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Technical Assistance Report

Project Number: 40050 June 2006

People’s Republic of : Preparing the Urban Infrastructure Project

CURRENCY EQUIVALENTS (as of 30 May 2006)

Currency Unit – (CNY) CNY1.00 = $0.124 $1.00 = CNY8.08

ABBREVIATIONS ADB – Asian Development Bank CMG – municipal government EIA – environmental impact assessment EMP – environmental management plan FSR – feasibility study report IA – implementing agency JPG – Jilin provincial government JUIP – Jilin Urban Infrastructure Project JWSSD – Jilin Water Supply and Sewerage Development m3 – cubic meter mg – milligram PMO – project management office PRC – People’s Republic of China RP – resettlement plan SEIA – summary environmental impact assessment SRB – Basin TA – technical assistance YMG – municipal government

TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification – Targeted intervention Sectors – Water supply, sanitation, and waste management Subsector – Water supply and sanitation Themes – Sustainable , inclusive social development, environmental sustainability Subthemes – development, urban environmental improvement

NOTE In this report, "$" refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations Group 2 Director General H. Satish Rao, East Department (EARD) Director R. Wihtol, Social Sectors Division, EARD

Team leader S. Penjor, Principal Financial Specialist, EARD

Map 1

118 o 00' 130o 00'E

JILIN URBAN INFRASTRUCTURE PROJECT IN THE PEOPLE'S REPUBLIC OF CHINA N

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Songhua River Basin (water pollution affected areas) National Capital Provincial Capital / H e i l River o n g Watershed Boundary o R o 52 00'N i 52 00'N v e Provincial Boundary X r Yilehuli Mountain I A

O International Boundary

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Boundaries are not necessarily authoritative.

N H

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G Aihui

A G G

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N T O r A r e e v v I i i R N g M R n S o eil n H Y e

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HEILONGJIANG G

Jiamusi

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N T a o Sanjiang Plain ' e r I r R e iv Riv e ua r gh Son H

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Lake Tianchi

S o Wuchang D n g h u a R iv e r INNER Jilin Changchun r ive o R Lia I L I N

LIAONING Changbai Mountain

Shenyang H E B E I

Liaodong Bay 40 o 00'N 40 o 00'N S e a o f J a p a n

Tianjin Bay

118 o 00'E 130o 00'E

06-1352a HR o o 123 00'E 129 00'E

JILIN URBAN INFRASTRUCTURE PROJECT

o IN THE o 46 00'N PEOPLE'S REPUBLIC OF CHINA 46 00'N

Baicheng

BAICHENG

Songhua H E I L O N G J I A N G I N N E R Yushu M O N G O L I A SONGYAN

Dehui Nongan CHANGCHUN

Jiutai

Changchun Jilin

SIPING Shuangyang JILIN

YANBIAN Siping Yanji

Liaoyuan

LIAOYUAN

o Project Area o 42 00'N 42 00'N Provincial Capital Project City Baishan Seat Tonghua River L I A O N I N G Boundary N Provincial Boundary International Boundary

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I. INTRODUCTION

1. During the 2006 Country Programming Review Mission, the Government of the People’s Republic of China (PRC) confirmed the request to the Asian Development Bank (ADB), to provide technical assistance (TA) to prepare the Jilin Urban Infrastructure Project (JUIP). The Fact-Finding Mission (i) visited the project area in April 2006; (ii) discussed technical and socioeconomic issues with representatives of the central, provincial, and municipal governments; and (iii) carried out an initial and social assessment, and rapid environmental assessment. This is based on the understandings reached by the Government and the Mission on the TA objectives, scope, cost estimates and financing plan, terms of reference, and implementation arrangements.1

II. ISSUES

2. Rapid urbanization in the PRC has not only taken its toll on the environment, but has also challenged the capacity of local governments to promote good governance, effective planning and management, sustainable financing, and timely delivery of public services. While progress has been made in building urban infrastructure over the past two decades, this progress is concentrated in the more highly developed eastern and southern coastal plains. The expansion and upgrading of public services is not keeping pace with rapid industrial growth, and rural migration to urban centers is now taking place in the inland regions, in response to government policies to promote economic development and job creation in these areas.

3. in the north and west experience widespread pollution because of (i) discharge of untreated wastewater, (ii) improper management of solid wastes, and (iii) inefficient burning of for heating. Shortages of safe drinking water are common. The Government has classified more than 300 cities as “water short”, 108 as having serious water problems, and more than 60 as being critically short of water. Changchun city is included in the list of cities that are critically short of water. A large number of the cities facing water shortage are in the north of the PRC. The need to cut back on groundwater extraction to sustainable levels because of salinity intrusion and ground subsidence has worsened the water shortage problem. The situation has been exacerbated by the pollution of raw water sources caused by the discharge of inadequately treated agricultural, municipal, and industrial wastewater. Municipal wastewater is a major contributor to pollution of the PRC’s rivers and lakes; the most severe pollution impacts are in the water-deficient northern region of the PRC. Currently, only about 40% of urban wastewater is treated (34% in 1999) and the rest is discharged untreated into rivers and lakes. Cities and in Jilin Province and throughout the PRC must overcome widespread environmental degradation and meet increasing demands for public services if they are to cope with rural–urban migration and assure that their economic development is sustainable.

