Measures as presented in Supplementary Appendix A. The proposed works to be implemented for the selected subproject cities

SOGREAH – JULY 2005 PAGE 65 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

has been outlined in the river basin and flood control plans, but the details presented in the feasibility studies suggest the scope of work has changed when compared to the outlines included in plans that were prepared in the late 1990’s. Under the PPTA, 8 core subprojects have been reviewed in detail and updated Feasibility Study Reports (FSR) have been prepared. These core subprojects are identified in Appendix 5, together with the detailed basis for their selection. Specific details of the core subprojects are presented in Appendix 6, together with summary details for the remaining 28 non-core subprojects. The completed feasibility study reports, together with their associated resettlement plans, initial environmental examinations, and a social and poverty impact assessment, are presented in Supplementary Appendix C.

3.5.3. SCHEDULE

The proposed works for up to 36 subprojects have all been scheduled for completion over six dry seasons, between the flood period that occurs generally between May and August each year. On the basis that a financial year is January to December, then the project implementation is scheduled to occur over 6 financial years, assuming loan effectiveness in early 2006. The provisional implementation schedule for up to 36 subprojects is shown in Appendix 10. It should be noted that HPG anticipates commencing work on the 8 core subprojects in about December 2005 (subproject preparatory works – site clearance, construction camps, materials stockpiling) and that if this occurs, the implementation will be from about December 2005 to about May 2011 (6 dry seasons across 7 financial years). The 8 core subprojects will be the initial group of subprojects to start implementation (currently estimated to be about December 2005), subject to approval of the PPTA FSRs, RPs, IEEs and SPIAs (Supplementary Appendix C), and acceptance of the Resettlement Framework and Ethnic Minority Development Plan (Supplementary Appendix B), and the overall Project Initial Environmental Examination and Environmental Management Plan (EMP) in Supplementary Appendix D. The remaining non-core subprojects, if approved, would commence implementation from about August 2006 onwards, and be on phased start up over about four years, with all completed by about June 2011. This would necessitate that any subproject requiring five construction dry seasons must commence no later than August 2006, those requiring four dry seasons no later than August 2007, and three dry seasons no later than August 2008. Despite this approach, which would minimise IDI requirements, PPMO is planning to start most most of these non-core subprojects as soon as possible, which may be from August 2006.

3.5.4. LAND ACQUISITION AND RESETTLEMENT

For the whole Project, one Resettlement Framework (RF) and 8 Resettlement Plans (RP) (for core subprojects) have been prepared, which are presented in Appendix 9 and Supplementary Appendix B and C. The RF and RPs for the 8 core subprojects will be used as models for preparing the RPs for future subprojects (the nominated 28 similar flood protection and control subprojects). Hunan Provincial Government’s PPMO will be responsible for the overall project management, and the city and county LPMOs will be the implementing agencies for their respective city, responsible for executing their cities subproject and implementing the resettlement program. The LPMOs will be responsible to prepare and implement the RPs for their subproject, and they will share this responsibility with other relevant city and county agencies, including the local land management and resettlement offices for asset valuation; consultation; delivery of entitlements; and issuance of land acquisition, demolition and building permits. Field tasks, such as paying compensation, selecting replacement land, and providing livelihood support will rest with the township and village officers. The EA will implement both internal and external monitoring during RP implementation. The internal monitoring effort will be carried out by both the PPMO and LPMOs, whilst external monitoring and evaluation will be assigned to a qualified independent monitoring agency. The PPMO will report to ADB on land acquisition and resettlement in the quarterly progress reports, and external monitoring

SOGREAH – JULY 2005 PAGE 66 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

reports will be submitted to ADB twice a year. Resettlement activities will be implemented on a staged basis, ensuring that necessary resettlement has been completed ahead of the schedule for implementing specific sections (or protection area) of work.

3.5.5. PROCUREMENT - CIVIL WORKS AND EQUIPMENT The Scope of Works for the Hunan Flood Management Project includes civil works, electro-mechanical equipment and metal structures for up to 36 subprojects in flood prone cities. The works22 will involve the construction of up to 556 km of dikes (new and strengthened earth embankments and flood walls, with slope and toe protection), and 401 gravity flow culvert sluices for up to 121 flood prone areas. The works will also include the construction of 87 km of flood diversion channels and 126 pumping stations, with a substantial quantity of electro-mechanical equipment and associated metal structures. There will also be miscellaneous works for many of the subprojects, including the removal and/or reconstruction of weirs and dams, dredging of the waterways, modification of bridges, and the construction or refurbishment of hydrological stations. The dikes works will variously include grouting for poor ground conditions and/or permeable existing construction, and armouring of the dike and river bank slopes. Each subproject will have one or more civil works contracts, but these will be limited in value (generally to the civil works for 1 or perhaps two protection areas each, or in a few cases, part of a protection area) so that the contracts will be suitable for local competitive bidding (LCB). On this basis, the 8 core subprojects would have a total of 13 LCB civil works packages, as indicated in Appendix 11. The breakdown of packages for the proposed non-core subprojects cannot be determined at this time, but based on pro-rata value, there would be about another 30 civil works packages. These civil works packages would generally include construction of the dikes, culverts and pumping stations, with other packages for the more specialist diversion, drainage, dredging and dam works, packaged so that generally all civil works packages would be suitable for local competitive bidding (LCB). The equipment will be procured under supply and install packages – split between the electro-mechanical equipment and the metal fabrication and structures work. These packages for equipment will be consolidated across groups of subprojects, with quantities to be tendered for supply according to a period and location schedule. This will avoid having many small equipment or fabricated metalwork contracts, and the consolidated value would be suitable for international competitive bidding (ICB). At this time, it is foreseen that supply packages might be divided into four or five groups according to the years when the various subprojects construction is scheduled to commence. However, not all subprojects will require the procurement of equipment (pumps, motors, hoists) or metalwork (gates, frames, fittings). Tender documents will be prepared by the nominated design institute, based on the detailed designs for the approved works. Tendering will be managed by an official qualified bidding agency, which will issue invites to potential contractors and suppliers. It is understood that prequalification may be undertaken to determine an eligible shortlist of contractors to be invited to bid for particular packages. The tendering process will follow the guidelines as set down and agreed with ADB. The supply of electro-mechanical equipment and fabricated metalwork will be tendered in packages suitable for international competitive bidding (ICB). Consolidated (multiple subproject groups) contracts for project management equipment, non-structural equipment and vehicles will be procured using international shopping (IS) or local shopping (LS) procedures as may be appropriate under the ADB procurement guidelines. Contract needs for technical assistance, training and capacity building, and resettlement, environmental and ethnic minority management and monitoring will be arranged under local Contract (LC) using domestic consultants and/or specialist monitoring agencies.

22 Following Loan Fact Finding, PPMO agreed to exclude Anhua subproject, and reduce the scope of work for Hengyang City (Yanfeng Circle), Chenzhou (Cut-Off Works) and Zhouzhou City (Qingxiangtian Circle). The data for actual works only reflects the cancellation of Anhua.

SOGREAH – JULY 2005 PAGE 67 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.5.6. CONSULTING SERVICES The need for consultants has been discussed with PPMO. They have stated that they are experienced at implementing the types of subprojects and works included within the subprojects, and that there is limited if any need for international consultants. However, it is foreseen that domestic consultants or agencies would be recruited by the PPMO to assist with specialist monitoring and compliance supervision in relation to environmental, resettlement and social survey/ethnic minority issues. The specific requirements are outlined in financing statements for the PPMO in Appendix 12. Terms of reference will have to be prepared, once all the compliance details for China and ADB are confirmed. Prior to the 3rd and final tripartite meeting for the PPTA, ADB held discussions with PPMO in respect of the need for a modified approach to project management and monitoring to facilitate project implementation, which would include aligning the ADB supervisory and compliance requirements with the domestic systems. Discussions with PPMO confirmed that supplementary technical assistance would be beneficial to help develop an appropriate management system for the project, especially in terms of supporting the linkage between the LPMOs and the PPMO, and for strengthening the reporting and coordination systems between the LPMOs, PPMO and ADB. Work has commenced on the development of relevant systems and monitoring procedures, and this is expected to be completed by loan negotiations. For the particular supervisory and compliance requirements for all subprojects, PPMO will hire domestic specialists or companies to undertake the necessary work, and PPMO with LPMOs.

3.5.7. TRAINING AND STUDY TOURS The PPMO anticipates that it has the necessary resources and management capabilities for itself at the provincial level, and within the LPMOs for each subproject, to manage and implement the proposed project works and associated activities. The PPMO has already commenced some domestic training to prepare the LPMOs for project implementation, and the procedures and readiness will be assessed under a Project Management Systems review to be undertaken under an on-going ADB staff consultancy. The PPMO also anticipates a need for training and study tours, under the capacity building component within the overall project management component. Summary details and preliminary cost estimates are presented in Appendix 12. Specific domestic training will be undertaken for construction management, ADB procurement procedures, financial management, resettlement and environmental management, and the development and application of non-structural measures. International training is proposed for flood management and the integrated use of non- structural measures. It is also foreseen that a number of domestic and international study tours would be planned and implemented in the early years of the project. A training and study tour needs assessment will have to be prepared in the early stages of project implementation. A domestic consultant would be hired for up to 3 months to fully review the needs, quantify the training and study tour packages, and prepare an appropriate implementation schedule that would contribute to effective project implementation without jeopardising on-going activities and programmes, and would ultimately help strengthen managerial and technical capacity at the provincial, and more specifically at the municipal/county levels. A budget of about $ 1.8 million, excluding consultant inputs, has been estimated for the training and study tour activities. The training work would have to be integrated with the overall project management and monitoring framework, and the related systems.

3.5.8. DISBURSEMENT ARRANGEMENTS To make adequate amounts of the loan proceeds available on a timely basis for the Project, the PPMO with Hunan’s PFD will establish, prior to loan effectiveness, an Imprest Account for the Project in US dollars and in a bank that is mutually acceptable to the Hunan Provincial Government and the ADB. The imprest account will be operated and maintained in accordance with ADB’s Loan Disbursement Handbook (January 2001)

SOGREAH – JULY 2005 PAGE 68 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

and the statement of expenditure (SOE) procedures under ADB loans. The initial deposit into the account will not exceed $5 million equivalent. ADB’s SOE procedures may be used for payments from the imprest accounts to reimburse eligible expenditures and liquidate advances in amounts not exceeding $100,000 equivalent per item of expenditure. PFD is already experienced at operating similar accounts for WB and JBIC projects, and already has initial plans in place to set up the Imprest account and financial management, eporting and monitoring systems for the Project. PFD will prepare a financial management manual for issue to all participating local governments.

3.5.9. ADVANCE PROCUREMENT ACTION The proposed implementation schedule (see Appendix 10) assumes that construction work for the 8 core subprojects (see Appendix 5) will commence in about December 2005. This would involve starting construction following completion of the subproject preliminary designs and confirmation of their acceptance. Loan negotiations are currently scheduled for November 2005, with Board approval in December or early January 2006. The project preparation and approval schedule has been discussed during the PPTA, and was tabled at the 3rd tripartite meeting. Details of the schedule were include in the Loan fact Finding MOU. Though there may be a possible need to initiate some procurement ahead of the loan becoming effective, typical Chinese process is for such early works to be financed from the local funds, and contributions from the loan to be drawn later. If this is the case, then direct retroactive financing may not be required, but initial Contracts would need to be in compliance with ADB requirements in order for Contract components to be eligible for financing under the loan at a date post Loan effectiveness. Specific details will require further discussion for conclusion at Project Appraisal. The Government may request approval of advance action for civil works and procurement of equipment up to contract signing. This request is justified due to the priority of strengthening major dikes that have been damaged by regular flooding and protecting urban areas where the current level of flood protection is extremely low. Based on the proposed implementation schedule, the ADB will be requested to approve in principle retroactive financing in an amount of up to $10 million equivalent for expenditures on core subprojects incurred from the time of loan appraisal to the date of loan effectiveness.23 The Government has been advised that ADB’s approval of advance action and retroactive financing does not constitute a commitment to finance the relevant expenditures under the Project or the Project itself.

3.5.10. ACCOUNTING, AUDITING, AND REPORTING Each LPMO will prepare quarterly progress reports indicating the progress made, problems encountered during the period under review, steps taken or proposed to remedy the problems, the proposed program of activities, and the expected progress during the following quarter. The PPMO will ensure a consolidated set of copies are prepared and provided to ADB. In addition to periodic reporting and monitoring, ADB and the Government will jointly review project implementation at least once a year to identify and resolve major issues. Within six months of physical completion of the Project, the PPMO will submit to ADB a completion report that describes strengthening of the flood management system, subproject selection, design and implementation, institutional strengthening and water basin management reform, other Project implementation matters, actual costs incurred in relation to cost estimates, benefits, beneficiary consultations, and other information requested by ADB. The PPMO and each LPMO will maintain separate accounts and records that are adequate to identify the goods and services financed from the proceeds of the loan, the financing resources received, the expenditures incurred for the Project, and the use of local funds. The account will be established and maintained in accordance with sound

23 These actions will be reported in accordance with ADB procedures in ADB Business Opportunities.

SOGREAH – JULY 2005 PAGE 69 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

accounting principles. The annual consolidated project accounts and related financial statements will be audited and translated by auditors acceptable to ADB. The audited reports and related financial statements will be submitted to ADB not later than nine months after the end of the fiscal year to which they relate. The Hunan Provincial Government will be informed of ADB policy on submission of audited accounts, which covers failure in submitting audited accounts and financial statements within the due date. During project implementation, a formal warning will be issued for accounts more than six months overdue and disbursements will be suspended for accounts that are 12 months overdue.

3.5.11. OPERATION AND MAINTENANCE The operation and maintenance (O&M) of each subproject will be managed at three levels. The Dike Management Office (DMO - 3rd level) will be responsible for dike operation and maintenance, including any related gravity culvert sluices and electric pumping stations. The city River Course Management Institute for flood control works (RCMI - 2nd level) oversees and coordinates the routine O&M activities of the DMOs in their area, and provides the overall administrative and financial management for them. The local Water Resources Bureau for each city (WRB - 1st level) provides technical guidance and support to the RCMIs. Together, these organisations will ensure compliance with the Design Specifications for Management of Dike Works (SL171-96), Design Specifications for Management of Sluices, and implement all necessary actions to ensure protection is provided with appropriately operated and maintained infrastructure. The O&M work will involve inspection, operation and maintenance of the main hydraulic structures, roads and other associated works, including the maintenance of any environmental protection and stabilisation measures (e.g. forest belts, grass sodding slope protection), monitoring of any dike movement (settlement, slippage, cracking, heave, seepage or surface erosion). Part of the work will include management of materials and equipment for any emergency response during floods, as well as pre-flood preparation and post flood reparation. During any large scale flood, the RCMI and RMO staff would also be responsible to organise the local residents in the protected areas to assist in preparing materials and equipment in readiness for the flood, and be primed for any emergency response and flood relief if and when needed. This will include being prepared to evacuate should the flood be too large for safe management with the established infrastructure. Identified sources of funds to finance O&M include two main sources: the collection of Flood Control Security Fund (FCSF); and a portion of the collection of Urban Maintenance and Construction Tax (UMCT). These funds will initially be used to finance construction of the flood control projects, as thereafter would remain in place to support the operation and maintenance of the completed works.

3.5.12. GOVERNANCE AND ANTICORRUPTION The Government of China remains vigilant in its approach to stamping out corruption, and there have been many well publicised accounts of action taken against those who been caught undertaking unacceptable project and business practices. There is a “Tendering and Bidding Law” that must be followed for all construction projects funded by the State and all external donors. ADB has assisted China in developing the relevant regulations and anticipates that these will be followed when implementing the project. The PPTA Consultant and the ADB have drawn the attention of HPG and the PPMO to the Guidelines for Procurement, especially in relation to bidders/suppliers/contractors observing the highest ethical standards when participating in ADB financed projects. The probability for sanctions to be applied should fraud arise were stressed, as was the anticorruption provisions in the Guidelines on the Use of Consultants.

3.5.13. PROJECT PERFORMANCE MONITORING AND EVALUATION Hunan PPMO will be responsible for the overall supervision of the Project. Each city/county LPMO where a subproject is located will be responsible to supervise the

SOGREAH – JULY 2005 PAGE 70 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

progress and quality of their subproject as it is implemented, including monitoring and adherence to defined standards and compliance requirements. This will include construction management, resettlement, environmental safeguards, financial management, and compliance with all other laws and regulations. Monitoring will be entrusted to the relevant quality supervision authorities for water resources works, resettlement and environment at the respective cities, and the provincial line agencies will review progress as necessary, in conjunction with PPMO staff. To ensure project quality and adherence to relevant laws and regulations, the implementing agency for each subproject will employ supervisory staff from independent monitoring consultants or firms. They will be responsible to ensure adherence to the annual plan related overall project management and monitoring systems and framework that are still being developed. Each subproject shall follow Supervision and Evaluation, Annual and Interim Reports of ADB-financed Projects, including subproject reports, accountant and auditing. LPMOs will have reports from their appointed supervisory and monitoring consultants, and they will be responsible to consolidate those reports to provide progress data to the PPMO, who will then consolidate reports received from all subprojects and submit a quarterly project progress report to ADB. This report would include recommendations issued to the relevant departments responsible for project implementation activities as and when necessary. PPMO, assisted by PFD, will have overall responsibility to disburse and monitor subproject finances, and in conjunction with the provincial finance bureau, will prepare and submit records to ADB. A Project Development and Monitoring Framework (PDMF) is presented in Appendix 2. It includes a range of indicators that will be used to assess the progress of the project in relation to impacts and outcomes, based on the provision of the defined inputs and completion of stated activities. The PDMF is comprehensive and defines actions to be taken with their expected date of completion. The provincial and local PMOs will provide regular reports to confirm progress and attainment of milestones and outputs, and they will also prepare and maintain records of relevant information for at least five years after subproject/project completion. PPMO will monitor and assess activities and include results in quarterly progress reports to ADB. Requirements for environmental, resettlement and social impacts monitoring and reporting are provided in the respective CIEE, RP and SPIA reports presented in the Supplementary Appendix to this report.

3.5.14. ANNUAL AND MIDTERM REVIEWS The Government and ADB will review project implementation annually, and update their overall plans in accordance with their annual plan based management systems. In preparing annual plans, in accordance with a project management and monitoring system that is now under development, core subprojects, related non-structural measures and flood management, and project management will be given priority ahead of prioritising the implementation of non-core subprojects. Each year, successive annual plans will be updated to take account of actual progress against plan for the previous year. At the end of the third year, both parties will undertake a comprehensive mid-term review of project progress and achievements. This will include a detailed review to assess adherence to and compliance with the resettlement, environmental management, and integrated flood plan development approach embodied in provincial policy for the inclusion of non- structural actions across the river basins. The review will critically assess the attainment of project objectives, and determine whether future plans and the project scope should be revised, particularly in terms of any institutional strengthening and management performance requirements. A primary objective will be to ascertain the likely scope of the overall planned works that can realistically be achieved within the agreed sector loan period, and how much this will impact upon realistaion of the projected benefits. If necessary, appropriate action will be taken to modify the project scope and design, with any associated reallocation of resources.

SOGREAH – JULY 2005 PAGE 71 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.5.15. CAPACITY BUILDING AND HUMAN RESOURCE DEVELOPMENT The Hunan Flood Management Project (HFMP will be the first sector type loan project in the water sector for Hunan Province. A major strength for this type of project is the paradigm shift away from a structural project focus to one of broader water resources management for a region or whole province. In the case of HFMP, the focus is for at least the river basin level, if not the whole province. The important capacity building aspect is to encourage increased coordination for water resources, and specifically flood management, across the whole river basin, in accordance with established laws, regulations, safeguards and current or planned policy initiatives (national, provincial, local). The HFMP can act as a catalyst to ensure all concerned line agencies, at provincial, municipal and county level are fully conversant with the planned direction for flood management interventions, and that all adhere to a coordinated plan and strategy to ensure policy becomes effective. The follow on initiative for a Project Management and Monitoring System (PMMS) and framework for overall project implementation in accordance with China’s Annual Plan based management system will strengthen the integrated approach for flood control and management development and operating activities. PPMO and other line agencies will be actively engaged in defining the management framework and preparing the PMMS. HPG, its PPMO and the respective line agencies – PDRC, PWRD and PFD – will ensure that municipal and county LPMOs and the associated line agencies (see Appendix 8) will understand and follow the defined policy, strategy and regulations to ensure the proposed flood control works and the flood management procedures are consistent with the provincial flood control plans, and that all relevant staff are fully advised, through training and study tours, on the importance and necessity for a consistent and coordinated approach to flood management on a basin level. The PPMO will have overall responsibility to ensure the LPMOs and their respective PIUs are fully advised on a consistent approach to implementing, managing and monitoring the subprojects as they are developed and commissioned, and the participating line agencies will be responsible to ensure their municipal and county equivalents are aware of and are following a coordinated approach to flood management across each river basin. They will ensure that each municipal and county line agency, and their respective assigned units for the subproject implementation and future operations have suitable trained professional staff to undertake all necessary activities for the successful implementation and long term sustainability of the project works. It is anticipated that PPMO will coordinate a detailed training and human resource development plan with the key line agencies at the commencement of the project, and that PPMO will supervise and monitor the training activities.

3.6. ENVIRONMENT AND SOCIAL MEASURES The specific subprojects result in physical changes in the flood protection zones immediately adjacent to the rivers, to borrow areas where material is sourced to construct dikes and provide river bank or dike stabilisation, and to spoil pits where excess waste soil materials are disposed. Additionally, as some parts of the river banks are urbanised, it will be necessary to implement some partial resettlement of people and demolish existing property and infrastructure. In general, resettlement and demolition has been minimised, but in order to attain the broader protection for flood affected areas, some disruption to existing residents, business and farmers is unavoidable. The following section describes the environment and social impact mitigation procedures and activities that will be followed to mitigate any negative impacts.

SOGREAH – JULY 2005 PAGE 72 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3.6.1. ENVIRONMENTAL IMPACTS AND MITIGATIONS

3.6.1.1. ADB Environmental Review Process

For ADB’s environmental assessment purposes, the Hunan Flood Management Project has been classified as category B, and has been deemed “environmentally sensitive” by the ADB Chief Compliance Officer (CCO). In accordance with the environmental requirements of the ADB an environmental review of the Project was undertaken24,25. An Initial Environmental Evaluation (IEE) report, including an Environmental Management Plan (EMP) was prepared for each of the 8 core subprojects. In addition several consolidated or project-wide environmental reports have been prepared, including a Consolidated IEE, a Consolidated Summary Initial Environmental Examination (SIEE) and a Consolidated Environmental Management Plan (EMP). The overall objective of the environmental review process was to:

• describe the relevant environmental assessment requirements of the People’s Republic of China (PRC) and the ADB;

• describe the proposed Project interventions;

• describe the baseline environmental and socioeconomic setting of the Project study area;

• undertake a screening to identify proposed Project interventions that may result in significant environmental impacts;

• predict and assess characteristics and magnitude of impacts for those interventions identified in the screening that may result in negative environmental impacts;

• recommend appropriate mitigation measures to minimize negative potential impacts, and predict and assess residual impacts;

• describe the public consultation process undertaken; and,

• prepare an EMP (consolidated and for each core subproject) that a) presents environmental compliance and ambient monitoring programs, relevant PRC environmental standards and regulations that will be adopted, and environmental reporting requirements; b) facilitates institutional arrangements and defines roles

24 For the purposes of the environmental review the Project Environmental Impact Area (PEIA) is defined as including: a zone approximately 100 m wide measured from the average perpendicular trend of the dikes (new and reinforced, left and right bank as appropriate), commencing 200 meters upstream of the start of dike construction and ending 200 meter downstream of terminus of dike construction; a zone approximately 100 m wide measured from the average perpendicular trend of the routes for drainage collection channels; and a zone approximately 100 m wide measured from the average perpendicular trend of temporary roads. The above zones will encompass the direct impact zones from most of the Project activities, including the creation or upgrading of dikes, the construction of the drainage collection channels, and the construction of drainage and pumping works. In addition, the PEIA is also defined as including: the area within a 100 m radius of the edge of borrow pits; the area within a 100 m radius of the edge of spoil disposal sites; and the areas within a 100 m radius of the edge of the sites where displaced persons will be resettled. However, it is also recognized that some impacts may occur outside of this zone, so this definition is not absolute, and has been adjusted as necessary to encompass any potential impact.

25 In addition, within any particular subproject the Subproject Study Area (SSA) is defined as the flood protection zone. The overall Project Study Area (PSA) is defined as the sum of the SSAs, which has an area of approximately 59.14 km2 for the 8 core subprojects (flood protection zone area is not yet available for the non-core subprojects).

SOGREAH – JULY 2005 PAGE 73 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

and responsibilities for the implementation of the environmental mitigation measures, environmental compliance and ambient monitoring programs, and environmental reporting; c) ensures compliance with the environmental requirements of the People’s Republic of China (PRC) and the Asian Development Bank (ADB); and, d) presents estimated EMP costs. The consolidated and core subproject IEEs have been submitted to the ADB for review and approval. As the Project has been deemed environmentally sensitive the Consolidated IEE must include an EMP with a budget (this is a separate, stand-alone document); the SIEE must be submitted to the Board 120 days prior to the Board consideration; and the SIEE must be posted on the ADB’s website and be made available to locally affected groups and NGOs upon request.

3.6.1.2. PRC Environmental Review Process

The Hunan Environmental Protection Bureau (HEPB) was granted authority by SEPA to review the proposed Project. In July 2005 HEPB officially certified that: according to SEPA Order 14 on EIA categorization, as a sensitive dike construction project an EIA document should be prepared; and according to the Notice on Strengthening the Environmental Management of IFI Projects, promulgated in 1993, projects which have limited negative impacts on the environment should be designated category B. Based on the above the HEPB assigned the Project as category B, and required that a full EIA report be prepared. The HHPDI subcontracted the Environmental Science Institute of Hunan Province (ESIHP) to prepare an EIA Report, supplemented by Site Environmental Assessment Reports (SEARs) prepared by the HHPDI26. A draft of the report was submitted to the HEPB in early July 2005, and approval is expected by the end of July. The EIA findings and recommendations have been incorporated into the SIEE, CIEE, CEMP and subproject IEEs.

3.6.1.3. Environmental Review Findings

The Hunan Flood Management Project will result in both socio-economic and environmental impacts. a. Socio-economic Impacts and Mitigation Measures The overall Project will permanently acquire about 863 ha of land. Approximately 53% of this is farmland, which will affect a total of 9,281 persons (core subprojects only). On average each affected person will lose about 0.05 ha of farmland. The remaining 47% is orchard, housing plots, unutilized urban land, and abandoned waste land. Approximately 604 ha of land will be occupied temporarily during the construction phase, some of which may also be farmland. In addition, approximately 1 million square meters of structures will be demolished, including roughly 694,000 m2 of residential structures and 308,000 m2 of non-residential structures. The demolition will relocate 5,236 households involving 20,778 persons (project-wide), and affect 76 enterprises and 15,224 employees (core subprojects only). A Project Social/Poverty Impact Assessment (SPIA), a Project Resettlement Framework (RF – both in Supplementary Appendix B) and subproject Resettlement Plans (RPs – Supplementary Appendix C) have been prepared in accordance with the standards and requirements of the PRC Land Administration Law (1998) and the associated Hunan

26 Under the Environmental Impact Assessment Law subproject level EIA reports are not required.

SOGREAH – JULY 2005 PAGE 74 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Provincial Implementation Decree (2000), as well as the ADB’s Policy on Involuntary Resettlement. All recommendations for compensation and resettlement presented in the Project SPIA, RPF and subproject RPs should be fully implemented. If done appropriately the relocation will provide an opportunity to improve housing conditions for the affected persons. b. Environmental Impacts and Mitigation Measures Construction of the Project is not anticipated to have any significant terrestrial ecological impacts as the Project Study Area (PSA) typically consists of heavily modified urbanized/rural farmland mosaics, and no sensitive terrestrial resources or rare and endangered flora and fauna have been identified in the core subproject PSA. Dike construction will not affect the hydrology of the Project Rivers. Erosion from construction sites and source rock and soil piles as well as other construction pollution sources may reduce water quality in the subproject Rivers, as will dredging. Dredging will have to be implemented carefully to minimize impacts. Other potential impacts include solid waste and noise pollution issues during construction, especially in the urban areas. Overall however, environmental impacts are localized and temporary, and can be adequately mitigated. Operation of the Project dikes will have no significant negative impacts on the water level in the Project rivers, on the water quality, or on terrestrial or aquatic flora and fauna. The main impacts that require special measures are associated with the construction phase, including: soil erosion and runoff from exposed earthwork sites; the rehabilitation of borrow areas and spoil sites; construction wastewater and domestic wastewater from construction camps; construction solid wastes and domestic waste from construction camps; air pollution from traffic and construction site dust; noise pollution from construction activities and heavy machinery; dredging; on and off-site health and safety; and, public safety. A comprehensive program of mitigation measures, ambient and effluent environmental monitoring and compliance inspections has been designed to address these issues. If the mitigations are appropriately implemented the Project should have minimal negative impacts and should result in overwhelming positive benefits brought about by the flood protection it will provide.

3.6.1.4. Environmental Management Framework

a. Environmental Management Plans A stand-alone Consolidated (project-wise) Environmental Management Plan (EMP) has been prepared, including an overview of the predicted environmental impacts of the proposed Project; an overview of the recommended mitigation measures; an Environmental Assessment Framework (EAF) for the environmental evaluation of the remaining 28 non-core subprojects; and an environmental compliance and ambient monitoring program. In addition the CEMP facilitates institutional arrangements for: the environmental evaluation of the remaining 28 subprojects; the implementation of the recommended environmental mitigation measures; the implementation of the recommended environmental compliance and ambient monitoring programs, including reporting requirements; and, compliance with the environmental requirements of the People’s Republic of China (PRC) and the Asian Development Bank (ADB). EMPs have also been developed for each core subproject, and are incorporated in the subproject IEEs. b. Environmental Monitoring Environmental monitoring will be undertaken to: provide feedback on the extent and severity of the environmental impacts against the predicted impacts; ensure that mitigations are being appropriately implemented; and, assess the overall effectiveness of the project environmental protection measures. Two types of environmental monitoring will be undertaken: compliance and inspection monitoring, and ambient monitoring. Compliance monitoring will be undertaken to ensure that the Contactor is implementing the mitigations measures in compliance with their contractual requirements and with the environmental regulations and standards of the PRC. The mitigation compliance

SOGREAH – JULY 2005 PAGE 75 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

inspections will be carried out by Environmental Supervision Engineers (ESEs) and Construction Supervision Engineer (CSEs) employed by suitably qualified and accredited inspection companies hired by the Local Environmental and Social Division (LESD) of the Local Project Management Office (LPMO). The subproject EMPs present environmental compliance monitoring programs which should be incorporated into legal agreements between the subproject LPMOs and the inspection companies. Ambient monitoring supports compliance monitoring through assessing either the quality or extent of pollutant generation (effluent) or the quality of the receiving environment (air, water, noise). The objective of ambient monitoring is to provide feedback on the extent and severity of the environmental impacts against the predicted impacts; assess the overall effectiveness of the project environmental protection measures; and ensure that relevant environmental standards of the PRC are being maintained. Ambient motoring will be carried out by the subproject EPBs, either through their environmental monitoring centers or through their own environmental monitoring companies. The subproject EMPs present ambient monitoring programs which should incorporated into monitoring agreements between the subproject LPMOs and the EPBs. c. Environmental Roles and Responsibilities The EMPs (consolidated and subproject) present institutional arrangements and responsibilities for the implementation of the measure and activities presented in the IEEs and EMP. They specify the roles and responsibilities of the key stakeholders for environmental management, including the PPMO and its Environmental and Social Division (ESD), Subproject Local Project Management Offices (LPMOs) and their Local Environmental and Social Division (LESDs), the Hunan Provincial Environmental Protection Bureau (HEPB), local EPBs and their environmental monitoring stations, Environmental Supervision Engineer (ESEs), Construction Supervision Engineers (CSEs), the Contractors, and ADB review/supervision missions. The EMPs also present measures for enforcing mitigation implementation and actions to be taken if non-compliance occurs. d. Incorporation of Environmental Management into Constriction Contracts PPMO and ADB have agreed that an Environmental Management Regulation for Project Construction (EMPRC) will provide the legal basis for the overall environmental management of the Project. The EMPRC will be developed by the ESD of PPMO. It will address the common environmental management and mitigation requirements and issues of all subprojects, and should include, but not be limited to a summary of: a) the mitigation measures presented in the CIEE; b) the Project Environmental Management Plan (EMP) presented in the CEMP; c) applicable PRC environmental regulation and standards presented in the CEMP; and, d) requirements for incorporation of environmental considerations into subproject construction tendering documents and contracts. At the Subproject the LESD, under supervision of the ESD, will develop tendering documents and ultimately construction contracts that clearly define the Contractors’ environmental obligations. The Subproject construction contract environmental obligations should include, but not be limited to, the Contractors responsibilities with respect to: a) implementation of the mitigation measures presented in the Subproject IEE; b) participating in the compliance monitoring program (mitigation compliance monitoring, and mitigation construction quality monitoring) presented in the EMP of the Subproject IEE; c) participating in the ambient monitoring program presented in the Subproject IEE; d) reporting responsibilities as presented in the Subproject IEE; e) participating in the environmental enforcement mechanism; f) developing a Construction EMP which describes how the Contractor will meet its environmental obligations; g) development of a Health and Safety Plan (HSP) which describes how the Contractor will meet its Health and Safety obligations; h) providing suitable environmental and Health and Safety training to employees; and, i) other responsibilities as designated by LESD. The construction contract environmental requirements should be part of the Subproject tendering documents and eventually part of the Subproject construction contracts. The construction contracts will be the legal documents for LPMO’s management of environmental issues in the subprojects.

SOGREAH – JULY 2005 PAGE 76 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

e. Environmental Management Budget The total estimated cost for implementation of the Project EMP is $13.35 million (equivalent to CNY 110.388 million). The total estimated cost for EMP implementation for the 8 core subprojects is $3.79 million (equivalent to CNY 31.372 million). The total (preliminary) estimated cost for EMP implementation for the non core subprojects is $9.56 million (equivalent to CNY 79.016 million).

3.7. RESETTLEMENT AND SOCIAL IMPACTS MITIGATION The required construction work will necessitate the disturbance and resettlement of some existing rural and urban residents. The majority of the rural people who lose land and property will be reabsorbed within their village through a process reallocation of available land. Collectively, the village residents will lose only a small proportion of their existing land holding, and this loss will be covered by appropriate compensation measures. The urban residents will however have to be relocated to new areas either close by their current location, or if agreeable, to new development areas within the city. The specific approach to be taken will be dependent upon community discussions, available options, compensation levels, and agreement by the people to be resettled. Resettlement Plans have been prepared and are open for discussion to ensure all affected peoples are comfortable and in agreement with the proposed changes, which would be implemented by the LPMOs and their associated resettlement management offices, in advance of the land being require for construction of the dikes. Detailed resettlement plans (RPs) are presented in Supplementary Appendix C for the 8 core subprojects, and the resettlement framework (RF) is presented in Supplementary Appendix B. A social survey and analysis was undertaken to obtain a social and poverty profile for the 8 core subprojects. This involved the collection and analysis of statistical information, meetings with the provincial and county government agencies in charge of poverty and minority affairs, survey of selected sample households, participatory discussions among gender-separated urban and rural residents, and interviews with representatives from the business and enterprise community. The survey also ascertained the community willingness to adopt the proposed flood protection measures, and their readiness to make necessary social and resettlement adjustments for the works to be implemented. In general, there was a ready acceptance to adopt the protection measures, and collectively give up the necessary land and established buildings in exchange for compensation and resettlement actions. In Hunan substantial progress has been made in reducing poverty during the 1990s, where the incidence of the extremely poor (CNY 627) has been reduced from 13% in 1993 to only 2.5% in 2003. Such a reduction is not uniform throughout the province, as poverty still remains severe in western Hunan. Using the new poverty line of CNY 900 annual income per capita, there are 4.1 million rural poor in Hunan (2003), accounting for 9.3% of the rural population. Most of the poverty is concentrated in the western mountainous areas, which is characterized by poor infrastructure and a concentration of ethnic minorities. Since most of the proposed 36 subprojects are located in mountainous regions, the rural poverty incidence in the project counties is 10.7% higher than the provincial average. Most of this poverty is concentrated in 15 national and provincial poverty counties. In addition, there are 3.07 million ethnic minorities in PA, accounting for 12%. Among them, 49% belong to the Tujia ethnic minority, 18% are Yao, and 15% are Miao. 81% of them are located in 9 minority counties27. Since the proposed flood control works will be placed in the urban areas of the project area, where the assets have the highest value and the cities economic activity is centred, the project beneficiary population (people in the project protected area (PPA)) do not include a large number of the rural poor. According to the analysis of 8 subprojects, the

27 They include 5 official minority counties, 1 county with minority status, and 3 counties with more than 50% of population being ethnic minorities.

