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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 27165-CHA PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$128 MILLION ANDA Public Disclosure Authorized PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$lO MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A GUANGDONG PEARL RIVER DELTA URBAN ENVIRONMENT PROJECT Public Disclosure Authorized May 18,2004 Urban Development Sector Unit China Country Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective January 1, 2004) CurrencyUnit = Yuan(Y) Y 1.00 = US$0.13 US$l.OO = Y 8.0 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS BOT Build, Operate Transfer ICB Intemational Competitive Bidding EA Environmental Assessment IPCAP Industrial Pollution Control Action Plan EMP Environmental Management Plan IST Institutional Strengthening & Training FMS Financial Management System MIS Management Information Systems GEF Global Environment Facility MOF Ministry of Finance GEMC Guangdong Environmental Monitoring NCB National Competitive Bidding Center GDEPB Guangdong Environmental Protection PRD Pearl River Delta Bureau GDFB Guangdong Financial Bureau PSP Private Sector Participation GDPMO Guangdong Project Management Office RAP Resettlement Action Plan GM Guangzhou Municipality SAR Special Administrative Region GP Guangdong Province SBD Standard Bidding Document GPG Guangdong Provincial Government NDRC National Development and Reform Commission GSTC Guangzhou Sewage Treatment Company SEPA State Environmental Protection Agency GTDC Guangzhou Tunnel Development Company SOE Statement of Expenditure GHWMC' Guangzhou Hazardous Waste Management WWTP Wastewater Treatment Plant Center GZPMO Guangzhou Project Management Office Vice President: Jemal-ud-din Kassum, EAPVP Country ManagedDirector: Yukon Huang, EACCF Sector ManagedDirector: Keshav Varma, EASUR Task Team Leader/Task Manager: Thomas Zearley, EASUR FOR OFFIWUSE ONLY CHINA GUANGDONG PEARL RIVER DELTA URBAN ENVIRONMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Global objective 3 3. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 7 C. Project Description Summary 1. Project components 7 2. Key policy and institutional reforms supported by the project 8 3. Benefits and target population 9 4. Institutional and implementation arrangements 9 D. Project Rationale 1. Project alternatives considered and reasons for rejection 11 2. Major related projects financed by the Bank andlor other development agencies 12 3. Lessons learned and reflected in the project design 13 4. Indications of borrower and recipient commitment and ownership 13 5. Value added of Bank and Global support in this project 14 E. Summary Project Analysis 1. Economic 14 2. Financial 15 3. Technical 16 4. Institutional 17 5. Environmental 18 6. Social 20 7. Safeguard Policies 21 F. Sustainability and Risks This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed lwithout World Bank authorization. I 1. Sustainability 21 2. Critical risks 22 3. Possible controversial aspects 23 G. Main Conditions 1. Effectiveness Condition 23 2. Other 23 H. Readiness for Implementation 25 I. Compliance with Bank Policies 26 Annexes Annex 1: Project Design Summary 27 Annex 2: Detailed Project Description 33 Annex 3: Estimated Project Costs 36 Annex 4: Cost-Effectiveness Analysis Summary 42 Annex 5: Financial Summary 53 Annex 6: (A) Procurement Arrangements 57 (B) Financial Management and Disbursement Arrangements 70 Annex 7: Project Processing Schedule 72 Annex 8: Documents in the Project File 73 Annex 9: Statement of Loans and Credits 75 Annex 10: Country at a Glance 79 Annex 11 : GEF - Incremental Cost Analysis 81 Annex 12: STAP Review 88 Annex 13: Project Implementation Schedule 92 Annex 14: Environmental Assessment and Mitigation Measures Summary 93 Annex 15: Resettlement 103 Annex 16: Project Financial Management System 107 MAP@) IBRD No 32949 CHINA Guangdong Pearl River Delta Urban Environment Project Project Appraisal Document East Asia and Pacific Region EASUR Date: May 18,2004 Team Leader: Thomas L. Zearley Sector ManagerDirector: Keshav Varma Sector@): Sewerage (70%), Solid waste management Country Manager/Director: Yukon Huang (20%), Sub-national government administration (10%) Project ID: PO75728 Theme(s): Water resource management (P), Lending Instrument: Specific Investment Loan (SIL) Environmental policies and institutions (P), Pollution management and environmental