4. The Songhua River Basin (SRB) is the third largest in the PRC after the Changjiang and basins. Located in Jilin and provinces and in the Autonomous Region of , SRB has a catchment area of 557,000 square kilometers and a population of 62 million. The Songhua is one of the most polluted of the 47 major rivers, contaminated with organic chemicals, heavy metals, and conventional pollutants. Water pollution is a major constraint on sustainable economic development. An ADB cluster TA2 assisted the Government in implementing the transjurisdictional provisions of the Water Pollution Prevention and Control

1 The TA first appeared in ADB Business Opportunities on 17 April 2006. 2 ADB. 2000. Technical Assistance to the People’s Republic of China for Transjurisdiction Environment Management. . 2

Act. To help reduce SRB’s pollution, ADB approved the Songhua River Basin Water Quality and Pollution Control Management TA3, to strengthen the Government’s capacity for its water quality and pollution control management in the SRB. To achieve sustainable wastewater management and protection of water resources, contributing to upstream pollution control in the SRB, ADB approved the Jilin Water Supply and Sewerage Development (JWSSD) project in 2005.4 The JUIP would strongly complement the JWSSD project.

5. The JUIP cities are Changchun and Yanji, which have urban populations of 2.8 million and 420,400, respectively. Changchun, the capital of Jilin Province, is an industrial, communication, and transportation center in the northeast PRC. Pillar industries include (i) automobile and automobile parts manufacture, (ii) agricultural products and by-products refining, and (iii) high-tech manufacturers. Yanji City is the capital of Yanbian Korean , bordering the Russian Federation and the Democratic People's Republic of Korea. It is the economic center of east Jilin Province and is one of the most developed cities in the province, rivaling Changchun and . Key industrial sectors include food, pharmaceuticals, textiles, farm machinery, and bus manufacture. There is a large Korean (60%) in Yanji. are the dominant cultural and economic force in the Yanbian Korean Autonomous Prefecture. The positive impacts of the JUIP on the Korean indigenous peoples are (i) provision of higher-quality and reliable water supply, (ii) reduction in water pollution in local rivers through improved collection and treatment of wastewater, and (iii) significant improvement in urban air quality through a 40% reduction in coal consumption for heating.5

6. All major rivers in Changchun (Yitong and Yongchun rivers) flow into the SRB. In Yanji, Buerhatong River crosses the from west to east and eventually empties into . Jilin Province, therefore, has a critical role to play in wastewater management in the SRB and Buerhatong River. Underdevelopment of wastewater collectors in the wastewater treatment plant service areas in Changchun and Yanji leads to the discharge of untreated wastewater into local rivers. Water quality in the Yitong and Yongchun rivers in Changchun do not meet the lowest class V of the National Water Quality Standard.6 Water quality in the Yanji section of the Buerhatong River has deteriorated from class II to class III because of the discharge of untreated wastewater. The lack of adequate wastewater management degrades local rivers, poses a threat to public , and adversely affects the quality of life in Changchun and Yanji. There is an urgent need to expand the sewer network and wastewater treatment capacity in Changchun and Yangji to improve water quality in the Yitong and Yongchun rivers, and Buerhatong River. There is increased focus on improving the city’s wastewater treatment coverage and capacity to contribute to controlling upstream pollution in the SRB. The ongoing JWSSD project and upgrades will allow Changchun to meet the state target of 70% secondary treatment by 2010.7 It is estimated that the JUIP will help Changchun achieve an 80%

3 ADB. 2002. Technical Assistance to the People’s Republic of China for Songhua River Water Quality and Pollution Control Management. Manila. This completed TA was highly successful. 4 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Jilin Water Supply and Sewerage Development Project. Manila. 5 The anticipated negative impact is temporary local disruption during construction and resettlement impact. Based on severity of the impact, two approaches will be proposed during TA implementation—either through the resettlement plan or a specific action plan that may not entail significant cost. 6 The PRC Environmental Quality Standards have five classes for surface water quality based on their use. (i) class I: water is pristine; (ii) class II: can be used for municipal drinking water supply; (iii) class III: once treated, can be used for municipal drinking water; (iv) class IV: can be used for industrial water supply; and (v) class V: can be used only for industrial cooling water, irrigation, and landscaping. 7 State government policies require that urban environmental pollution and ecological damage be controlled by 2010. Major cities, such as provincial capitals, should attain a wastewater treatment rate of 70% by 2010.

3 wastewater treatment rate by 2012. Yanji municipal government is now constructing a 100,000 cubic meters per day (m3/day) wastewater treatment plant. On completion in 2006, it will have the capacity to achieve 100% treatment of municipal wastewater discharge in Yangji. To ensure that this capacity can be fully utilized, improvements in the wastewater collector system are urgently required.

7. Changchun and Yanji rely primarily on surface water for their water supply. Their per capita production levels are well within the normal range for the PRC.8 Under normal conditions, water demand is expected to exhaust developed capacity in both Changchun and Yanji by 2010. Both cities experienced supply problems during a severe drought in 2004, leading to dangerously low water levels in water supply reservoirs and a resulting loss of effective treatment plant capacity. Changchun and Yanji experienced low water pressure and supply interruptions.