SOGREAH – JULY 2005 PAGE 77 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

PPA will cover less than 1% of the total area and less than 10% of the total population in the project counties, including 3% of the rural population and 30% of the urban population. Of the total beneficiaries, 53,900 persons or 9.1% are under the poverty line, including 46,068 urban poor (85%) and 7,840 rural poor (15%). This gives a rural poverty incidence of 5% and an urban poverty incidence rate of 10%. While most of the rural poor are the vulnerable groups or have a serious illness, the urban poor are mainly laid off workers, retirees, landless farmers and vulnerable people. The main approach to poverty reduction in the urban areas is to provide a minimum living allowance so that the average monthly income is at or above the poverty line. The proposed Project, by reducing risks to personal safety, livelihood and assets, will produce social and poverty alleviation benefits for all residents in the flood-prone area.

SOGREAH – JULY 2005 PAGE 78 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

4. PROJECT BENEFITS, IMPACTS, AND RISKS

4.1. BENEFITS

4.1.1. PROJECT JUSTIFICATION Overall, recurrent financial losses and physical damage to the economic activity of major cities – municipal centres or main county towns that are expanding rapidly as the Hunan rural, commercial and industrial economy for each city grows - will increase substantially if flood protection is not provided. The burden on the cities and its people, especially those most directly affected who live in some of the older and poorer areas, will become unsustainable. Therefore, HPG and its respective agencies for river management and civil administration plan to develop protective and flood management measures to reduce the recurrent flood damage, and provide physical and economic security for these major growth centres. Implementation of the project is expected to substantially reduce flood and drainage problems for the concerned cities, and provide both the directly affected residents, businesses and farmers with increased certainty against unexpected flood risk, property damage and personal loss, which is detrimental to improving living conditions, general community health, and leads to continued economic deprivation. For city residents who are less directly affected, they will benefit by virtue of the city having reduced irregular obligations to assist people recover from flood affected areas, which in themselves detract from effective long term development goals for the cities and their peoples.

4.1.1.1. Economic Evaluation

The Project is a part of Hunan’s overall flood control system. After the project is completed, subproject areas will be protected against 1 in 50 (most) to 1 in 100 (parts of Zhuzhou, Hengyang, Xiangtan) year floods for the 9 municipal cities, and against a 1 in 20 year flood for the county cities. This will provide increased security for people’s lives, property and economic activity. At 2004 values, the annualized economic benefit of the eight core subprojects is estimated at CNY 140 million for a baseline investment of CNY 1.08 billion. Assuming the other subprojects have similar returns to the investment, the total annualized economic benefit of the project is estimated at about CNY 550 million (Appendix 13). The economic life of the project structures will be 50 years (excluding the construction period); the replacement period for electromechanical equipment will be 25 years; the economic opportunity cost of capital is taken as 12%; and the calculation base year is the first year of construction. The data in Appendix 13 shows that the economic internal return rate (EIRR) of individual core subprojects ranges between 12.3% and 14.0%. The aggregate economic net present value (ENPV) for them is estimated at CNY 108.1 million. If the remaining subprojects have a similar impact, the ENPV for the aggregate project will be about CNY 422 million. The project will provide demonstrable social benefits and economic benefits.

4.1.1.2. Social Dimensions

Economic and social development in Hunan is heavily influenced by the floods. Aside from direct tangible financial losses, the direct effects of floods include death, injuries, health hazards, community displacement, loss of property and productive assets, and general disruption to education, livelihood, and social life. Relocation of flood victims to congested evacuation camps creates fertile conditions for disease and social tension,

SOGREAH – JULY 2005 PAGE 79 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

while the need to reconstruct houses and buildings puts additional unplanned resource and financial burdens on local communities and their administrative authorities. Children and elders will suffer disproportionately when family and communities are distressed because of floods; and the feeding of livestock and maintaining normal daily economic and social activity is also hindered. The environment, especially water, will be polluted due to the chaos and disruption of water flowing through the developed areas. If there is a significant flood within a city area (especially in a county city), then the local flood control command headquarters could also be inundated, and then the government will be unable to manage the flood fighting effectively. In such a case, the incurred losses for the particular city would most likely be substantially higher than if the flood control command centre can operate unhindered by direct impact from the flood.

4.1.2. IMPROVED FLOOD PROTECTION The whole project will provide protection to 121 flood prone areas. This includes 59.14 km2 of protected area for the 8 core subprojects, which represent about 25% of the total project by value, and about 32% of the city areas. Extrapolated across all proposed 36 subprojects, this would mean about 200 km2 of area would be protected. The cities have a current (2000) total population of 6.4 million, which means about 2 million will benefit directly from the flood protection, and all city residents will indirectly benefit as the recurrent financial burden for flood reparations is eased for the future. Additionally, there will be potential benefits for those areas that will also be serviced with improved drainage evacuation of stormwater, even when river levels are higher than normal. Overall, the city residents will have increased peace of mid, as the flood risk is better managed, and specific flood inundation will become less frequent.

4.1.3. FINANCIAL AND ECONOMIC The development of the subprojects will place a substantial financial burden upon many of the cities. However, infrequent but damaging flooding also places an unwanted burden on the cities and their people, due to unforeseen and often difficult to manage damage and flood losses. Whilst damage and loss continues to occur on an unpredictable basis, this also limits the economic performance and growth of the cities, and continues the perennial fight of mitigating natural hazard and overcoming unnecessary financial loss. The provision of flood protection, though initially a large financial burden on the city and its people, will introduce greater certainty for the life of the city, its people and overall future prosperity. Therefore, if the cities are able to withstand the initial financial burden for implementing the flood protection works, then there is a reasonable expectation that over time, the cities added security and minimization fo flood damage and losses will enable the cities economy to grow. Economic analysis for flood projects is not an exact science, but the work on the 8 core subprojects indicates that there is a reasonable expectation that the planned flood protection and management measures will encourage sustainable economic growth. All eight subprojects have demonstrated that an EIRR of over 12% should be possible as a result of implementing the planned works.

4.1.4. SOCIAL AND POVERTY REDUCTION The Project will produce social benefits for all major stakeholders in the flood-prone area by reducing the risks to personal safety, livelihood, and assets, which include male and female residents, small business persons, industrial managers, and the local government officials in the PPA. A reduction of the flood damage to crops, houses and assets of the rural and urban residents will mean they can make more savings and improve their income in future by being able to invest in their business. Community interviews strongly suggested that the residents hold back on investment in their business activities (e.g. greenhouses, livestock production, building improvements) because they are afraid of the potential for significant loss during floods. Frequent house reconstruction after floods is a major drain on their capacity to accumulate financial resources. Removal of the flood danger from the protected areas will create a safer environment for both urban and rural residents so that

SOGREAH – JULY 2005 PAGE 80 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

they can rest easier during the wet season, and worry less about the safety of their family members and security of their limited physical assets. Unskilled labour participation in the Project construction will directly increase the labourers cash income, which should help them build their savings and alleviate poverty. The poorer residents will benefit because of the improved personal and family security provided by the Project, and mitigation of the floods will assist the local government by reducing unforeseen and unpredictable financial impacts. The safer conditions will lead to increased confidence for public infrastructure investment, and this in turn will encourage further private investment in the flood affected areas of the cities. Overall, the safe and secure environment will encourage business activity and future urban development, which will benefit the local communities, urban and rural residents, the private commercial and business sector, and the Local Government. Improved flood protection will lead to a reduction in the occurrence and frequency of potential damages and interruptions caused by floods, which will enable business and enterprises to increase their profits. When the various companies are able to operate without unexpected disruption, then they will be able to grow and employ more staff. Collectively, the wages to employees will increase, and in turn the Local Government will be able to accrue more tax revenue. For many of the state owned enterprises that have substantial land areas, the improved protection will make them more attractive to outside investment, and this will in turn make jobs more secure and provide a more secure basis for the business to expand and create more jobs. Besides such obvious economic benefit, group discussions among the stakeholders also identified a range of non-economic benefits that would occur because of the Project. These include: (1) a better urban and amenity environment along the river front due to elevated protected areas and improved drainage; (2) improved transport and access for local residents; (3) a safer environment for local residents, particularly for children and the elderly; and (4) an increase in the non-farm employment opportunities by participating in the Project construction, and which would also provide skills training for affected community members. Even for people who reside outside of the PPA, a reduction of the flood impact in the county town will mean less interruption to farm produce market activities, and less interruption to the government programs and services, which are particularly critical for many of the rural and urban poor. The Project will be financed mainly by the local government, using general revenues, the urban construction and maintenance tax, revenue from land lease sales, and the flood protection fee that is collected from business, enterprises and wage earners throughout the project counties.28 The major negative impact for the Project will be land acquisition and resettlement, as some people will have to be relocated when they lose their houses, farmland and business premises for the construction of the Project works. To ensure that the affected people will not be disadvantaged by any loss of land, housing or property, detailed resettlement plans have been prepared for the 8 core subprojects, based on detailed socio-economic impact surveys and consultation with the affected people. Similarly detailed resettlement plans will be prepared for the remaining 28 non-core subprojects in readiness for Project implementation.

4.2. IMPACTS

4.2.1. SOCIAL IMPACTS The provision of flood protection will be a major contribution to social adhesion, as the affected people will soon have security against frequent and uncertain damage and losses due to flood and restricted drainage inundation of varying magnitude, sometimes several times each year. This reduction will enable people to undertake their daily

28 According to information provided by the project counties, the flood protection fund account for less than 1% of the total revenue.

SOGREAH – JULY 2005 PAGE 81 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

activities with more confidence, and invest in their business and homes with more confidence. Though the city and its residents will still have the burden of repaying for the protection measures, including repayment of the loan to ADB, the financial burden will be regular and more manageable, allowing the local government more freedom to plan and implement other city development measures in the interests of all the city residents. This will engender increased confidence and trust between the local government and the city/county communities.

4.2.2. FISCAL IMPACT AND SUSTAINABILITY The proposed measures to be adopted for each city, affecting both rural and urban residents, are quite costly, and both the local costs and loan repayments are to be met by the local city government. Many of the cities can afford the project, especially where it is sure to reduce the future uncertainty of costs for flood damage reparations and compensation. However, there are many of the smaller county cities that may find it difficult to make the necessary local contributions in the near term, though they should have the necessary revenue to meet O&M costs and repay the loan. This initial affordability may be a significant constraint, and alternative financing options may have to be considered if all the proposed works are to be completed. Failing this, many county cities may have to consider rescoping their project works to something that is more easily afforded. Despite this, there is a reasonable expectation that by having the project, the necessary measures will alleviate direct but irregular social, physical and financial impacts for the city, and this should also ease the more uncertain social and economic impacts that arise because of higher incidence of disease and poverty. Therefore, the cities propose to raise the necessary subproject financing funds through normal city revenue streams, plus the addition of some special charges to the city residents for flood fighting and management. The citizens, through the social survey, have indicated a willingness to pay for the flood protection measures. The overall affordability should be monitored as the project develops,

4.2.3. LAND ACQUISITION AND RESETTLEMENT The need to acquire land and necessitate involuntary resettlement has been handled sensitively with prevalent economic and social benefits balanced against any additional costs. By and large, the need to demolish buildings and resettle people has been minimised wherever possible by using floodwalls in preference to earth embankment dikes, thus limiting the total land area to be used. Where resettlement has been unavoidable, then options have been offered for affected peoples to either be resettled within their village, with some partial land adjustment between the village community, or for cash or replacement housing to be provided. In general, the surveyed village and urban residents have indicated their general satisfaction for both having the improved flood protection and a range of agreeable options for resettlement and/or compensation due land and/or housing loss and need for resettlement.

4.2.4. ETHNIC MINORITIES Most of the cities have no significant ethnic minority population. The cities in the west of Hunan have a higher proportion of ethnic minority population, and the social survey undertaken for the 8 core subprojects included Sangzhi, in the Lishui basin, where the ethnic minority was found to be about 60%. This is the second highest of the 36 subproject cities (the highest is Fenghuang, Yuanjiang basin, at 72%). The Sangzhi findings show that ethnic minority groups are not disadvantaged, nor isolated from the main community of the city. It is therefore concluded that ethnic minorities in Hunan will not be adversely affected by the proposed project developments, and that more notably, it is probable they will share in the overall positive impacts that come from the added security and certainty as a result of the flood protection measures.

SOGREAH – JULY 2005 PAGE 82 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

4.2.5. ENVIRONMENTAL IMPACTS The Hunan Flood Management Project will result in both socio-economic and environmental impacts. The most significant socio-economic impacts are primarily related to the construction-phase resettlement. All recommendations for compensation and resettlement presented in the Project SPIA, RF and subproject RPs should be fully implemented. If done appropriately the relocation will provide an opportunity to improve housing conditions for the affected persons. Potential environmental impacts are associated with construction phase solid and liquid wastes, noise and air pollution and dredging. Negative environmental impacts are generally localized, short-term, and can be fully mitigated or minimized. A range of mitigation measures has been recommended to address the environmental issues raised in analysis. The mitigations relate to the rehabilitation of borrow areas, control of soil erosion and runoff from earthworks, prevention of water, air and solid waste pollution, reduction of impacts from dredging, noise reduction, construction health and safety, and public safety. A comprehensive environmental monitoring program has also been developed. The estimated budget for environmental protection and monitoring is CNY 110.388 million (equivalent to 13.348 million USD). With the implementation of the recommended mitigation and monitoring measures the Project is not expected to have any significant negative environmental impacts. Overall the flood protection provided by the Project will significantly enhancing the safety and quality of life of the residents living and working in the flood protection zones. Environmental impacts identified in the CIEE and in the Subroject IEEs confirm the environmental designation for the Project as Category B, in accordance with both China’s and ADB’s environmental policies and guidelines. No significant residual environmental impacts are expected, and all minor impacts predicted during construction and operation can be fully mitigated, in accordance with the EMP.

4.3. RISKS AND MITIGATION MEASURES The following potential risks may arise and therefore may have to be managed effectively to mitigate impacts during project implementation. The Project Development and Monitoring Framework (PDMF) and the Annual Plan based Project Management and Monitoring System (PMMS) now under development will be used to monitor and manage these risks and ensure relevant mitigation and management measures are adopted. Potential risks and suggested measures to mitigate their impacts are foreseen as:

i. Contracts take longer to mobilise than anticipated. PPMO and LPMOs will need to be proactive in preparing tender and contract documentation to ensure they establish contracts and get them implemented as planned. It will be important to know and understand the relevant approval procedures and ensure that all documentation meets the requirements of both the Chinese authorities and ADB.

ii. Work takes longer to implement than expected. Though China and Hunan have much experience in implementing construction contracts, the progress is still constrained by factors such as site access, timely delivery of inputs, acquisition of necessary approvals, and provision of finance. The PPMO and LPMOs will need to monitor project progress and contractor performance, and ensure that all necessary support and timely approvals are given to enable the work to proceed smoothly. Special attention will need to be given to compliance with defined safeguards. The PMMS will be an important means to minimize any potential slippage in the works progress.

iii. Quality issues arise with the constructed works. The general site conditions are not ideal, being tightly confined to narrow strips along the river banks, where the prevailing ground conditions can be highly variable. PPMO and

SOGREAH – JULY 2005 PAGE 83 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

LPMOs will have to be vigilant to ensure that construction quality and standards are maintained, and that contractor’s understand the need to complete the works so they will be durable for the long term. iv. Protection is not as good or as effective as expected. This risk is probably low as generally, Chinese design is good and will fulfill the intended purpose. However, the design standard is only up to a defined magnitude of flood, and therefore should a larger flood occur, the installed works may be unable to maintain the expected protection. It will be important for WRB flood managers to be vigilant, using all flood forecasting facilities at their disposal, including any new facilities installed as part of the project, to generate early warnings to the local residents should a flood in excess of the design standard and protection level be forming. In this way, residents should not be caught unawares if and when an actual flood in excess of the design standard occurs and tests or even breaches the installed protection works. v. Non-Structural measures fail to fulfil expectations. Each city will upgrade existing and/or install new flood monitoring and measurement facilities. These will be linked to flood forecasting and warning systems, coordinated through PWRD for the whole river basin. In the mountainous areas of the river basins, the time available for warning and evacuation is quite short. WRB staff, responsible for river monitoring and management, in conjunction with the local flood control office, will need to be vigilant and able to respond quickly should there be any risk of a flood, as public understanding will be that the installed measures should provide protection against any potential flood. It will be important that LPMOs, WRBs and relevant subordinate flood monitoring and management divisions keep the people properly advised about the installed facilities, and highlight the risks and need for rapid response by all residents in the event that an above design standard flood occurs. The stakeholders need to be aware of the limitations of the installed facilities as well as the positive benefits that come from the substantial investment in flood protection works. vi. Resettlement does not proceed smoothly, and/or some community members are disadvantaged. The Design Institute has prepared good resettlement plans that minimise the need for land acquisition and involuntary resettlement of affected people. However, these plans still have to be advised to the concerned people, and they have to confirm that they agree with the need for some partial sacrifice and relocation for the protection of the broader community. Though the signs are good that there will be little if any objection to any necessary resettlement, there is a possibility that the program may take longer to implement than currently estimated. LPMOs will need to take early action to ensure timely acceptance of the resettlement plans and compensation arrangements by all affected people and the broader project stakeholders. This should be arranged by LPMOs through earliest promotion of the plans through various media channels and at public meetings. Any potential objections need to be addressed and resolved well in advance of the proposed project implementation schedule. vii. Environmental safeguards are not maintained, and adverse impacts are inadequately managed. The IEEs and associated EMPs outline the concerns and proposed mitigation measures to limit any adverse impacts whilst the flood protection works are implemented. The main concerns would be impacts on the river water, and possible contamination of the city water supply, or poor management of the physical site and borrow areas, producing dust, noise and other adverse consequences. The EMPs outline the mitigation measures to be taken. The LPMO’s EO and the local EPB should monitor and manage any environmental impacts, and take appropriate action if necessary to ensure compliance. In any extreme case, such action might involve closing down project site activities until relevant corrective action has been taken. This could potentially impact on the project progress should Contractors fail to comply with the environmental management safeguards.

SOGREAH – JULY 2005 PAGE 84 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

viii. Costs are higher than projected. The cost of the proposed flood protection measures for many of the subproject cities are very high, and this will necessitate some careful financial management by the local government to ensure that the required works and other city activities can be implemented without any severe financial constraint. Therefore, it will be important that actual costs are contained within the planned estimates, in order to ensure all the works can be completed as planned. Should costs be higher than estimated, then some cities may be forced to reduce the scope of works for their proposed subprojects, in line with what the city can realistically afford. ix. Revenue is not sufficient to cover project development and future O&M costs, and other local government commitments limit opportunities to rectify the deficits (i.e overall affordability is tested). For some cities, the subproject will be a major financial burden upon the city finances, even though the alternative also means the city will still be subject to unforeseen and unbudgeted costs. The city may have to make some sacrifice between competing demands for the available city revenue if the flood protection subproject is to be completed as planned. The local government therefore needs to ensure that the subproject can be financed together with all other competing demands for a part of the city revenue.

SOGREAH – JULY 2005 PAGE 85 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 1: FLOOD MANAGEMENT IN HUNAN

1. CURRENT SITUATION

1.1. FLOODS IN HUNAN Hunan province is located in a wet subtropical region, where the climate is largely influenced by monsoon. In winter it is controlled by the Siberian cold air mass and the climate is dry and cold. In summer it is entrenched by the hot and wet low latitude sea air masses, with high temperature and humidity. At the end of spring and the beginning of the summer, it lies in the transition zone of alternating cold and hot air flows where frontal surfaces and cyclone are frequent and result in plum wet weather that is cloudy and moist. In July and August, wet weather occurs due to the influence of strong tropical winds, which results in localized heavy storms. Rainfall within Hunan Province is mostly due to cyclones (April to June), or occasionally from typhoons (July to August). Rain storms form because of the low atmospheric pressure system, such as the south-western low vortex, Jianghuai shear line or low channel, and the static front, cold front, cyclonic wave and typhoon on the ground. In addition, convection currents, due to increased ground temperatures in mid -summer also lead to localized heavy thunder storms. Hunan province lies within a U-shaped geosyncline, with high mountains and sharp canyons in the eastern, southern and western border regions, and the Dongting Lake plain in the north. The convection caused by this topography is one of the main reasons why Hunan has intense rain storms. It is these intense rain storms that lead to the recurrent flood and logging disasters in Hunan Province. Based on statistics, the average rain storm days in Hunan where the rainfall exceeds 50mm per day is 3.3 days / station each year. Rain normally occurs in the period from March to October, with the most intense falls between May and October. The major storms that cover a large area and last for several days normally occur in June and July. Generally, the storms occur initially in the southeast (May to July) and then later in the northwest (June to August). Storm as recorded at a single rainfall station normally last about one day, though storms lasting up to four days have been recorded. Given the nature of the rainfall, the resultant floods from the mountains are generally classified as flash floods, though this term is perhaps incorrect, except where such events occur due to very intense rainfall within a very small part of the catchment. More generally, the mountainous region floods exhibit a characteristic of quite rapid rise and more gradual fall over a period of from 1 to three days, depending on the intensity and area covered by the rainfall. The time for noting the probability of a flood, and the arrival of that flood is usually quite short, which is why the mountainous floods tend to be dangerous and sometimes cause substantive localized damage. The flows from the mountains, especially if coming from more widespread rain across several sub-catchments and/or more than one of the main river basins in Hunan (Xiang, Zi, Yuan, Li) then lead to the more prolonged (up to several weeks) slow rise and even slower decline lake area floods, most noticeably witnessed throughout the Donting Lake area. Mountainous floods occur in the four main river basins within Hunan – the Xiang, Zi, Yuan and Li rivers. Specific floods may be more pronounced in sub-catchments to these rivers, depending on the nature of the rainfall – general widespread rain or localized thunder storms. The runoff in these river systems progresses over a number of days to the Dongting Lake. When there is a major combination of flood runoff from the four main rivers, and

SOGREAH – JULY 2005 PAGE 86 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

particularly if combined with substantive flood discharge in the Yangtze River, then the floods within the province always lead to a large scale flood throughout the Donting Lake area. Because of the natural topography, geology and climate of the mountainous areas, the upland floods normally have the following characteristics: • in the mountainous areas, where the rivers have a steep gradient, the runoff is fast, turbulent and accumulates rapidly because of the, steep and short flow path; • In close proximity to the centre of the rainfall, the runoff water level rises quickly, confirmed by a sharp peak in the runoff hydrograph; • Records at the upstream hydrologic streamflow and water level monitoring stations show a pattern of rapid rise and fairly rapid decrease in the stormwater flow (discharge and levels), confirming a very short time of concentration for the storm runoff; and • the high runoff flow velocities result in severe scour, often with high mud and rock content, which confirms a severe level of erosion as a result of rapidly changing flood discharge in the upper catchments. Floods in the Dongting Lake area occur because of a combination of overflow from the Yangtze River through the three diversion channels (Songci, Taiping and Ouchi), and discharge from the four rivers in Hunan province. Floods in the Dongting Lake have the following significant characteristics: They occur frequently, and are generally of a large-scale, in terms of area inundated and overall water level; As Donting lake acts as an off-stream balancing / detention basin for the Yangtze river, which is a very slow response river system, floods in the Donting Lake tend to last a long time – weeks rather than months; and Because of the long duration, encroachment into the Lakes area by farmers, and the general rising trend in flood levels, each flood causes high levels of damage and economic loss.

1.2. RIVER SYSTEMS IN HUNAN The rivers in Hunan traverse the province within the four major river basins, providing an extensive river system. There are 5,141 rivers that are over 5km long, and the majority are linked to the overall Yangtze river - Dongting Lake system, draining 96.7％ of the province. Only 3.3％ of the province drains to either the system or the system. The river system that drains to Dongting Lake consists primarily of the four main rivers within the province – the Xiang, Zi, Yuan and Li. There are several other medium to small rivers that drain directly to Dongting Lake, including the Miluo and Xinqianghe rivers. Hunan’s major rivers start up in the mountainous provincial border areas in the east, south and west of the province. The Xiang and Zi rivers flow from south to north, the from southwest to northeast, and the Li river from west to east, all discharging into Donting Lake. The Miluo and Xinqianghe rivers both flow from east to west into Donting Lake, and the three diversion channels from the Yangtze river flow from north to south into Dongting Lake. Dongting Lake then attenuates the flow from all these sources before discharging back into the Yangtze River at Chenglingji, near . The effect is a radial river system centered on Dongting Lake. The overall layout of the four main river basins and their linkage to Donting Lake and the Yangtze River is shown in Figure 1 of the Main Report. The detailed Map in the main report illustrates the major catchments. Details of the river network are presented in Table 1-1.

SOGREAH – JULY 2005 PAGE 87 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 1-1: INFORMATION ON THE RIVER SYSTEM OF HUNAN PROVINCE Pearl and River System Xiang Zi Yuan Li Dongting Total Lake Gan Rivers Number of Rivers 2,157 771 1,491 326 432 164 5,341 Number of Rivers longer than 50 km 77 26 55 11 10 6 185 Number of Rivers with Catchment 27 7 13 4 4 2 57 Area greater than 1,000 km2 Length of Main Stream (km) 856 653 1,033 388 Catchment Area (km2) 94,660 28,142 89,163 18,496 15,200 5,868 Average Gradient of Main Stream (‰) 0.134 0.887 0.594 1.02 Total Population (103) 32,155.8 10,530.0 8,995.0 4,147.0 Total farmland (103 mu) 25,394.5 8,137.0 9,279.0 4,615.0 GDP（103 yuan） 21,207.9 3,573.0 4,043.0 1,744.0

Source : PWRD

1.2.1. XIANGJIANG RIVER The Xiangjiang is the largest river in Hunan Province, and the fifth largest tributary of the Yangtze river, originating from Longmenjie of Haiyangping, Lingui County, Guangxi Autonomous Region. It flows into Dong’an County in the south of Hunan, after passing through Xing’an, Quanzhou and Douniuling in Guangxi. The main stream then flows through Yongzhuo, Qiyang, Hengyang, Zhuzhou, Xiangtan and Changsha to join Dongting Lake at the Hao river estuary in . The Xiangjiang basin includes Changsha City, the capital of Hunan Province, and the other main industrial cities of Hengyang, Zhuzhou, Xiangtan, Yongzhuo and Loudi. The basin is one of the major economic regions that lies adjacent to the middle reach of the Yangtze river and is traversed by the Beijing to Guangzhou railway, and is therefore a significant part of the national economy. Within Hunan, it is the most important of the four main river basins.

1.2.2. ZISHUI RIVER The Zishui traverses the central part of Hunan Province, starting on the southeastern slopes of Xuefeng (Snow Peak) Mountain. The catchment, falling from south to north, is relatively narrow (east to west), and typically high in the southwest and low in the northeast, passing through undulating hills in the north. The Zishui is the third largest river in Hunan, and has two main sources – from the west and from the south. In the west, the Nanshui river starts from Huangmajie in the Qingjie Mountains of Chengbu County, and flows through Chengbu, Wugang, Dongkou and Longhui Counties, to the Shuangjiangkou confluence. The Nanshui has a total length of 188 km, and a total catchment area of 7,149 km2. In the south, the Fuyishui river starts from Yuechengling in Ziyuan County, Guangxi Autonomous Region, and flows through Xinning and Shaoyang in Hunan province to the Shuangjiangkou confluence. The Fuyuishui has a total length of 248 km, and a catchment area of 4,554km2. Based on traditional practice, the western Nanshui River is deemed to be the major stream for the Zishui. The two sources combine into the Zishui at Shuangjiangkou in , which then flows through Shaoyang, Xinshao, Xinhua, Anhua and Taojiang counties before discharging into the Dongting Lake at Ganxigang in County. As the Zishui flows through quite mountainous and upland areas, the majority of its tributary rivers are quite short with minor catchments, as dictated by the local topography.

SOGREAH – JULY 2005 PAGE 88 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1.2.3. YUANJIANG RIVER The Yuanjiang is the second largest river in Hunan Province, starting in south-eastern Guizhou Province. It has two sources, the southern Longtou river, which starts in the Yunwu mountains in Duyun County, Guizhou Province, and the northern Chong’anjiang river, which starts in Majiang County, Guizhou Province. The river becomes the Qingshuijiang at the confluence of these two source rivers, and then flows to Luanshan mountain and into Zhijiang County, Hunan Province. From there, it flows east to City, where the Qushui river joins it, and it becomes the Yuanjiang River. The Yuanjiang basin is dominated by high mountains. On the eastern side, the separate it from the Zishui basin; on the western side, it abuts the Fanjing Mountains and the Wujiang River basin; to the south, the Miao Mountains separate it from the Liujiang River; and in the north, it abuts the that separate it from the Lishui River. The Yuanjiang system consists of many substantial tributaries, including the Wushui, Wuushui, Chenshui, Xushui and Youshui Rivers. Finally, the Yuangjiang discharges into Dongting Lake at Deshan, in County.

1.2.4. LISHUI RIVER The Lishui basin lies in the north-west of Hunan province, and north of the Wuling Mountains, which form the boundary between Lishui and Yuanjiang basins. The Chongshan Mountains, which form the border between Hunan Province and Hubei Province, are also the northern boundary of the Lishui basin, adjacent to the Qingshuijiang basin. The Lishui flows east into Dongting Lake. The Lishui basin is narrow on the north-south axis, and long on the west to east axis. The natural topography is mountainous in the northwest and low in the southeast. The Zishui is the smallest river among the four main rivers of Hunan province. The Lishui River has three main sources, though the northern source is the major source that starts from Shamujie in , Hunan Province, and flows through Sangzhi, , Cili and Jinshi. It is joined by the major tributary rivers of Loushui, Dieshui, Daoshui and Chenshui before it flows to Xiaodukou in Jinshi County, where it discharges into Dongting Lake.

1.2.5. DONTING LAKE Dongting Lake is in the north of Hunan Province, to the south side of the Yangtze River as it passes through the Jinjiang Section. The Lake is fed by inflow from the south and west by the four main rivers as described above. During flood periods in the Yangtze, there are three channels that convey diverted water into the Lake from the northwest – the Songzi, Taiping and Ouchi. Donting Lake outflows to the northeast, where it joins the Yangtze River at Chenglingji, . Dongting Lake covers a large plain, with many linked lakes and water channels in both Hunan and Hubei provinces. The Lake area is downstream of the controlling stations that lie at the outfall of the four main rivers (Xiang, Zi, Yuan and Li). The general topography of the Lake area is no higher than 50 m above sea level. Dongting Lake has a total area of 18,780 km2, of which 15,200 km2 lies in Hunan, and 14,641 km2 is now protected by an extensive network of dikes. Dongting Lake is the second largest fresh water lake in China, and it operates as a flood channel lake, with West Dongting Lake, and East Dongting Lake. The natural lake area is 2,625 km2, and the flood channel area is 1,418 km2.

SOGREAH – JULY 2005 PAGE 89 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

1.3. FLOODS IN THE FOUR RIVER BASINS

1.3.1. XIANGJIANG FLOODS Xiangjiang river basin floods are mainly caused by cyclonic rain. The characteristics of the floods in time and space are consistent with the variance of the rainstorms. The period from April to September in each year is the flood season, and the annual maximum flood usually occurs in the period from April to August, while most floods occur in May and June. The reoccurrence probability of the annual maximum flood between Laobutou station (Yongzhou) and Xiangtan Station is 56.5 to 65.2％. The Xiangjiang river has a large catchment area with ample annual rainfall. A typical flood hydrograph in the middle and lower reaches of the main stream generally takes place over about 10 days, although at Xiangtan, a 15 day flood has been recorded. Downstream of Xiangtan, the Xiangjiang flow is influenced by the prevailing water level in Dongting Lake, most notably in the period June to September. When the water level in Dongting Lake is high, then the backwater effect is felt within the lower Xiangjiang reach,especially when the Xiangjiang flow is low. Under flood flows, the backwater effect is less pronounced, though there will always be some backwater effect when the Donting Lake is in flood.

1.3.2. ZISHUI FLOODS Floods in the Zishui basin are caused mainly by rainstorms. There are three rainstorm centers within the catchment area – Anhua, Ziyuan and Longhui-Shuiche. The rainstorm center over Anhua is the most well known one in Hunan, as it forms a large scale rainstorm area centered around Yixi. The two other rainstorm centers are: the upper reaches of the Zishui river close to Ziyuan County, Guangxi Autonomous Region, and the area from Liuduzhai in to Shuiche in Xinhua County. Zishui floods are caused by rainstorms that occur between April and August each year. The overall flood situation varies between the upper and lower reaches. Floods at hydrological stations above Xiaoxi normally occur during the period April to June, whereas floods at hydrological stations downstream of Runxi occur between July and August. Between April and June, there tends to be continuous cloud and rain, and floods often occur simultaneously on both the upper and lower reaches. The flood hydrographs usually have a high peak and large flow, often with two peaks, and long duration. Local rainstorms occur in July and August and these often generate relatively large floods downstream of Zhexi, with a high peak, low flow, steep single peak hydrograph.

1.3.3. YUANSHUI FLOODS Yuanshui floods are all formed by the rainstorms. The main system that causes large rainstorms and flood is the low vortex that moves east along with a shear line at high level between a cold front and a static warm front at ground level. The flood season for Yuanshui basin is from April to August. The annual maximum flood generally occurs between mid-April and August, with most occurring between May and July, which accounts for about 75 to 88％ of all floods. An occasional flood can occur as late as September through to early November, but these are infrequent events. The largest historic floods have generally occurred in June and July, though there are a few large floods that have been recorded in August. However, all of the large floods that have had a high peak and large flow have been recorded in June and July. Among the largest floods recorded in the 20th century, the notable events were in 1931, 1935, 1954 and 1998. As these floods also coincided with major Yangtze River main stem floods, they were extremely significant due to their impact on the lower reaches of the Yuanshui River and the Dongting Lake.

1.3.4. LISHUI FLOODS SOGREAH – JULY 2005 PAGE 90 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The Lishui river is located in the well-known Wufeng (Five Peaks) Significant Rainstorm Area, where the mountains are high and the land relief is steep, which leads to extremely rapid concentration of rainfall runoff into the tributaries and main rivers. A typical hydrograph shows an extremely sharp peak to the flow, with the water levels rising very rapidly and falling suddenly once the peak has passed. For instance, the maximum rate of rise at Liangshuikou Station is 3.58 m/h. Whilst a flood can last from 3 to 5 days, the maximum water level variation at Sanjiangkou Station has been recorded as 25.25 m, which is the biggest range recorded among the four rivers. The Lishui River belongs to the same rainstorm zone as the Three Gorges area on the Yangtze River. The two tributaries to the Lishui on the northern side - the Loushui and Dieshui Rivers, generally contribute almost half of the runoff for the total Lishui catchment area, and this characteristic makes the prediction and management of floods in the Lishui extremely complicated, as flow peak superimposition often occurs. When this occurs with a flood peak in the Yangtze causing river flows into Dongting Lake along Songzi diversion channel, then it often leads to complicated interference between the flows, and higher overall water levels in the Yangtze River and Dongting Lake. It is these conditions that may cause the collapse of dikes and inundation of polders in the lower reaches of the Lishui river and cause unwanted disaster.

1.4. MAIN FEATURES OF HISTORIC FLOODS

1.4.1. 1998 FLOOD In 1998, the Xiangjiang, Zishui, Yuanjiang and Lishui basins, and Dongting Lake area were covered by intensive rain. The storms over the four main rivers in Hunan resulted in eight large flood peaks in the Yangtze River, which created the largest flood in Dongting Lake since 1954. The precipitation in Hunan Province that contributed to the 1998 flood is shown in Table 1-2. River-basin-wide floods occurred from early March on the Xiangjiang which meant that the large scale reservoirs - Shuangpai, Ouyanghai, Shuifumiao – had to open their gates and release water several times. Consequently, water levels on the main stream of the Xiangjiang rose rapidly, and flood peaks 2 to 6 m higher than the corresponding warning levels occurred successively between March 7th and 10th at the hydrological stations between Yongzhou and Changsha. The peak flood level at Changsha station was the highest one for the same period since 1910, when hydrological recording was started. In mid to late June, concentrated rainfall occurred in the Xiang, Zi, and Yuan river basins and Dongting Lake area, and the storms were intense and prolonged. On the 14th of June, a peak flood of 11,500 m3/s was recorded in the Zishui at Taojiang (the second highest discharge on record), and the peak flood of 8,500 m3/s was recorded between Zhexi and Taojiang, which was the highest recorded since records started in 1949. In mid to late July, continuous heavy rain fell in the middle and lower reaches of the Lishui and Yuanjiang which resulted in a rapid rise in the water levels on the Lishui and Yuanjiang. On the 23rd July, the peak flow in the Lishui at Shimen Station was recorded as 19,000 m3/s, 1,400 m3/s more than the highest ever recorded to that time; and on 24th July, the peak flood water level of the Lishui at Jinshi Station was 45.01 m, 1.0 m higher than the previously recorded maximum. Those synchronized with the rainstorm flood in the Lishui basin. The continuous intense rain in the middle and lower reaches of the Yuanjinag resulted in a large scale flood in the lower reaches of the Yuanjiang, which is second only to the flood recorded in 1996. The maximum inflow into the Wuqiangxi reservoir on July 24th was 34,000 m3/s.