health (P), Infrastructure services for private sector development (S) - P Global Supplemental ID: PO84003 Team Leader: Thomas L. Zearley Sector Managerhlirector: Keshav Varma Sector@): Sewerage (70%), Solid waste management Lending Instrument: Specific Investment Loan (SIL) (20%), Sub-national government administration (10%) Focal Area: I- International waters Theme@): Pollution management and environmental health Supplement Fully Blended? Yes (P) , Water resource management (P), Infrastructure services for private sector development (S) For LoanslCreditslOthers: Loan Currency: United States Dollar Amount (US$m): 128.00 + Global Environment Facility (GEF) Grant: 10.00 Borrower Rationale for Choice of Loan Terms Available on File: Yes Proposed Terms (IBRD): Variable-Spread Loan (VSL) Grace period (years): 5 Years to maturity: 20 Commitment fee: 0.75% Front end fee (FEF) on Bank loan: 1.OO% GLOBAL ENVIRONMENT FACILITY 7.52 2.48 10.00 Total: 326.12 116.26 442.38 - I - BorrowerlRecipient: PEOPLE'S REPUBLIC OF CHINA Responsible agency: GUANGDONG PROVINCE, through the Guangdong Provincial Finance Bureau's World Bank Project Management Office Address: 26 Cang Bian Road, GuLgzhou, China Contact Person: Mr. Yuchang Zeng, Executive Director General Tel: (86 20) 8333 6405 Fax: (86 20) 833 30007 Email: Expected effectiveness date: 12/01/2004 Expected closing date: 1213 112009 -2- A. Project Development Objective 1. Project development objective: (see Annex 1) 1. The development objective of the project is to assist in addressing the environmental problems of the Pearl River Delta in Guangdong Province and the South China Sea, through the improvement and rationalization of environmental service delivery based on a regional planning approach. 2. Global objective: (see Annex 1) The project's global environmental objective is to improve the environmental condition of the South China Sea's large marine ecosystem (LME), by addressing the major threat of land-based pollution. The Global Environment Facility (GEF) has agreed to help the littoral states manage and sustain the South China Sea's LME to achieve global environmental benefits. With the cooperation ofthe GEF/UNDP/IMO Partnerships in Environmental Management for the Seas of East Asia and the GEFAJNEP Project on Reversing Environmental Degradation Trends in the South China Sea and Gulf ofThailand, GEF-supported analyses have identified land-based pollution as one ofthe most serious trans-boundary threats to the South China Sea, and China's Pearl River Delta as one of its land-based pollution "hot-spots" and the largest source ofland-based pollution emanating from China. By reducing land-based pollution from the Pearl River Delta, the project will help reverse the degradation ofthe South China Sea, and generate trans-boundary environmental benefits for the millions ofpeople whose livelihood and health depend on it. 3. Key performance indicators: (see Annex 1) Key performance indicators relating to the development objective are: (a) Increased percentage of domestic wastewater collection and treatment (b) Increased pretreatment of industrial wastewater before discharge, and relocation of highly polluting industries (c) Increased collection and treatment of hazardous wastes (d) Improved water quality monitoring information, and data sharing for environmental management (e) Increased collaboration between Guangdong and Hong Kong Special Administrative Region (SAR) for environmental management of the PRD and the South China Sea region. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: R2002-0218 (IFCR2002-0224) Date of latest CAS discussion: 1/22/03 CAS Memorandum ofJanuary 22,2003 and Country Program Matrix (FY03-05) The project is consistent with the themes and specific goals of the CAS. It will facilitate the urban transition that is underway in China, by helping to enhance the productivity of cities, create employment opportunities, and improve environmental infrastructure and urban living conditions. Project investments will support the environmentally sustainable development process, by improving the management of water resources and hazardous waste. la. Global Operational strategymrogram objective addressed by the project: The GEF initiative under this project will be one of the first major elements of a planned large-scale, -3- long-term program of GEF co-financed assistance to the littoral states
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