8. Changchun has a domestic solid waste management system featuring (i) domestic9 waste pickup, (ii) extensive informal recovery of recyclables, and (iii) disposal in a managed landfill. Given that the present landfill site will be fully utilized within 18 months, timely construction of a new domestic solid waste treatment facility is urgently needed.

9. Yanji has a central heating plant that services the core. This system services about 15% of the building space (2 million square meters). It is inefficient because (i) the existing distribution system does not allow efficient hot water delivery, and (ii) the plant is an older single-purpose design that fails to achieve the efficiencies possible with newer cogeneration plants (heat and power). The remaining area is heated by about 700 small inefficient boilers, resulting in total suspended particles in the urban area averaging 0.38 milligrams (mg) per m3, more than twice the state environmental standard of 0.15 mg/m3. Yanji will construct a new cogeneration plant10 which is expected to be completed by early 2009, allowing complete coverage of the city with a central heating service. The closure and replacement of the 700 polluting coal-based boilers by the JUIP would result in a major improvement in Yanji’s air quality, which would contribute significantly to public health in Yanji city. However, to fully capture the benefits of this facility, the heating distribution system needs to be upgraded, and treated wastewater effluent is required for plant cooling.

10. Sustainable development requires that Changchun and Yanji strengthen their capacities to manage their utility services to (i) formulate integrated urban plans, and (ii) monitor and enforce environmental regulations. The Jilin provincial government (JPG) has identified a priority list of investment projects totaling $300 million, of which $100 million is proposed for ADB financing. The proposed ensuing multisector urban infrastructure development project (JUIP)—comprising water supply and wastewater management in both cities, domestic solid waste management in Changchun, and central heating in Yangi—will help improve the urban environment and achieve long-term sustainable development in Changchun and Yanji. The JUIP is one step by JPG in a major planning exercise for pollution control on the Songhua River Basin. The JUIP will (i) enhance the quality of water resources; (ii) strengthen water supply, wastewater, and domestic solid waste management; and (iii) improve urban air quality. All components of the JUIP have one common objective—to improve the urban environment and enhance the quality of life in Changchun and Yanji.

8 211 liters per capita per day in Yanji and 327 liters per capita per day in Changchun. 9 Domestic waste in the PRC includes residential and institutional waste. 10 The project proposal for the cogeneration plant was approved by National Development Reform Commission (NDRC) in 1995. In 2003, NDRC confirmed that the 1995 approval was still valid. 4

11. The JUIP is consistent with ADB’s water policy11 and will help the PRC achieve Millennium Development Goal 7, target 10, which establishes the 2015 target of reducing by 50% the proportion of people without sustainable access to safe drinking water and improved sanitation. The JUIP is also consistent with ADB strategic objectives to make markets work more efficiently through infrastructure development and to promote environmental sustainability in the PRC. Over the past decade, ADB increased its involvement in urban development and water resource management in the PRC through its lending and TA operations. The knowledge gained from similar investment projects in Changchun, , , , , Tianjin, , and have been incorporated in the design of the proposed TA.

III. THE TECHNICAL ASSISTANCE

A. Impact and Outcome

12. The expected impact of the project preparatory TA is improved urban environment, and enhanced quality of life in the cities of Changchun and Yanji in Jilin Province. The expected outcome is the agreed design of the JUIP. The design and monitoring framework is in Appendix 1, and the initial poverty and social analysis is in Appendix 2.

B. Methodology and Key Activities

13. The TA will (i) evaluate the JUIP in the context of strategic long-term development plans, the 11th 5-year plan, and alternative strategies for wastewater management and water supply capacity, solid waste management, and urban heating facilities to meet the project cities’ increasing demand; (ii) identify sector investment priorities in each city; (iii) review and assess the feasibility of the selected subprojects based on technical, institutional, environmental, social, economic, and financial assessments; (iv) develop an institutional strengthening component, based on a needs assessment for the implementing agencies (IAs) of the subprojects in each city; and (v) design a corporate development plan for the IAs, based on a financial management assessment. Household surveys will be conducted to address issues of public awareness and preference, willingness to pay, and affordability. The TA will identify stakeholders and develop a participatory strategy for project preparation, design, construction, and operation. Consultation workshops and tripartite meetings will be scheduled strategically during TA implementation.

14. The major assumptions and risks that need to be considered for successful TA implementation include (i) inadequate counterpart support and performance, (ii) lack of adequate and timely provision of necessary data, (iii) delay in submitting required studies, (iv) delays in appointing and mobilizing consultants, and (v) inadequate performance by consultants. Efforts will be made to ensure that competent consultants are recruited on time and that regular performance checks are carried out on their work. The Government has agreed to (i) provide adequate counterpart support, (ii) provide all necessary data when required, and (iii) undertake and update all required studies according to a timetable agreed with ADB. Close coordination among ADB, the JPG, the Executing Agency of the TA, and IAs, and consultants will further mitigate potential risks.