SOGREAH – JULY 2005 PAGE 91 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 1-2: PRECIPITATION IN HUNAN PROVINCE - 1998

Period Rainfall Rainfall Rainfall Area Main Precipitation Areas Climatic Center Area (mm) System

Between Mar. 3 to Quanzhou, 154 Xiang Basin Quanzhou, Yongzhou Plum rains Mar. 8 Guangxi, and Yongzhou

Lower Xiang Subtropical high Tributaries of : Liuyang, River and Zi pressure rising June 11 to Whole Hunan Laodao, Wei, Miluo Rivers, and River, between 310 north, warm June 27 Province between Zhexi and Taojiang on the Zhexi and moisture air flow Xiang River. Taojiang from the southwest

Subtropical 346 on Li anticyclone Li river basin, July 20 to Upper Li and You River, withdrawing south, upstream of You Li river basin, upstream of You river the rainfall area July 25 Rivers 283 on You river located on the River upper reaches of the Yangtze River, Liuyang, Laodao, Miluo and Wei Middle and lower rivers; between Zhexi and Taojiang, July 27 to Laodao, Liuyang reaches of Zi and Subtropical 74 to 337 and the Zhexi reservoir area; July 30 and Miluo Rivers Yuan Rivers, lower anticyclone between Wuqiangxi and Taoyuan, rivers of Xiang River and the Wuqiangxi reservoir area

157 on Li August 15 Upper Li and You river, Subtropical to August Li and Yuan Rivers Li, You, and Wuu Rivers Rivers anticyclone 18 169 on You river

Large floods occurred successively on all four rivers in Hunan Province, and as they combined with the flood in the Yangtze River, the maximum flow into Dongting Lake was 63,800 m3/s. This resulted in the 1998 flood exceeding the historically highest water levels previously recorded for the lower Xiangjinag basin, the Lishui basin, and the East Dongting Lake. Five peaks occurred one after the other at Chenglingji from July to August, and four of these peaks exceeded the historically highest water level recorded prior to those events.

1.4.2. OTHER HISTORIC SIGNIFICANT FLOODS Hunan Province is subject to the most frequent flood and drought disasters of the flood affected provinces in China. Historically, many large and severe floods have occurred in Hunan Province. Statistics indicate that within the 20th century, a total of 42 province- wide floods have occurred, of which 18 are classified as large scale province-wide floods. Large scale province-wide floods have occurred in 1906, 1915, 1931, 1935, 1937, 1948, 1954, 1980, 1983, 1988, 1990, 1991, 1993, 1994, 1995, 1996, 1998, and 1999 (18 occasions). The floods in 1954 and 1998 were the most serious province-wide large scale floods to have been recorded in the past 100 years. Data on the main historic floods in Hunan Province are shown in Table 1-3.

SOGREAH – JULY 2005 PAGE 92 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 1-3: DATA OF MAIN HISTORIC FLOODS IN THE 4 MAIN RIVERS OF HUNAN PROVINCE

Catchmen Historic Flood Results River Station t Area Item (km2) 1 2 3 4 5 Year 1924 1994 1906 1968 1926 Xiangjiang Zhuzhou 71,979 Peak Flood 21,200 20,700 20,600 19,900 19,600 Year 1924 1996 1949 1954 1955 Zishui Lengshuijiang 16,236 Peak Flood 11,200 11,000 10,800 8,910 8,360 Year 1996 1848 1931 1926 1995 Yuanjiang Pushi 54,144 Peak Flood 31,200 30,100 26,000 25,300 24,400 Year 1935 1862 1908 1909 1998 Lishui Shimeng 15,053 Peak Flood 30,300 24300 22,200 20,800 19,900

SOGREAH – JULY 2005 PAGE 93 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. GOVERNMENT PLANS, LEGAL AND INSTITUTIONAL FRAMEWORK

2.1. RIVER BASIN PLANS Following relevant national laws, regulations and rules, Hunan Provincial Government has prepared overall river basin water resource management plans and flood control plans for the four main river systems of the province – the Xiang, Zi, Yuan and Li rivers. These plans provide the necessary guidelines for formulating and developing the Hunan Flood Management Project and the specific works for each of the 36 City/County Flood Control subprojects. The relationship and status of the plans is shown in Figure 2 and Table 5 of the Main Report, and the following summarises the general content and intention of each of the plans.

2.1.1. COMPREHENSIVE WATER RESOURCE MANAGEMENT PLANS FOR XIANG, ZI, YUAN AND LI RIVER BASINS Primary development objectives for the Xiang river basin are prioritised as navigation, power generation, flood control and other comprehensive utilization of water resources (irrigation, water supply, industry). The overall plan states that floods on the Xiang main stream will be managed by raising, strengthening and extending dikes, and improving the overall river channel safe discharge capacity. Floods on the tributaries downstream of any large-scale reservoirs will be managed by a combination of effective reservoir operations and improvement of dikes and other infrastructure, whilst floods at locations where there is no effective upstream reservoir facility will be controlled by using improved and/or extended dikes and related infrastructure. Development objectives for the basin, prior to construction of Zhexi reservoir, were power generation, flood control, irrigation, navigation and other comprehensive utilization of water resources. Construction of Zhexi reservoir divided the Zi main stream into two sections that have different natural characteristics and socio-economic conditions. Consequently, the Zi river basin plan (revised in 1995) now has different development objectives for each section. Upstream of Zhexi, where the adjacent land to the river is predominantly hilly farmland, the development objectives are prioritised as irrigation, power generation, flood control, navigation and other comprehensive utilization. Downstream of Zhexi, the development objectives are prioritised as flood control, power generation, navigation, irrigation and other comprehensive utilization. This means that floods upstream of Zhexi reservoir will be controlled by raising, strengthening and building dikes in combination with increasing the safe river channel discharge capacity. Floods downstream of Zhexi will be managed by regulating discharge from Zhexi reservoir and improving the downstream dikes. Floods on the tributary rivers will generally be controlled by building new or improving the existing dikes. Development objectives for the Yuan river basin are prioritised as power generation, flood control, navigation, irrigation and other comprehensive utilization of water resources. Floods on the main stream above Wuqiangxi reservoir will be controlled by raising, strengthening and building dikes to increase the safe river channel discharge capacity. Floods on the main stream of the Yuan river downstream of Wuqiangxi reservoir will be controlled by careful operation of the Wuqiangxi reservoir and the improvement of dikes. On tributaries, floods downstream of any large-scale reservoir will generally be managed through effective operation of the reservoir water levels and dikes for critical locations. If there is no upstream reservoir, then dikes will be used. The reservoir will help to mitigate the magnitude of floods in the downstream reach.

SOGREAH – JULY 2005 PAGE 94 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Development objectives for the Li river basin are prioritised as flood control, irrigation, power generation, navigation and other comprehensive utilization of the water resources. As the river discharge and flood characteristics of the Li river basin are heavily influenced by many discharge and flow management structures, the overall plan for the Li river basin will involve comprehensive flood control and administration measures. This includes the operation of dikes, reservoirs and flood detention basins, for enhanced river channel management and regulation of the river channel discharge capacity. The Jiangya Dam and Reservoir was completed recently for flood control, and the Zaoshi Dam and Reservoir for flood control is now being constructed. Floods in the river basin at city and above will be controlled mainly by raising, strengthening and building new dikes to improve the overall river channel discharge capacity. Floods downstream of Cili will be managed mainly by using the reservoirs and existing dikes. Floods on tributary rivers, where there is no reservoir, will be managed by using existing, improved or new dikes.

2.1.2. RIVER BASIN FLOOD CONTROL PLANS FOR XIANG, ZI, YUAN AND LI RIVERS River basin flood control plan are prepared according to the provisions in the comprehensive water resource management river basin plans, and as specified in relevant laws, regulations, rules, codes and specifications. Guidelines and tasks for flood management are presented in the river basin flood control plan, which aims to optimize the flood control management scheme. It includes specific flood control measures for: reservoirs (development and operations), cities, farmland next to the river, river channel renovation, water and soil conservation, torrential flood management and emergency response measures, and non-structural measures within the river basin. The overriding principle for river basin flood management is to facilitate effective discharge as the main solution, but utilise in and off channel storage capacity to mitigate discharge peaks when necessary. The plan principles are: adopt an holistic river basin approach, taking all factors into account, addressing both root causes as well as symptoms, using near and long term measures appropriate to the local conditions, within a comprehensive flood management administration. Each flood control area has a defined protection standard that must be attained following the implementation of planned works. This may include raising, strengthening and building dikes, constructing flood control reservoirs, improving the flood control potential of existing reservoirs, and integrating the use of these measures with river channel improvements and non-structural water management measures. The relationship of the specific flood control plans for each of the HFMP cities to the overall river basin flood control plans of the Xiang, Zi, Yuan and Li are outlined as follows: • City flood control standard: both the near and long term standard for Changsha City is protection against a 1 in 200 year return flood protection, and for the suburban areas, between I in 50 and 1 in 100 year return flood. The core urban, business and industrial centres of major cities such as Changde, Yiyang, Xiangtan, Zhuzhou and Hengyang, that have jurisdiction over many districts (Prefecture level), will have 1 in 100 year return flood protection for both the near and long term, whilst the suburbs will have 1 in 20 to 1 in 50 year return flood protection for the near term and 1 in 50 year return flood protection for the long term. Flood control standards for seven municipal cities (Shaoyang, Jishou, Loudi, Huaihua, Zhangjiajie, Yongzhou and Chenzhou) which also have jurisdiction over several districts (Prefecture level) will have 1 in 50 year return flood protection in the near term and 1 in 100 year return flood protection for the long term, whilst those for the suburban areas are of 20 year return flood for the near future and 50 year return flood for long term. The flood control standards for other county-level cities are of 20 year return flood for the near future and 50 year return flood for long term.

SOGREAH – JULY 2005 PAGE 95 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 1-4: HUNAN CITIES – FLOOD CONTROL STANDARDS City Type City Centre (1 in return Suburbs (1 in return period) period) Changsha 1 in 200 1 in 50 1 in 100 Major Cities 1 in 100 1 in 20 1 in 50 Municipal Cities 1 in 50 1 in 100 1 in 20 1 in 50 County Cities 1 in 20 1 in 50 Source: Hunan Province Flood Control Plans Major Cities: Changde, Yiyang, Xiangtan, Zhuzhou, Hengyang Municipal Cities: Shaoyang, Jishou, Loudi, Huaihua, Zhangjiajie, Yongzhou, Chenzhou • Objectives of city flood control plan: city flood control protection areas will be constructed/closed and city drainage systems will be improved to minimize periodic damage and losses due to floods and waterlogging. The management capability for city flood control will be strengthened. The functionality of the city flood alarm and warning system, forecasting system and decision support system will be improved and/or established. The river channel flood discharge capacity will be improved, and the city environment adjacent to the river will be also improved (beautified) and protected. • Schemes for City Flood Control Plans: the geological location and topographic conditions in each city influence the form of physical infrastructure solutions for managing floods. The work can include structural measures to improve the river channel (dredging, obstacle removal, widening) and protection measures (dikes; reservoirs; detention basins). Generally, cities in the plains will use dikes as the main protective measure; whilst cities in the mountainous areas will use reservoirs as the main measure provided the general conditions and costs are affordable. Cities downstream of reservoir(s) will use dikes as the main measure; whilst cities in the hilly upland areas will use a combination of reservoirs, detention areas and dikes to provide flood protection. In the current plans, only the flood control functionality of completed and under-construction reservoirs has been considered, For the long term future, the flood control functionality of planned new reservoirs will be taken into account, thus mitigating the required scale of specific city flood control measures to be adopted. In the near term, the flood control plans assume that the cities will include some non-structural measures to assist the cities with their overall flood management. These measures would be an integrated part of the non-structural measures for river basin flood management.

2.2. LEGAL AND REGULATORY FRAMEWORK FOR FLOOD MANAGEMENT

2.2.1. GENERAL River basin management is legitimised in the national laws, legal regulations, State Council rules, regulations, standards and specifications. the local legal regulations and the governmental rules and regulations as well as standards and specifications, and the overall river basin plan and various specific professional plan. Hunan Provincial Water Resources Department is the water administrative authority of Hunan Provincial Government, taking charge of the overall management of the water resources in the whole province, organizing preparation of the overall plan and associated professional plans for main river basins. Up to now, the overall plans for the Xiang, Zi, Yuan, Li Rivers and their key tributaries as well as their professional plans such as the flood control plan, hydropower plan, irrigation plan, water supply plan, water resource plan, soil and water conservation plan etc. Hunan Provincial Communication Department prepared the Navigation Plan/Program for Hunan Province. Preparation of such plans provides the technical basis necessary for river basin management.

SOGREAH – JULY 2005 PAGE 96 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2.2.2. BRIEF INTRODUCTION OF LEGAL SYSTEM

2.2.2.1. National Legal System

The laws and legal system of China for Water Resources Management are divided into three levels: The first level is the national laws developed by the National People’s Congress. The second level is the administrative legal regulations developed by the State Council on the basis of the national laws. The third level is the standards and codes developed by the ministries and commissions under the State Council on the basis of the national laws and legal regulations. The national laws, legal regulations and the standards and codes are the main basis for river basin management.

2.2.2.2. Laws and Legal Regulations on River Basin Management

In China, there is no specific law or legal regulation focusing on river basin management. However, provisions are set out in such main water-related laws as The Water Law of the People’s Republic of China, The Flood Control Law of the People’s Republic of China etc. For example, as specified in the Water Law, the country implements a management system/mechanism combined with the river basin management and the administrative region management. The administrative authority under the Council takes charge of the overall management and supervising or the water resources of the entire country. The river basin management institution, established by the State by the water resources administrative authority under the State Council for each important river/lake determined, takes charge of executing the responsibilities on management and supervision on water resources within its jurisdiction as specified in the laws and the administrative legal regulations and as delegated by the water administrative authority of the State Council. The water resources administrative authority of the local people’s government of the county level and above takes charge of the overall management and supervision of water resources within its jurisdiction, in accordance with the specified authorities. As specified in Flood Control Law, the State follows the principle of combined overall management and hierarchy management on the river channels. The provincial government has not yet established a specific authority for river basin management. River basin management is carried out in accordance with the legal provisions and on the basis of the specified authorities/jurisdiction.

2.2.2.3. Local Legal Regulations, Governmental Specifications and Regulations and Codes/Standards in Hunan Province

Hunan Provincial People’s Congress works out, on the basis of the national laws and with consideration of the realities/actual conditions of Hunan Province, the local legal regulations related to water resource management. The People’s Government of Hunan Province works out the governmental rules and regulations for water resource management in accordance with the administrative legal regulations of the State Council. Hunan Provincial Water Resources Department works out the standards and codes for water resources management on the basis of the provisions in the standards/codes of the water administrative authority of the State Council as well as the laws and the legal regulations. These local legal regulations, governmental specifications and codes/standards are the important criteria for river basin management.

2.2.2.4. Provisions Associated with Project Management/ Administration

Project management is divided into two parts, one is project management during preparatory stage and the other project management during implementation. The project management during preparatory stage mainly covers management of the relevant governmental authority/authorities on the works in the preparatory stage of a construction project in accordance with the national laws, legal regulations, standards and codes. The project management during implementation covers management of the project legal person/the employer on organization and implementation of the project in accordance

SOGREAH – JULY 2005 PAGE 97 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

with the approved construction documents. In china, the preparatory works for a water conservancy and/or hydropower project cover stages such as planning, project proposal, feasibility study, preliminary design, bidding design and construction drawing design. The project implementation period includes the project construction stage, the production preparatory stage and the testing for acceptance on completion and taking over stage. The water administrative authority of the State Council works out a series of policies documents for project management of water related projects on the basis of the relevant laws and legal regulations. Such policies documents play a very important role in further strengthening the trade management in water related projects, helping the project management/administration of the water related projects gradually go into a road of (/a manner of) legislation and standardization/ normalization, assuring completion on schedule, safety, quality and investment benefits.

2.2.2.5. Analysis on Further Improvement of Laws and Legal System for Water

China’s Government pays high attention to legal system building. With regard to water resource management, a series of laws and legal regulations have been established. However, the water law and the water legal system is not so perfect, it still needs to further strengthen the building of policies and legal regulations associated with the Water Law, speeding up formulation, revision, improvement of the corresponding laws and legal regulations, promoting water control and water management on the basis of the legal system.

2.2.3. RELEVANT LAWS AND REGULATIONS

2.2.3.1. National Laws, Legal Regulations and Policy Documents related to Water Resource Management

The national laws associated with river basin management are: i) Water Law of the People’s Republic of China: The first Water Law of China was issued in 1988 and has been instrumental for standardizing water resource development, utilization and protection, controlling water disasters and promoting water conservancy. However, with continuous development and situational change, new problems have arisen and the original Water Law was no longer adequate to deal with prevailing demands. Therefore, a revised Water Law was developed in 2002, which has the following characteristics: • It strengthens unified administration of water resources, considers their macro allocation, and creates a market for water resources allocation; • It defines water as an economic resource, prioritises water resources protection for the greater social good, and improves water use efficiency; • It guides the development, utilization, saving, protection and management of water resources, defines the legal role of the water resource plans for water resource development, and strengthens overall river basin management; • It aims to match demand with supply for sustainable water resource utilization, and through rational allocation, provide the basis to coordinate water consumption for living, production and ecology; and • It fulfils increasing demand for legalised administration of water resources, and strengthens the definitions of legal responsibility. The main contents of the Water Law issued in 2002 are as follows: a. -Water Resources Management: the Water Law defines the administrative system for water resources in China, where the State defines the administrative system for water resources and sets up the river basin administrative authorities under the water administrative department of the State Council. The department is responsible for the

SOGREAH – JULY 2005 PAGE 98 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

centralized administration and supervision of water resources in the country. The river basin authorities, established by the water administrative department for each important river/lake, implements water resource administration and supervision as specified by the laws and regulations, and as authorized by the water administrative department of the State Council. The water resource administrative departments at the local government level or above are responsible to administer and supervise water resources usage within their local jurisdiction. b. Water Resources Plan: the Water Law defines the entity responsible for preparing the plan and the authority responsible to approve the plan. It explicitly states that a plan for the development, utilization, saving and protection of water resources and water disaster management must be prepared on both a river basin and an administrative division basis, and the approved plan must be strictly followed. c. Water Resources Development and Utilization: the Water Law provides guidelines for water resources development and utilization. Project construction must conform with the comprehensive river basin plan, the river basin flood control plan and the river basin land utilization plan. d. Protection of Water Resources, Water Bodies and Water Works: the Water Law gives detail protection requirements for water resources and water bodies, emphasizing that project construction must satisfy the National Flood Control Standard and other relevant technical specifications, and that project construction must protect the integrity of the river channel. e. Water Resource Allocation and Economic Use: to strengthen macro administration of the development and utilization of water resources, rationally allocate and regulate them, reduce water use conflicts, and match social and economic development with the available supply. The Water Law establishes a mechanism for managed supply and demand over the medium and long term. To mitigate current problems, such as a lack of awareness and weak administration for economic water usage within the community, low water tariffs, serious water wasteage, and low rates of recycling, the Water Law stipulates that the State authorities should promote economic water use practices, using new technology and techniques to help develop industries, agriculture and services that helps save and protect water. The People’s Government at all levels should take action to strengthen the administration and regulations for cost effective water usage, and boost education and training in water use technologies. ii) Flood Control Law of the People’s Republic of China: The Flood Control Law was issued in 1997 and was the first law issued for flood control in China. The law was stipulated for the purposes of controlling flood, mitigating flood disasters and maintaining safety for life and properties, to ensure smooth economic development. The main contents of the Flood Control Law are as follows: a. Flood Control Plan: The Flood Control Law explicitly defines the authorities responsible for developing the river basin and regional flood control plans, as well as those responsible to administer and implement the plans. It is emphasized that construction of flood control works on the rivers and lakes must conform with the flood control plans. b. Administration and prevention: the Flood Control Law specifies in details the provisions for administration of the rivers and lakes, and administration and protection of the river channels, emphasizing that project construction must conform with the flood control standards, the river bank alignment plan, navigation requirements and other specific water resource requirements. c. Administration of flood control areas and flood control facilities: the Flood Control Law explicitly defines the flood control area, floodplain, flood retaining and protection areas, stipulating that each level of government must manage the defined zones in accordance with specifications in the flood control plan for land utilization within the flood control area. The State Council and the relevant provincial, autonomous regional, and provincial level

SOGREAH – JULY 2005 PAGE 99 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

municipal governments must establish a supporting, compensatory and salvage/assistance mechanism for the designated flood retaining areas. d. Flood control and flood fighting: The Flood Control Law stipulates that the “first administrative person responsible mechanism” (nominated government authority representative) must implement flood control and disaster fighting measures at all levels. Under this mechanism, flood management commands will be centralized and the responsibility will be taken by the respective department at each level. The State Council has established a National Flood Control Command Center, responsible to lead and organize flood control and disaster fighting for the whole country. River basin flood control command offices are set up for each important river and lake as defined by the State, and these offices are responsible to direct the flood control and disaster fighting within their administrative area. Each government at the county level and above, that is tasked to provide flood control and disaster fighting, will establish a flood control command office to manage floods and disasters in their locality, as directed by the higher level flood control office and their local government. Each government level must determine a local flood control program (including the responsible actions for extremely large floods) in accordance with the comprehensive river basin plan(s), the available flood control works and the applicable flood control standards. If necessary, the local flood control command office at each level can decide, based on the conditions and approval procedures specified in the Flood Control Program, to use flood retaining area(s). e. Guarantee Measures: The Flood Control Law stipulates clearly that each level of government must take action to improve the general level of flood protection and management; must finance the construction and maintenance of city flood control facilities; and must establish a management fund to be used for the construction, operation and maintenance of flood control works and water conservancy facilities. iii) Soil and Water Conservation Law of the People’s Republic of China: To prevent and control water and soil losses, the State Council of China prepared Tentative Guidelines of the People’s Republic of China for Water and Soil Conservation (1957) and Regulations on Water and Soil Conservation (1982), but these were found to be inappropriate for the current needs. Therefore, to protect and rationalise the use of water and soil resources, to minimize water, drought and sand storm disasters, and to improve the ecology and environment, China issued the Law on Water and Soil Conservation (1991).

The main contents of this Law are outlined below: a. Prevention of Water and Soil Loss: A significant characteristic of the Law of Water and Soil Conservation was to establish new guidelines for water and soil conservation, changing the “putting prevention and administration/harnessing at the same important position” (in Regulations for Water and Soil Conservation) into “taking prevention as the major measures”. This means prevention, protection and supervision are now of primary importance. The law stipulates that prevention measures must be taken to secure future long term benefits and sustainable resource management. b. Renovation of Water and Soil Conservation: the Water and Soil Conservation Law provides for different treatment of land where water and soil loss has already occurred. To ensure future responsibility for soil and water conservation, and timely renovation of affected areas, management measures must be incorporated into all future land and project development activities. All construction activities must be implemented in accordance with the provisions given in the law and regulations for water and soil conservation. c. Supervision of Water and Soil Conservation: the law stipulates that the water administrative authority at the county level or above is the supervisory authority for water and soil conservation in their jurisdiction, and that the water administrative authority of the State Council is responsible to establish the framework for the supervision, forecasting and monitoring of trends in water and soil loss.

SOGREAH – JULY 2005 PAGE 100 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

d. Legal Guarantee: the law stipulates detailed penal provisions for units or persons in relation to breach of provisions of the Water and Soil Conservation Law. iv) Water Pollution Control Law of the People’s Republic of China: This law is formulated for the purposes of preventing and controlling the water pollution, protecting and improving environment, safeguarding the health of the human bodies, ensuring the effective utilization of the water resources, promoting the development of construction of the socialism modernization. This law is applicable to the prevention and control of the surface and underground water bodies such as rivers, lakes, channels, canals, reservoirs etc. within the territory of the People’s Republic of China. It is one of the important laws that must be followed for river basin water resource management. v) National Administrative Legal Regulations and Standards/Codes related to River Basin Management These are mainly: Regulations on Management of River Channel of the People’s Republic of China: These regulations are formulated on the basis of Water Law of the People’s Republic of China for the purposes of improving the river channel management, ensuring safety of flood control, realizing the comprehensive benefits of the rivers. These administrative regulations is the main legal regulations for river channel management in river basin management. It gives definite provisions on the management and construction of river channel, river channel protection, and obstacle clearance for river channel, funding for river channel management etc. By-Laws for Implementing Soil and Water Conservation Law of the People’s Republic of China: This is prepared based on Soil and Water Conservation Law of the People’s Republic of China. Temporary Measures for Compensating Utilization of Flood Retention Area By-Laws for Reservoir Dam Safety Management By-Laws for Land Acquisition Compensation and Resettlement for Constructing Large and Medium Scale Water Conservancy and Hydropower Projects Specifications on Management of Construction Projects Within the Jurisdiction of River Channel Management

2.2.3.2. Local Legal Regulations and Governmental Rules and Regulations for Water Resources Management

In order to strengthen the administration of water resources and flood control, Hunan Province has worked out a series of local legal regulations and rules in accordance with the national laws and regulations such as the Water Law, the Flood Control Law, the Water and Soil Conservation Law and the Regulations on River Channel Administration. The main local regulations and rules include: a. Measures for Implementing the Water Law of the People’s Republic of China of Hunan Province: these are prepared as per the Water Law, but with due allowance for the actual conditions prevalent in Hunan province. The outstanding characteristics are: promote water conservation and pollution prevention, adopt sustainable utilization, ensure economic and social development, improve water utilization efficiency, strengthen river channel administration, and emphasize development of the socio-economy and natural resources in harmony with the environment and ecology. The regulations strengthen the macro administration for water resources, define the legal mechanisms (e.g strategic water resources plan, river basin (regional) plan, water resources augmentation, river flow allocation and emergency response program for water allocation during drought, and water saving. The regulations also stipulate the legal standing of the water resources plans, which confirm that the former situation of prevention and control of water pollution is now inconsistent with the need for comprehensive development and utilization of the

SOGREAH – JULY 2005 PAGE 101 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

water resources, and river water quality protection should be established according to the sustainable bearing capacity of those water resources. b. Measures for Implementing the Flood Control Law of the People’s Republic of China in Hunan Province: should be implemented in accordance with the Flood Control Law and the provisions of other relevant laws and regulations, as relevant to the prevailing conditions in Hunan province. The Measures explicitly gives provisions on the flood control plans for rivers, lakes and cities, contents and scope of administration, configuration and tasks of flood control authorities within the jurisdiction of Hunan province. The Measures emphasize that flood control plans for the main streams of the Xiang, Zi, Yuan, Li rivers, the , the Xinqiang river and other important rivers should be verified by the HPG, should include an organization plan for the water administrative authority, and be approved by the provincial government, and be reported to the water administrative authority of the State Council for registration; that the flood control plans for other rivers shall be prepared with organization of water administrative authority of the respective municipal or county government. The Measures give detail provisions on the units for organizing and preparing the flood control plans and approving the flood control plans. The flood control plans for the city where the municipal and prefecture government is located shall be prepared by the water administrative authority, construction administrative authority and other relevant authorities with organization of the municipal and prefecture government, and shall be incorporated in the overall city plan after being approved in the approval procedures as specified by the State Council. The flood control plans for the cities/towns where the county government is located shall be prepared by the water administrative authority, construction administrative authority and other relevant authorities as well as the town government with organization of the county government, and shall be incorporated in the overall city/town plan after being reviewed by the water administrative authority of the respective municipal and prefecture government and approved by the respective municipal and prefecture government. c. Measures for Implementing the Water and Soil Conservation Law of the People’s Republic of China in Hunan Province: The Measures are prepared in accordance with the Water and Soil Conservation Law of the People’s Republic of China, Implementation Regulations for the Water and Soil Conservation Law of the People’s Republic of China, and in combination with the actual conditions of Hunan province. The Measures defines the basic principles for water and soil conservation of Hunan province, stipulates that the water administrative authority of the people’s government at the county level or above shall be responsible for the water and soil conservation within the jurisdiction, and gives provisions on the duties and responsibilities of the water administrative authority on water and soil conservation. It designates the key protective areas for water supply conservation forests and water and soil conservation forests in Hunan province. It gives detail requirements on prevention and control of water and soil loss and provisions on relevant legal responsibilities. d. Measures for Implementing the Regulations on River Channel Administration of the People’s Republic of China in Hunan Province: these are prepared in accordance with the Regulations on River Channel Administration of the People’s Republic of China and the provisions of other relevant laws and regulations, as appropriate for the actual conditions prevalent in Hunan province. The Measures stipulate that Dongting Lake, and the main streams of Xiang, Zi, Yuan and Li rivers, and other important trans-municipality or trans- prefecture (including autonomous prefectures) river sections in Hunan Province, shall be the responsibility of the provincial administrative authority (PWRD) for river channels; and that non transjurisdictional river channels shall be the responsibility of the relevant municipal, autonomous prefecture or county authority. If it is necessary to utilize any dike crest, berm or dike protection to serve as a road, the prevailing standard for dike flood control shall be followed, and provisions for dike administration shall be observed, so as to ensure safety. Industrial and commercial units, farm households, and private industrial and commercial entities that benefit from the dikes, bank protection, irrigation and drainage sluices/culverts, polders and drainage works, shall pay fees for their construction, maintenance and administration to the river channel administrative authority. The measures also provide detail requirements for the renovation and construction of river channels, river channel protection and river channel obstacle clearance. SOGREAH – JULY 2005 PAGE 102 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

The local legal regulations and governmental rules, regulations and standards/codes in Hunan Province for water resources management mainly cover: Hunan Provincial Measures for implementing Water Law of the People’s Republic of China Hunan Provincial Measures for implementing Flood Control Law of the People’s Republic of China Hunan Provincial Measures for implementing Soil and Water Conservation Law of the People’s Republic of China Hunan Provincial Measures for implementing By-Laws for River Channel Management of the People’s Republic of China Hunan Provincial Measures for Hydrological Management Hunan Provincial Measures for Management of Water Intake Permits and Acquisition and Management of Water Resources Fee Hunan Provincial By-laws for Implementation of Acquisition and Management of Flood Control and Safeguard Fund Temporary Measures for Collection of and Management of Using Water Conservancy Construction Fund for Hunan Province. Other local laws and regulations and rules include:

Hydrological Administrative Methods of Hunan Province,

Measures for Water Intake Permits and Water Resources Fees Acquisition and Administration of Hunan Province,

Measures for Acquisition and Administration of Flood Control and Safeguard Fund of Hunan Province, and

Tentative Measures for Raising, Using and Administrating Water Facilities Construction Fund of Hunan Province.

2.2.3.3. Flood Control Management

Every level of government works out the overall river basin plan and the flood control plan on the basis of such national laws and legal regulations as Water Law of the People’s Republic of China, Flood Control Law of the People’s Republic of China, Soil and Water Conservation Law of the People’s Republic of China, Regulations on River Channel Management in the People’s Republic of China etc., implement the management and control and protection for the river basin in accordance with the approved overall river basin plan and the approved flood control plan, and carries out the overall/extensive management on the flood control areas and the flood control facilities, organizes the formulation of the flood control and fighting scenario, directing the flood fighting etc. A system called the first administrative leader responsible system is used for each level of the people’s government for flood control and flood fighting, with unified direction and being responsible in levels and in departments. A flood control commanding institution is set up for each level of people’s government, taking charge of directing the flood control and works for the corresponding area..

2.2.3.4. Environmental Impact Assessment

The environmental impact assessment system currently in force in China only focuses on the construction projects, including the newly-built projects, expansion projects, technical innovation projects and regional development. The environmental impact assessment system currently in operation in China only concerns the construction projects, including the newly-built projects, the expansion projects, the technical innovation projects and the

SOGREAH – JULY 2005 PAGE 103 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

regional development. Environmental Impact Assessment system is the core of the environmental management for construction projects, with the legal criteria as Environmental Impact Assessment Law of the People’s Republic of China. The implementation procedures are specified in Approach of Environmental Protection Management for Construction Projects, and By-laws of Environmental Protection Management for Construction Projects issued by the State Council and Procedures for Environmental Protection Management of Construction Projects issued by the State Environmental Protection Administration. In order to normalize the technical approaches/measures for environmental impact assessment, the State Environmental Protection Administration has issued the line standard, Technical Guidelines for Environmental Impact Assessment, that specifies the detailed procedures, methods and requirements for environmental impact assessment.

2.2.3.5. Monitoring System for Hydrology and Water Environment

At present, China has established a relatively well established monitoring system for hydrology and water environment. The water administrative authority of the State Council is the responsible agency for monitoring the hydrology and water environment of the Country. Hunan Provincial water administrative authority is the responsible entity for monitoring the hydrology and water environment of the province. The hydrological institution in Hunan Province is the Hunan Hydrology Bureau, and the institution for monitoring the water environment is the Hunan Provincial Water Environment Monitoring Center. These two institutions subordinates nine survey branches of hydrology and water resources, five survey teams of hydrology and water resources, manages 124 hydrological stations/gauging stations, 465 contracted rainfall gauges. Hunan Provincial Environmental Protection Administrative Authority has established institution for monitoring polluting sources, which will monitor the effluent and concentrations of the main pollutants of the polluted sewage of the main outlets.

2.2.3.6. Existing Problems In Local Legislation for Water Resources Management

In recent decades, Hunan Province has established substantive local legislation together with a series of local regulations on water resources management. These provide a legal guarantee for strengthening water resources management, ensuring people’s safety, securing their property, and strengthening the economy. However, some problems still exist with the local water resource management legislation. The main problems are that the local legal regulations that correspond to national laws and legal regulations are not complete, and the local legal legislation for river basin management still needs to be developed and issued in accordance with the situation in Hunan Province. These local regulations and rules provide legal basis for raising capital for project construction.

2.3. INSTITUTIONAL FRAMEWORK FOR FLOOD MANAGEMENT

2.3.1. NATIONAL - MINISTRY OF WATER RESOURCES (MWR) At the national level, several ministries and ministerial level organizations are directly or indirectly involved with flood control and management. These organizations include the Ministries of Water Resources (MWR), Construction (MOC), Land and Resources (MLR), Agriculture (MOA), and the State Agencies for Environmental Protection (SEPA) and Forestry (SFA). The Flood Control and Drought Relief Headquarters (FCDRHQ), under the State Planning Commission (SPC), has its routine operations office within MWR. This office has overall responsibility to assess and make recommendations for the FCDRHQ members, who ultimately make the decisions and coordinating resources for major flood and emergency management, when serious floods occur in the major flood prone areas of the national river basins. The Vice Premier is the Director of the FCDRHQ. All of the above mentioned ministries and ministerial level organizations are members of the

SOGREAH – JULY 2005 PAGE 104 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

FCDRHQ. The actual office for FCDRHQ was established to take responsibility for the routine work of the FCDRHQ. This office, operating within MWR, is under the Direction of an MWR Vice Minister. MWR is the most important Ministry with responsibility for flood control and management in China. MWR drafts legislation, supervises the application and enforcement of laws (notably the 1988/2002 Water Law, the 1997 Flood Control Law, and the 1991 Water and Soil Conservation Law), provides unified management of water resource development, and formulates medium to long term policies and plans. Other responsibilities include the organization of water withdrawal permits, implementation of the water fee collection system, construction of soil and water conservation facilities, development of multi- purpose water projects, implementation of structural and non-structural measures for flood and rural water resource management (including irrigation and drainage), and the review of proposals and feasibility studies for large and medium sized water resource development projects. The MWR gives technical guidance and instruction on the professional application and adherence of laws to the Provincial Water Resources Departments (PWRD), who are administratively responsible to Provincial Governments. There are offices for FCDRHQ (P) within the PWRD’s, and there are also sub-offices for FCDRHQ at the municipal (M) and county (C) level cities.