11 ADB. 2001. Water for All: The Water Policy of the Asian Development Bank. Manila.

5

C. Cost and Financing

15. The total cost of the TA is estimated at the equivalent of $630,000. The Government has requested ADB to finance the equivalent of $500,000. The TA will be financed on a grant basis by ADB’s technical assistance funding program. The Government has agreed to provide the balance of $130,000 equivalent in kind through counterpart staff, office space, furniture, administrative support services, and local transport and logistics. Details of the cost estimates and financing plan are in Appendix 3. The Government has been informed that approval of the TA does not commit ADB to finance any ensuing project.

D. Implementation Arrangements

16. A vice governor of JPG will chair the TA steering committee, with members from the Jilin Development and Reform Commission; Jilin bureaus of construction, finance, environment protection, and water resources; and Changchun and Yangji municipal governments. The TA office will be headed by the vice director general of the construction bureau and will include staff from all the abovementioned bureaus to (i) ensure consultants’ access to relevant project information and data, and (ii) liaise with ADB on matters relating to TA implementation. Prior to the start of TA implementation, the Changchun and Yanji municipal governments will establish a similar organization structure, chaired by their vice , to implement the TA. JPG will provide the consultants with a suitably furnished office with utilities, telecommunication access, materials, maps, data, and all required project documents.

17. The TA will be implemented over 5 months from August to December 2006. Total consultants’ input is estimated at 40 person-months: 13.5 international and 26.5 domestic. The consultants will be engaged through a firm in accordance with ADB’s Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers, based on the quality- and cost- based selection method. The consultants will have expertise in water supply, wastewater treatment, domestic solid waste management, heating, financial and economic analyses, institutional and regulatory development, social analysis, resettlement, and the environment. The consultants’ outline terms of reference are in Appendix 4. ADB’s simplified technical proposal approach will be used to select and engage the consultants. TA equipment will be procured by the consultants in accordance with ADB’s Procurement Guidelines, and will be retained by the EA on completion of the TA.

18. The consultants will submit to ADB and JPG, in English and Chinese, the inception, interim, draft final (4 months after commencement of the TA), and final reports, and the summary environmental impact assessment report; and an English translation of the Government’s resettlement plan and its summary. Study findings will be presented in workshops.

IV. THE PRESIDENT’S DECISION

19. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of $500,000 on a grant basis to the Government of the People’s Republic of China for preparing the Jilin Urban Infrastructure Project, and hereby reports this action to the Board. 6 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Data Performance Assumptions and Design Summary Sources/Reporting Targets/Indicators Risks Mechanism Impact Changchun Assumptions Improved urban Water quality of Yitong River Monitoring reports of the • Project design environment and improves to class IV Changchun and Yanji and construction enhanced quality of environmental implemented Wastewater services extended life in the cities of protection and water effectively and to 26,000 rural residents Changchun and Yanji resource bureaus quickly providing protection to Xin in Jilin Province Cheng Reservoira water (contributing to the • Timely provision supply source for Changchun achievement of of project city Millennium financing

Development Goal 7, Wastewater treatment rate in requirements, target 10) Jinyue District of Changchun including Asian is increased from almost zero Development in 2006 to 100% by 2010 Bank (ADB) loan Water supply capacity Risks increased by 300,000 cubic • Urban 3 meters per day (m /day) and development vulnerability to drought ends pressures The existing landfill facility, outpace planned which will be exhausted in infrastructure 2007, will be replaced by a development, new facility with a capacity of especially for 2,600 metric tons/day solid waste Yanji • Water quality of the • Weak Buerhatong river improves to enforcement of class II environmental laws and Coal consumption for heating regulations reduced by one third and total suspended particles meet People’s Republic of China (PRC) air quality standards Urban vulnerability to drought reduced by a water supply capacity increase (60,000 m3/day), wastewater effluent reuse (50,000 m3/day), and non- revenue water control to below 30% Wastewater collection efficiency improves extensions and separation of combined sewers

Appendix 1 7

Data Performance Assumptions and Design Summary Sources/Reporting Targets/Indicators Risks Mechanism Outcome Assumptions Agreed design of Jilin Project design agreed by the Project preparatory • Jilin provincial Urban Infrastructure Government and ADB and technical assistance government Project (JUIP) represents an investment (PPTA) report and (JPG) remains project that is suitable for ADB report and committed to financing recommendation of the JUIP for ADB President (RRP) financing Memorandum of understanding (MOU) signed MOU of loan appraisal • Priorities for by the Government and ADB mission public during appraisal mission Loan documents infrastructure Loan approval and signing investment do Record of loan not change Timely loan disbursement with disbursements minimum loan savings Risks

• Government plans change • The Government plans to seek alternative funding. Outputs Assumptions 1. Analysis of urban Sector analysis completed Inception report and first • Community development plans tripartite review meeting ownership and policies and (second month) developed overall justification of through Midterm report (MTR) JUIP stakeholder fourth month) participation 2. Technical peer Technical review and redesign MTR (fourth month) • Strong support review of subproject completed Second tripartite review from Changchun selection, design, Least cost analysis completed meeting (fourth month) and Yanji costs, etc. government Subprojects are Feasibility study reports are Draft final report (DFR) agencies revised and refined finalized and approved (fifth month) as necessary. • Domestic 3. Analysis of Completed financial MTR (fourth month) feasibility study financing needs, management assessment, reports are Second tripartite review financial financial sustainability translated and meeting (fourth month) management, and assessment, and institutional available early in the PPTA institutional assessment DFR (fifth month) capacities in • Necessary data Changchun and Yanji is made available and social surveys

8 Appendix 1

Data Performance Assumptions and Design Summary Sources/Reporting Targets/Indicators Risks Mechanism 4. Assessment of Completion of household MTR (fourth month) are successfully socioeconomic surveys and other social conducted Second tripartite review impacts of impact analyses meeting (fourth month) Risks subprojects on Completion of detailed beneficiaries, DFR (fifth month) • Assigned economic analyses affected persons, consultants are (willingness to pay, cost and poor and vulnerable not available benefit assessment, economic persons because of internal rate of return, etc.) scheduling 5. Assessment of Completion of surveys in Completed RPs and conflicts involuntary resettlement areas summary RP and draft • Delay in resettlement impacts (third month) resettlement plans completion of the and preparation of RPs developed and approved various technical resettlement plan (fifth month) assistance tasks (RP) caused by 6. Environmental Draft SEIA and EMP are EIAs, SEIA, and EMP staffing, data, impact assessments submitted for review reports and other (EIAs), summary (fifth month) problems environmental impact • Weak assessment (SEIA), coordination and and environmental support provided management plan by the project (EMP) management 7. Institutional JPG and municipal Capacity building plan office of the capacity building plan governments agree to include documented in the DFR Executing and corporate the capacity-building Agency development plan component in the project design and to improve corporate governance in relevant agencies 8. Participatory Stakeholder workshops Stakeholders’ planning process conducted at inception, workshops completed developed and midterm, and final tripartite as planned implemented meetings Survey findings, public Participatory methods used in meetings, and other environmental, social, and participatory methods resettlement work documented in the DFR 9. Investment project Complete financing plan in DFR documentation of proposal for ADB place project costs and financing financing plan Terms, conditions, and covenants of the ADB loan Draft RRP agreed Final report approved by Draft RRP submitted as part of ADB and JPG the final report submitted to ADB (sixth month)

Appendix 1 9

Activities with Milestones Inputs

1. Inception • International Consultants: 13.5 person-months 1.1. Inception report completed (month 1) 1.2. Urban sector review completed (month 2) • Domestic Consultants: 1.3. First tripartite meeting for inception report and first stakeholder 26.5 person-months workshop (month 1)

2. Interim • ADB: $500,000

2.1. Assessment of subprojects in terms of their technical, financial, and • Government: $130,000 economic performance and sustainability (months 2–3) 2.2. Analysis of the subprojects for environment impact, poverty reduction, social impact, and involuntary resettlement (months 2–3) 2.3. Estimation of detailed costs and financing plan and institutional arrangements for different subproject/policy options (months 2–3) 2.4. Development of project design and monitoring framework and monitoring and evaluation system for project (month 3) 2.5. Development of capacity-building component and corporate development plan (month 3) 2.6. Conduct of stakeholder workshop and second tripartite and review meetings (month 3)

3. Final

3.1. Fine-tuning of the technical, financial, economic, environmental, and social assessments based on tripartite discussions (month 4) 3.2 Conduct final stakeholder workshop (month 4) 3.3 DFR and third tripartite meeting (month 5) 3.4 Final report

10 Appendix 2

INITIAL POVERTY AND SOCIAL ANALYSIS

A. Linkages to the Country Poverty Analysis

Is the sector identified as a national Yes Is the sector identified as a national Yes priority in country poverty analysis? priority in country poverty partnership No agreement? No Contribution of the sector or subsector to reduce poverty in the People Republic of China: The Jilin Urban Infrastructure Project (JUIP) will improve the urban environment of the cities of Changchun and Yanji, enhancing the quality of life and health conditions of 3.6 million urban residents. Changchun is the capital of Jilin, and is one of 60 cities facing severe water shortages in the People’s Republic of China (PRC). Yanji is the capital of Yanbian Korean Autonomous Prefecture in Jilin. It borders the Russian Federation and the Democratic People's Republic of Korea. Overall, improvements to water and air quality from the JUIP will improve the quality of life and health conditions, especially of the poor who are most vulnerable to air and water pollution.

B. Poverty Analysis Targeting Classification: Targeted intervention

What type of poverty analysis is needed?

Poverty analysis will be carried out to develop pro-poor design and quantify how the JUIP will help to reduce poverty, and incorporate other social dimensions within the scope of project implementation. The analysis will be conducted following the guidelines in the Asian Development Banks’ (ADB’s) Handbook on Poverty and Social Analysis.

C. Participation Process

Is there a stakeholder analysis? Yes No

Major stakeholders include (i) national, provincial, municipal and, county governments; (ii) water supply, wastewater, solid waste management, and companies; and (iii) project beneficiaries including utility service customers, residents near impacted rivers and neighborhoods, and resettlement- affected persons. Stakeholder analysis, including a household survey, will be conducted during the implementation of the technical assistance (TA).