2.3.2. NATIONAL - OFFICE OF STATE FLOOD CONTROL AND DROUGHT RELIEF (SOFCDR) The SOFCDRH is the ultimate authority for flood control and management during the flood period. Its main responsibilities are: • in the non-flood period, flood control and management scheme planning, development and supervision of safety measures (i.e. flood preparedness), preparation and distribution (stockpiling) of materials for emergency flood control actions, and post-flood assessment of any flood damage and supervision of reconstruction; • during the flood season, collection and assessment of hydrologic data, preparation of reports on the flood situation to the FCDRHQ, and coordination of disaster relief operations. • In times of emergency, the SOFCDRHQ reports directly to the Director of the FCDRHQ. In Hunan, relevant level FCDRHQ and OFCDRHQ have been established at the provincial level (P), municipal level (M) and county levels (M), all within the PWRD or it’s local government level equivalent technical and administrative offices. In order to minimise flood risk and associated impact (damage and loss), the SOFCDR has undertaken a major nationwide initiative to upgrade all relevant hydrological data acquisition, communications, flood forecasting and warning systems. At the provincial level, this is handled by the POFCDRHQ, in conjunction with the PWRD Hydrology Bureau. Similarly, the MWRD and CWRD are involved to plan and upgrade the non- structural flood management systems within their administrative area. This includes regular monitoring of rainfall, river water level and discharges, where each monitoring station on the river will have agreed alert, warning and critical levels. As each stage is reached, the local office for flood control and drought relief will be advised, and as the situation moves through warning and critical stages, the advice is issued to the offices at provincial and national level. Advice is also issued by the SOFCDRHQ via government at different levels to all concerned parties responsible for flood emergency response and relief activities, and to the public via various communication channels (radio, TV, newspapers, public address).

2.3.3. BASIN - YANGTZE RIVER WATER RESOURCES COMMISSION (CWRC) The Changjiang (Yangtze River) Water Resources Commission (CWRC) is the Yangtze River basin authority within the Ministry of Water Resources, responsible for the Yangtze River from the west of the Lancang river (including the Lancang river – upper

SOGREAH – JULY 2005 PAGE 105 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

river) to the Yangtze outfall into the China Sea at Shanghai (the River Basin). CWRC executes all management responsibility for the Yangtze River on behalf of the Ministry of Water Resources, including implementation, supervision and inspection of all relevant laws and regulations; preparation and organization of the overall river basin management plan and other professional and special infrastructure facility plans; administration of the River Basin water resources; preparation, organization and implementation of the River Basin flood control scheme; implementation and operation of key and critical water resource management and conservation infrastructure for flood control and drought management as per the legal and regulatory provisions; and has responsibility for the relevant activities of the River Basin Flood Control Headquarters. CWRC organizes and implements prevention, supervision and administration of water and soil loss in the key areas for water and soil conservation and ecological construction in the River Basin. The CWRC is the basin wide flood forecasting and management, implementing all technical data management, processing and forecasting for the Yangtze River Flood Control Headquarters. Consequently, it has a number of hydrological and rainfall stations within Hunan Province which report directly to CWRC during the flood season, as well as reporting to the Hunan Hydrology Bureau. Thus, CWRC and PWRD / HHB have a shared interest and work together for monitoring and forecasting floods for their respective Flood Control Headquarters. Hunan is more specifically concerned with their local situation within the province, but developments within the province are important for the management of floods within the Yangtze main stem, particularly as Donting Lake is an offstream attenuation facility within Hunan, which may be subject t conflicting needs from CWRC (to manage floods in Yangtze) and for Hunan (to pass local floods through to Yangtze for discharge to the sea. The operation of Donting Lake becomes extremely critical to both Hunan and CWRC when there are extensive large floods in both Hunan and other parts of the Yangtze river, and therefore extensive cooperation between CWRC and Hunan is an essential part of effective flood management.

2.3.4. PROVINCE - HUNAN PROVINCIAL WATER RESOURCES DEPARTMENT (PWRD) AND HUNAN HYDRO & POWER DESIGN INSTITUTE (HHPDI) The organizational structure in Hunan Province mirrors the structure of the central government, with a people’s congress, a standing committee, and the provincial government. The people’s congress and standing committee may adopt local regulations, provided these conform with the laws and regulations issued by central government authorities, but any localised regulations must be reported to the Standing Committee of the National People’s Congress. At the provincial level, several bureaux and bureau level organizations are directly or indirectly involved with flood control and management. The leader among them is the Hunan Provincial Water Resources Department (PWRD), which has primary responsibility for all water resources administration in Hunan. Within PWRD, the Hunan Provincial Flood Control and Drought Relief Headquarters (PFCDRHQ) holds the main responsibility to coordinate resources and initiate appropriate actions for key area flood management when a flood emergency develops in Hunan province. A HPG Vice Governor is the Director of the PFCDRHQ, and members come from PWRD, Provincial Land and Resources Department, Provincial Agriculture Department, Provincial Construction Department, Provincial Forestry Department, and the Provincial Environment Protection Bureau. The PFCDRHQ, is responsible to implement routine work at the provincial level, similar to the SFDCDRHQ, and it operates under the guidance and supervision of MWR, the SFCDRHQ, and PWRD. PWRD is responsible to implement the routine work requested by the PFCDRHQ, administer all water resources (rivers, lakes and reservoirs, flood control and drought relief, and water and soil conservation) throughout the province. It also drafts the specific regulations applicable for Hunan, and supervises adherence to the laws (Water Law, Flood Control Law, Water and Soil Conservation Law) through a unified management of water resources. PWRD formulates and develops medium to long term policies and plans, organizes water withdrawal permits and implements the fee collection system, constructs water and soil conservation facilities, organises and manages the development of multi- SOGREAH – JULY 2005 PAGE 106 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

purpose projects, assesses and selects options between structural and non-structural measures for water resource and flood management, plans and oversees rural water development (including irrigation and drainage), and reviews proposals and feasibility studies for large and medium sized water projects. PWRD also provides technical guidance and instruction for the professional operation and implementation of laws and regulations on water and flood management by the Water Resources Departments at municipality and county levels, though these departments are under the administration of the municipal and county local government offices. Hunan Provincial Hydraulic and Hydropower Planning Design Institute (HHPDI) is a subordinate unit to the Hunan Provincial Water Resources Department (PWRD). HHPDI is a National Class A design and research institute with professional staff who understand and have worked on water conservancy and hydropower projects in Hunan Province. HHPDI has a staff of more than 1,600 people, with more than 1,000 technical staff who have advanced training in many varied professions (this includes 11 technically qualified professors (senior engineers), 200 senior technical and engineering staff, and more than 500 technically qualified staff). HHPDI undertakes business across central, south, northwest and southwest China. HHPDI has undertaken engineering survey, design and technical consultant services in 15 countries in Asia, Africa and America, and has carried out technical cooperation and exchange with ten countries, including the USA, Japan andCanada.

2.3.5. MUNICIPAL / COUNTY - LOCAL DEPARTMENTS (MWRD, MHPDI AND CITY AUTHORITIES) At the municipal and county levels, the organizational structure mirrors that at the provincial level, with more localised responsibility for flood management, preparation, emergency response and relief operations. Such activities are coordinated with the provincial level office. The MWRD’s and CWRD’s have similar functions and responsibilities for their administrative area as PWRD has for the overall province, though major structural and basin wide developments would be handled either by the PWRD, or in special cases, by MWR through it’s Yangtze Water Resources Commission (major river regulation and hydropower structures). Hydraulic and hydropower survey and design institutes have been established in each municipality of Hunan Province. They are mainly responsible for technical survey and design of medium to small scale water conservancy projects within their respective municipality, and provide services to the Counties within their municality (e.g. Loudi Design Institute prepared the designs for Xinhua subproject). These design institutes have the capacity to prepare the feasibility studies and detailed designs for flood control works for the cities at the county level or above within their respective municipality.

2.3.6. 3.6. PROJECT - PROJECT MANAGEMENT OFFICE (PPMO) A Project Leading Group (PLG) has been established at the provincial level to oversee the preparation and implementation of the HFMP, and the Vice Governor has been appointed as its Director. Members of the PLG are from the main provincial departments, including Provincial Development and Reforming Commission, Provincial Financial Department and Provincial Water Resource Department. The municipal and county level governments have also established their Project Leading Groups, which mirror the provincial PLG. The Provincial Project Management Office (PPMO) for the “City Flood Control Project in the Mountainous Areas of Hunan Province” has had substantial experience for administering the planning and implementation of foreign funded projects. These include the World Bank financed “Yangtze River Water Resources Project (Jiangya Water Conservancy Sub-project, Tieshan Sub-project, Liuduzhai Subproject)”, the World Bank financed “Yangtze River Dike Strengthening Project (Hunan Component)”, the JBIC financed “City Flood Contorl Project”, and the French Government financed “Automatic Hydrological Measuring and Data Acquisition System for the Xiang River”. Hunan PPMO

SOGREAH – JULY 2005 PAGE 107 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT also has substantial experience for construction projects financed with foreign capital. Hunan Provincial Water Resources Department (PWRD) and Hunan Hydro and Power design Instiutute (HHPDI) have many professional and managerial staff with experience in the design of foreign financed projects. Some of these technical and managerial specialists have participated or assisted in the completion of the HFMP preparation activities, and will be responsible for completing the remaining 28 subproject feasibility study reports, social impact assessments, resettlement plans and environmental impact assessments. Overall, the PPMO has substantial resources at its disposal within the Hunan Government Departments and affiliated Enterprises and Institutions to ensure that the proposed HFMP activities can be completed to the relevant national, provincial and ADB standards within the agreed life of the project.

SOGREAH – JULY 2005 PAGE 108 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 2: PROJECT DEVELOPMENT AND MONITORING FRAMEWORK

Design Performance Data Sources/Reporting Assumptions Targets/Indicators Mechanisms Summary and Risks Impact Assumptions Reduce private and public Reduction in loss of life from Government and provincial Increased flood protection costs of floods and promote floods reports. reduces public costs for flood inclusive economic growth in management and post-disaster

Hunan Province. recovery Reduction in annualized Flood Control office and

damage to public property, cost Municipal and County Targeting flood protection in of repairs to public property, Government budget and actual growth centers of the upper level of compensation for flood expenditures. reaches of river basins losses, and flood management increases investment in

costs. business and property Provincial, municipality and Increased investment in county statistics. protected growth centers Reduction in per capita private increases employment property losses in flood opportunities for urban and protected areas. Government and provincial rural poor documents, statistics and

reports. Risks Increased investment and Developed works are unable to employment in flood protected mitigate floods in excess of areas. City statistics and land sales. design standard. Anticipated outcomes aren’t Increased land values in flood Improved economic activity and realized. protected areas. growth of the city. National / Provincial development climate alters adversely. Overall improvement to investment climate for the city and rural communities as a result of lower flood incidence.

Outcome Assumptions Improved flood protection for Flood protection standard Monitoring and evaluation Improved flood protection strategic and priority flood increased to at least 50 year reports of PWRD. measures minimize inundation prone areas in the upper recurrence in project area of municipal and county growth reaches of the 4 main river municipal cities, and from centers. basins in Hunan Province. below 5 year recurrence to at Annual progress and flood least 20 year recurrence in management reports. The Government's address

project county cities. needed complementary measures by developing and implementing the integrated Project performance monitoring flood management strategy Structural measures are better system. planned and coordinated and plans.

between stakeholders. Interagency coordination is strengthened and the

SOGREAH – JULY 2005 PAGE 109 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Design Performance Data Sources/Reporting Assumptions Targets/Indicators Mechanisms Summary and Risks Project completion report. implementation capacity of the project municipal and county Non-structural measures partly cities is increased offset need for and / or amplify Reduced annual flood the benefits obtained from Risks compensation and reparation physical infrastructure. costs. Project implementation is delayed.

Early warning enables people Increased economic use and Institutional strengthening and and property in vulnerable value generation from flood capacity building does not fulfill areas to be secured against the prone areas. expectations. flood or evacuated from vulnerable flood areas. Economic conditions change adversely and planned works Reduced incidence of cannot be completed. disruption to public services Flood impacts on broader due to floods. community and city economy are reduced. Overall reduction in annualized flood damage as a result of Institutional capacity to earlier warning and timely develop, operate and manage intervention from flood floods is strengthened. managers.

SOGREAH – JULY 2005 PAGE 110 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Design Performance Data Sources/Reporting Assumptions Targets/Indicators Mechanisms Summary and Risks Outputs Assumptions 1. Flood management Improved flood forecasting and Operational system and Project investments in non- measures completed as part of warning systems developed progress reports. structural measures are linked Hunan's Non-structural and implemented. to the existing provincial

Measures Flood Control Plan. forecasting and warning

system.

Enhanced flood emergency

response and recovery Adequate and timely provision of counterpart funds during measures adopted. PWRD, Municipality and project implementation. County reports.

Municipal and County level Civil works planned, contracted agencies have managerial, and implemented as planned administrative and technical 2. Flood protection works and on schedule. Approved plans and designs, staff available to manage, completed in priority locations implementation progress monitor and maintain systems as part of Hunan's River Basin and procedures during and reports, and PWRD project Flood Control Plans and 11th after implementation. progress and monitoring Five Year Plan. reports. Province leads and participates

Provincial PMO capacity in process of strengthening 3. Institutional capacity is strengthened to plan and capacity at the municipal and improved and the provincial implement structural and non- county levels. level strategic plan for structural plan components, Components of Hunan's flood Risks integrated flood management is including adherence to management plan approved enhanced. approved processes for and implemented. Coordination of city resettlement and environmental nonstructural measures with

management. the river basin and/or provincial level is not realised.

Completed works are delayed Local project management or not finished. strengthened for continued planning and implement of Trained personnel do not stay structural and nonstructural with the project or their flood 4. Capacity at local level is plan projects management agency. strengthened for effective Insufficient budget and management of structural and incentives is provided to non-structural flood protection Provincial and local Municipal and county level encourage dedicated measures. government's capacity progress reports, and PWRD managers. strengthened for long term site visit monitoring reports O&M and sustainability of the completed works. Stakeholder surveys and independent monitoring reports. Reduced emergency response and reconstruction costs, and lower annualized losses.

SOGREAH – JULY 2005 PAGE 111 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Design Performance Data Sources/Reporting Assumptions Targets/Indicators Mechanisms Summary and Risks Activities with Milestones Inputs 1. Flood Management ADB 1.1. Improved network of agencies and personnel to plan and ADB project loan of $200 million. direct necessary preparations and responses operational by mid- term review (June 2008). Procurement review and approval. 1.2. New hydrological stations established, and improved Semi-annual monitoring missions. forecasting system and warning procedures operational by mid- term review (June 2008). Government 1.3. All new management equipment reporting reliably in real-time for the 2009 flood season (April). Counterpart financing of $290 million. 1.4. Overall river basin and provincial flood management system Project management offices established and maintained at expanded with reliable communications links to new city flood provincial and local level. management offices. Operations and maintenance budget and staffing.

2. Flood Protection Works Cofinancing 2.1. Engineering designs are completed in readiness for Grant TA assistance from Government of Spain of -- implementation of nominated subprojects and other components to commence as scheduled (overall project implementation plan). 2.2. 862 ha of land acquired, 1 million m2 of buildings demolished, Beneficiaries and about 20,800 affected people resettled in readiness for each Contributions to structural measures through levies and taxes. subprojects construction period (overall project implementation plan). 2.3. Estimated 570 km of flood protection embankments and walls Private sector strengthened and improved; 405 culverts and sluice gates Contributions to structural measures as appropriate. rehabilitated or constructed;126 pump stations rehabilitated or constructed; 87 km of flood diversion or drainage channels constructed; about 4.8 million m3 of dredging completed; about 24 km of jet grouting for embankment strengthening completed, and Others a quantity of miscellaneous specific structures removed or Contractors by building quality cost effective infrastructure suitable strengthened, all by June 2011. for long term operation. Consultants and/or advisors/supervisors by ensuring adherence to 3. Integrated Flood Management Plan Development safeguards and completion of structural and non-structural measures to approved standards. 3.1. Provincial flood management plans reviewed, revised and strengthened by June 2008. 3.2. Project flood protection works and non-structural measures confirmed as completed elements of the plan by June 2011 (early stages of 12th 5 year plan).

SOGREAH – JULY 2005 PAGE 112 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Design Performance Data Sources/Reporting Assumptions Targets/Indicators Mechanisms Summary and Risks 4. Capacity Building in Management 4.1. Improved flood management offices established in up to 36 cities in four river basins by project completion. 4.2. Strengthened river course operation and maintenance units established in up to 36 cities by project completion. 4.3. Overall capacity to plan, design and implement future floodworks (structural and nonstructural) for the 9 municiplaities and up to 27 county cities increased and strengthened through various training activities and practical experience by subproject completion. 4.4. Provincial project management capacity (technical, financial, administration, implementation) strengthened through long term management of HFMP through to completion.

SOGREAH – JULY 2005 PAGE 113 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 3: EXTERNAL ASSISTANCE TO THE SECTOR

External assistance for flood control and, more lately, management of flood management planning, implementation and operation, has been substantial. Many international agencies have supported projects and programs throughout the China, and more specifically in the Yangtze river basin, including Hunan Province, with particular attention for the flood problems in the Dongting Lake Area, and the relationship for flood management as a key flood detention area alongside the Yangzte River. Key projects have included: • The Japan Bank for International Cooperation (JBIC) is currently funding flood control improvements for 23 urban centers within the Dongting Lake Area ($200 million), and along the lower reaches of Hunan’s main rivers that flow into the Lake. • The World Bank is funding a project to strengthen 142 kilometers of dikes along the Yangtze River within Hunan Province, which involves resettling 11,000 families ($27 million) and supporting research into flood control and waterlogging within Dongting Lake to improve early warning of impending floods and facilitate post-flood drainage ($3 million). • The Government of the Netherlands is funding a dredging project in Dongting Lake to improve water flow into and out of the lake for flood control ($25 million, in two tranches). • The Australian Agency for International Development (AusAID) is funding the Yangtze River Flood Control and Management Project ($12 million), which will improve flood forecasting, flood warning, and the operation of flood detention basins along the middle reaches of the Yangtze, including 24 detention basins (up to 300 square kilometers in area) around Dongting Lake. • The Canadian International Development Agency (CIDA) has recently completed a major hydraulic modeling study to improve flood forecasting for the Lake. • The French Government has provided a loan to Hunan’s PWRD to facilitate the procurement and installation of hydrological data acquisition equipment within the middle and upper reaches of the Xiangjiang Basin, as a first stage towards strengthening the Hunan Hydrology Bureau’s capability to monitor, forecast and manage floods. • The World Bank funded the recently completed Jiangya Multi-purpose Project on the Loushui River, a tributary of the Lishui River ($97 million). • The governments of Austria, Canada, and Belgium, together with several private organizations, are funding seven hydropower projects in the mountainous areas of the province ($116 million in total) involving the construction of low dams (25 to 30 m high) that will provide some flood control capacity.

Whilst there has been substantial concentration on dealing with flood control and management for the Yangtze and Donting Lake since the 1998 flood, there has been limited external assistance provided to improve flood protection and management for flood prone areas adjacent to the upper and middle reaches of the mountainous rivers in Hunan. Now that the initial works for Donting Lake and Yangtze are nearing completion, Hunan Provincial Government is looking to mobilise local government resources to address flood management needs in the four major river basins of the province, and will

SOGREAH – JULY 2005 PAGE 114 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT facilitate the acquisition of external assistance to help with implementation of measures included in the 11th 5 year plan. The Hunan Flood Management Project, to be supported by a loan from ADB, is a first step in addressing the flood issues for key cities within the upper and middle reaches of Hunan’s major river basins. The following Table 3-1 provides an indication of ADB’s Technical Assistance support to China within the Agriculture and Natural Resources sector (including water and environment) since 1998. Additionally, ADB is providing Loans to China for the Songhua Flood Control Project, for the Yellow River Flood Management Project, and is currently examining the provision of a loan for the Sanjiang Wetlands Management Project.

SOGREAH – JULY 2005 PAGE 115 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

List of Approved Technical Assistance (TA) projects for the ADB Agriculture and Natural Resources Sector since 1989 (as at 31 December 2004) Amounts in US Dollars Approval TA No. Project Type ADB JSF Others Source Total Date

AGRICULTURE AND NATURAL RESOURCES Fertilizer Production 1138 Fertilizer Sector Study PP 85,000 - - 85,000 14-Mar-89 1714 Fertilizer Sector Review A&O 98,000 - - 98,000 16-Jun-92 1884 Fertilizer Sector Legal and Regulatory Development A&O 183,000 - - 183,000 12-May-93 1885 Assessment of Small-Scale Nitrogen Fertilizer Plants A&O 300,000 - - 300,000 12-May-93 Fisheries 1760 Fishery and Coastal Marine Resources Management and A&O 595,000 - - 595,000 30-Sep-92 Development 1934 North China Marine Culture and Coastal Resources Management PP - 583,800 - 583,800 19-Aug-93 2337 Coastal Environmental Protection and Institutional Assessment A&O 98,500 - - 98,500 29-May-95 2695 Coastal Resources Conservation and Environmental A&O - 810,000 - 810,000 3-Dec-96 2874 Zhejiang Sweetfish Research and Breeding Program A&O 100,000 - - 100,000 24-Sep-97 Forestry 1759 Training in Establishment and Management of Forest Plantations A&O 560,000 - - 560,000 29-Sep-92 1767 Yunnan-Simao Forestry Development and Pulp Mill PP - 395,000 - 395,000 20-Oct-92 2119 Forest Ecosystem Planning and Agro-Industrial Pollution Control A&O - 600,000 - 600,000 2394 Jianfengling Park Management and Biodiversity Conservation A&O - 600,000 - 600,000 7-Sep-95 3998 Sanjiang Plains Wetland Protection PP 600,000 600,000 22-Nov-02 Sanjiang Plains Wetland Protection (supplementary) PP 115,000 115,000 26-Mar-04 4307 Poverty Reduction in Key Forestry Conservation Programs A&O 400,000 400,000 19-Dec-03 4308 Poverty Reduction in Grassland Improvement Program A&O 400,000 400,000 19-Dec-03 Industrial Crops and Agro-Industry 906 Hexian Pulp Mill PP 75,000 - - 75,000 7-Oct-87 1088 Strengthening Government Implementation Capacity in the Pulp A&O - 400,000 - 400,000 20-Dec-88 1504 Tropical Crops Development PP - 420,000 - 420,000 11-Apr-91 1892 Hainan Agriculture and Natural Resources Management PP - 593,000 - 593,000 20-May-93 2120 Corporate Ownership and Management Systems for Yunnan Yun- A&O - 400,000 - 400,000 30-Jun-94 Jing 3172 Bank Participation in Horticultural Exposition, 1999 A&O 18,000 - - 18,000 18-Mar-99 Irrigation and Rural Development 940 Improvement of Irrigation Management and Cost Recovery A&O 320,000 - - 320,000 8-Jan-88 1165 North Hainan Water Resources Development PP - 2,300,000 - 2,300,000 15-Jun-89 1356 Integrated Rural Development of Selected Provinces in A&O 597,000 - - 597,000 17-Aug-90 1506 Multipurpose Water Resources Development PP - 600,000 - 600,000 15-Apr-91 1860 Fujian Soil Conservation and Rural Development PP - 406,000 - 406,000 29-Mar-93 1881 Integrated Rural Development for Minority Areas PP - 550,000 - 550,000 10-May-93 2372 Preliminary Analysis of Water Resources Projects A&O 99,000 - - 99,000 4-Aug-95 2407 Capacity Building for Soil and Water Conservation A&O - 590,000 - 590,000 28-Sep-95 2817 Strategic Options for the Water Sector A&O 1,180,000 - - 1,180,000 26-Jun-97 Strategic Options for the Water Sector (Supplementary) A&O 57,000 - - 57,000 14-Jul-99 3139 Policies and Strategies for Sustainable Development of the Land A&O 660,000 - - 660,000 22-Dec-98 3474 Ningxia-Shapotou Water Resources Development PP - 930,000 - 930,000 31-Jul-00 3708 Strategic Planning Study for the Preparatio of the Yellow River A&O 970,000 970,000 28-Aug-01 Law Livestock 2156 Improvement of Northern Grassland Ecosystems A&O - 746,000 - 746,000 16-Sep-94 Agricultural Support 1425 Institutional Strengthening of Agricultural Bank of China A&O 480,000 - - 480,000 29-Nov-90 1573 Red Soils Development in Hunan Province A&O - 789,000 - 789,000 3-Oct-91 1659 Upgrading of Agricultural Information Services A&O 600,000 - - 600,000 15-Jan-92 1740 Policy Studies and Institutional Strengthening for the Ministry A&O 800,000 - - 800,000 13-Aug-92 1912 Second Agricultural Bank of China PP - 491,000 - 491,000 23-Jul-93 2042 West Henan Agriculture Development PP 600,000 - - 600,000 29-Dec-93 2073 Changjiang Water and Soil Conservation and Environmental A&O - 600,000 - 600,000 24-Mar-94 Protection 2214 Cooperative Banking Development A&O - 600,000 - 600,000 1-Dec-94 2288 Institutional Strengthening of Commercial Finance, Management A&O - 830,000 - 830,000 12-Jan-95 2395 Strengthening of Corporate Management and Marketing and A&O - 455,400 - 455,400 7-Sep-95 2408 Land Use and Land Tenure Policy in Fujian Province A&O 600,000 - - 600,000 28-Sep-95 2539 All China Federation of Supply and Marketing Cooperatives A&O - 580,000 - 580,000 5-Mar-96 2574 Capacity Building of the Hexian Pulp Mill A&O - 600,000 - 600,000 24-May-96 2672 Institutional Strengthening for Marine Culture Lending A&O 250,000 - - 250,000 29-Oct-96 2939 Reform of the Rural Credit Cooperative System A&O - 997,000 - 997,000 15-Dec-97 3026 Strengthening Risk Management of the Agriculture Bank of China A&O - 1,000,000 800,000 France 1,800,000 4-Jun-98 3069 Soil and Water Conservation in the Upper Yangtze River Basin A&O 99,000 - - 99,000 16-Sep-98 3143 International Symposium on Microfinance and Urban A&O 150,000 - - 150,000 23-Dec-98 Unemployment 3259 Yellow River Flood Management Sector PP - 930,000 - 930,000 22-Sep-99 3281 West Henan Agricultural Development PP 150,000 - - 150,000 26-Oct-99 3370 Efficient Utilization of Agricultural Wastes PP 703,000 - - 703,000 26-Dec-99 3372 Yunnan Comprehensive Agricultural Development and PP 350,000 982,000 - 1,332,000 23-Dec-99 3376 Songhua River Flood, Wetland, and Biodiversity Management PP 330,000 1,215,000 - 1,545,000 27-Dec-99 Songhua River Flood, Wetland, and Biodiversity Management PP 250,000 250,000 30-Jul-01 (Suppl.) 3446 Study of Funding Options for Agricultural Research in the PRC A&O 150,000 - - 150,000 25-May-00 3497 Global Environmental Facility Partnership on Land Degradation A&O 100,000 - - 100,000 5-Sep-00 3548 Preparing National Strategies for Soil and Water Conservation A&O 800,000 800,000 20-Nov-00 3551 II PP 650,000 650,000 24-Nov-00 3657 PRC-GEF Partmership on Land Degradation in Dryland A&O 800,000 350,000 1,150,000 25-May-01 Ecosystems 3663 Optimizing Initiatives to Combat Desertification in Gansu A&O 610,000 610,000 5-Jun-01 3851 Dryland Farming Project in the Northern Regoin PP 450,000 450,000 1-Apr-02 4401 Rural Income and Sustainable Development A&O 900,000 900,000 30-Sep-04 Water Resource Management 4324 Hunan Flood Management Project PP 150,000 550,000 700,000 29-Mar-04 Environment 4327 Flood Management Strategy Study A&O 500,000 500,000 14-Apr-04 4358 Technical Assistance to Support Implementation of Capacity A&O 1,000,000 1,000,000 28-Jun-04 Building to Combat Land Degradation Project 4404 Implementation of the National Strategy for Soil and Water A&O 379,000 379,000 7-Oct-04 Conservation 4447 Evaluation of Envionmental Policy and Investment for Water A&O 500,000 500,000 25-Nov-04 Pollution Control in the Basin and the Taihu Lake 4553 Supoort for Environmental Legislation A&O 400,000 400,000 23-Dec-04 72 SOGREAH – JULY 2005Subtotal 42,954,700 PAGE 116 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 4: LESSONS LEARNED

1. OVERALL

The Hunan Flood Management Project (formerly the Hunan Flood Control Project) was originally planned for implementation under a regular project modality. However, the overall project was formulated as being administered at the provincial level, but implemented as 36 individual subprojects, financed at the local government level. Hunan’s Hydro and Power Design Institute, or their affiliates at the Municipal City level, had prepared the initial feasibility study reports for the 36 subprojects. Though generally comprehensive, they were heavily weighted towards the engineering aspects of the subprojects, and quite extensive additional work had to be undertaken to ensure all safeguard issues were adequately covered. To that end, it soon became apparent that the necessary work could not be completed for all 36 subprojects by the relatively small PPTA team. Therefore, at Inception Review, it was agreed that the project would be restructured as a Sector Project, and 8 Core subprojects would be prepared, as models for the preparation of the remaining 28 subprojects. This change of project modality also necessitated a more detailed sector analysis, and more detailed attention to the broader policy and strategy aspects of the sector development plans. Additional TA personnel had to be mobilised for this work, and some additional delay to the overall PPTA program ensued. Thus, though most reports were produced as planned (i.e. to the modified plan following the Inception Review), a delayed review by ADB resulted in a need for further detailed work to be undertaken at a late stage of the original program. Therefore, the PPTA was extended to ensure the additional analysis and detail was completed in readiness for loan fact finding. Overall, this has resulted in a better structured project, with relevant justification and rationale within the 11th 5 year plan for flood management in Hunan.

SOGREAH – JULY 2005 PAGE 117 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. SPECIFIC LESSONS LEARNED

2.1. COORDINATED MANAGEMENT AND MONITORING FOR PROJECT IMPLEMENTATION Though the overall objective for implementing flood management projects is agreed between China and ADB, the specific requirements that have to be fulfilled are not always compatible for efficient preparation of an investment project. During the course of implementing the PPTA, it was realised that it would be preferable for the Chinese and ADB requirements to be rationalised, to eliminate duplication of activities, and to ultimately make future management and monitoring or project implementation more effective. ADB held discussions with national agencies in Beijing, and it was concluded that if a suitably structured project management and monitoring framework could be developed, that relates ADB requirements to the Chinese annual and 5 year plan approach to project development, then this could do much to reduce some of the current constraints for efficient project implementation. The framework would be the basis for developing project specific management and monitoring systems that facilitate both the Chinese and ADB project supervision and safeguards processes, whilst reducing the constraints of preparing for and obtaining approvals for sequential implementation of the project activities. By having relevant frameworks and systems for implementation of resettlement, environment management, social, ethnic and gender impacts, procurement and financial management (the safeguards), as well as a detailed plan for the specific project components implementation, it is foreseen that ADB would in time be able to undertake supervisory field reviews to ensure required compliance, as compared to undertaking timely review and approval procedures in Manila, prior to project activities being implemented. The safeguard for this revised approach to take effect for Hunan and perhaps other sector projects will be that the necessary frameworks are determined and agreed between all stakeholders, and that project implementation and progress will be made in compliance with these frameworks, which satisfy both Chinese and ADB developmental standards and guidelines. A follow on TA activity is now underway to prepare relevant management and monitoring frameworks as a basis to trial this approach with implementation of the Hunan Flood Management Project.

2.2. APPLICATION OF DUE PROCESS China is in the process of institutional reform, with increased delegation of supervisory and approval authority being adopted from the national to the provincial level. Relevant project stakeholders are generally aware of these progressive changes, but their application is still at an early stage. Though the Chinese undertake relevant training as new decrees and policy changes are introduced, it has been apparent during implementation of the HFMP PPTA that overall understanding of the changes, and the implications for all necessary processing – both Chinese and ADB – are still being learnt. Though the ADB processing requirements appear to be quite demanding, and necessitate a lengthy processing period, there are also various steps in the Chinese process which generally require additional time, and which must run in parallel with the ADB procedures. It would be beneficial if all the various steps were fully understood by all involved stakeholders, and that these were stated in the form of timeline and milestones at an early stage of the overall project preparation activities. Some of this is now being done as part of the proposed Management and Monitoring Framework, but further work is needed in order to fully clarify all the specific steps that must be followed for resettlement, environment, land acquisition, financing, procurement and overall organisation in

SOGREAH – JULY 2005 PAGE 118 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

readiness for the key steps of project appraisal, loan negotiations and loan effectiveness, as well as the preparation of all necessary documentation – feasibility study reports, resettlement plans and framework, environmental impact assessment and management plans, social and poverty impact assessments, ethnic minority development plans and framework, overall project feasibility reports and implementation plans (Chinese and ADB), financing plans, RRP and others. Much time might be saved for overall processing if the detailed requirements, sequencing and scheduling of reviews and approvals could be more fully outlined at an early stage of project preparation.

2.3. FINANCIAL AFFORDABILITY The subprojects are to be financed wholly at the local government level, guided and assisted with support from the overall Project Management Office at the provincial level. Although the major cities within Hunan are growing rapidly, with migration into them from the rural areas, in search of work opportunities as new businesses and industry become established in these regional centres, their local revenue for effective city management and development of essential services and infrastructure is still highly variable. To finance the flood protection measures, the cities have introduced additional levies and the beneficiaries have indicated and in many cases demonstrated a willingness to pay. However, when examining the fiscal situation for the implementation of the subprojects, many cities do not have sufficient resources to fully finance the capital investment component (the local contribution). Their annualised revenue is however estimated to be adequate in most cases to meet the loan interest and repayments, and the annual operation and maintenance charges for the works. It will be important if all proposed subprojects are to be successful, and to be completed as planned, for the cities to be able to call on additional capital support from the provincial and/or national governments, should this be required. Under the regular provincial annual plan process, PWRD applies to the central government for some additional financial support for its development programs. Specific allocations are based upon priority for particular measures. Recurrent floods with attendant physical damage and personal losses would mean those projects aimed at mitigating those losses would be afforded highest priority, though competition for limited alternative funding will be high. Some local governments may ultimately find it difficult to finance the locally funded parts of their proposed flood protection projects if additional financial support should be unavailable. This will need to be monitored during project implementation. A key indicator for limitations on financing may be unexpected delays for progress of their subproject implementation.

2.4. ECONOMIC ANALYSIS The Hunan Hydro and Power Design Institute was responsible for the preparation of the initial feasibility study reports. These covered the technical engineering aspects very well, but were less strong in relation to the safeguards issues. More crucially, the economic analysis was extremely weak. Under the PPTA, model procedures have been developed for economic analysis, including increasing the awareness of unquantifiable benefits as an approach to accruing benefits as a basis to justify flood protection works. These procedures were presented in a short training program in conjunction with an explanation of the model procedures to be adopted for developing the economic justification for the non-core subprojects. It was also concluded that provided a minimum level of economic benefits (12%) could be determined, it was not necessary to undertake any additional analysis to produce a higher EIRR. This approach has now been adopted for future subproject analysis.

2.5. ENVIRONMENTAL MANAGEMENT PLANS (EMP) Both the ADB and the Chinese SEPA have established guidelines for determining the environmental category for a project, and development of the environmental management plans. Some confusion over the environmental category arose for the HFMP which was

SOGREAH – JULY 2005 PAGE 119 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

only resolved after the Loan Fact Finding was completed, and which has necessitated some additional work to ensure the adequacy of the detail presented in the EMPs. For the future, it will be important that all concerned parties are fully aware of the necessary requirements for environment management plans, and that the mitigation measures and implementation procedures and responsibilities are clarified and confirmed as early as possible. It will also be important that these plans and measures are founded on a firm basis of site surveys, investigations, overall construction planning and due consultation with concerned stakeholders.

2.6. RESETTLEMENT AND LAND ACQUISITION Resettlement and land acquisition is a fairly protracted process which has to be completed in accordance with safeguard policies and guidelines (Chinese and ADB) before development work can commence upon the construction site. Though detailed resettlement plans have been prepared for the 8 core subprojects, it is apparent that the detailed steps to be followed before access to the construction site can be granted is not always fully understood. Not withstanding other procedures that may influence project startup, it is highly likely that the essential resettlement preparation and approval steps will be the major obstacle to any work commencing on the 8 core subprojects in 2005. The required steps need to be given more detailed attention, and the various responsible stakeholders may need to adopt a more pro-active approach to ensuring all approvals are secured in adequate time for the planned flood measures works to proceed.

2.7. COORDINATION FOR NON-STRUCTURAL MEASURES As per the main civil works component of HFMP, the local governments will be funding non-structural measures (predominantly data acquisition and flood forecasting) for their local area. However, overall flood forecasting for each of the river basins and for the whole province is the responsibility of the Hunan Hydrology Bureau (HHB), under PWRD, on behalf of the Provincial Flood Control and Drought Relief Headquarters (PFCDRHQ). However, HHB, who will need to coordinate the development of the localised city flood data collection and forecasting capability within its overall river basin system, does not have a specific active role in the development of this component. It is recommended that the PPMO should include a representative from HHB, in order to effectively coordinate this non-structural component.

SOGREAH – JULY 2005 PAGE 120 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 5: SUBPROJECT SELECTION CRITERIA

The main flood management objectives for HPG include: • economic activity and social life should not be affected by typical moderate floods; • extraordinary floods should not severely disrupt economic activity and social life; and • the long-term provincial economic development program should still be accomplished. Fulfilling these objectives will require a combination of structural and non-structural measures. The structural measures will improve the flood control standard for county cities to a 1 in 20-year-return flood and municipal cities to a 1 in 50 or a 1 in 100-year- return flood. The structural measures will include some or all of the following: • new and strengthened earth embankments, • flood control walls; • dike slope protection and toe protection; • dike seepage prevention; • riverbank protection; • building or renovating flood diversion channels; • construction of new gravity discharge culvert sluices and electric pumping stations; • dredging to improve river channel capacity; • installation of traffic access gates; • renovation or removal of river weirs, and; • the construction of flow management dams and control gates. To be eligible for financing under the Project, each structural subproject FSR must include a flood risk and situation assessment; a technical analysis and description of the proposed works and objectives, a subproject rationale, scope of works and definition of components, a cost estimate and financing plan; an implementation schedule, and a financial and economic analysis with a social and poverty impact assessment. Based on the feasibility study, structural subprojects will be selected in accordance with the following criteria: (i) the subproject must be a priority investment within the 11th Hunan Flood Control Plan (2006 – 2010), and a logical part of one of the four River Basin Flood Control plans – specifically the Xiangjiang, Zishui, Yuanjiang or Lishui; (ii) the subproject flood risk analysis must be based on PRC standards for hydrological and hydraulic survey and technical analysis procedures for the estimation of flood flows and the residual impact, that occurs with the implementation of structural solutions and designs in accordance with the PRC technical design standards;

SOGREAH – JULY 2005 PAGE 121 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

(iii) the subproject should be a least-cost solution using a combination of appropriate structural and non-structural measures for optimal flood management within prevailing constraints, whilst maximizing protection and reducing flood risk; (iv) the subproject's flood protection measures will have a net positive impact on stakeholders' social welfare, have poverty reducing effects, and can be monitored in accordance with the social and poverty impact assessment; (v) the subproject must be designed to minimize social impacts and ensure that people adversely affected by civil works under the project are compensated in compliance with PRC laws and ADB involuntary resettlement safeguard policies; land acquisition, resettlement processes and compensation procedures follow PRC laws and regulations, due consultation and process is carried out in line with the Resettlement Framework (RF), Resettlement Plans (RP), and any Ethnic Minority Development Framework (EMDF) and Plans (EMDP) agreed with ADB; and local government has submitted written confirmation to the EA and ADB that all households to be moved, and all minority peoples who will be affected by the subproject, are agreeable to the terms and conditions in these documents; (vi) no structural measures other than those listed in paragraph 1 are to be implemented; a subproject IEE/EIA must be prepared in accordance with PRC laws and regulations, ADB's environment guidelines, and the model IEEs developed for the core subprojects; the IEE/EIA must confirm that the subproject will not result in any significant long term negative environmental impacts; the IEE/EIA must include a costed subproject Environmental Management Plan (EMP) and defined mitigation measures in line with PRC laws and ADB environment safeguard policies and be implemented to mitigate identified environmental impacts during construction and operation; mitigation measures will follow PRC laws and regulations, and are incorporated in civil works contracts or as part of local government responsibilities; an environmental management regulation for project construction and supervision is developed; the subproject is designed to minimize detrimental environmental impact as a result of cumulative downstream flood effects from improved structural works; and due consultation and processes in line with the Environmental Management Plan are agreed with ADB; (vii) the IA managing the subproject must have been assessed by the EA to have the necessary staffing and implementation and financial management capacity, including internal audit, or the IA must be able to provide specific assurances to confirm that any shortcomings will be rectified, such as providing sufficient additional qualified staff and/or in-service training in a timely way to ensure adequate capacity to implement the subproject; (viii) the subproject's implementation timeframe is reasonable and surveys and design can be prepared, due review, and safeguard processes and procedures followed, and implemented within the project period (2006 to 2011) (ix) the subproject cost is affordable by the borrowing local government, and the local government provides written commitment to the investment, providing a statement of budgetary resources to meet counterpart funding requirements and schedule for capital expenditures during the construction phase, resettlement costs, environmental management costs, repayment through the term of the loan, and can sustain the project routine operations and maintenance (resources, equipment, materials and finance); (x) local communities and beneficiaries have demonstrated a commitment to the investment through willingness to contribute, in cash or kind, to the cost of development as appropriate; and

SOGREAH – JULY 2005 PAGE 122 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

(xi) the subproject economic rate of return is shown to exceed 12% in line with PRC requirements for subproject EIRR calculation, and in accordance with calculations following ADB's Guidelines of Economic Analysis of Projects. The following specific considerations were followed for identifying and selecting the core priority subproject’s to be used as model subprojects for the subsequent preparation and development of non-core subprojects through the project. 1. Primary Considerations There are up to 36 subprojects, involving mostly the construction or strengthening of various earth embankments (dikes), flood walls, diversion channels, gravity drainage culverts with sluice gates, electrically powered small head drainage pump stations, embankment armouring (rock, concrete slab and or grass sodding), and other miscellaneous works, including upgrading of weirs, dams and tunnels (Chenxi). All have a range of associated non structural measures, based on need and position within the river basin. Initially, four subprojects were identified as the primary subprojects. These are Yongzhou, Loudi and Leiyang in the Xiangjiang river basin, and Wugang in the Zishui river basin. Following the inception tripartite meeting, it was agreed that a total of eight subprojects would now be defined as ‘Core’ subprojects, on the basis that they would represent the broad range of characteristics and conditions to be found across the 36 proposed subprojects. Table 5-1 shows the “8 Core Subprojects selected for Hunan Flood Management Project PPTA 4324-PRC”, and provides summary details for each of these subprojects. 2. Selection Criteria The subproject selection criteria was based broadly on the following: 1. Representation of each of the 4 river basins, proportionately by size of the basin, which results in 3 for Xiangjiang, 2 for Zishui, 2 for Yuanshui, and 1 for Lishui; 2. Representation of both Municipal and County cities (there are 9 municipal and 27 county cities within the 36 proposed subprojects, so an approximate 1 to 3 split would be appropriate); 3. Representation of the varying value of the proposed subproject development work – highest, lowest and median subproject values); 4. Representation of both Provincial and Municipal Design Institute designs and implementation plans, via the prepared feasibility studies; 5. Representation of the overall scale of affected population for the selected cities – highest, lowest and approximate median levels between these extremes; 6. Scale of the city area and relative area in each city to be protected; 7. Overall impacts of the proposed works, especially in terms of land acquisition and resettlement; 8. Typical impacts on the existing environment due to proposed construction works and likely longer term changes that would arise because of the permanent works; 9. Proportion of those people who would be directly affected by the subproject who are currently below the poverty line; and 10. Proportion of the affected people who are members of ethnic minorities. 11. Financial capacity – ability to manage and repay the loan. 3. Subproject Selection Based on these considerations, selection was made as follows: • Xiangjiang basin is represented by Yongzhou, Loudi and Leiyang (3) subprojects; • Zishui basin is represented by Wugang and Xinhua (2) subprojects;

SOGREAH – JULY 2005 PAGE 123 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

• Yuanshui basin is represented by Huaihua and Chenxi (2) subprojects; and • Lishui basin is represented by Sangzhi (1) subproject. Of these eight subprojects:- • 3 are Municipal cities (Yongzhou, Loudi and Huaihua) and 5 are County cities (Leiyang, Wugang, Xinhua, Chenxi and Sangzhi); • 1 (Loudi) has an investment of more than CNY 300 million, 1 (Yongzhou) is between CNY 200 and 300 million, 2 (Huaihua and Xinhua) are between CNY 100 and 200 million, and 4 (Wugang, Leiyang, Chenxi and Sangzhi) are below CNY 100 million of investment (excluding finance charges). • In terms of the specific works, all have earth dikes, gravity culverts and slope protection works, most have pumping stations and concrete flood walls, 5 have diversion channels, 4 have dredging works, and Chenxi has a dam construction and diversion tunnel; • The current population for each city varies between 42,500 (Sangzhi) to 333,800 (Huaihua), with 2 below 100,000, 2 between 100,000 and 200,000, 2 between 200,000 and 300,000, and 2 over 300,000;

• The overall urban area ranges from as little as 6 km2 (Sangzhi) to 36.0 km2 (Loudi); • The number of people that have to be resettled ranges from as few as 26 (Chenxi) to 1,121 (Yongzhou), whilst the amount of land that has to be acquired for the works is as little as 47 mu (Chenxi) to 1,590 mu (Loudi); • The preliminary environmental assessment, adjusted by weighting for the major concerns of dredging and impact on any existing natural environmentally sensitive areas, shows that Loudi, relatively, has the most significant environmental issues (substantial dredging of river section), that will require specific monitoring for the disposal (and or use) of spoil, particularly if it is partially contaminated from any local industrial activities. Huaihua has the second most significant environmental concern, again relatively rather than significantly, again because there is dredging to be done for the more substantive diversion and/or drainage canals that are required. • There is a higher incidence of poverty amongst the affected populations of the County cities in the Zishui, Yuanjiang and Lishui river basins (notably Sangzhi, Chenxi and Wugang); • The presence of ethnic minority peoples is highest in Sangzhi, in conjunction with poverty, due to the remote location of the city; though there is also some minority presence in Xinhua (Zishui Basin) and Huaihua and Chenxi (Yuanjiang Basin) but to a substantially lower degree than occurs in Sangzhi (though all ethnic minority peoples in the city appear to be quite well integrated with the overall city community); and • Assessment made on sources of revenue, current and future expected financial burdens, and proportion of expected revenues required to service the loan.

SOGREAH – JULY 2005 PAGE 124 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

4. Selection between Poverty and Ethinic Minority Priorities Consideration was given to the inclusion of Fenghuang, because of both ethnic minority and cultural issues, but as it is on a secondary level tributary in the Yuanjiang basin, has a relatively low discharge from a small catchment area, has floods of generally short duration (a few hours), and the overall damage and losses that arise tend to be smaller than those accrued in other flood prone cities, it was agreed that it did not warrant inclusion as a Core subproject. Additionally, the protection measures that are being proposed are mostly for areas on the left bank of the river, and not for the old historic centre on the right bank. Overall, the proposed project will have positive benefits for the long term security and future of the city, though the required investment is relatively small. After taking all the various factors into account, the scope and value of the works, the scale of resettlement and land resumption, the environmental impact and poverty issues, it was assessed that Fenghuang did not specifically fit as a worst case as compared with the other selected subprojects. The only clear area where Fenghuang is a worst case arises because the minority population, at 71%, is marginally higher than that of Sangzhi (60%), but Sangzhi was given priority in the selection process as it is the sole representative subproject in the Lishui basin.

SOGREAH – JULY 2005 PAGE 125 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 5-1: SELECTION OF 8 CORE SUBPROJECTS

(*) Subproject Basin City Design Value Type of Population Urban Area Resettlement Environment Poverty Minority 2 Institute (million CNY) Works km People (No) Land (mu) Dredging Dykes Excav. Canals Priority %

Yongzhou Xiang Municipal Provincial 267.14 Dy/Fw/Di/Cu/Ps/Re 308,400 38.5 484.0 1,747.0 03317Urbann.s

Loudi Xiang Municipal Provincial 381.18 Dy/Fw/Cu/Ps/Re/Dr 278,200 36.0 563.0 1,592.0 331013n.sn.s

Leiyang Xiang County Provincial 79.93 Dy/Fw/Cu/Re 232,700 24.6 1,063.0 329.1 01203 n.sn.s

Wugang Zi County Shaoyang 108.28 Dy/Fw/Di/Cu/Ps/Re 125,600 13.9 1,320.0 114.6 01236Ruraln.s

Xinhua Zi County Loudi 122.12 Dy/Di/Cu/Ps/Re/Dr 137,000 30.0 305.0 645.0 11217Rural20%

Huaihua Yuan Municipal Provincial 214.01 Dy/Fw/Di/Cu/Ps/Re/Dr 335,700 35.0 1,170.0 825.0 122310n.s20%

Chenxi Yuan County Provincial 46.12 Dy/Fw/Di/Cu/Ps/Re 56,000 3.1 227.0 128.9 01113Rural10%

Sangzhi Li County Provincial 101.22 Dy/Fw/Cu/Ps/Re/Dr 42,500 6.0 510.0 201.2 11206Rural60%

Dykes Dy Notes for Environmental Analysis Yongzhou, Loudi, Leiyang and Wugang Flood Wall Fw were selected as priority subprojects. Diversion Channel Di Impact Ranking by Activity Category: Culverts Cu 0 = activity not occurring Pump Stations Ps 1 = low impact in relation to other subprojects Xiang Basin 3 Yongzhou, Loudi & Leiyang Rock, Earth and Sand Excavation Re 2 = moderately significant impact in relation to other subprojects Zi Basin 2 Wugang and Xinhua Dredging River Dr 3 = highly significant impact in relation to other subprojects Yuan Basin 2 Chenxi, Huaihua or Fenghuang Li Basin 1 Sangzhi not significant n.s Overall Environmental Ranking of the 9 Subprojects presented above: significant rural poor Rural Calculated by adding Activity Category Ranking score. Dredging weighted by factor 3; all others weighted at 1. significant urban poor Urban Note: (*) Costs at 12 June, 2005, including finance charges For the 36 subprojects Chenzhou (Xiang Basin) probably has the highest overall environmental impact, marginally ahead of Loudi. However, as there are already three subprojects in Xiang Basin, Chenzhou was not included.

SOGREAH – JULY 2005 PAGE 126 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 6: DESCRIPTION OF CORE SUBPROJECTS

As indicated in Appendix 5, 8 Core subprojects have been selected for detailed review and preparation of updated feasibility studies, together with a resettlement plan (RP), an initial environmental examination (IEE) and a social and poverty impact assessment (SPIA). Full details on the 8 Core subprojects are presented in Supplementary Appendix C. An ethnic minority development plan has also been prepared for Sangzhi subproject, where the ethnic minority is about 60% of the overall city population (See Supplementary Appendix B. Other documents related to the overall project, including up to 28 non-core subprojects (though Anhua has now been cancelled) are presented in Supplementary Appendix B and C to this report. They provide substantial detail on the proposed flood control development plans, the social and environmental situation for each of the cities, and the extent of the resettlement and relocation required for the proposed works to be constructed. The following tables provide summary detail and description of the eight core subprojects as follows: • Table 6-1: Summary Data Sheet on 36 Subprojects (though Anhua is now cancelled – post Loan Fact Finding, June 2005); • Table 6-2: Core subprojects – Land Acquisition, Buildings Demolition and People Resettlement • Table 6-3: Construction Works, Quantities, Land and Buildings Removal, and People to be Resettled • Table 6-4: Summary of Project and Project Protected Areas, and related Urban / Rural Populations • Table 6-5: 28 Non-Core Subprojects – Estimated Land Acquisition, Buildings Demolition and People Resettlement.

SOGREAH – JULY 2005 PAGE 127 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 6-1: SUMMARY DATA SHEET ON 36 SUBPROJECTS

City River Catchment Urban Protected Design return Works Total project City (5) Main river(s) City Population (103 - 2000) (6) Design flood Flood & Drainage Protection Works (new constructions + rehabilitations) Jet grouting Specific structures Permanent Land Acquisition & Resettlement Type Basin Area (1) Area Area period (1 in x yr) period cost (7) Flood Diversion or Culvert with Electric Rock, earth & Buildings People km² Dikes Dredging Embankment Land (mu) Employees People km² total urban rural km² (m3/s) flood drainage Walls Drainage sluice drainage sand excav. Demolished Affected by month CNY * 103 (2000) (km) (m3 *103) Length (m) (3) Affected Relocated (km) canals (km) gate(s) stations (m3 *103) (m²) Land Loss A Core Subprojects (8) 1 Yongzhou M X Xiangjiang + Xiaoshui 33,590 31.50 308.40 249.90 58.50 12.60 14,600 50 10 21.50 23.37 1.30 16 6 1,015.50 - 1 traffic gate at Dock 1,002.00 52,332 1,491 6,842 1,121 49 248,253 2Wugang C Z Nanshui 608 13.90 130.40 71.07 58.33 8.49 1,360 20 10 5.47 10.76 6.00 14 4 194.03 17,760 1 new aperture on two bridges. 218.00 19,704 565 636 792 48 100,546 Culverts includes two flow control gates. 3 Loudi M X Lianshui + Sunshui 7,962 36.00 278.20 215.00 63.20 11.60 2,760 50 10 30.91 5.89 - 19 2 945.11 307.90 1,590.00 51,213 1,884 1,978 488 34 356,854 4Leiyang C X Leishui 9,902 24.60 232.70 169.30 63.40 5.20 5,390 20 10 11.29 1.05 - 5 306.18 - 2,640 Grouting to prevent seepage near 265.00 29,822 1,214 5,280 409 36 75,789 culverts 5Chenxi C Y Yuanjiang + Shuangxi 52,249 7.30 65.00 57.00 8.00 3.10 22,600 20 10 0.73 1.95 3 1 142.97 - New Overflow Dam (Zheping) + 47.00 1,066 163 5 26 18 42,265 Diversion Channel/Tunnel (Shuangxi) 6 Huaihua M Y Wushui + Taipingxi 9,836 35.00 333.80 224.90 108.90 7.34 1,610 50 10 13.39 9.64 5.44 10 4 370.00 58.99 0 410.00 26,712 1,981 3 483 48 200,502 7 Xinhua (2) CZZishui 17,740 30.00 130.00 100.00 30.00 5.72 10,240 20 10 12.25 - 1.30 4 2 221.20 39.55 2,100 0 473.00 8,212 1,897 82 172 48 113,547 8 Sangzhi C L Lishui + Youshui 3,114 6.03 42.50 40.20 2.30 5.09 7,770 20 10 7.29 - 7 2 313.03 40.12 0 68.00 26,460 86 331 201 37 95,262 Core Subproject Sub-Totals 135,001 184.33 1,521.00 1,127.37 392.63 59.14 94.80 58.74 15.99 78 21 3,508.03 446.56 22,500 4,073.00 215,521 9,281 15,157 3,692.00 1,233,018

B Non-Core Subprojects (28) (6) 9 Hengyang M X Xiangjiang 52,150 61.84 754.20 20700/22500 50/100 10 39.21 18.30 3.20 88 31 1,018.57 733.00 0 882.50 52,175 1,810 47 558,561 4 bridges + 5 concrete weirs 10 Chenzhou M X Chenjiang, Tongxin 948 26.00 300.00 1,020 + 511 50 10 23.30 23.80 3.23 39 0 1,835.90 1,882.70 replaced by rubber dams 617.44 113,912 959 49 328,841 11 Shaoyang M Z Zishui 12,238 41.00 606.10 10,800 50 10 1.60 7.40 1.13 9 8 378.66 - 0 773.71 22,810 409 28 239,800 4 bridges and 5 concrete weirs 12 Jishou M Y Donghe 4,143 ? 18.00 152.00 2,130 50 10 - 22.40 7.70 27 0 352.00 290.40 replaced by rubber dams 119.41 32,527 54 54 175,452 13 Zhuzhou C X Xiangjiang 71,979 24.00 55.00 19,700 20 10 8.66 3.10 18 7 92.98 3.90 0 376.00 15,900 529 21 69,269 14 Youxian C X Mishui 6,198 12.00 47.80 40.00 7.80 4840/5840 20/50 10 10.90 1.40 5.96 15 4 109.77 301.30 2 apertures 108.83 12,797 460 48 69,034 15 Anhua C Z Zishui 22,810 2.60 33.00 28.00 5.00 10,300 20 10 3.30 10.55 4 0 135.80 270.00 15,941 645 79,151 16 Hengyang C X Zhengshui 2,857 10.00 90.80 2,770 20 10 14.60 0.34 - 6 4 288.60 3.32 0 319.20 37,944 560 23 117,626 17 Longhui C Z Nanshui 5,871 6.37 95.49 60.00 35.49 6,070 20 10 4.50 3.60 1.80 5 3 114.80 520.00 2 traffic gates 169.10 16,285 318 48 89,476 18 Jiangyong (2) CXYongming 505 3.17 25.00 1,310 20 10 4.43 2.61 5.25 4 0 222.80 138.53 0 52.49 7,278 80 36 56,509 19 Xintian C X Chongling 390 4.20 40.00 514 20 10 11.70 7.52 - 3 3 168.70 35.00 0 124.00 11,400 285 36 50,342 20 Ningyuan C X Ningyuan 2,169 25.69 42.00 1,160 20 10 4.80 8.30 3.40 4 0 342.10 0 215.50 7,149 406 36 62,555 21 Zhongfang C Y Wushui 9,874 2.23 18.00 6180/7570 20/50 10 5.62 0.50 3.00 3 2 236.50 - 0 219.03 - - 48 74,433 22 Xupu C Y Xushui + Sandu 3,156 8.80 106.80 56.00 50.80 5,370 20 10 5.71 2.57 - 5 2 285.80 64.20 0 92.88 16,697 202 32 64,150 23 Lianyuan C X Lianshui 1,749 12.80 101.00 490 20 10 4.07 13.10 - 17 0 311.00 - 0 401.32 13,080 419 48 73,083 24 Shuangfeng C X Ceshui 1,462 6.40 76.00 1,830 20 10 4.40 5.41 3.19 12 2 412.70 17.89 0 436.80 15,991 461 48 103,899 25 Cili C L Lishui + Loushui 11,282 7.22 84.50 74.75 9.75 13,600 20 10 11.99 5.70 6.25 5 1 118.36 - 0 288.82 39,917 621 34 101,981 26 Zhuzhou M X Xiangjiang 71,979 70.25 748.50 23,900 100 10 24.50 8.50 - 7 14 1,252.60 - 4 traffic gates 452.20 85,610 1,428 49 410,788 27 Xiangtan M X Xiangjiang 81,638 40.00 692.10 24,600 100 10 12.90 - - 5 2 1,426.50 - 3 traffic gates 387.10 63,733 1,516 22 151,506 28 Qiyang C X Xiangjiang 23,420 18.60 103.00 13,100 20 10 9.70 5.40 - 10 3 993.20 - 1 traffic gate 601.20 9,017 1,380 48 137,567 29 Liling C X Lujiang 20.00 153.00 104.00 49.00 20 10 3.49 7.90 7.97 5 4 485.72 - 0 287.50 42,604 1,197 22 110,725 30 Shimen C L Lishui 15,113 5.20 131.60 16,300 20/50 10 12.95 - 7.05 7 2 260.19 - 1,439 0 387.30 29,472 629 26 93,637 31 Shaodong C Z Shaoshui 614 12.98 134.50 955 20 10 11.10 0.54 4.07 7 4 368.60 13.21 1 weir removed + 1 traffic gate 591.67 23,805 338 28 110,292 32 Jianghua C X Xiaoshui 12,099 5.80 66.00 4,450 20 10 2.87 0.74 - 3 3 81.93 19.25 0 103.02 13,349 472 48 50,794 33 Xinhuang C Y Wushui 6,717 5.40 60.00 4,820 20 10 - 6.35 1.96 4 3 288.10 115.00 0 36.19 12,158 294 60 58,150 34 Lengshuijiang C Z Zishui 16,236 8.35 119.00 9,720 20 10 5.40 1.69 0.90 9 3 528.89 65.48 0 269.32 27,680 396 42 98,271 35 Fenghuang C Y Tuojiang 524 6.30 45.00 672 20 10 - 5.15 2.25 0 0 126.03 140.82 26 bridges 13.90 24,840 552 48 90,566 36 Baojing C Y Youshui 12,495 6.80 37.00 14,560 20 10 1.30 3.65 - 6 0 271.40 - 0 271.00 23,242 666 48 111,498 Sub-Total 446,474 472.00 4,917.39 362.75 157.84 243.00 173.42 71.41 327 105 12,508.20 4,344.00 1,439 8,867.43 787,312 17,086 3,737,955

Hunan Non-Structural 36 34,384

All Subprojects Total 581,475 656.33 6,438.39 1,490.12 550.47 337.80 232.16 87.40 405 126 16,016.22 4,790.56 23,939 12,940.43 1,002,833 20,778 5,005,357 Average 16,152 18.23 178.84 41.39 15.29 9.38 6.45 2.43 11.25 3.50 444.90 133.07 359.46 27,856 577 139,038

(1) indicative value: the figure corresponds either to the exact catchment area or to the catchment area of the closest hydrological station or dam Investment (2) Difficult report: poor translation, different values for the same parameter, inconsistent units, or false unit conversions Minimum (3) In many reports, the unit in the project characteritics table is ha instead of mu Average (4) Inconsistent value from the report. 13 Mu represents less than the 24,900 m² for households [most likely this is 13 ha = 197 mu]. Maximum (5) The Municipal Cities are generally referred to as City. The County Cities are variously referred to as both Cities (the urban area) and County (the County seat). (6) Numbers generally adopted from the Design Institute Feasibility Study Reports, unless other more specific information has been made available. Detailed identification of actual City urban and rural population is imprecise. (7) Project costs in US$ at 14/6/05, excluding finance charges.

SOGREAH – JULY 2005 PAGE 128 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 6-2: CORE SUBPROJECTS - LAND ACQUISITION, BUILDINGS DEMOLITION AND PEOPLE RESETTLEMENT No. City Protection Areas Land Acquisition Permanent Temporary No. km2 Urban Farm Total Urban Farm Total Urban Farm Total Urban Farm Total ha mu ha mu

1 Yongzhou 4 12.60 35.51 31.49 67.00 532.65 472.35 1,005.00 22.18 0.91 23.09 332.35 14.00 346.35 2 Wugang 3 8.49 7.35 7.65 15.00 110.25 114.75 225.00 10.29 0.68 10.97 154.55 10.00 164.55 3 Loudi 4 11.60 55.12 50.88 106.00 826.80 763.20 1,590.00 73.60 9.31 82.91 1,103.65 140.00 1,243.65 4 Leiyang 2 5.20 7.40 10.60 18.00 111.00 159.00 270.00 5.57 2.33 7.90 83.50 35.00 118.50 5 Chenxi 2 3.10 0.19 2.97 3.16 2.85 44.55 47.40 6.13 2.67 8.80 92.00 40.00 132.00 6 Huaihua 8 7.34 12.30 15.00 27.30 184.50 225.00 409.50 24.00 24.00 360.00 360.00 7 Xinhua 2 5.72 1.96 29.60 31.56 29.40 444.00 473.40 9.44 2.23 11.67 142.05 33.00 175.05 8 Sangzhi 2 5.09 0.84 3.56 4.40 12.60 53.40 66.00 7.64 0.85 8.49 114.35 13.00 127.35

Totals 27 59.14 120.67 151.75 272.42 1,810.05 2,276.25 4,086.30 158.85 18.98 177.83 2,382.45 285.00 2,667.45

Protection Areas means distinct separate physical areas, rather than the aggregated numbers often given. Chenxi Protection area is split into two with the left bank and the right bank of the Shuangxi. Loudi Protection Areas (2) are each split with Chengbei East and West, divided by the Qinfeng River; and Chengdong North and South, with areas respectively adjacent to the Lianshui and Sunshui rivers.

No. City Protection Areas Buildings Demolished People Resettled Houses Other Total Permanent Temporary No. km2 Urban Farm Total Urban Farm Total m2 1 Yongzhou 4 12.60 40,694 11,638 52,332 1,121 1,491 1,491 2 Wugang 3 8.49 14,486 5,218 19,704 792 792 565 565 3 Loudi 4 11.60 30,723 20,490 51,213 433 55 488 315 1,569 1,884 4 Leiyang 2 5.20 21,507 8,315 29,822 409 409 185 1,029 1,214 5 Chenxi 2 3.10 819 247 1,066 26 26 42 121 163 6 Huaihua 8 7.34 24,232 2,480 26,712 483 1,981 7 Xinhua 2 5.72 5,272 2,940 8,212 172 58 1,839 1,897 8 Sangzhi 2 5.09 16,860 9,600 26,460 201 86

Totals 27 59.14 154,593 60,928 215,521 433 1,282 3,692 600 6,614 9,281

SOGREAH – JULY 2005 PAGE 129 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 6-3: CONSTRUCTION WORKS, QUANTITIES, LAND AND BUILDINGS REMOVAL, AND PEOPLE TO BE RESETTLED

Core Subprojects Yongzhou Wugang Loudi Leiyang Chenxi Huaihua Xinhua Sanghzi Total

Subproject Key Characteristics Unit Value Value Value Value Value Value Value Value Value

Total Length of Dike km 44.87 16.24 36.80 12.34 0.72 23.03 12.25 7.29 153.53 Existing Dike to be Reinforced km 10.14 0.75 4.50 15.39 New Earth Dike km 25.98 6.83 30.91 11.29 13.39 7.75 96.13 New Flood Wall km 8.75 4.25 5.89 1.05 9.64 5.89 35.48 Masonry Dike Wall km 4.41 0.72 1.40 6.53 New Pump Stations Stns / No. / kw 6 / 10 / 1,460 4 / 8 / 940 2 / 5 / 1,385 1 / 3 / 540 4 / 7 / 395 2 / 7 / 1,465 2 / 4 / 220 21 / 44 / 6,405 New Sluice Gated Culverts No. / Gates 15 / 24 12 / 12 19 / 23 5 / 7 2 / 3 10 / 10 4 / 6 7 / 9 74 / 94 New Traffic Gate to Harbour No. / Gates 1 / 1 1 / 1 Flow Control Gates No. / gates 2 / 5 1 / 1 3 / 6 New Drainage Channel No. / km 1 / 1.3 2 / 6.0 1 / 1.95 4 / 5.44 4 / 3.0 12 / 17.69 River Channel Diversion km 0.95 1.17 2.12 River Diversion Tunnel km 0.40 0.40 Dike Slope Concrete Revetment km 34.73 6.83 36.80 11.29 13.39 12.25 0.65 115.93 Dike Slope Grass Revetment km 34.73 16.24 36.80 12.34 23.03 12.25 135.38 Hardened Dike Crest Surfacing km 6.37 36.80 12.34 13.39 12.25 81.14 Rip Rap Bank Protection km 16.68 7.75 24.43 Bridge Enlargement No. / m 2 / 40 2 / 40 New Gated Dam in Dike No./ m 1 / 50 1 / 50 New Gated Overspill Dam No. / m 1 / 328 1 / 328

Earth and/or Rock Excavation m3 x 103 1,015.50 194.03 945.11 306.18 142.97 370.03 221.20 313.03 3,508.06 Dredging m3 x 103 307.90 58.99 39.55 40.12 446.56 Earth and/or Rock Fill m3 x 103 1,701.46 442.10 3,803.61 450.81 95.53 1,818.64 831.61 226.83 9,370.60 Sand and Gravel Bedding m3 x 103 1.04 14.87 84.45 11.04 1.56 13.94 24.36 1.96 153.21 Grouted Rubble m3 x 103 143.76 50.40 178.60 22.18 63.18 94.70 18.31 219.94 791.08 Plain and Reinforced Concrete m3 x 103 73.53 54.46 13.50 19.45 59.73 70.94 21.79 22.15 335.54 Reinforcing Steel Bar t 3,118.57 276.96 1,057.50 141.66 137.45 1,652.50 605.56 321.71 7,311.91 Metalwork and Hoists t 160.55 196.59 260.35 11.42 113.05 16.73 58.51 817.20 High Pressure Grouting m 17,760.00 2,640.00 2,100.00 22,500.00 Consolidation Grouting for Tunnel m 3,200.00 3,200.00 3 3 Construction Quantities Construction Concrete Block Revetment Structures Civil Works m x 10 1.03 11.89 52.29 11.04 14.43 23.86 2.35 116.89 Grass Slope Protection m2 x 103 384.40 91.23 969.16 129.60 357.44 193.42 2,125.25 Dike/Road Sealing m2 x 103 38.20 184.00 74.05 92.10 75.08 463.43

Land Acquisition mu 1,002.00 218.00 1,590.00 265.00 47.00 410.00 473.00 67.80 4,072.80 ha 66.80 14.53 106.00 17.67 3.16 27.33 31.53 4.52 271.55 House Demolition m2 x 103 40.69 14.49 30.72 21.51 0.82 24.23 5.27 16.86 154.59

Social / Other Building Demolition 11.64 5.22 20.49 8.32 0.25 2.48 2.94 9.60 60.93

Resettlement Population Resettled People 1,121 792 488 409 26 483 172 201 3,692

Subproject Investment (includes 3 financing charges) CNY x 10 267,140 108,280 381,175 79,934 46,119 214,014 112,117 101,223 1,310,002

Investment Impacts Yongzhou Wugang Loudi Leiyang Chenxi Huaihua Xinhua Sanghzi Total

Cost per person resettled CNY x 103 238.31 136.72 781.10 195.44 1,773.81 443.09 651.84 503.60 354.82

People Protected No. 65,000 51,362 86,300 49,274 37,000 77,500 130,000 35,375 531,811

Cost per person protected CNY x 103 4.11 2.11 4.42 1.62 1.25 2.76 0.86 2.86 2.46

All City Residents No. 308,400 130,400 278,200 232,700 65,000 333,800 130,000 42,500 1,521,000

Cost per City Resident CNY x 103 0.87 0.83 1.37 0.34 0.71 0.64 0.86 2.38 0.86

Note: These investment numbers will be subject to some change before finalisation. Investment costs include financing charges.

SOGREAH – JULY 2005 PAGE 130 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 6-4: SUMMARY OF PROJECT AND PROJECT PROTECTED AREAS, AND RELATED URBAN / RURAL POPULATION

8 Core Subprojects Aggregate ## ^^ $$ Year 2000 Unit Yongzhou Wugang Loudi Leiyang Chenxi Huaihua** Xinhua Sangzhi Average Total %

City / County Area ** km 2 38.10 59.30 36.00 40.00 19.20 35.00 51.00 6.03 35.58 284.63 Project (City Urban) Area (PA) km2 31.50 13.90 36.00 31.42 7.30 35.00 30.00 6.03 23.89 191.15

Urban Developed Project Area km2 26.10 9.69 26.00 24.60 6.20 35.00 20.00 5.36 19.12 152.95 80% Urban % Area of Project Area (PA) 83% 70% 72% 78% 85% 100% 67% 89% 80% Rural Project Area km2 5.40 4.21 10.00 6.82 1.10 10.00 0.67 5.46 38.20 20% Rural % Area of Project Area (PA) 17% 30% 28% 22% 15% 0% 33% 11% 20% Project Protected Areas (PPA) No. 4 3321822 25.00 Actual Protected Area km2 12.00 8.49 11.60 7.50 5.20 7.34 5.72 5.09 7.87 62.94 % Protected Area (PPA) of Project Area (PA) 38% 61% 32% 24% 71% 21% 19% 84% Urban Developed Protected Area km2 8.64 6.00 6.00 5.30 3.10 4.94 3.65 4.95 5.32 42.58 68% Urban % Area of Protected Area (PPA) 72% 71% 52% 71% 60% 67% 64% 97% 69% Rural Protected Area km2 3.36 2.49 5.60 2.20 2.10 2.40 2.07 0.14 2.55 20.36 32% Urban % Area of Protected Area (PPA) 28% 29% 48% 29% 40% 33% 36% 3% 31% Project (City Urban) Area Population No. 308,400 130,400 278,200 232,700 65,000 333,800 130,000 42,500 190,125 1,521,000

Urban Developed Area Population No. 249,900 71,074 215,000 169,300 57,000 224,900 100,000 40,200 140,922 1,127,374 74% Urban % Pop'n of Project Area Pop'n 81% 55% 77% 73% 88% 67% 77% 95% 77% Rural Area Population No. 58,500 58,326 63,200 63,400 8,000 108,900 30,000 2,300 49,078 392,626 26% Rural % Pop'n of Project Area Pop'n 19% 45% 23% 27% 12% 33% 23% 5% 23%

Protected Area Population No. 65,000 51,362 86,300 49,274 37,000 77,500 49,500 35,375 56,414 451,311 30% % Protected Pop'n of Project Area Pop'n 21% 39% 31% 21% 57% 23% 38% 83% Urban Developed Area Protected Population No. 57,000 35,057 47,900 26,529 31,000 50,000 31,600 33,641 39,091 312,727 69% Urban % Pop'n of Protected Pop'n 88% 68% 56% 54% 84% 65% 64% 95% 72% Rural Area Protected Population No. 8,000 16,305 38,400 23,015 6,000 27,500 17,900 1,734 17,357 138,854 31% Rural % Pop'n of Protected Pop'n 12% 32% 44% 47% 16% 35% 36% 5% 29%

Source : PPMO, HHPDI and Subproject Feasibility Study Reports prepared by Design Institutes ## Yongzhou protected area was large, and a number of 12 plus breakdown is now given. ** Variously this number refers to the City area, the County area or a District area within the County ^^ Leiyang - the proteetced area is now different to any earlier values, and a breakdown has been given. $$ Xinhua protected area numbers provided by HHPDI have been corrected downwards. ** Huaihau Urban Area = the Project City (Urban) Area, but still we have a rural poulation and rural protected area.