Is there a participation strategy? Yes No

Three stakeholder workshops will be conducted during the TA implementation. Findings from the household survey will be used as inputs. Public consultation will be carried out by the Executing Agency, officials, design institutes, and others during preparation of the feasibility study, poverty and social assessment, environmental impact assessment, and resettlement plan. Separate consultations with resettlement-affected persons on resettlement and compensation options will be conducted in addition to public consultations. D. Gender Development

Strategy to maximize impacts on women:

ADB’s Policy on Gender and Development will be followed by the Executing Agency during project preparation and implementation. Gender aspects will be incorporated into the design and implementation of some project components, particularly in relation to employment opportunities and the resettlement plan (RP).

Has an output been prepared? Yes No

This will be prepared during implementation of the TA.

Appendix 2 11

E. Social Safeguards and Other Social Risks

Item Significant/ Plan Not Significant/ Strategy to Address Issues Required None

The RP will be prepared following the PRC Land Significant Full Administration Law and ADB’s Policy on Resettlement Involuntary Resettlement. The RP will be Not significant Short disclosed to the public and project-affected

people. Internal and external monitoring None None arrangements will be developed.

Economic and financial analyses will be Significant Yes conducted to assess affordability issues for all Affordability subprojects involving cost recovery through user Not significant No charges.

None

The JUIP will not have any negative impact on Significant Yes labor. Labor Not significant No

None

There is a large Korean ethnic group (60%) in Significant Yes Yanji. Koreans are the dominant cultural and Indigenous economic force in Yanbian Korean Autonomous Peoples Not significant No Prefecture. Koreans migrated to the area 200–300

years ago from the Democratic People’s Republic None of Korea and have thrived there ever since, maintaining their culture and language. The is common in the workplace, including local government offices. Korean is taught in schools and Korean newspapers are widely available. The Korean community maintains close economic ties with the Republic of Korea, and officials with the Civil Affairs Bureau consider the Korean community to be somewhat better off economically than other groups. In Changchun, 96.5% of the targeted population belongs to the Han ethnic group while other ethnic groups have similar customs and economic activities.

The JUIP may have a negative impact on the poor Significant Yes through land acquisition and resettlement Other Risks associated with certain subprojects. The needs of and/or Not significant No vulnerable groups will be addressed in the RP. Vulnerabilities None

12 Appendix 3

COST ESTIMATES AND FINANCING PLAN ($'000)

Total Item Cost A. Asian Development Bank (ADB) Financinga 1. Consultants a. Remuneration and Per Diem i. International Consultants 273.4 ii. Domestic Consultants 91.4 b. International and Local Travel 26.4 c. Reports and Communications 8.0 2. Translation 10.0 3. Equipment and Softwareb 18.0 4. Workshop and Seminar 12.0 5. Surveys 9.0 6. Miscellaneous Administration and 8.0 Support Costs 7. Representative for Contract Negotiations 5.0 8. Contingencies 38.8 Subtotal (A) 500.0

B. Government Financing 1. Office Accommodation and Transport 60.0 2. Remuneration and Per Diem 40.0 of Counterpart Staff 3. Preparation of FSRs, EIAs, and RPs 20.0 4. Workshops and Tripartite Meetings 10.0 Subtotal (B) 130.0

Total 630.0 FSR = feasibility study report, EIA = environmental impact assessment, RP = resettlement plan. a Financed by ADB’s technical assistance funding program. b Including a minimum of three Pentium computers, one photocopier, one scanner, two laser printers, one fax machine, and related software. Source: ADB estimates.

Appendix 4 13

OUTLINE TERMS OF REFERENCE

A. Overview of Requirements

1. Review of Changchun and Yanji’s Comprehensive Urban and Specific Sector Development Plans

1. The consultants will review the comprehensive urban development plan of Changchun and Yanji, particularly with regard to the cities’ overall strategies for sustainable growth and development. They will also evaluate relevant municipal sector development plans and programs pertaining to water supply, wastewater treatment, solid waste management, central heating, and water resources and regional watershed and higher-level planning documents for the Songhua River Basin and Tunmen River, including proposals for pollution control activities on the Songhua River Basin in the 11th 5-year plan. Following the review, programs and projects aimed at improving the urban environment and quality of life in Changchun and Yanji will be identified and assessed in terms of their relative importance and in the context of the proposed Project

2. Policy Discussion and Related Activities

2. The People’s Republic of China (PRC) and Asian Development Bank (ADB) have closely collaborated on several policy-oriented studies and investment projects aimed at promoting sustainable urban development and environmental protection. This partnership has grown substantially and is expected to continue as urbanization accelerates in the PRC. To strengthen the policy content of the Project, the consultants will prepare notes on such policy issues as (i) water, wastewater, solid waste, and central heating service cost recovery and tariff reform; (ii) corporate governance and enterprise reform; (iii) integrated water resources management and water conservation; (iv) environmental regulatory enforcement and monitoring; (v) private sector participation; and (vi) urban poverty reduction and social protection. The consultants will review material prepared under related technical assistance (TA) projects.1 Since the Project also includes a central heating subproject, the consultants will prepare policy notes on central heating planning addressing (i) related environmental issues; (ii) energy conservation; and (iii) system management, operation, and maintenance.