SOGREAH – JULY 2005 PAGE 131 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 6-5: 28 NON-CORE SUBPROJECTS – ESTIMATED LAND ACQUISITION, BUILDINGS DEMOLITION AND PEOPLE RESETTLEMENT Project Affected Permanent Land Aq Temporary Land Aq Buildings Demolished No. Subproject Township Village Household Population Total Farmland Total Farmland All Households Unit No. No. No. No. mu mu m2 m2 9 Hengyang Cit 5 16 441 1,810 882.50 600.50 1,114 296 49,392 2,783 10 Chenzhou 10 15 297 959 617.44 281.87 475 60 52,425 61,487 11 Shaoyang 5 10 70 409 773.71 515.40 776 94 16,746 6,064 12 Jishou 6 16 13 54 119.41 32.21 27 21 2,433 30,094 13 Zhuzhou Co 1 4 142 529 376.00 146.00 151 26 15,900 - 14 Youxian 2 7 128 460 108.83 63.62 52 17 12,797 - 15 Anhua 4 4 178 645 270.00 123.00 273 122 15,941 - 16 Hengyang Co 1 9 157 560 319.20 229.80 355 39 28,330 9,614 17 Longhui 1 7 105 318 169.10 113.60 44 11 10,806 5,479 18 Jiangyong 1 5 26 80 52.49 19.34 423 372 2,276 5,002 19 Xintian 1 3 70 285 124.00 88.00 45 13 11,400 - 20 Ningyuan 1 6 95 406 215.50 125.00 114 89 7,149 - 21 Zhongfang 1 1 - - 219.03 149.22 16 16 - - 22 Xupu 1 5 40 202 92.88 56.88 12 12 11,371 5,326 23 Lianyuan 3 15 111 419 401.32 93.90 87 32 13,080 - 24 Shuangfeng 1 12 139 461 436.80 194.20 91 28 12,517 3,474 25 Cili 1 12 168 621 288.82 127.27 130 92 26,319 13,598 26 Zhuzhou City 7 14 275 1,428 452.20 152.00 177 61 68,680 16,930 27 Xiangtan 2 6 409 1,516 387.10 64.30 218 84 41,343 22,390 28 Qiyang 2 10 237 1,380 601.20 336.00 273 91 9,017 - 29 Liling 3 10 313 1,197 287.50 166.20 158 35 38,304 4,300 30 Shimen 2 16 192 629 387.30 224.76 696 139 25,008 4,464 31 Shaodong 1 9 79 338 591.67 549.00 447 103 11,935 11,870 32 Jianghua 3 6 95 472 103.02 51.36 99 34 9,079 4,270 33 Xinhuang 3 8 87 294 36.19 3.80 76 76 7,219 4,939 34 Lengshuijiang 2 7 120 396 269.32 127.63 99 35 15,888 11,792 35 Fenghuang 1 10 138 552 13.90 8.50 6 - 23,224 1,616 36 Baojing 1 3 136 666 271.00 4.00 100 27 16,728 6,514 Total 72 246 4,261 17,086 8,867.43 4,647.36 6,533 2,025 555,306 232,006

SOGREAH – JULY 2005 PAGE 132 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 7: COST ESTIMATES AND PROJECT FINANCING

1. INTRODUCTION

The total project cost is estimated at CNY 5.29 billion ($604.0 million), of which CNY 1.76 billion ($200.3 million) is the foreign exchange cost. The Asian Development Bank (ADB) will finance the total foreign exchange cost, or 33.1 percent of the project cost. The ADB loan financing will cover the interest during implementation (IDI), commitment charges, and front-end fee. Hunan Provincial Government will finance CNY 21.1 million ($2.4 million) of local currency costs to cover the cost of the PPMO. The 36 county and municipal city governments will finance the remaining local currency costs amounting to CNY 3.51 billion ($401.5 million). The total project cost, excluding IDI, commitment charges and front-end fees, is estimated at CNY 5.0 billion ($571.0 million). The ADB loan will support the foreign exchange portion of civil works, equipment, vehicles, capacity building, and monitoring and evaluation. The cost estimates exclude routine operation and maintenance (O&M) costs of the subproject project management office and infrastructure built under the Project. Table 7.1 gives the breakdown of the total project cost by project component. Table 7.2 summarizes subproject costs by expenditure account. Tables 7.3 and 7.4 give the breakdown of components and expenditure accounts by year. Tables 7.5 and 7.6 show the overall detailed financing plan and the detailed financing plan by year.

SOGREAH – JULY 2005 PAGE 133 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. PARAMETERS AND GENERAL ASSUMPTIONS

Project costs are based on cost and price data as of June 2004 and were derived from the feasibility reports prepared for the individual subprojects by the Hydro and Power Design Institute of Hunan Province and by other local design institutes in Hunan, together with the implementation schedules provided in the various Feasibility Study Reports. The allocation of costs was verified with the design institutes. The Provincial Project Management Costs were prepared in collaboration with the Project Management Office. The following general parameters were used in estimating costs: (i) The project implementation period is estimated as six calendar years (2006 to 2011, inclusive) although some activities are planned for implementation in 2005, between loan appraisal and loan effectiveness, and are to be retroactively financed. The cost of these activities are included in the 2006 (year 1) costs. (ii) The exchange rate for base cost calculations is CNY 8.28 per $ for the subproject implementation period while project costs are estimated using constant purchasing parity exchange rates. (iii) Domestic inflation rates are assumed to be 3.0 percent for 2006, and 4.0 percent per year thereafter. Foreign exchange costs are inflated at a rate of 0.89 percent per year for the full project period. (iv) Physical contingencies for all expenditure are estimated at 10 percent. (v) Interest during implementation (IDC) is estimated on a biannual (6 months) basis on the loan outstanding using an interest rate of 4.58 percent per annum, the rate applicable on 12 June 2005 for the 5-year swap LIBOR rate for US dollars plus a spread of 40 points (0.4 percentage points). The loan outstanding includes loan funds disbursed, cumulative interest, front-end fees, and commitment fees. (vi) Commitment charges for the overall project were estimated as 0.75 percent of the shortfalls in disbursements from the disbursement thresholds indicated for the project. The thresholds are 15 percent of the total loan amount for the first year of project implementation, and 45, 85, and 100 percent for the second, third, and fourth and subsequent years, respectively. (vii) The front-end fee equivalent to 1 percent of the loan amount is charged after loan signing. The amount and its interest charges are capitalized into the total loan amount for the duration of the project implementation period. (viii) Project costs include local taxes, which are charged at 3.41 percent on the cost of civil works, and the vehicle purchase added fee, which is charged at 15 percent on the purchase of vehicles. Duties and taxes were not applied to the cost of other items required under the subproject since the Government is expected to exempt the subproject from payment of these charges.

The following are the estimated foreign exchange contents and tax rates applicable to the different types of expenditure: (i) Based on experience in other flood sector projects in PRC, 34 percent of the cost of civil works is considered as indirect foreign cost. Civil works are subject to a local tax of 3.41 percent levied by the city, which accounts for 3.3 percent of the unit cost of civil works. (ii) Ninety-two percent of the costs of electrical and mechanical equipment were considered as foreign exchange costs. The costs of the processing fee, commercial inspection fee, porting fee, managing fee, and local delivery

SOGREAH – JULY 2005 PAGE 134 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

costs, in total amounting to 8 percent of unit costs were considered as local currency costs to be financed by the local governments. (iii) Eighty-five percent of the cost of vehicles and boats were considered as foreign exchange costs. The costs of the processing fee, commercial inspection fee, porting fee, managing fee, and local delivery costs, in total amounting to about 3 percent of unit costs were considered as local currency costs to be financed by the local governments. A vehicle purchase added fee of 15 percent was applied to the net prices of vehicles, equivalent to 12.7 percent gross. Purchase of vehicles was assumed to be free of import duty. (iv) Thirty-five percent of the cost of monitoring and evaluation (M&E) was counted as foreign exchange cost. (v) Land acquisition and compensation, surveys and detailed designs, construction supervision, soil and water conservation, and project administration operations do not have any foreign exchange costs. Therefore, they are not to be financed under the ADB loan. Minor taxes will be levied on land acquisition and resettlement compensation.

ADB will partly finance the costs of civil works, vehicles, equipment, domestic and international training, environment and resettlement monitoring, and project monitoring and evaluation.

TABLE 7.1: PROJECT COST SUMMARY BY COMPONENT % % Total

(CNY Ten Thousand) (US$ '000) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs

A. Flood Control 274,967.8 111,168.4 386,136.2 332,086.7 134,261.4 466,348.1 29 92 B. Flood Management 770.7 8,668.3 9,439.0 930.8 10,468.9 11,399.8 92 2 C. Project Management 1. Provincial Project Management 1,786.6 1,155.3 2,941.9 2,157.7 1,395.3 3,553.0 39 1 2. Local Project Management 21,254.0 2,191.5 23,445.5 25,669.1 2,646.7 28,315.8 9 6 Subtotal Project Management 23,040.6 3,346.8 26,387.4 27,826.8 4,042.0 31,868.8 13 6 298,779.1 123,183.5 421,962.7 360,844.4 148,772.4 509,616.7 29 100 Physical Contingencies 29,669.8 12,318.4 41,988.1 35,833.1 14,877.2 50,710.3 29 10 Price Contingencies 24,928.0 11,657.0 36,585.0 7,267.6 3,364.4 10,632.1 32 2 353,376.9 147,158.8 500,535.7 403,945.0 167,014.0 570,959.1 29 112 Interest During Implementation - 25,502.7 25,502.7 - 29,414.7 29,414.7 100 6 Commitment Charges - 1,692.5 1,692.5 - 1,857.3 1,857.3 100 - Front-end fees - 1,761.2 1,761.2 - 2,002.9 2,002.9 100 - 353,376.9 176,115.2 529,492.1 403,945.0 200,288.9 604,234.0 33 119

SOGREAH – JULY 2005 PAGE 135 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.2: PROJECT COST SUMMARY BY EXPENDITURE ACCOUNT

% % Total (CNY Ten Thousand) (US$ '000) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs

I. Investment Costs A. Civil Works 175,100.8 90,203.4 265,304.2 211,474.4 108,941.4 320,415.7 34 63 B. Equipment 2,367.5 27,226.8 29,594.3 2,859.4 32,882.6 35,741.9 92 7 C. Vehicles 320.5 1,816.4 2,136.9 387.1 2,193.7 2,580.8 85 1 D. Capacity Building International Training and Study Tours - 742.5 742.5 - 896.7 896.7 100 - Domestic Training and Study Tours 454.7 151.6 606.3 549.2 183.1 732.2 25 - Subtotal Capacity Building 454.7 894.1 1,348.8 549.2 1,079.8 1,629.0 66 - E. Consulting Services 2. Domestic Consultants 69.0 - 69.0 83.3 - 83.3 - - F. Environmental Management and Monitoring 5,673.9 3,042.8 8,716.7 6,852.5 3,674.9 10,527.4 35 2 G. Soil and Water Conservation 2,255.8 - 2,255.8 2,724.3 - 2,724.3 - 1 H. Land Acquisition and Resettlement 68,673.1 - 68,673.1 82,938.6 - 82,938.6 - 16 I. Project Management 2,219.1 - 2,219.1 2,680.0 - 2,680.0 - 1 K. Construction Management 17,488.5 - 17,488.5 21,121.4 - 21,121.4 - 4 L. Research and Design 21,689.1 - 21,689.1 26,194.5 - 26,194.5 - 5 Total Investment Costs 296,312.0 123,183.5 419,495.5 357,864.7 148,772.4 506,637.0 29 99 II. Recurrent Costs A. Recurrent Costs 2,467.2 - 2,467.2 2,979.7 - 2,979.7 - 1 Total Recurrent Costs 2,467.2 - 2,467.2 2,979.7 - 2,979.7 - 1 TOTAL BASELINE COSTS 298,779.1 123,183.5 421,962.7 360,844.4 148,772.4 509,616.7 29 100 Physical Contingencies 29,669.8 12,318.4 41,988.1 35,833.1 14,877.2 50,710.3 29 10 Price Contingencies 24,928.0 11,657.0 36,585.0 7,267.6 3,364.4 10,632.1 32 2 TOTAL PROJECT COSTS 353,376.9 147,158.8 500,535.7 403,945.0 167,014.0 570,959.1 29 112 Interest During Implementation - 25,502.7 25,502.7 - 29,414.7 29,414.7 100 6 Commitment Charges - 1,692.5 1,692.5 - 1,857.3 1,857.3 100 - Front-end fees - 1,761.2 1,761.2 - 2,002.9 2,002.9 100 -

Total Costs to be Financed 353,376.9 176,115.2 529,492.1 403,945.0 200,288.9 604,234.0 33 119

SOGREAH – JULY 2005 PAGE 136 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.3: SUMMARY OF BASE COSTS BY COMPONENT BY YEAR (IN $’000S)

(US$ '000) Base Cost 2006 2007 2008 2009 2010 2011 Total

A. Flood Control 112,169.6 122,030.2 115,517.3 70,759.8 30,390.0 15,481.1 466,348.1 B. Flood Management 2,376.2 5,837.7 2,990.5 13.0 182.3 - 11,399.8 C. Project Management 1. Provincial Project Management 1,550.7 756.8 495.3 476.6 273.7 - 3,553.0 2. Local Project Management 9,555.1 7,044.3 4,795.0 3,825.1 2,085.7 1,010.7 28,315.8 Subtotal Project Management 11,105.8 7,801.0 5,290.3 4,301.6 2,359.3 1,010.7 31,868.8 Total BASELINE COSTS 125,651.6 135,668.9 123,798.2 75,074.5 32,931.7 16,491.8 509,616.7 Physical Contingencies 12,340.1 13,540.5 12,379.8 7,507.4 3,293.2 1,649.2 50,710.3 Price Contingencies Inflation Local 1,550.3 5,305.4 8,517.8 7,597.9 4,378.8 2,486.8 29,837.1 Foreign 140.6 579.0 972.4 830.0 484.5 357.9 3,364.4 Subtotal Inflation 1,691.0 5,884.3 9,490.2 8,427.9 4,863.4 2,844.7 33,201.6 Devaluation -1,086.9 -3,890.0 -6,438.7 -5,825.9 -3,389.4 -1,938.6 -22,569.5 Subtotal Price Contingencies 604.1 1,994.3 3,051.6 2,602.0 1,473.9 906.2 10,632.1 Total PROJECT COSTS 138,595.8 151,203.8 139,229.6 85,183.9 37,698.8 19,047.1 570,959.1

Taxes 5,056.5 3,576.7 3,269.6 2,023.0 922.5 477.2 15,325.6 Foreign Exchange 31,740.7 43,818.0 44,366.1 27,173.1 12,393.0 7,523.2 167,014.0

SOGREAH – JULY 2005 PAGE 137 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.4: SUMMARY OF BASE COSTS BY EXPENDITURE ACCOUNT BY YEAR

(US$ '000) Base Cost 2006 2007 2008 2009 2010 2011 Total % Amount

I. Investment Costs A. Civil Works 65,098.4 84,235.1 84,762.9 51,396.0 23,026.9 11,896.4 320,415.7 34.0 108,941.4 B. Equipment 4,414.6 9,689.4 10,292.3 6,076.8 2,768.6 2,500.2 35,741.9 92.0 32,882.6 C. Vehicles 1,950.8 630.0 - - - - 2,580.8 85.0 2,193.7 D. Capacity Building International Training and Study Tours 317.0 317.0 135.9 126.8 - - 896.7 100.0 896.7 Domestic Training and Study Tours 476.5 103.9 82.0 69.9 - - 732.2 25.0 183.1 Subtotal Capacity Building 793.5 420.9 217.9 196.7 - - 1,629.0 66.3 1,079.8 E. Consulting Services 2. Domestic Consultants 29.0 18.1 13.3 12.1 10.9 - 83.3 - - F. Environmental Management and Monitoring 1,263.6 2,509.7 2,875.1 2,112.0 1,284.6 482.5 10,527.4 34.9 3,674.9 G. Soil and Water Conservation 1,206.9 788.8 539.9 188.7 - - 2,724.3 - - H. Land Acquisition and Resettlement 24,757.9 23,752.0 19,795.4 10,774.2 3,325.7 533.4 82,938.6 - - I. Project Management 640.3 600.0 539.6 527.5 372.7 - 2,680.0 - - K. Construction Management 6,555.9 5,212.4 3,828.7 3,016.0 1,645.2 863.3 21,121.4 - - L. Research and Design 18,389.6 7,114.7 228.9 224.0 168.7 68.6 26,194.5 - - Total Investment Costs 125,100.5 134,971.0 123,094.0 74,523.9 32,603.3 16,344.4 506,637.0 29.4 148,772.4 II. Recurrent Costs A. Recurrent Costs 551.2 698.0 704.2 550.5 328.4 147.4 2,979.7 - - Total Recurrent Costs 551.2 698.0 704.2 550.5 328.4 147.4 2,979.7 - - Total BASELINE COSTS 125,651.6 135,668.9 123,798.2 75,074.5 32,931.7 16,491.8 509,616.7 29.2 148,772.4 Physical Contingencies 12,340.1 13,540.5 12,379.8 7,507.4 3,293.2 1,649.2 50,710.3 29.3 14,877.2 Price Contingencies Inflation Local 1,550.3 5,305.4 8,517.8 7,597.9 4,378.8 2,486.8 29,837.1 - - Foreign 140.6 579.0 972.4 830.0 484.5 357.9 3,364.4 100.0 3,364.4 Subtotal Inflation 1,691.0 5,884.3 9,490.2 8,427.9 4,863.4 2,844.7 33,201.6 10.1 3,364.4 Devaluation -1,086.9 -3,890.0 -6,438.7 -5,825.9 -3,389.4 -1,938.6 -22,569.5 - - Subtotal Price Contingencies 604.1 1,994.3 3,051.6 2,602.0 1,473.9 906.2 10,632.1 31.6 3,364.4 Total PROJECT COSTS 138,595.8 151,203.8 139,229.6 85,183.9 37,698.8 19,047.1 570,959.1 29.3 167,014.0

Taxes 5,056.5 3,576.7 3,269.6 2,023.0 922.5 477.2 15,325.6 - - Foreign Exchange 31,740.7 43,818.0 44,366.1 27,173.1 12,393.0 7,523.2 167,014.0 - -

SOGREAH – JULY 2005 PAGE 138 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.5: FINANCING PLAN

(US$ '000)

Foreign Local Total Percent

The Government - 0.0 0.0 - ADB 200,288.9 - 200,288.9 33.1 Hunan Province - 2,415.8 2,415.8 0.4 Loudi City - 30,936.7 30,936.7 5.1

Yongzhou City - 20,967.9 20,967.9 3.5 Leiyang City - 7,021.7 7,021.7 1.2 Wugang City - 8,539.1 8,539.1 1.4 Huaihua City - 16,973.4 16,973.4 2.8 Hengyang City - 41,553.5 41,553.5 6.9 Chenzhou City - 28,349.3 28,349.3 4.7

Zhuzhou City - 29,126.3 29,126.3 4.8

Liling City - 9,035.6 9,035.6 1.5

Hengyang County - 9,996.0 9,996.0 1.7

Qiyang County - 10,742.2 10,742.2 1.8

Xiangtan City - 12,340.6 12,340.6 2.0

You County - 5,332.0 5,332.0 0.9

Lianyuan City - 6,107.0 6,107.0 1.0

Xintian county - 4,020.8 4,020.8 0.7

Shuangfeng County - 8,498.4 8,498.4 1.4

Jiangyong County - 4,757.5 4,757.5 0.8

Jianghua County - 3,948.3 3,948.3 0.7

Ningyuan County - 5,143.2 5,143.2 0.9

Shaoyang City - 18,412.6 18,412.6 3.0

Anhua County - 6,679.8 6,679.8 1.1

Xinhua County - 9,509.4 9,509.4 1.6

Shaodong County - 9,049.7 9,049.7 1.5

Lengshuijiang City - 8,063.4 8,063.4 1.3

Zhuzhou County - 5,477.1 5,477.1 0.9 Jishou City - 14,106.4 14,106.4 2.3 - 8,823.9 8,823.9 1.5 Longhui County - 7,315.1 7,315.1 1.2

Fenghuang County - 7,312.6 7,312.6 1.2 - 3,372.0 3,372.0 0.6 - 5,110.1 5,110.1 0.8 - 5,938.6 5,938.6 1.0 Xinhuang County - 4,298.9 4,298.9 0.7 - 7,731.9 7,731.9 1.3

Cili County - 8,606.2 8,606.2 1.4

Sangzhi County - 8,331.9 8,331.9 1.4

200,288.9 403,945.0 604,234.0 100.0

SOGREAH – JULY 2005 PAGE 139 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.6: FINANCING PLAN BY YEAR 2006 2007 2008 2009 2010 2011 Total I. Investment Costs The Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ADB 31,740.7 43,818.0 44,366.1 27,173.1 12,393.0 7,523.2 167,014.0 Hunan Province 813.4 408.2 324.8 312.6 244.2 - 2,103.2 Loudi City 19,077.8 7,556.7 4,035.9 - - - 30,670.3 Yongzhou City 10,090.7 5,451.1 3,046.5 2,235.7 - - 20,824.1 Leiyang City 4,578.6 1,669.6 733.4 - - - 6,981.6 Wugang City 3,778.9 2,593.6 2,089.6 - - - 8,462.1 Huaihua City 10,664.8 2,006.2 2,554.0 1,609.2 - - 16,834.2 Hengyang City 8,898.6 9,715.8 9,830.9 4,174.7 4,409.2 4,101.1 41,130.4 Chenzhou City 7,535.2 8,338.2 6,907.1 4,411.4 960.8 - 28,152.6 Zhuzhou City - 6,122.9 7,659.3 7,588.4 4,446.8 3,135.1 28,952.5 Liling City - 3,424.1 3,921.9 1,647.0 - - 8,993.0 2,760.9 4,176.1 2,832.4 154.6 - - 9,924.0 Qiyang County - 2,594.5 2,989.3 2,390.6 1,381.7 1,326.3 10,682.4 Xiangtan City - 6,272.7 4,645.0 1,341.0 - - 12,258.7 1,069.9 302.2 909.6 1,828.8 1,143.2 - 5,253.8 Lianyuan City 1,767.7 1,337.4 1,470.1 1,187.4 343.8 - 6,106.4 Xintian county 1,076.1 1,146.8 1,423.7 360.9 - - 4,007.4 1,986.7 2,563.1 2,611.4 1,169.7 19.1 - 8,349.9 1,731.8 1,522.1 1,324.1 149.3 - - 4,727.2 Jianghua County - 1,161.6 1,238.0 964.8 566.2 - 3,930.7 1,584.2 1,715.7 1,315.1 491.9 - - 5,106.9 Shaoyang City 4,564.5 5,060.0 5,014.9 3,663.1 - - 18,302.5 Anhua County 1,372.1 1,994.2 2,288.4 991.7 - - 6,646.4 Xinhua County 4,323.0 2,020.9 1,880.3 1,208.9 - - 9,433.1 Shaodong County - 2,859.2 3,361.1 1,874.8 917.0 - 9,012.1 Lengshuijiang City - 2,533.8 1,747.1 2,180.2 1,538.4 - 7,999.5 Zhuzhou County 2,282.6 2,567.7 608.2 - - - 5,458.6 Jishou City 1,833.5 2,824.6 3,179.5 3,015.8 2,308.8 846.1 14,008.2 Baojing County - 2,156.1 2,135.3 2,021.5 1,684.4 759.6 8,757.0 Longhui County 1,580.6 1,448.6 1,622.2 1,578.3 1,027.5 - 7,257.2 - 1,880.0 1,967.1 1,821.5 1,222.6 361.3 7,252.4 Chenxi County 2,830.0 512.9 - - - - 3,342.8 Xupu County 1,176.4 1,521.3 1,238.7 881.0 250.7 - 5,068.1 Zhongfang County 1,887.5 1,387.7 868.0 1,182.1 559.5 - 5,884.8 Xinhuang County - 956.8 931.3 902.7 644.6 824.3 4,259.7 Shimen County - 2,168.2 1,576.1 2,645.4 1,261.4 - 7,651.1 Cili County 2,624.5 2,116.6 2,399.4 1,401.3 - - 8,541.8 Sangzhi County 4,356.1 2,520.7 1,391.8 - - - 8,268.6 Total Investment Costs 137,986.8 150,425.8 138,437.6 84,559.3 37,322.9 18,876.9 567,609.2

SOGREAH – JULY 2005 PAGE 140 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.6 (CONTINUED)

2006 2007 2008 2009 2010 2011 Total

II. Recurrent Costs The Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Hunan Province 57.4 59.2 61.1 65.8 69.1 - 312.6 Loudi City 88.0 88.8 89.6 - - - 266.3 Yongzhou City 35.5 35.8 36.1 36.4 - - 143.8 Leiyang City 13.3 13.4 13.5 - - - 40.2 Wugang City 25.4 25.6 25.9 - - - 76.9 Huaihua City 34.4 34.7 35.0 35.3 - - 139.3 Hengyang City 69.0 69.6 70.2 70.8 71.5 72.1 423.2 Chenzhou City 38.6 39.0 39.3 39.7 40.0 - 196.7 Zhuzhou City - 34.1 34.4 34.7 35.1 35.4 173.7 Liling City - 14.1 14.2 14.3 - - 42.6 Hengyang County 17.8 17.9 18.1 18.3 - - 72.1 Qiyang County - 11.8 11.9 12.0 12.1 12.2 59.9 Xiangtan City - 20.3 41.0 20.7 - - 82.0 You County 15.4 15.5 15.6 15.8 15.9 - 78.2 Lianyuan City 0.1 0.1 0.1 0.1 0.1 - 0.6 Xintian county 3.3 3.3 3.4 3.4 - - 13.4 Shuangfeng County 36.6 36.9 37.3 37.6 - - 148.4 Jiangyong County 7.5 7.5 7.6 7.7 - - 30.3 Jianghua County - 4.3 4.4 4.4 4.5 - 17.6 Ningyuan County 9.0 9.0 9.1 9.2 - - 36.3 Shaoyang City 27.2 27.4 27.6 27.9 - - 110.1 Anhua County 8.2 8.3 8.4 8.5 - - 33.4 Xinhua County 18.8 19.0 19.2 19.3 - - 76.3 Shaodong County - 9.3 9.4 9.4 9.5 - 37.6 Lengshuijiang City - 15.8 15.9 16.0 16.2 - 63.9 Zhuzhou County 6.1 6.2 6.2 - - - 18.5 Jishou City 16.0 16.1 16.3 16.4 16.6 16.7 98.2 Baojing County - 13.2 13.3 13.4 13.5 13.6 67.0 Longhui County 11.4 11.5 11.6 11.7 11.8 - 57.9 Fenghuang County - 11.8 11.9 12.0 12.1 12.2 60.2 Chenxi County 14.5 14.7 - - - - 29.2 Xupu County 8.3 8.3 8.4 8.5 8.6 - 42.0 Zhongfang County 10.6 10.7 10.8 10.9 11.0 - 53.8 Xinhuang County - 7.7 7.8 7.9 7.9 8.0 39.3 Shimen County - 19.9 20.1 20.3 20.5 - 80.8 Cili County 15.9 16.0 16.2 16.3 - - 64.3 Sangzhi County 20.9 21.1 21.3 - - - 63.2 Total Recurrent Costs 609.0 778.0 792.0 624.7 375.9 170.2 3,349.9

SOGREAH – JULY 2005 PAGE 141 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 7.6 (CONTINUED)

2006 2007 2008 2009 2010 2011 Total III. Financial Charges ADB 2,610.7 2,425.6 4,820.9 6,781.0 7,949.3 8,687.3 33,274.9 Total Financial Charges 2,610.7 2,425.6 4,820.9 6,781.0 7,949.3 8,687.3 33,274.9 Total Financing of Costs 141,206.5 153,629.4 144,050.5 91,965.0 45,648.1 27,734.4 604,234.0

SOGREAH – JULY 2005 PAGE 142 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 8: ORGANIZATION CHART AND FLOW OF FUNDS

Flow of Funds Asian Development Bank Ministry of Finance

Provincial Government (HPG)

Project Leading Group (PLG)

Water Resources Development and Reform Finance Department

Provincial Government Department (PWRD) Commission (PDRC) (PFD)

Project Management Office (PPMO)

Municipal/County Government (LG)

Local Leading Group (LLG)

Water Resources Development and Reform Finance Bureau Bureau (WRB) Commission (LDRC) (LFB)

Local Government River Course Management Institute (RCMI) Local Project Management

Office (LPMO)

Project Protection Project Implementing Unit SOGREAHArea – JULY Resident 2005 PAGE 143 Management Office (PIU) ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 9: RESETTLEMENT FRAMEWORK AND SECTOR LENDING ARRANGEMENTS

1. BACKGROUND

Hunan Flood Management Project includes up to 36 subprojects, which will involve 47 county level administrative units in four river basins of Hunan Province. Following project construction principles, flood protection standards and project design, the subprojects (Table 9-1) will include the rehabilitation or new construction of 338 km of earth dikes and 232 km of flood wall, the upgrading or construction of 405 sluice gated culverts, the upgrading or construction of 126 pumping stations, and the upgrading or construction of 87.4 km of diversion and/or drainage channels. These physical works will require 863 ha (12,940 mu) of land acquisition, about 1 million square metres of building demolition, and the resettlement of 20,778 affected people. The involuntary resettlement policy of the ADB for sector loans requires the preparation of (1) a Resettlement Framework (RF) applicable to all subprojects, and (2) a number of specific Resettlement Plans (RPs) for selected core subprojects, both of which are pre- requisites for project appraisal. In consultation with the local (sub)project management offices (LPMOs), and with assistance from the Hunan Provincial Hydro and Power Design Institute (HHPDI), the Hunan Provincial Project Management Office (PPMO), located in the Hunan Provincial Water Resources Department (HPWR) offices, has prepared a draft resettlement framework for the whole Project. Detailed resettlement plans have been prepared for 8 core subprojects (Table 9-2), which are based on detailed socio-economic surveys and extensive consultation among the affected people. For the remaining 28 non- core subprojects, similar resettlement plans, based on the adopted resettlement framework, will be prepared during the course of project implementation. This Appendix summarizes the RF and reviews the available impact data and preparation procedures for the non-core subprojects. The RF for the Project is presented in Supplementary Appendix C and the RPs for the 8 core subprojects are presented in supplementary Appendix D.

SOGREAH – JULY 2005 PAGE 144 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. RESETTLEMENT FRAMEWORK AND PROCEDURE GUIDELINES

2.1. PROJECT IMPACT – LAND ACQUISITION, BUILDING DEMOLITION AND RESETTLEMENT According to the preliminary survey, the proposed 36 subprojects would affect 101 townships (towns or sub-districts) and 352 villages (urban residential committees). A total of 863 ha (12,940 mu) of land area would have to be acquired for the project works, including 461 ha (6,918 mu) of farmland (53%). In addition, during the construction phase, about 613 ha (9,200 mu) of land will have to be temporarily occupied. Based on the reduction in per capita farmland in the 36 subproject areas, a total of 13,969 people will require full economic rehabilitation. In terms of people directly affected by land acquisition, assuming each affected person would lose about 50% of their land holding, a total of 27,938 persons would be affected by the land acquisition. Along with land acquisition, about 1 million square meters of buildings will have to be demolished, including 709,900 m2 (71%) of residential housing and 292,933 m2 (29%) of non-residential buildings. Of these demolished residential houses, 70% belong to urban residents and 30% belong to rural residents. The demolition will cause the relocation of 5,236 households and 20,778 persons (77% urban, 23% rural) and affect 95 enterprises and 132 shops. About 62% of the houses are made of brick and concrete, and 38% are made of either brick wood or earth wood. Table 9-1 provides a brief summary of the key land acquisition and resettlement impacts for up to 36 subprojects. Table 9-2 provides summary details of the land acquisition and resettlement for the 8 core subprojects. The demolition of buildings and relocation of the affected people would provide an opportunity for those people to improve their living conditions. Besides the major buildings and land, there are also other affected public and commercial assets which includes telecommunications and electricity supply infrastructure, ponds used for fish and lotus cultivation, sheds, walls, graves and cash crop orchards.

SOGREAH – JULY 2005 PAGE 145 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 9-1: SCOPE OF LAND ACQUISITION AND RESETTLEMENT FOR UP TO 36 SUBPROJECTS

No. Project Cities Relocated Relocated Land Farmland Temporary Farmland Houses Non-Res’t

Household Population (mu) (mu) Land (mu) (mu) (m2) Structures (m2)

1 Zhuzhou 275 1428 452 152 177 61 68,680 16,930

2 Zhuzhou County 142 529 376 146 151 26 15,900 0

3 Liling 313 1197 288 166 158 35 38,304 4,300

4 Youxian 128 460 109 64 52 17 12,797 0

5 Xiangtan 409 1516 387 64 218 84 41,343 22,390

6 Hengyang 441 1810 883 601 1,114 296 49,392 2,783

7 Hengyang County 157 560 319 230 355 39 28,330 9,614

8 Leiyang 95 409 265 157 118 35 21,507 8,315

9 Chengzhou 297 959 617 282 475 60 52,425 61,487

10 Loudi 151 488 1,590 761 1,244 140 30,723 20,490

11 Lengshuijiang 120 396 269 128 99 35 15,888 11,792

12 Lianyuan 111 419 401 94 87 32 13,080 0

13 Xinhua 32 172 473 444 175 33 5,272 2,940

14 Shuangfeng 139 461 437 194 91 28 12,517 3,474

15 Shaoyang 70 409 774 515 776 94 16,746 6,064

16 Shaodong 79 338 592 549 447 103 11,935 11,870

17 Wugang 196 792 218 114 165 10 14,486 5,218

18 Longhui 105 318 169 114 44 11 10,806 5,479

19 Anhua 178 645 270 123 273 122 15,941 0

20 Yongzhou 313 1121 1002 471 346 14 40,694 11,638

21 Jianghua 95 472 103 51 99 34 9,079 4,270

22 Jiangyong 26 80 52 19 423 372 2,276 5,002

23 Qiyang 237 1380 601 336 273 91 9,017 0

24 Ningyuan 95 406 216 125 114 89 7,149 0

5 Xintian 70 285 124 88 45 13 11,400 0

26 Shimen 192 629 387 225 696 139 25,008 4,464

27 Cili 168 621 289 127 130 92 26,319 13,598

28 Sangzhi 43 201 68 53 127 13 16,860 9,600

29 Jishou 13 54 119 32 27 21 2,433 30,094

30 Fenghuang 138 552 14 9 6 0 23,224 1,616

31 Huaihua 139 483 410 226 360 0 24,232 5,658

32 Chenxi 6 26 47 44 132 40 819 247

33 Zhongfang 0 0 219 149 16 16 0 0

34 Xinhuang 87 294 36 4 76 76 7,219 4,939

35 Xupu 40 202 93 57 12 12 11,371 5,326

36 Baojin 136 666 271 4 100 27 16,728 6,514

Total 5,236 20,778 12,941 6,919 9,201 2,309 709,899 292,933

Core Subprojects 975 3,692 4,074 2,271 2,667 285 154,594 60,927

Percent of Total 18.6% 17.8% 31.5% 32.8% 29.0% 12.3% 21.8% 20.8%

Non-Core Subprojects 4,261 17,086 8,867 4,647 6,533 2,025 555,306 232,006

Percent of Total 81.4% 82.2% 68.5% 67.2% 71.0% 87.7% 78.2% 79.2% Source: Hunan Hydropower Survey and Design Institute.

SOGREAH – JULY 2005 PAGE 146 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 9-2(1): SCOPE OF LAND ACQUISITION AND RESETTLEMENT FOR 8 CORE SUBPROJECTS Non-Resident Relocated Relocated Land Farmland Temporary Farmland Houses Subproject Structures Household People (mu) (mu) Land (mu) (mu) (m2) (m2) Yongzhou 313 1121 1,002 471 346 14 40,694 11,638 Wugang 196 792 218 114 165 10 14,486 5,218 Loudi 151 488 1,590 761 1,244 140 30,723 20,490 Leiyang 95 409 265 157 118 35 21,507 8,315 Xinhua 32 172 473 444 175 33 5,272 2,940 Huaihua 139 483 410 226 360 0 24,232 2,480 Chenxi 6 26 47 44 132 40 819 247 Sangzhi 43 201 68 53 127 13 16,860 9,600 Total 975 3,692 4,074 2,271 2,667 285 154,594 60,927 Source: Hunan Hydropower Survey and Design Institute.

TABLE 9-2(2): SCOPE OF LAND ACQUISITION AND RESETTLEMENT FOR 8 CORE SUBPROJECTS People with Land Relocated Relocated Permanent Loss Temporary Loss Affected Subproject Loss Employee Household People Total HH People HH People HH People Yongzhou 313 1121 446 1,491 439 1467 7 24 6842 Wugang 196 792 221 565 188 499 33 66 636 Loudi 151 488 669 1884 507 1569 162 315 1978 Leiyang 95 409 281 1214 236 1029 45 185 5280 Xinhua 32 172 622 1897 596 1839 26 58 82 Huaihua 139 483 558 1981 558 1981 0 0 3 Chenxi 6 26 52 163 32 121 20 42 5 Sangzhi 43 201 20 86 14 56 6 30 331 Total 975 3,692 2,869 9,281 2,570 8,561 299 720 15,157 Source: Hunan Hydropower Survey and Design Institute. HH = Household

2.2. RESETTLEMENT FRAMEWORK The Resettlement Framework reflects both the Chinese legal requirements and ADB’s policy. The main principles are: (i) minimizing negative impacts as much as possible; (ii) implementing resettlement and providing compensation so as to improve or at least restore the pre-project income and living standard for the affected people (APs); (iii) fully informing and consulting the APs on compensation options and resettlement planning; (iv)

SOGREAH – JULY 2005 PAGE 147 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

providing asset compensation at replacement rates; and (v) compensating in full for lost assets, replacement of dwellings and resettlement allowances prior to ground leveling and demolition. ADB approval of a subproject that involves involuntary resettlement will be subject also to ADB’s approval of the subproject RP. The Resettlement Framework stipulates eligibility and entitlements for land, houses, income losses, and rehabilitation subsidies, in accordance with the 1998 Land Administration Law, the State Council No. 28 Decree on Deepening Reform on Land Acquisition System and Reinforcement, (2004), and ADB’s policy on involuntary resettlement. As Chinese laws and regulations allow for various compensation eligibility alternatives, methodology and rates, each subproject RP must provide specific provisions within these allowable options and ranges according to land productivity, available land holding in the affected villages, features of each subproject site and intense consultation with local communities. The general options and compensation ranges are as follows: 1. Permanent land loss will be replaced by land reallocation within village domains and through the payment of (a) a land compensation fee, and (b) a resettlement subsidy. According to the Land Administration Law (1998) and the Hunan Provincial Implementation Decree (2000), the compensation for farmland will be based on total output value over the past three years and multiples as set forth according to per capita land holding among the affected villages. Specifically, the land compensation will be set to be at least 6 times of the Annual Average Output Value (AAOV), and the resettlement subsidy will be set to be at least 4 times of the AAOV per each affected person. 2. Temporary land loss will be paid for in cash to the APs at the rate of 2 times the AAOV (assuming 2 years of occupation), plus land reclamation cost and compensation for lost green crops and trees. 3. House and attachment loss will be paid to APs in cash at replacement cost, free of demolition expenses and salvaged materials. The compensation rates will be based on an analysis of material costs to replace the building in each project area. The compensation for various attachments, infrastructure facilities, moving allowance, and compensation for various trees will be set in accordance with the compensation paid at similar projects in the project counties. 4. Non-residential Building loss will be paid for in cash to the affected work units and individuals at replacement cost. The compensation rates will be based on an analysis of material costs for replacement of the buildings in the project area. In relation to compensation for equipment relocation, a moving allowance and compensation for lost wages and income during interruption will be arranged in accordance with the actual costs. 5. Special facilities impacts will be compensated on the basis of replacement cost to the relevant government departments. The compensation rates for affected facilities will be determined in accordance with relevant regulations and unit costs estimates for similar subproject areas. The HPWR and LPMOs will ensure that the resettlement entitlements are provided to the people affected prior to the start of ground leveling and demolition. A land compensation and resettlement subsidy will be paid to the affected village collectives. Housing compensation and compensation for young crops and other assets will be provided directly to the people who lose those assets. Compensation for infrastructure, such as electrical and communication facilities, will be paid to the concerned government departments so they can rearrange the supply facilities.

2.3. RESETTLEMENT AND REHABILITATION Affected rural households, who have to be resettled because of house demolition, will be provided with compensation based on replacement value, together with funds to obtain a new house site that is connected by road and supplied with electricity and water within their current villages. Affected urban households will be provided with both a cash option

SOGREAH – JULY 2005 PAGE 148 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

and an in-kind option. The in-kind option will involve the allocation of replacement housing that will have better quality and facilities within the urban areas. There will be no reduction in house compensation for depreciation, and people will be allowed to salvage materials from their old houses. Though some farmers will lose some of their land, the impacts will be more widely dispersed among the affected villages and village groups, so that the actual losses are not so severe when averaged across all of the affected village residents. For most affected village groups, where the collective land holding is relatively high, the overall impact of land acquisition could be mitigated through land readjustment and adequate compensation within the village community. Where the affected village group is small with limited land holding, the directly affected people may have to be compensated and resettled with non land based and non-farm activities. Through a process of extensive consultation, detailed economic rehabilitation plans have been developed for all the affected villages, and details of these are given in the draft resettlement plans for each subproject.

2.4. RESETTLEMENT FRAMEWORK AND RP PREPARATION For all subprojects that involve land acquisition and resettlement, individual resettlement plans will be prepared (8 completed for core subprojects) and implemented according to the policies in this resettlement framework. Based on ADB requirements, detailed RPs for the 8 core sub-projects have been prepared and submitted to ADB for review and approval. The remaining 28 non-core subprojects will be prepared by the PPMO, who will organize detailed resettlement impact surveys and preparation of the resettlement plans, to be done by HHPDI by October 2005. Where subprojects will affect less than 500 people, an abbreviated resettlement plan will be prepared according to the resettlement framework. The abbreviated RPs will be submitted to the PPMO for review and approval prior to implementation. Subprojects that involve impact on more than 500 people will require a full resettlement plan to be prepared in accordance with the resettlement framework, and these RPs will be reviewed by the PPMO before submission to ADB for approval prior to implementation. PPMO, LPMOs, independent resettlement monitoring agencies, and the ADB project team will supervise and monitor the resettlement implementation for individual subprojects.

2.5. DISCLOSURE AND PUBLIC CONSULTATION RP preparation will entail intense public consultation carried out through questionnaires and community meetings that include the involvement of the implementation agencies, local governments and APs. A resettlement information booklet (in Chinese) will be distributed to all affected villages, which will contain compensation policies, rehabilitation options, entitlements, and a grievance procedure. The same documents in English will be available at ADB Headquarters and the Resident Mission.

2.6. INSTITUTIONAL RESPONSIBILITIES As this project is now set up as a sector loan, the PPMO will be responsible for the overall project implementation. The city and county LPMOs for the 36 subprojects are the designated executing agencies for their subproject and will be responsible for implementing their subproject resettlement program. The LPMOs will be tasked with preparing and implementing specific RPs, and will share the responsibility with the city and county governments, and the local land management and resettlement offices, for effective implementation of the resettlement activities. This would include asset valuation, community consultation, provision and delivery of entitlements, and the issue of land acquisition, demolition and building permits. Field tasks, including the payment of compensation, selection of replacement land, and provision of livelihood support, will rest with the township and village officers.

SOGREAH – JULY 2005 PAGE 149 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2.7. GRIEVANCE PROCEDURES Complaints and grievance procedures will be defined in the RPs. Grievances will be lodged first with the village committee. If no settlement is reached within two weeks, the complainant will have one month to raise the case with the township or sub-district. If the case is still unresolved within two weeks, he or she could appeal directly to the local city or county project resettlement office (PMO). The city project resettlement office should formally record any appeal and provide a resolution within 15 days. If the dispute still cannot be resolved, in accordance with the appeal process, then the affected people could appeal to the PPMO, or go directly to the People’s Court. The APs will be advised about the grievance procedures during the community consultation meetings and this will be set out in the resettlement information booklet.

2.8. MONITORING AND EVALUATION In accordance with ADB guidelines, both internal and external monitoring of the RP implementation will be required. The internal monitoring will be led by the PPMO and LPMOs, and this will include reviewing the implementation milestones and evaluating the resettlement effect. External monitoring and evaluation will be assigned to a qualified independent monitoring agency. The PPMO will advise ADB on progress with land acquisition and resettlement through the quarterly progress reports. External monitoring reports will be submitted to ADB twice a year.

SOGREAH – JULY 2005 PAGE 150 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 10: IMPLEMENTATION SCHEDULE

1. PROJECT PREPARATION

The Project involves the development of flood control works for up to 36 cities located throughout Hunan along the main rivers and tributaries of the four main river basins – Xiangjiang, Zishui,Yuanjiang,Lishui. Generally, each city will have two or more flood prone areas that are to be protected. Civil works (dikes, diversions, drainage) in the major urban areas will be implemented in sequence, with priority given to those works required to protect those areas with the highest flood risk. In general, the priority will be given to the main dike works, followed by the drainage works – drainage channels, gravity sluice outlets, pumping stations. Depending on the critical nature of the works sequence, parallel activities may also be undertaken on river dredging, bridge widening and construction of any flow diversion works. Construction will generally be implemented between the flood seasons (April to August), section by section. The construction of pump stations and culvert sluices would most probably be completed throughout one dry season, though this may also depend on the timing for various sections of dike works. Construction preparation and/or auxiliary works that are not directly affected by flood conditions will be done where possible during the flood period. In the four rivers, the Xiangjiang has its main flood season from April through to July, Zi and Yuan rivers have their flood season from May through to July, and the Li river has its flood season from May through to August. The overall designated flood period for the major rivers in Hunan is from April through to August, though occasionally some late localised but smaller floods may occur in September. The works items to be completed for each subproject are not identical, though there is much similarity in the type of works required for each subproject. For example, eight of the HFMP subprojects do not have a pump station, as they can all be effectively drained by gravity through sluice gated culverts. Therefore, each subproject has to be planned in accordance with the nature and scale of the works, and the probability of interruption due to localised heavy rainfall and/or flood events within the river. Details on the scope of works are presented in Appendix 6, and for the 8 core subprojects, in Supplementary Appendix C.

SOGREAH – JULY 2005 PAGE 151 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. CONSTRUCTION PROGRAM

It is proposed that construction will start for the eight core subprojects in December 2005 (Year 0) with construction preparation (1 month for each subproject), and they will be completed in or before December 2009 (Year 4), depending on the scale of the works to be completed (Yongzhou requires 49 months, Chenxi 18 months overall). Initial discussions with PPMO indicated that the remaining 28 core subprojects would be implemented in 2 groups, but subsequent discussions have resulted in a deferred startup for the remaining subprojects, such that they could still be completed by the time the Loan comes to closure. This doesn’t preclude the subprojects starting earlier, but it does facilitate spreading the preparation time for the remaining subprojects, and has the potential to minimise IDI charges. The provisional implementation schedule based on recent discussions (June 2005) is shown in Table 10-1. It is clear that those subprojects that require up to 58 months for completion must commence no later than August 2006, in order to be completed within the six year period assumed for overall project implementation. Generally, construction will be done in three progressive stages - preparation, construction and completion. The construction preparatory period will vary between 1 to 2 months from initial mobilization at each subproject site. The closure period for each subproject will vary, as not all subprojects will take the same length of time for construction, nor involve the same scale and diversity of civil works, but the period will be about 1 to 2 months. The actual construction work period will vary from as little as 16 months through to 56 months, depending on the subproject and the number of areas to be protected, and thus the scale of the overall works to be implemented. In most instances, the schedule assumes that the overall subproject activities would be completed in about June of the final year for that particular subproject, and that the works would be broken into elements that can be completed between flood seasons. The activities of the Contractors will be significantly influenced by the annual wet season, and though it will be the Contractor’s responsibility to manage risk, it is anticipated that PPMO will keep Contractor’s appraised of anticipated climatic severity so that any flood/climate related disruption can be minimised. Project preparatory works will include the construction of temporary roads, construction cofferdams, construction warehouses, establishment of borrow areas, and other auxiliary construction facilities (laboratory, offices, equipment yards, material stockpiles). It will also include establishing an understanding of all safeguards to be followed, and ensuriung the necessary resettlement and environment safeguard preparatory actions and monitoring procedures are implemented. The actual construction will include the improvement and/or development of the dikes, pump stations, culvert sluices, flood diversion channels, river channel dredging and realignment, installation of dike and river bank protection works, installation of electro- mechanical equipment, and fabrication and installation of metal gates and ancilliaries. Final completion will involve the testing and commissioning of the finished works, tidying up of the construction site, demolition of any temporary facilities, restoration of temporarily occupied land and borrow areas, final inspection and handover of the completed works. The overall implementation period for each subproject is determined on the basis of the scale and construction conditions of each subproject. The construction duration for both Hengyang City and Jishou City is 5 years, where Hengyang city is the largest overall subproject. In general, the construction duration for most subprojects is 3 to 4 years. For those cities where the scope of works is small and where the subproject areas are fragmented - e.g. Xiangtan city, Chenxi county, the construction period will be under 2

SOGREAH – JULY 2005 PAGE 152 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT years. Non-structural measures will be implemented concurrently with the major structural works. Advanced technology will be adopted so that the Xiangjiang basin can establish an automated hydrological measuring and data transmission system for the whole river basin. It is expected that the Zishui, Yuanjiang and Lishui basins will be equipped with similar systems in parallel with the main project activities. In accordance with the National Flood Control Command System requirements for the development of non-structural measures, similar equipment and software will be provided to each city, and the development work should be completed within at most 4 years. Hunan’s Hydrology Bureau will be responsible to coordinate, support and monitor the works specifications, procurement, installation and commissioning of the non-structural component, either directly or through it’s local Hydrology Bureau staff in each city. The overall implementation plan for the construction works for up to 36 cities is shown in Table 10-1. The details for the eight core subprojects that should commence implementation in late 2005 are presented in Supplementary Appendix C, based on work undertaken during the PPTA. The schedules for the planned 28 non-core subprojects are provisional, based on discussions and agreement with PPMO and HHPDI. However, the commencement of implementation will be dependent upon the completion and approval of updated FSRs, RPs, IEEs and SPIAs for these subprojects, and also the readiness of the LPMOs and other participating agencies to both fund and commence the works. To that end, PPMO, which was set up in late 2003, has progressively promoted the establishment of the LPMOs, and has also been responsible to provide training to the LPMO staff in resettlement, economics and environmental management. A crucial aspect in this respect will be the approval and implementation of the resettlement plans, in order that access will be available for the construction sites. PPMO is confident that all cities are ready to progress the works, and it will be their responsibility to ensure that all relevant procedures are followed, approvals granted, and contracts prepared and awarded on a timely basis.

SOGREAH – JULY 2005 PAGE 153

ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 10-1: IMPLEMENTATION SCHEDULE FOR UP TO 36 CITY URBAN FLOOD CONTROL PROJECTS

No Basin Subproject City Overall 2005 (Year 0) 2006 (Year 1) 2007 (Year 2) 2008 (Year 3) 2009 (Year 4) 2010 (Year 5) 2011 (year 6) Name Type Period JASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJA months78910111212345678910111212345678910111212345678910111212345678910111212345678910111212345678

1XYongzhou M49 2ZWugang C37 3XLoudi M 34 4XLeiyang C35 5YChenxi C 18 6YHuaihua M48 7ZXinhua C 34 8LSangzhi C37 9XHengyang M 58 10 X Chenzhou M49 11 Z Shaoyang M 34 12 Y Jishou M60 13 X Zhuzhou C21 14 X Youxian C48 15 X Hengyang C 22 16 Z Longhui C 46 17 X Jianyong C 33 18 X Xintian C 32 19 X Ningyuan C 36 20 Y Zhongfang C 31 21 Y Xupu C31 22 X Lianyuan C 34 23 X Shuanfeng C46 24 L Cili C33 25 X Zhuzhou M 49 26 X Xiangtan M22 27 X Qiyang C 46 28 X Liling C 22 29 L Shimen C 32 30 Z Shaodong C 32 31 X Jianghua C 32 32 Y Xinhuang C 46 33 Z Lengshuijiang C 32 34 Y Fenghuang C43 35 Y Baojing C 47 Non-Structural Measures

X Xiangjiang River Basin M Municipal City Subprojects to be commenced in about December2005 (year 0) with consideration for retroactive financing, subject to Loan Approval (scheduled for December 2005) Z Zishui River Basin C County City Subprojects to provisionally commence in about August 2006 (Year 1) subject to satisfactory preparation and compliance with safeguads measures. Y Yuanjiang River Basin Subprojects to provisionally commence in about August 2007 (Year 2) subject to satisfactory preparation and compliance with safeguads measures. L Lishui River Basin Subprojects to provisionally commence in about August 2008 (Year 3) subject to satisfactory preparation and compliance with safeguads measures. Subprojects to provisionally commence in about August 2009 (Year 4) subject to satisfactory preparation and compliance with safeguads measures. Flood Risk Period - construction work may continue, but Contractor will have to manage the risk. Contractor Mobilisation / Demobilisation - clean up the site period.

SOGREAH – JULY 2005 PAGE 155 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 11: INDICATIVE PROCUREMENT PACKAGES

Procurement packages have been estimated following discussions with PPMO and HHPDI. A detailed schedule has been prepared for the 8 core subprojects (see Table 11- 1), with the balance of the project investment available for procurement packages for up to 28 non-core subprojects. All civil works packages will be prepared for local competitive bidding (LCB), to be managed at the local government level, using approved tendering agencies. PPMO and HHPDI have reviewed the detailed packaging for the 8 Core subprojects, which has resulted in there being 13 LCB packages as shown in Table 11-1. By extrapolation, wherein the 8 Core subprojects represent about 32% of the total project investment, it is concluded that the remaining non-core subprojects would involve up to about 40 additional civil works Contrracts. The procurement of equipment and metal fixtures and fittings for the subprojects will be undertaken by consolidating the requirements for several subprojects together, and these packages, managed by the PPMO, will be open to International Competitive Bidding (ICB). For the 8 Core subprojects, it is proposed that there will be one ICB Contract for equipment, and another one for the metal fixtures and fittings. The Contracts will be structured for phased delivery of the requirements to the individual subprojects, with progressive payments. Other packages for the project management equipment, non-structural equipment, vehicles, training and study tours (capacity building) and environmental management and monitoring (domestic consultant and/or domestic monitoring agency) will be arranged through international or local shopping (IS or LS), or under a local contract (LC) for TA services.. A more detailed statement on the procurement packaging for the 8 core subprojects is included in the relevant FSRs for those subprojects in Supplementary Appendix C. Details for the non-core subprojects will have to be determined and grouped for consolidated procurement as the various subprojects are prepared once the loan becomes effective. However, all civil works will be packaged for LCB, and would be limited to a maximum value of $10 million, as per the ADB guidelines. Equipment and consultancy services will be consolidated for groups of subprojects, and will be tendered in accordance with ADB guidelines. The overall number of contracts will be minimised wherever possible. The PPMO will be responsible for arranging the tendering process, but civil works Contracts will be signed by the respective local government LPMOs. PPMO will be responsible for signing for all consolidated contracts covering two or more subprojects. Notes:for Table 11-1 – Contracts for 8 Core Subprojects 1. 8 core subprojects, 19 procurement packages (including 13 civil works, 5 equipment supply and 1 technical assistance). 2. Civil Works - for Yongzhou and Chenzhou, there are 2 civil works procurement packages respectively, which are described according to the protection areas. For Loudi there are 4 civil works packages, according to distinct protection areas. For Wugang, Leiyang, Chenxi, Xinhua and Sangzhi, there is just one overall civil works procurement package, thus reducing the number of contracts required and increasing the contract package value to attract competition. 3. 5 Equipment Supply and 1 Technical Assistance contracts, including all equipment, vehicles, capacity building and environment management & monitoring for the 8 core subprojects; numbered as Core SP-S01 to S05, and Core SP-TA1. 4. Core SP-S01 for Electromechanical Equipment and Installation with estimated contract value of 1,975.0 (1,659.3) US$×103 5. Core SP-S02 for Metal Structure Equipment, with estimated contract value of 1,743.5 (1,431.7) US$×103

SOGREAH – JULY 2005 PAGE 156 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

6. Core SP-S03 for Project Management Equipment, with estimated contract value of 221.8 (204.2) US$×103 7. Core SP-S04 for Non-Structural Equipment, with estimated contract value of 2,453.0 (2,256.7) US$×103 8. Core SP-S05 for Vehicles, with estimated contract value of 568.5 (483.4) US$×103 9. Core SP-TA1 for Consultants and/or Monitorring Company, with estimated contract value of 915.2 (303.4) US$×103

SOGREAH – JULY 2005 PAGE 157 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 11-1: INDICATIVE PROCUREMENT PACKAGING Yongzhou City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Yongzhou-C01 Zhishan Embankment Civil Works 9,432.60 4,056.00 LCB 1-Oct-05 Y Y 1-Sep-05 Yongzhou-C02 Lengshuitan Enbankment Civil Works 8,510.10 3,659.30 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 606.40 500.60 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 568.30 492.50 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 53.60 49.30 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 398.50 366.60 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 77.10 65.50 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 97.50 32.40 LC 1-Mar-06 N N N Assistance Total 19,744.10 9,222.20

Wugang City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Wugang-C01 Wugang city embankment Civil Works 6,671.80 2,868.90 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 418.20 353.10 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 254.20 169.20 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 20.20 18.60 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 248.70 228.80 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 43.80 37.30 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 97.40 32.20 LC 1-Mar-06 N N N Assistance Total 7,754.30 3,708.10

SOGREAH – JULY 2005 PAGE 158 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 11-1: INDICATIVE PROCUREMENT PACKAGING (CONT’D) Loudi City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Loudi-C01 Chengbei (North West) Embankment Civil Works 9,943.90 4,275.90 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C02 Chengbei (North East) Embankment Civil Works 6,592.80 2,834.90 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C03 Chengzhong (Central North) Embankment Civil Works 9,241.10 3,973.70 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C04 Chengzhong (Central South) Embankment Civil Works 2,071.10 890.60 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 391.50 351.70 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 447.50 364.10 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 42.00 38.70 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 331.60 305.10 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 119.60 101.60 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 152.80 50.70 LC 1-Mar-06 N N N Assistance Total 29,333.90 13,187.00

Leiyang City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Leiyang-C01 leiyang city embankment Civil Works 4,409.50 1,896.10 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 84.60 73.90 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 16.40 15.10 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 256.10 235.60 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 43.80 37.30 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 117.60 39.00 LC 1-Mar-06 N N N Assistance Total 4,928.00 2,297.00

SOGREAH – JULY 2005 PAGE 159 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 11-1: INDICATIVE PROCUREMENT PACKAGING (CONT’D) Chenxi City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Chenxi-C01 Chenxi City Embankment Civil Works 3,202.50 1,377.10 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 223.00 177.00 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 23.40 19.40 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 23.00 21.20 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 272.60 250.80 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 54.50 46.30 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 106.80 35.40 LC 1-Mar-06 N N N Assistance Total 3,905.80 1,927.20

Huaihua City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Huaihua-C01 Taizuo (Protection Zone) Embankment Civil Works 9,435.60 4,057.30 LCB 1-Oct-05 Y Y 1-Sep-05 Huaihua-C02 Taiyou (Protection Zone) Embankment Civil Works 6,786.90 2,918.00 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 190.90 159.20 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 288.30 252.00 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 30.20 27.80 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 383.60 352.90 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 142.10 120.80 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 144.40 47.90 LC 1-Mar-06 N N N Assistance Total 17,402.00 7,935.90

SOGREAH – JULY 2005 PAGE 160 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 11-1: INDICATIVE PROCUREMENT PACKAGING (CONT’D) Xinhua City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Xinhua-C01 Xinhua City Embankment Civil Works 8,427.20 3,630.40 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 62.50 48.70 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 35.30 25.70 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 21.00 19.30 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 287.50 264.50 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 43.80 37.30 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 101.50 33.60 LC 1-Mar-06 N N N Assistance Total 8,978.80 4,059.50

Sangzhi City Urban Flood Control Subproject Land Land Contract Type of Estimated Contract Procurement Expected Date of Farmland Description Acquisition Acquisitio Identification No. Contract Amount Model Contract Award Involved Required n Date US$×103 (Loan Amount) (Y/N) (Y/N) (Y/N) Sangzhi-C01 Sangzhi City Embankment Civil Works 6,996.10 3,008.30 LCB 1-Oct-05 Y Y 1-Sep-05 Core SP-S01 Electromechanical Equipment and Installation Supply 82.50 69.00 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 41.90 34.90 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 15.40 14.20 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 274.40 252.40 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 43.80 37.30 IS 1-Dec-07 N N N Technical Core SP-TA1 Consultants and/or Monitorring Company 97.20 32.20 LC 1-Mar-06 N N N Assistance Total 7,551.30 3,448.30

SOGREAH – JULY 2005 PAGE 161 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 11-1: INDICATIVE PROCUREMENT PACKAGING (CONT’D) Consolidated Procurement Packages for Eight Core City Urban Flood Control Subproject Consolidated Land Land Type of Estimated Contract Procurement Expected Date of Farmland Contract Description Acquisition Acquisitio Contract Amount Model Contract Award Involved Identification No. Required n Date US$×103 (Y/N) (Y/N) (Y/N) CIVIL WORKS Total Loan Yongzhou-C01 Zhishan Embankment Civil Works 9,432.60 4,056.00 LCB 1-Oct-05 Y Y 1-Sep-05 Yongzhou-C02 Lengshuitan Enbankment Civil Works 8,510.10 3,659.30 LCB 1-Oct-05 Y Y 1-Sep-05 Wugang-C01 Wugang city embankment Civil Works 6,671.80 2,868.90 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C01 Chengbei (North West) Embankment Civil Works 9,943.90 4,275.90 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C02 Chengbei (North East) Embankment Civil Works 6,592.80 2,834.90 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C03 Chengzhong (Central North) Embankment Civil Works 9,241.10 3,973.70 LCB 1-Oct-05 Y Y 1-Sep-05 Loudi-C04 Chengzhong (Central South) Embankment Civil Works 2,071.10 890.60 LCB 1-Oct-05 Y Y 1-Sep-05 Leiyang-C01 leiyang city embankment Civil Works 4,409.50 1,896.10 LCB 1-Oct-05 Y Y 1-Sep-05 Chenxi-C01 Chenxi City Embankment Civil Works 3,202.50 1,377.10 LCB 1-Oct-05 Y Y 1-Sep-05 Huaihua-C01 Taizuo (Protection Zone) Embankment Civil Works 9,435.60 4,057.30 LCB 1-Oct-05 Y Y 1-Sep-05 Huaihua-C02 Taiyou (Protection Zone) Embankment Civil Works 6,786.90 2,918.00 LCB 1-Oct-05 Y Y 1-Sep-05 Xinhua-C01 Xinhua City Embankment Civil Works 8,427.20 3,630.40 LCB 1-Oct-05 Y Y 1-Sep-05 Sangzhi-C01 Sangzhi City Embankment Civil Works 6,996.10 3,008.30 LCB 1-Oct-05 Y Y 1-Sep-05 EQUIPMENT Core SP-S01 Electromechanical Equipment and Installation Supply 1,975.00 1,659.30 ICB 1-Dec-05 N N N Core SP-S02 Metal Structure Equipment Supply 1,743.50 1,431.70 ICB 1-Dec-05 N N N Core SP-S03 Project Management Equipment Supply 221.80 204.20 LS 1-Dec-07 N N N Core SP-S04 Non-Structural Equipment Supply 2,453.00 2,256.70 IS 1-Mar-06 N N N Core SP-S05 Vehicles Supply 568.50 483.40 IS 1-Dec-07 N N N CONSULTANTS Technical Core SP-TA1 Consultants and/or Monitorring Company 915.20 303.40 LC 1-Mar-06 N N N Assistance Total 99,598.20 45,785.20

SOGREAH – JULY 2005 PAGE 162 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 12: CONSULTING SERVICES, TRAINING AND STUDY TOURS

The Project is the first project in Hunan Province to utilize an ADB loan. More specifically, this is the first Sector Loan to be implemented in Hunan. Although Hunan PPMO has substantial experience in the administration of construction projects financed with foreign capital, they do not have established experience for administering construction projects financed under an ADB loan. Consequently, PPMO proposes to employ domestic specialist Consultants, who are familiar with the rules of ADB’s loan, during the implementation period.

Additionally, PPMO plans to implement a range of training initiatives for relevant personnel in the PPMO and at the LPMOs of the municipalities and the counties, in order to strengthen their knowledge and capability to prepare, implement and administer the various project components and subprojects in accordance with Chinese national, Hunan province and ADB guidelines and regulations. The majority of the proposed training will be undertaken in Hunan, but where it is beneficial and necessary to acquire some particularly advanced knowledge of new technology and management procedures, then it is anticipated some key personnel would be encouraged to undertake some short term international standard training, whether at other locations in China or overseas.

During the early stages of Project implementation, it is also proposed that relevant PPMO and LPMO personnel undertake short duration study tours, seminars and workshops with other Chinese National and Provincial agencies that have already successfully implemented ADB financed projects. Key aspects of this training will be to learn about the necessary guidelines and standards that must be followed to implement water conservancy and flood management construction projects. It is anticipated that during the life of the project, a number of international study tours may also be implemented so that key technical and managerial staff can see first hand the latest trends and management approaches that have been adopted for major water management projects in other areas of the world. Details for such tours will have to be developed during the early stages of loan implementation.

The following Table 12-1 presents a preliminary indication of the PPMO’s estimates for project management, training, consultants and its overall operations through the life of the project. Section C of this table gives an indication for the proposed training, study tours and consultant service requirements to facilitate capacity building and project implementation. This detail will be reviewed in more detail as part of the overall Project Management Framework (PMF) and the Project Management and Monitoring System

SOGREAH – July 2005 PAGE 163 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

(PMMS) that are now under preparation through a supporting ADB staff consultancy.

Table 12-1 outlines both Investment Costs (CNY 29.47 million = $3.56 million) and Recurrent Costs (CNY 2.30 million = $0.28 million) for the operation of the PPMO, including overall capacity building, over the 6 year life of the project. ADB will finance about 92% of the equipment costs, 85% of the vehicle costs, and 25% of the capacity building costs. All other costs will be financed through Hunan Provincial Government and/or Local Government contributions.

SOGREAH – July 2005 PAGE 164 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 12-1: ESTIMATE FOR PPMO PROJECT MANAGEMENT, TRAINING AND STUDY TOUR COSTS 29

Unit UnitQuantity Total Cost (No. or Value) Rate (incl. tax) (CNY 104) 2006 2007 2008 2009 2010 2011 (CNY 104) I. 投Investment Costs 2,947.40 A Equipment 89.00 1. Desktop Computers 1 set 1.30 12 15.60 2. Laptop Computers 1 set 1.60 12 19.20 3. Printers 1 set 0.40 12 4.80 4. Computer Software (Windows, Office, CAD, Anti-Virus) 1 set 1.50 12 18.00 5. Photocopier 1 set 4.00 2 8.00 6. Scanner 1 set 0.30 8 2.40 7. Digital Camera 1 set 1.50 3 4.50 8. Fax Machines 1 set 0.60 3 1.80 9. Projector and Screen 1 set 4.50 1 4.50 10.TV Set 1 set 0.60 1 0.60

Ofiice Furniture (Table, Chair, etc.) Set 0.80 12 9.60

B. Vehicles 240.00 1. Four-Wheel Drive Unit 60.00 4 240.00

C. Capacity Building 1,511.40 1. Training 776.40 a. Domestic Training (incl. Travel, Board, Accom., etc.) 146.40 i. Construction Management person-day 0.12 90*3 32.40 ii. ADB Procurement Proceedures person-day 0.12 50*3 18.00 iii. Finance and Disbursement person-day 0.12 50*3 18.00 iv. Resettlement and Environmental Protection person-day 0.12 80*5 48.00 v. Non-Structural Measures person-day 0.12 50*5 30.00

b. International Training 630.00 i. Construction Management Procedures person-day 0.25 30*21 30*21 315.00 ii. Non-Structural person-day 0.25 30*21 30*21 315.00

2. Study Tours 735.00 a. Domestic person-day 0.15 40*7 40*7 40*7 40*7 40*7 210.00 b. International person-day 0.35 25*15 25*15 25*15 25*15 525.00

D. Consultant Services 69.00 1. International Consultants a. Project Implementation Specialist person-month b. Procurement and Finance Specialist person-month c. Economic Analyst person-month d. Environment Specialist person-month e. Resettlement Specialist person-month

2. Domestic Consultants 69.00 a. Project Implementation Specialist person-month 1.00 1*6 1*4 1*3 1*3 1*1 17.00 b. Procurement and Finance Specialist person-month 1.00 1*4 1*4 1*3 1*3 1*3 17.00 c. Economic Analyst person-month 1.00 1*4 1*3 7.00 d. Environment Specialist person-month 1.00 1*4 1*3 1*2 1*2 1*1 12.00 e. Resettlement Specialist person-month 1.00 1*6 1*4 1*3 1*2 1*1 16.00

E. PPMO Staff 366.00 1. Professional Staff 279.00 a. Director 45.00 i. Director (Full-Time) person-month 0.40 1*12 1*12 1*12 1*12 1*12 24.00 iii. Vice-Director (Full-Time) person-month 0.35 1*12 1*12 1*12 1*12 1*12 21.00

b. Administration 36.00 i. Administration Offical person-month 0.30 2*12 2*12 2*12 2*12 2*12 36.00

c. Finance Department 36.00 i. Financial Officer person-month 0.30 2*12 2*12 2*12 2*12 2*12 36.00

d. Engineering and Procurement Department 108.00 i. Senior Engineer person-month 0.30 3*12 3*12 3*12 3*12 3*12 54.00 ii. Procurement Officer person-month 0.30 3*12 3*12 3*12 3*12 3*12 54.00

e. Environment and Resettlement Department 54.00 i. Environment Officer person-month 0.30 1*12 1*12 1*12 1*12 1*12 18.00 ii. Resettlement Officer person-month 0.30 2*12 2*12 2*12 2*12 2*12 36.00

2. Support Staff 87.00 a. Secretary person-month 0.25 1*12 1*12 1*12 1*12 1*12 15.00 b. Translator person-month 0.30 2*12 2*12 2*12 2*12 2*12 36.00 c. Driver person-month 0.15 4*12 4*12 4*12 4*12 4*12 36.00

F. Temporary Staff 72.00 Design Institute and/or Other Agencies person-month 0.30 4*12 4*12 4*12 4*12 4*12 72.00

G Office Operations 180 150 100 90 80 600.00

II. Recurrent Costs b/ 50% 43 44 45 48 50 230.00

29 The PPMO has generally planned for implementation of the project without direct support from an international consultant. The proposal is to engage both domestic consultants and/or domestic monitoring and training companies to help PPMO and the LPMOs develop their own internal capacity to implement the project. ADB has recognized the basis for this confidence, through the implementation of several foreign loans projects (Yangzte Dike Strengthening (WB), Donting Lakes Hydraulic Modelling (WB), and the Donting Lake Cities flood control projects (JBIC). Development of a PMMS is in progress.

SOGREAH – July 2005 PAGE 165 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 13: ECONOMIC AND FINANCIAL ANALYSIS

1. INTRODUCTION

The Hunan Flood Management Project (HFMP) is designed to improve flood management in 36 county and municipal cities distributed in the mountainous areas of the four main river basins in Hunan Province using a combination of structural measures including embankments, reservoirs, dams, sluice gates and pumping stations, and non- structural measures to strengthen the flood warning systems of the participating cities. As a sector-like project, a preliminary selection of 36 candidate subprojects for inclusion in the overall project was made based on a number of criteria including the availability of proposals for flood control projects, the willingness of the cities to participate in the project, and their capacity to repay. To demonstrate likely outcomes of the project, eight core subprojects were selected, in agreement with the Hunan Provincial Government, from the long-list of subprojects to reflect the range of possible situations including at least one subproject from each of the four river basins, one subproject in a poverty county, one subproject in an ethnic minority county, and one subproject in an area with anticipated environmental issues. The core subprojects include: Leiyang City, Loudi City and Yongzhou City all in Xiangjiang river basin; Huaihua City, and Chenxi County in Yuanjiang river basin; Xinhua County and Wugang City in Zijiang river basin; and Sangzhi County in Lishui river basin. An overview of the general approach for the economic analysis is presented below and results are presented for each of the eight subprojects. Detailed results for individual subprojects are set out in the supplementary appendixes for the individual Subproject Feasibility Study Reports (Supplementary Appendix C).

Benefits and costs are first estimated in financial values and are then converted to economic values in order to examine the economic viability of the core subprojects. Since the local authorities that will own the flood control structures financed under the proposed project do not generate revenue directly from the flood protection services and do not operate them as financially independent entities, financial analysis of the subproject investments, either in the form of net present value of internal rate of return, does not provide relevant indicator of subproject sustainability from the perspective of the local authority. Rather the issue of financial sustainability is addressed through investigation of

SOGREAH – July 2005 PAGE 166 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT the financial resources available to each local authority to cover the local currency costs of the subproject during implementation and subsequently for loan repayment and operation and maintenance (O&M). This is compared to the current revenue-raising capacity of the authority.