3. Review of Domestic Feasibility Studies

3. The consultants will review domestic project proposals, feasibility studies, environmental assessments, and resettlement plans for all the subprojects, and other related reports used to substantiate the analyses of the feasibility studies.

4. Project Framework

4. The consultants will develop a project design and monitoring framework in consultation with government agencies and ADB. Relevant ADB staff will provide a sample framework that will include performance targets or measurable benefits for the monitoring and evaluation analysis. The consultants will work closely with the Jilin provincial government (JPG), Changchun municipal government (CMG), and Yanji municipal government (YMG) in collecting existing information to serve as baseline indicators—including data on public health, such as

1 ADB. 2000. Technical Assistance to the People’s Republic of China for Transjurisdiction Environment Management. Manila; ADB. 2002. Technical Assistance to the People’s Republic of China for National Guidelines for Urban Wastewater Tariffs and Management Study, Manila; and ADB. 1999. Technical Assistance to the People’s Republic of China for Water Tariff Study II. Manila. 14 Appendix 4 incidence of waterborne and respiratory diseases, which can be attributed to environmental pollution.

5. Reporting

5. The consultants will submit (i) an inception report within 1 month from commencement of the TA, which will describe work completed to date as well as methodologies to be used in the project preparatory technical assistance (PPTA) analysis; (ii) an interim report within 2 months from commencement of the TA, which will (a) describe work completed to date, (b) identify key issues to be resolved, and (c) provide a preliminary analysis for the main areas of analysis (e.g., technical peer review, environment, costing, finance, economics, social, etc.); (iii) a draft final report within 4 months from commencement of the TA; and (iv) a final report 1 month after receiving comments on the draft final report from the Government and ADB.

B. Detailed Tasks by Area of Expertise

1. Team Leadership and Project Management (international - 4.5 person months, domestic – 6 person months).

(i) Prepare a detailed work plan and formulate a project design and monitoring framework that captures the multisector nature of an urban development investment project. (ii) Review and assess all relevant government urban and sector development plans, environmental policies, and the feasibility study reports (FSRs) of all subprojects. (iii) Oversee the detailed peer review of FSRs. (iv) Prepare the project implementation schedule and detailed implementation arrangements. (v) Ensure that crosscutting concerns (resettlement, environment, poverty, social, gender, private sector development, and anticorruption) are rigorously addressed at subproject and project levels. (vi) Liaise and coordinate with the Executing Agency (EA), steering committee, and ADB on project-related matters, such as reporting, TA administration, and counterpart funding. (vii) Ensure the timely preparation of the inception, interim, draft final, and final TA reports and their submission to the Government and ADB.

2. Subproject Analysis: Water Supply, Wastewater Management, and Solid Waste Management (international – 1 person month, domestic – 2 person months).

(i) Analyze the current situation of water supply, wastewater management, and solid waste management, including its implications and impact on Changchun’s water resources and the Government’s proposals for water supply, wastewater management, and solid waste management. (ii) Conduct a peer review of domestic FSRs dealing with wastewater management, water supply, and solid waste management. The scope of the peer review with respect to subproject alternatives includes alternative treatment plant designs and sites, alternative levels of capacity development, alternative designs and routes for subproject mains and pipes, alternative land fill and transfer station design and sites. (iii) Review subproject costs considering the costing approach; phasing of project costs; and, where applicable, unit costs and related physical quantities.

Appendix 4 15

(iv) Review and evaluate projections of water sales and production, and wastewater generation (volume and strength). Comment on the reasonableness and suitability of projections for planning purposes and develop alternative projections as appropriate for the TA analysis. Consider industrial effluents and pretreatment requirements in assessing wastewater strength. (v) Review and comment, as appropriate, on municipal policies and project measures (e.g., sewer replacement and rehabilitation) to control storm water inflow and groundwater infiltration into sanitary sewers in the subproject catchments. (vi) Review and comment on measures in place to reduce non-revenue water, including subproject components involving replacement or rehabilitation of existing transmission and distribution pipes. (vii) Evaluate arrangements and plans for management, operation, and maintenance of subproject facilities.

3. Subproject Analysis: Central Heating (international – 1 person month, domestic – 4.5 person months).

(i) Analyze the current heating situation and related impacts on Yanji’s air quality. Review government plans for central heating and related objectives for environmental improvement and energy conservation; recommend refinements as appropriate based on international good practice and standards. (ii) Review all aspects related to central heating in connection with the city master plan. (iii) Conduct a peer review of domestic FSRs dealing with central heating; the scope of the peer review with respect to subproject alternatives includes (a) alternative heating plant locations, (b) options to control heating loss in transmission and distribution, (c) alternatives to central heating, and (d) heating energy conservation in buildings. (iv) Review subproject costs considering costing approach; phasing of project costs; and, where applicable, unit costs and related physical quantities. (v) Evaluate arrangements and plans for management, operation, and maintenance of subproject facilities. (vi) Assist PPTA financial specialists in assessing financial requirements for managing, operating, and maintaining subproject facilities. (vii) Assist in the preparation of the project design and monitoring framework. (viii) Collect baseline air quality data and develop monitoring framework indicators. (ix) Review the efficiency of the central heating system and recommend measures for efficiency improvement and energy conservation through improved facility design and heating system user practices.