The benefits from subproject implementation are assessed as the increased protection that will be provided by the proposed investments as compared to that offered by the current situation. The current levels of protection vary by subproject, and even within individual subprojects, and need to be individually assessed. For the with project situation, the anticipated level of protection provided is for a 20-year return period flood in the case of county-level cities and a 50-year return period for municipal level cities. Some authorities also anticipated improved protection against localized inundation (waterlogging) and this is included as necessary. Benefits from non-structural are not included since the extent of the interventions is considered minor.

SOGREAH – July 2005 PAGE 167 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. ECONOMIC PRICING

Financial prices used in the analysis were identified through careful review of the cost estimates developed by the provincial and local design institutes for the initial feasibility studies, including estimates of unit costs and estimated quantities. Where discrepancies were located these were cross-checked with the original estimates and verified with the design institutes. The quantities were similarly checked by the consultant team. In order to assess each subproject’s contribution to the Chinese economy it is necessary to convert financial values to their economic equivalents. Economic valuations exclude transfers from one part of the economy to another (i.e. taxes, duties, and subsidies)30 and attempt to facilitate to facilitate the comparison of project benefits and real opportunity costs to the economy by translating all prices into a common undistorted footing. Basic assumptions used in the economic part of the analysis include:

• The use of a domestic price numeraire.

• Values are expressed in constant mid-2004 prices (the time of preparation of the original feasibility studies) so as to exclude inflation.

• The PR Chinese Yuan (CNY), or Renminbi, is the unit of account. The exchange rate used is CNY 8.28 per US dollar.

• The economic benefits of the subprojects are estimated as the annualized economic value of damages avoided through implementation of the subprojects.

• For non-traded goods a standard conversion factor (SCF) of 0.926 and a shadow wage rate factor (SWRF) for unskilled labor of 0.90 are used.

• Transfer payments such as taxes, duties and subsidies are excluded in the estimation of economic values.

• Based on the extent of taxes, non-traded goods, and unskilled labor, conversion factors are estimated determining the economic value of subproject benefits based on the losses avoided to civil works, material, equipment, and others. The estimated conversion factors are 0.89, 0.93, 0.88, and 0.87, respectively.

30 National level taxes and duties are excluded from the cost estimates since the subprojects are anticipated to be excluded from these due to their strategic importance. However, local taxes on purchases of equipment and vehicles, as well as land tax as a part of resettlement costs are included.

SOGREAH – July 2005 PAGE 168 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

• All costs that are incurred prior to loan appraisal are treated as sunk costs and costs expected to be incurred between loan appraisal and loan effectiveness are treated as Year 1 costs.

• The economic value of incremental O&M costs is estimated as 5% of the incremental costs of civil works, equipment, and vehicles, including physical contingencies.

SOGREAH – July 2005 PAGE 169 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3. CORE SUBPROJECTS

The eight core subprojects are located throughout Hunan Province and are designed both to construct new flood protection infrastructure and to upgrade existing infrastructure so as to provide the level of protection stipulated for each city. Since the subprojects are concentrated in urban areas, the main benefits are anticipated to accrue to urban infrastructure including state-owned and private factories, houses, and public infrastructure and to include significant reductions in the losses of production and inventory. Agricultural benefits are relatively minor being largely related to rice and vegetable crops.

Based on information from the local development plans the populations of all of the cities is expected to increase rapidly due to the urbanization process that is progressing throughout the province and the proposed interventions are expected to provide the opportunity for increased land values and rapid urban development within the protected areas. However, in the absence of detailed plans and cost estimates for such development it is not possible to precisely estimate the overall financial and economic benefits. The benefits of each subproject were therefore estimated based on the existing population, infrastructure, production and land use to be protected and an annual increase of 3% in real terms applied to the value of assets protected.31 If the protected area is developed as anticipated, the estimated benefits are likely to be extremely conservative.

3.1. BENEFITS

Only direct and quantifiable benefits are included in the estimation of subproject benefits and these predominantly relate to protection from flooding. In four subproject areas – in particular Huaihua City, Loudi City, Sangzhi County, and Yongzhou City – the local authorities report direct benefits from localized inundation and these are included in the estimated benefits. 32 Information for estimation of the financial damage caused by flooding is obtained from a combination of the local (city-level) flood control office and the design institute responsible for preparation of the original feasibility study. Information has

31 Information all of the subproject areas indicates that the local economy is currently growing significantly faster than the national economy, and that this growth will be further accelerated by the project.

32 Wugang City authorities report that they expect to obtain some benefits but that these have already been included in the flood benefits. Consequently no separate estimate is provided.

SOGREAH – July 2005 PAGE 170 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

been confirmed by field visits to each of the subproject locations. Direct benefits are estimated for a number of categories including farm land differentiated into rice fields, vegetable land and waste land33; houses differentiated by type of construction, factories and enterprises including structures, equipment, inventory, and lost production; public assets including public buildings, roads, railways, parks, etc.; and population affected. The extent of damage in each category, and hence the potential benefits from damage avoided, is estimated for floods with various return periods including the current and planned levels of protection and these estimates converted to their economic values by applying the specific conversion factors. The annualized value of damage avoided can then be estimated by using a triangulation procedure to estimate the area under the damage curve between the current and planned levels of protection.

Damage from localized inundation is estimated from local authority records of the extent of damage to different types of infrastructure and the area affected. Based on the reported return periods for the storms causing the inundation, and annualized value for the area affected is estimated. The annualized economic benefits from each of the subprojects are summarized in Table 13-1. The overall annualized economic benefits from the eight core subprojects are estimated at CNY 140.1 million, comprising CNY 131.1 million for flood control and CNY 9.0 million from reduction in inundation.

TABLE 13-1: ANNUALIZED ECONOMIC BENEFITS FOR CORE SUBPROJECTS

Subproject Annualized Flood Annualized Total Benefits Control Benefits Inundation (CNY millions) (CNY millions) Reduction Benefits (CNY millions) Chenxi County Urban Flood 5.43 - 5.43 Control Huaihua City Urban Flood 20.48 2.21 22.69 Control Leiyang City Urban Flood Control 8.29 - 8.29 Loudi City Urban Flood Control 42.18 2.61 44.80 Sangzhi County Urban Flood 9.78 0.56 10.34 Control Wugang City Urban Flood 10.82 - 10.82 Control Xinhua County Urban Flood 12.72 - 12.72 Control Yongzhou City Urban Flood 21.37 3.67 25.04 Control Total 131.07 9.05 140.13

33 Although designated some areas are designated as waste land, they are reported to have some agricultural production that is damaged by flooding.

SOGREAH – July 2005 PAGE 171 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

There are considered to be substantial additional indirect and non-quantifiable benefits that are not included in the analysis. For example, the economic benefit estimates exclude the avoidance of injuries, hospitalization, loss of lives, mobilization of flood- fighting crews, and large-scale emergency evacuation that will occur during major floods. The evaluation also excludes potential losses due to disruption of communications and transportation to areas adjacent to flood-prone zones, and loss of household assets, livestock, and farm machinery. Significant non-quantifiable benefits are also envisaged from the major improvements to the City environment and provision of recreational areas along the embankments. The EIRR therefore provides a conservative estimate of the true social and economic benefits of the subproject.

3.2. COSTS

The cost components for each of the subprojects are limited to the costs of flood control infrastructure, flood management (non-structural costs) and local subproject management. The cost of provincial-level project management, which accounts for about 1% of project base costs, is not included. Table 13-2 summarizes the base financial cost by major expenditure account for each of the core subprojects. The detailed breakdown by year is shown in Supplementary Appendix E.

SOGREAH – July 2005 PAGE 172 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 13-2: BASE COSTS BY MAJOR EXPENDITURE ACCOUNT FOR CORE SUBPROJECTS (CNY TEN THOUSANDS)

Subproject Civil Equipment Vehicles Environ- Resettle- Project Total Works menta ment Managementb Chenxi County Urban Flood 2,477 382 41 169 177 522 3,768 Control Huaihua City Urban Flood Control 12,137 634 90 426 2,319 1,888 17,494 Leiyang City Urban Flood Control 3,327 265 33 301 2,131 624 6,681 Loudi City Urban Flood Control 21,582 908 90 678 5,425 2,765 31,448 Sangzhi County Urban Flood 5,258 292 33 293 1,376 1,079 8,331 Control Wugang City Urban Flood Control 5,125 607 38 222 1,701 1,053 8,746 Xinhua County Urban Flood 6,628 439 37 218 1,488 999 9,809 Control Yongzhou City Urban Flood 13,499 1,287 58 828 3,699 2,146 21,517 Control Total 70,033 4,814 420 3,135 18,316 11,075 107,809

a Includes Environmental management and monitoring, soil and water conservation, and capacity building

b Includes incremental staff, research and design, and recurrent costs of subproject management

The financial subproject costs are converted to economic values by expenditure account and year using the Costab program.

3.3. ECONOMIC ANALYSIS

3.3.1. ECONOMIC RETURNS

The economic analysis assumes an asset life span of 40 years following completion of subproject construction and an incremental O&M cost of 5% of the investment in civil works, equipment and vehicles. This is considered conservative for the types of structures built if they are properly maintained.

The results of the economic analysis of the eight core subprojects are summarized in Table 13-3. The economic internal rate of return (EIRR) ranges between 12.2% for Sangzhi County and 14.0% for Chenxi County. The narrow range in results is largely as expected due to the similarities between the subproject areas and the types of intervention proposed. The economic net present values (ENPVs), assuming a 12% economic opportunity cost of capital, range between CNY 1.3 million for Sangzhi County and CNY52.8 million for Loudi City. The main reason for the wide range in ENPVs is the wide range in subproject investment costs. However, all of the core subprojects are concluded to be economically viable.

SOGREAH – July 2005 PAGE 173 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 13-3: ECONOMIC ANALYSIS OF CORE SUBPROJECTS Subproject EIRR ENPV @12% discount (%) (CNY millions) Chenxi County Urban Flood Control 14.0 7.39 Huaihua City Urban Flood Control 12.7 11.02 Leiyang City Urban Flood Control 12.8 5.09 Loudi City Urban Flood Control 13.7 52.76 Sangzhi County Urban Flood Control 12.2 1.30 Wugang City Urban Flood Control 13.6 11.75 Xinhua County Urban Flood Control 13.7 13.81 Yongzhou City Urban Flood Control 12.3 4.94

SOGREAH – July 2005 PAGE 174 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

4. SENSITIVITY ANALYSIS

The economic analysis of the subprojects is based on the assumption that costs and benefits over the project life will be as expected. The future, of course, will not perfectly follow that pattern, particularly in the case of flood control projects where annualized values represent only the aggregate of flooding that is expected to occur in the future. There is no way to tell if the one in 20 year flood will occur next year or in ten years, or indeed if it will occur at all during the next 30 years. It is useful to examine some of the risks to check what impact they might have on the economic viability of the subprojects. While ideally these risks should relate to specific items such as the impact of exchange rate changes or the impact of cost increases for specific items, the complexity of the subprojects precludes such detailed analysis. Sensitivity tests are therefore conducted for standard parameters including the impact of a 10% cost increase, a 10% benefit decrease, a 10% cost increase and 10% benefit decrease combined and a one-year lag in benefits. The results of the sensitivity tests (Table 13-4), and related sensitivity indexes and switching values (Table 13-5) indicate that the core subprojects are in general sensitive to both cost increases and benefit decreases. Only four of the subprojects – Chenxi County, Loudi City, Wugang City and Xinhua County – will remain viable if either the costs increase by 10% or the benefits decrease by 10%. If both of these changes occur together none of the subprojects will remain viable. A one-year lag in subproject benefits will have a similar impact with the same four subprojects remaining viable. Table 13-5 suggests that all of the subprojects are sensitive to both cost increases and benefit decreases. However, the low probability of such cost overruns should be fully acknowledged.

TABLE 13-4: SENSITIVITY TESTS FOR CORE SUBPROJECTS Subproject 10% Cost Increase 10% Benefit 10% Cost Increase & 1-yr Lag in Decrease 10% Benefit Decrease Benefits EIRR ENPV EIRR ENPV EIRR ENPV EIRR ENPV Chenxi County 12.7 2.98 12.6 2.24 11.4 (2.17) 12.4 1.73 Huaihua City 11.6 (7.94) 11.4 (9.04) 10.4 (28.00) 11.4 (10.97) Leiyang City 11.7 (1.97) 11.6 (2.48) 10.6 (9.54) 11.5 (3.21) Loudi City 12.5 17.19 12.4 11.92 11.3 (23.64) 12.2 7.94 Sangzhi County 11.1 (7.99) 11.0 (8.12) 9.9 (17.41) 10.9 (9.04) Wugang City 12.3 2.64 12.2 1.47 11.0 (7.64) 12.1 0.48 Xinhua County 12.4 3.75 12.3 2.37 11.1 (7.69) 12.1 1.28 Yongzhou City 11.1 (17.29) 11.0 (17.78) 10.0 (40.01) 11.0 (19.95)

EIRR = Economic Internal Rate of Return; ENPV = Economic Internal Rate of Return

SOGREAH – July 2005 PAGE 175 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 13-5: SENSITIVITY INDEXES AND SWITCHING VALUES FOR CORE SUBPROJECTS Subproject 10% Cost Increase 10% Benefit Decrease SI SV SI SV Chenxi County Urban Flood Control 6.0 16.7 7.0 14.3 Huaihua City Urban Flood Control 17.2 5.8 18.2 5.5 Leiyang City Urban Flood Control 13.9 7.2 14.9 6.7 Loudi City Urban Flood Control 14.8 6.7 12.9 7.7 Sangzhi County Urban Flood Control 71.2 1.4 72.2 1.4 Wugang City Urban Flood Control 7.8 12.9 8.8 11.4 Xinhua County Urban Flood Control 7.3 13.7 8.3 12.1 Yongzhou City Urban Flood Control 45.0 2.2 46.0 2.2 SI = Sensitivity Index; SV = Switching Value

4.1. USER CHARGES

Given the nature of the proposed investments and the fact that the local authorities do not operate their flood protection services as a commercial business, it is considered more appropriate to assess financial viability in terms of the capacity of the local authority that will implement and own the flood control structures to cover the local currency costs of implementation, together with the subsequent loan repayment and incremental O&M costs. As the first stage information has been sought from the financial bureaus of each of the local authorities implementing the core subprojects (Table 13-6).34 Although shown here for only 2004, data are presented for 2001 to 2004 in Supplementary Appendix C.

For all of those authorities providing data Table 6 indicates that in most cases central and provincial transfer revenue contributes about 50% of total revenue, while for Sangzhi County it is around 80%. The contributions of the flood control security fund and urban construction and maintenance revenue typically represent only a very small part of total financial revenue. By contrast land sale and exploitation revenue can provide a significant contribution to financial revenue, although there is concern in some areas as to the sustainability of such high level of exploitation. Examination of financial over the past four years suggests that all sources of revenue are growing rapidly, and are likely to continue to do so in the immediate future.

34 No information was available from Loudi City. However, since this is clearly the wealthiest of the subproject areas it is considered most likely to be able to afford the investment.

SOGREAH – July 2005 PAGE 176 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 13-6: FINANCIAL STATUS OF LOCAL AUTHORITIES IMPLEMENTING CORE SUBPROJECTS (2004)

(CNY million) Local Authority Total Local Central Flood Urban Land Sale & Financia Financia & Control Construction Exploitation l l Provinci Security & Revenue Revenue Revenue al Fund Maintenance Transfer Revenue Revenue Chenxi County 170.0 78.1 91.9 1.05 0.95 1.70 Huaihua City 470.9 229.2 241.7 3.80 16.20 21.92 Leiyang City 350.0 n.a. n.a. 2.31 13.97 4.52 Loudi City n.a. n.a. n.a. n.a. n.a. n.a. Sangzhi County 270.0 47.0 223.0 1.30 1.20 3.40 Wugang City a 128.0 n.a. n.a. 1.08 48.20 n.a. Xinhua County 481.2 245.0 236.3 2.77 4.29 3.81 Yongzhou City 610.0 n.a. n.a. 3.30 35.00 240.00

a Data for 2003.

In order to assess loan affordability the disbursement schedule for each subproject is derived from a combination of Costabs and an estimated semi-annual repayment of the loan assuming that the subproject authorities will receive their portion of the overall loan on the same terms and conditions as the main loan, that is with six years grace period, interest being capitalized for six years, and repayment over 20 years. Table 13-7 summarizes the key data derived from this analysis. In general the most critical period is identified as that during subproject implementation, when local authorities will need to ensure the availability of sufficient revenue to finance the local currency costs. The critical period for loan repayment will be year 7, when interest is at its highest. However, it is likely that O&M costs will be marginally lower that projected during these early years so that some trade off may be possible.

Based on an assessment of the financial income of the local authorities and the financial requirements of the subprojects, together with information on the status of local financial planning (see Supplementary Appendix C) an assessment is made of loan affordability for each subproject. In most cases it is assessed as good since either there is clearly sufficient revenue to cover the incremental costs or the local authority has provided a good indication of the proposed financing plan. In two cases loan affordability has been assessed as satisfactory due to some limitations in the availability of information, which leads to the conclusion that the authority should carefully reconsider its position. In one case, Leiyang City, the financial situation appear to be marginal since there appear to be some constraints in the availability of finance but at the same time the city does not appear to have reviewed the situation and made appropriate plans.

SOGREAH – July 2005 PAGE 177 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 13-7: LOCAL CURRENCY FINANCING, LOAN REPAYMENT REQUIREMENTS FOR CORE SUBPROJECT AUTHORITIES, AND ASSESSMENT OF LOAN AFFORDABILITY Local Local Currency Annual Payments Loan Authority Requirements (CNY millions) Affordabilit (CNY millions) y Local Estimated Maximum Maximum Incrementa Currency Annual Fund Loan Loan l O&M Cost Costs a Availability Outstandin Repayment g Chenxi County 27.8 2.9 b 21.16 2.11 1.59 Satisfactory Huaihua City 139.1 25.7 c 80.75 8.65 7.07 Satisfactory Leiyang City 57.7 8.9 24.07 2.49 1.99 Marginal Loudi City 253.9 30.0 d 139.94 14.73 12.42 Good Sangzhi County 68.3 6.0 b,d 35.46 3.72 3.07 Good Wugang City 64.8 13.3 47.29 4.08 3.17 Good Xinhua County 71.2 3.4 b,d 54.60 4.74 3.91 Good Yongzhou City 158.2 40.0 e 117.75 10.19 8.16 Good

a Excluding price contingencies

b Local Authority is developing plans to raise funds from other sources.

c Includes CNY 19.5 million annually from sale and exploitation of land.

d Excluding revenue from sales and exploitation of land.

e Based on plans developed by the local authority

SOGREAH – July 2005 PAGE 178 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

APPENDIX 14: SOCIAL AND POVERTY IMPACT ASSESSMENT

1. GOVERNMENT POLICIES ON POVERTY REDUCTION

Since 1994, China has been implementing a poverty reduction program in counties officially classified as poor by national or provincial standards. These counties are located in the remote mountains, desert and loess plateau regions, reservoir catchments, areas of frequent disaster, and former revolutionary bases. Poor transport, environment degradation, slow economic growth, lack of drinking water, and extremely harsh conditions for production and livelihood, where there are ethnic minority concentrations, characterizes these areas. In Hunan Province, most of the rural poverty is concentrated in 38 poverty counties, located in the western and southern mountainous areas. Targeting poverty villages, increasing participation, and addressing both income poverty and non- income poverty are the main features of the new strategy for poverty alleviation in the new century.35

Increasing the emphasis on urban poor is another development of the Chinese government strategy for fighting poverty in the new millennium. China has no official urban poverty line, but there is a variety of urban minimum living standards set by different city governments, under which supplement living allowances are provided. The responsibility for financing and delivering such assistance to the urban poor lies primarily with the city government. The urban poor includes laid off workers, landless farmers, and vulnerable people (e.g. disabled, elderly, households headed by women, single parent families). In Hunan, under the poverty guidelines set by different cities and counties, about 1.34 million urban people are deemed to be poor, accounting for 6% of the provincial urban population (2003).3637 The main alleviation effort for urban poverty is focused on providing financial relief, which is supplemented with job information and skills based employment training by the different local governments.

35 See official document of Guideline of China’s Poverty Alleviation: 2001-2010.

36 It ranges from CNY 120 in poor counties to CNY 200 in provincial capital – Changsha.

37 All indicated values are taken as year 2003, as presented in the 2004 Hunan Statistical Yearbook, unless otherwise stated.

SOGREAH – July 2005 PAGE 179 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

2. SOCIOECONOMIC CHARACTERISTICS OF THE PROJECT

AREAS (PA)

The Project will finance up to 36 subprojects covering the four river basins in Hunan Province. They are Xiangjiang, Zishui, Yuanjiang and Lishui river basins, which account for 84% of the total land area, and 77% of the total population in Hunan. About 15.9 million people live in the urban areas, accounting for 31% of the total population in the river basin. The total gross domestic product (GDP) for the 4 river basins was CNY 347 billion in 2003, accounting for 75% of the whole province. The per capita GDP was CNY 6,770 per person in the basins, which is slightly lower than the provincial average (CNY 6,963).

The proposed subprojects will involve 47 counties, including 19 urban districts, 24 counties and 4 county level cities. These 47 counties (districts, cities) are defined as Project Area (PA) for the Project.38 In 2003, there were 7.18 million households and 25.08 million people in the PA, with 34% in urban areas, ranging from 22% in Lishui to 40% in Xiangjiang. The total GDP in the PA was CNY 157.37 billion in 2003, averaging CNY 6,274 per capita, which is 93% of the basin average, which ranges from CNY 8,180 in Xiangjiang to CNY 3,647 in Yuanjiang. The average per capita farmland in the PA was 1.14 mu per rural person, which is 12% less than the provincial average (1.3 mu). The average rural per capita income was CNY 2,358 (2003), which is about 5% lower than the provincial average. (Table 14-1).

Compared with the provinces in the impoverished western region of China, much of Hunan is relatively well-off, and the number of people classified as in absolute rural poverty was 1.1 million or 2.5% of the provincial rural population (2003), which is less than the national average (3.4%). However, there is still many others who endure income poverty in the rural areas of Hunan. Using the new poverty line value of CNY 900 annual income per capita, it is stated that there are 4.1 million rural poor in Hunan (2003), which accounts for 9.3% of the rural population. Most of the poverty is concentrated in the western mountainous areas, which is characterized by poor infrastructure and a concentration of ethnic minorities. Of the project counties, there are 15 poverty counties, accounting for 32% of the PA counties. A large portion of the rural poverty is concentrated in these poverty counties. For example, of the 1.76 million rural poor in the PA, which includes 2,371 poverty villages, 90% of the people and 83% of the poverty

38 Disparity between the number of subprojects and the number of project counties is because some subprojects are located in prefecture level municipalities and often involve more than 1 urban district.

SOGREAH – July 2005 PAGE 180 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

villages are located in the 15 poverty counties. The poverty incidence among the poverty counties was 20.6%, which is 2.8 times the average; and rural per capita income was only CNY 1,454 in the poverty counties or 62% of the PA average. (Table 14-2)

TABLE 14-1: FEATURES OF THE PROJECT AREAS (MILLION) Items Hunan Four River Project Percent of Poverty Percent Basins Areas River Counties of PA Basins in PA (PA) Number of Counties 122 99 47 47.5% 15 31.9% Total Population 66.63 51.30 25.08 48.9% 9.56 38.1% Urban Population 22.32 15.91 8.61 54.1% 1.86 21.6% Rural Population 44.31 35.39 16.47 45.9% 7.70 46.8% ％ Urban Population 33.5% 31.0% 34.3% 19.5% Minority Population 6.9 6.8 3.1 45.6% 2.4 77.4% % Minority Population 10.5% 13.3% 12.2% 27.10%

Total GDP (billion CNY) 463.9 347.3 157.4 45.3% 32.2 20.5%

Per Capita GDP (CNY) 6,963 6,770 6,274 92.7% 3,368 53.7%

Area (1,000 km2) 211.83 178.69 73.22 41.0% 39.17 53.5%

Total Farmland (1,000 ha) 3,830.0 n.a. 1,248.3 516.0 41.3%

Per capita farmland (ha) 1.30 n.a. 1.14 1.01 88.6%

Source: Hunan Provincial Statistical Yearbook 2004.

TABLE 14-2: POVERTY CONDITIONS IN THE PA AND THE FOUR RIVER BASINS (2003) (MILLION)

Percent Percent River Project Poverty Items Hunan Project Basins Areas of River Counties Basin Areas No. of Counties 122 99 47 47.5% 15 31.9% No. of Poverty Counties 38 35 15 42.9% 15 100.0% No. of Minority Counties 20 20 9 45.0% 8 88.9% Total Population 66.63 51.30 25.08 48.9% 9.56 38.1% Urban Poverty Population 1.34 1.01 0.58 57.4% n.a. Urban Poverty Incidence (%) 6.0 6.3 6.7 Rural Poverty Population 4.10 n.a. 1.76 1.59 90.3% Rural Poverty Incidence 9.3% 10.7% 20.6% Rural Per Capita Income 2,474 n.a. 2358 1,454 61.7%. No. of Poverty Villages 5,497 5,009 2,371 47.3% 1,971 83.1%

Source: Hunan Provincial Statistical Yearbook 2004.

SOGREAH – July 2005 PAGE 181 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

Since 1993, under the National 8–7 Poverty Reduction Plan39, substantial progress has been made to reduce poverty in Hunan. About 3 million rural poor (under CNY 627 per annum) have seen their food and clothing problems resolved between 1990 and 2003. This has led to a decline in the overall poverty incidence from 13% to only 2.5% for the rural population of the whole province. Such reduction is not uniform throughout the province, as poverty still remains severe in western Hunan. Since 2001, under a new national poverty strategy, the focus for the provincial poverty alleviation effort has changed from one of assisting poverty counties to one of targeting the poverty villages, covering both income poverty and non-income poverty among 5,497 poverty villages in Hunan.

However, since the proposed flood control works will be placed in the urban areas of project cities and counties, the project beneficiaries (people in the project protected area (PPA)) may exclude a substantial number of the rural poor. According to analysis of the 8 core subprojects, the PPA involves less than 1% of the total project area, with less than 10% of the total project population in the project counties. The PPA population includes 3.2% of the rural population and 30.4% of the urban population in the project area.40 Among all the beneficiaries for the 8 core subprojects (593,393 persons), 25% are rural and 75% are urban, which contrasts with the population distribution in the project counties. In terms of poverty incidence, there are 53,900 poverty persons in the PPA, accounting for 9.1% of the PPA population. This includes 46,068 urban poor (85%) and 7,840 rural poor (15%). This gives a rural poverty incidence rate of 5.3% and an urban poverty incidence rate of 10.3%. In other words, the project beneficiaries include about 1.5% of the rural poor and 32% of the urban poor in the project counties.41 (Table 14-3).

39 National 8-7 Poverty Reduction Plan refers 7 years (1993-2000) used to solve basic food and clothing problems for 80 million absolute rural poor in China.

40 Due to lack of information on the project protected areas among the 28 non-core subprojects, analysis of the poverty profile among project beneficiaries has been based on 8 core subprojects.

41 Such difference is expected since villages in the PPA have well developed infrastructure and easy access to markets. The small number of rural poor is mainly those vulnerable families who lack skill and/or ability for labor type work, family members having serious medical problems or disabled, and many children of school age.

SOGREAH – July 2005 PAGE 182 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

TABLE 14-3: POVERTY CONDITIONS IN PROJECT AREAS AND PROJECT PROTECTED AREAS FOR 8 CORE SUBPROJECTS

Items Project County Percent Protected Areas Percent PPA as Percent (PA) (PPA) of PA Total Population 6,044,100 100.0% 593,393 100.0% 9.82% Rural Population 4,578,100 75.7% 147,516 24.9% 3.22% Urban Population 1,466,100 24.3% 445,877 75.1% 30.41% Rural Poverty 529,900 11.6% 7,838 5.3% 1.48% Urban Poverty 134,600 9.2% 46,068 10.3% 34.23% Total Poverty 663,500 11.0% 53,906 9.1% 8.12%

Source: Hunan Provincial Statistical Yearbook 2004 and filed survey.

Using the urban poverty line for the project cities and counties, there are 578,340 urban poor in the project counties, accounting for 6.7% of the project area urban population.42 About one third of these poor urban residents will be project beneficiaries, accounting for about 10.3% of all urban residents in the PPA. According to the statistics from Hunan Civil Affairs Department, about 70% of the urban poor are either former or current employees of state owned and collectively owned enterprises. Based on a survey of selected urban communities, most of the urban poor tend to live in the old urban neighborhoods with dilapidated houses and poor infrastructure. The majority of the residents of these areas do not have regular jobs and most of their income comes from small business, daily labor, and the minimum living allowance subsidy provided by the local governments. The main approach taken to reducing poverty is to provide a minimum living allowance so that the average monthly income is at or above the urban poverty line. To supplement their cash income, the urban poor are also entitled to a range of subsidies for key utilities, which include exemption from paying education fees, an allocation of up to 4 m3 of free water supply per family per month, and free electricity supply up to 6 kilowatt hours per month per family.

The frequent floods put a heavy financial burden on local communities. In addition to the severity where lives are lost, the floods often cause damage to houses and people’s personal belongings, inundate crops, disrupt or even destroy small businesses, cause the temporary if not permanent shut down of factories, and inflicts damage on public facilities and utilities (markets, transport, power supply, communications). This leads to substantial direct and indirect economic loss to the local economy and the affected city residents. Because of the accelerated economic development over the past two decades, the overall economic loss due to floods in the four river basins has continued to grow, increasing from CNY 0.48 billion in 1980 to CNY 23.4 billion by the end of the 1990s. The damage and loss due to inundated farmland and impacts upon the affected population

42 The adopted urban poverty line in 8 core subprojects ranges from CNY 120 per person per month in Sangzhi to CNY 156 per person in Loudi City,

SOGREAH – July 2005 PAGE 183 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

has also increased dramatically over the same period (Table 14-4).43 For most rural and urban people, particularly for the most vulnerable groups, serious and regular flood damage, with attendant physical and economic loss, is a major factor that ensures they remain impoverished or are even pushed into impoverishment. In some cities and county towns, about one third of the urban poverty is caused by frequent floods. In fact, among the urban poor, serious illness, loss of jobs, single parenthood, and flood damage are the main contributory factors that lead to poverty.

TABLE 14-4: FLOOD DAMAGES AMONG FOUR RIVER BASINS IN HUNAN IN SELECTED YEARS

Affected Population Inundated Farmland Flood Damages (CNY million) Year (million) (1,000 ha) Rural Urban Total 1980 437.7 340.3 139.0 479.3 4.45 1993 1,085.5 3,840.4 1,453.6 5,294.0 15.65 1996 1,322.2 25,176.9 13,419.1 38,596.0 27.2 1998 1,387.6 16,783.9 6,569.9 23,353.8 19.18

Source: Integrated Flood Management Sector Analysis – PPTA Report.

43 In average, each affected person shared about CNY 1,218 to CNY 1,419 of the flood loss in the basin, which is about one year income for most poor families.

SOGREAH – July 2005 PAGE 184 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

3. OVERVIEW OF SOCIAL BENEFITS

The Project will produce social benefits for all residents in the flood-prone area by reducing the risks to personal safety, livelihood, and assets. The main beneficiaries include urban and rural residents, small businesses, industries, and the public sector in the PPA. For rural and urban residents, a reduction in the flood damage to their crops, houses and assets would give them increased opportunity for making more savings from higher future income. Community interviews strongly suggested that the residents forgo investment in higher income activities such as greenhouses and livestock production, and hold back on making house improvements, for fear of the potential loss during floods. Moreover, the need for frequent house reconstruction following floods is a significant drain on the peoples financial resources, and severely restricts their capacity to accumulate savings.

The opportunity for many of the people to participate in the Subproject construction, even as unskilled laborers, will directly increase their opportunity for cash income over the construction period, and this could help them to build their savings and lift themselves above the poverty line and poor conditions in the PPA. The poorer residents will benefit because the improved safety and security provided by the Project will ease their recurrent flood impact costs, whilst also assisting the local government from having to meet financial compensation costs. Data collected from the 8 core subprojects indicates that due to limited revenues, quite a few counties continue to have a low level of government investment in the provision of local social services and infrastructure, particularly drinking water, drainage, roads, and education. Confidence that public infrastructure investment will be more secure will promote future investment to strengthen and build the city and its facilities. The improved business environment will encourage urban development, helping to strengthen local communities and build urban prosperity. For business and enterprises, improved flood protection will reduce the risk and costs from potential flood damage and interruption to business activity, and this should facilitate growth in future company profits, expansion of the business and increased employment opportunities. In turn, as city enterprise and employment expands, local government revenues should also increase, as per relevant taxes, levies and other forms of revenue collection.

In addition to economic benefit, group discussion among stakeholders also identified a range of non-economic benefits that would arise from the Project, These include: (1) a better urban environment and amenity along the river front, due to improved drainage and river bank management; (2) improved transport and access for local residents; (3) provision of a safer environment for the local residents, particularly for children and the elderly; and (4) enhancement of non-farm employment opportunities, by providing current

SOGREAH – July 2005 PAGE 185 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT rural and urban poor with Project construction employment and skill development opportunity and training. Even for those people outside the PPA, a reduction in the flood impacts for the city or county town will mean less interruption to the market activities, and less interruption of government programs and services that are critical activities for assisting the poorest urban and rural residents to improve their own situation in the future.

Although the Project will create an appropriate environment for longer term income generation, the Project will not provide assistance solely to the poor and less fortunate members of the city communities. Effective flood mitigation is based on placing flood and drainage control structures in the most strategic locations so that unwanted inundation and disruption can be minimized. This does not always mean it will involve areas that have the largest proportion of poor residents. Further, the project is not intended to directly support improved income generation capacity development for households, or to directly address the key impediments to poverty reduction in each location. The Project, however, will assist the poor in the following ways: (1) foster community consultation for the planning and design of subprojects and the formulation of resettlement plans, which will enhance the community’s role in developing appropriate measures to restore and/or strengthen income generation opportunities, to deliver compensation, and strengthen overall development capacity for the City and its people through the provision of technical assistance and training; (2) provide adequate compensation to local villages for land loss and house demolition, in accordance with State Council Decree (No. 28) on Land Acquisition, where the adopted compensation will provide affected villages with an opportunity to improve and restore their income and livelihood; (3) provide priority through employment to poor households to participate in constructing and maintaining the project works and other related facilities for the relocated people and local facilities.44

44 In consultation with stakeholders, land acquisition and resettlement was identified as the major negative impact by the Project. The Project has prepared detailed RPs for core subprojects, which will be reviewed and endorsed by local PMOs, and a resettlement monitoring and evaluation system will be set up to ensure smooth implementation.

SOGREAH – July 2005 PAGE 186 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

4. PROJECT EMPLOYMENT IMPACT

Although it might be difficult to quantify the actual increase in income among the poor, it is possible to estimate employment impact brought in by the proposed Project. According to the estimated person-day requirements for the construction of the 8 core subprojects (3.8 million), about 25,500 unskilled labor positions will be created, based on an assumption that each laborer will work for 7.5 months during the construction period. Using an average local rate of CNY 25 per day, a total of CNY 95.8 million will be paid to the temporary laborers. Further, assuming 50% of the laborers (about 12,750 persons) will be selected from the poor (both urban and rural poor), then at least CNY 47.9 million will be earned by the poor during project construction. This will average CNY 3,750 per person, which is about 3 times the average annual per capita income for most poor households. Although project activities are not aimed at income generation, the extra incomes earned from construction work will give households the opportunity to build savings and improve their ongoing farming or future employment situation, finance new income-generating activities, and lower the risk of them falling back into poverty.

SOGREAH – July 2005 PAGE 187 ASIAN DEVELOPMENT BANK - T.A. NO. 4324-PRC HUNAN FLOOD MANAGEMENT PROJECT R4: FINAL REPORT

5. DISTRIBUTION OF PROJECT BENEFITS

The eight core subprojects were analyzed to assess the distribution of subproject benefits to project stakeholders: households, industry and the economy. A study also assessed how the Project directly benefits the poor. Economic analysis showed that the benefits to households were derived primarily from improved employment opportunities, skills development, direct avoidance of flood damage to crops and houses, and the reduced risk of disruption to farming and enterprise activities. Industries will benefit from the reduced risk for damage and interruption to operations, while the public sector will benefit from reduced compensation and restoration work necessitated by flood damage to public infrastructure, flood evacuation, and economic disruption. During construction, laborers will accrue benefits from direct employment opportunities. The public sector will have increased tax income, but will bear most of the investment cost for the project. A small part of the project cost will be recovered through the flood protection fee, to be collected from urban wage earners, small businesses and enterprises who have the necessary income and ability to pay.

SOGREAH – July 2005 PAGE 188