4. Environmental Analysis (international – 1 person month, domestic – 3 person months).

(i) Conduct rapid environmental assessment(s) to propose or justify the Project’s environmental categorization, and list environmental issues and approaches to be mitigated or addressed in the Environmental impact assessment (EIA) analysis. (ii) Undertake all aspects of the environmental work in coordination with the work of other technical experts. (iii) Identify the cumulative environmental benefits of the Project. 16 Appendix 4

(iv) Summarize resettlement issues and key socioeconomic conditions for the project areas and compare with national conditions. (v) Review summary environmental impact assessments (SEIAs) from the Jilin Water Supply and Sewerage Development Project2 for sectors covered in the proposed Project. (vi) Review EIAs of each subproject, suggest improvements, and help the CMG and YMG to revise the EIAs and prepare an SEIA in accordance with ADB’s Environmental Guidelines (2003) and Environment Policy (2002). (vii) Assist CMG and YMG in carrying out the necessary EIA and SEIA investigations and analyses. (viii) Assist CMG and YMG in revising EIA and SEIA reports in response to comments from ADB, the environmental protection bureaus at all levels, and other PPTA stakeholders. (ix) Assist CMG and YMG in planning and implementing two rounds of stakeholder participation and consultation, and other public involvement activities deemed appropriate during EIA and SEIA preparation. Assure that appropriate methods that promote broad-based acceptance of the Project are used. Assure full disclosure and documentation of methods and results in the EIA and SEIA reports as required by ADB. (x) Help the subproject proponents develop environmental management plans (EMPs) at the project and subproject level in accordance with ADB guidelines. The EMPs must address the costs of environmental monitoring and mitigation, stakeholders’ responsibilities, and institutional strengthening and capacity building.

5. Financial Analysis (international – 1.5 person months, domestic – 3.5 person months).

(i) Evaluate the historical financial performance of all entities that manage revenue- generating subprojects. Conduct a financial management assessment of all entities involved in project and subproject implementation and subproject operation. This assessment will follow ADB's Guidelines for Financial Management and Analysis of Projects (2005). (ii) Complete a pro forma financial analysis of all subprojects at a subproject level or an operating entity level as appropriate. (a) Prepare pro forma financial statements in nominal terms (income and expenses, balance sheet, and flow) for entities that will operate revenue-generating subprojects. (b) Forecast standard financial performance indicators for entities that will operate revenue-generating subprojects. (c) Estimate the financial internal rate of return and perform sensitivity and risk analysis, including switching value calculation and calculation of the real weighted average cost of capital for each revenue-generating subproject. (d) Estimate a time-bound profile of future tariff adjustments leading to the establishment of full financial cost tariffs. (iii) Assess the financial sustainability of the Project and all subprojects. (iv) Review existing levels, structures, and policies for tariffs; and charges for water and wastewater, solid waste, and central heating. Determine their adequacy in

2 ADB. 2003. Technical Assistance to People’s Republic of China for Jilin Water Supply and Sewerage Development. Manila.

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terms of financial cost recovery and recommend reforms taking into account state and lower-level regulations, full financial cost recovery over the life of the project, cross subsidies, and affordability.

6. Economic Analysis (international – 1.5 person months, domestic – 2.5 person months).

(i) Conduct economic analysis of the Project in accordance with ADB’s Guidelines for the Economic Analysis of Projects3 and other relevant guidelines and technical notes. (ii) Review government goals, objectives, policies, and plans within each subproject sector relating to (a) general social and economic development, and (b) overall urban development. Based on this review, evaluate the social and economic justification for the Project and subprojects. Review and evaluate existing levels, structures, and policies for tariffs; and charges for water and wastewater, solid waste, and central heating from the perspective of their economic performance. (iii) Evaluate, as appropriate and in consultation with the PPTA social development specialist, the willingness to pay of beneficiaries for subproject benefits. (iv) Forecast the demand for subproject services taking into account, as appropriate, the response of demand to population and economic growth, changes in the efficiency of service delivery, and changes in tariffs and charges. The evaluation of demand will be completed in consultation with PPTA sector and financial specialists. (v) Identify all quantifiable and nonquantifiable economic benefits and costs of each subproject based on with- and without-subproject scenarios. Quantify, as appropriate and feasible, incremental and non-incremental economic benefits and costs. This task is to include an assessment of the impacts on health. (vi) Carry out a distribution analysis of project benefits and costs following the methodology set forth in ADB's Guidelines for the Economic Analysis of Projects (Appendixes 25 and 26) and Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects.4 The distributional analysis should explicitly consider poor and vulnerable persons and households.

7. Social Development (international – 1 person month, domestic – 1.5 person months).

(i) Prepare a community participation and public awareness action plan on water supply, wastewater, solid waste management, and central heating. Based on this plan, help the project management office (PMO) establish consultation and participatory processes that will be used during project preparation and will continue throughout project design, construction, and operation. The participatory processes will include an assessment of stakeholders, stakeholder consultations, and formulation of recommendations to incorporate stakeholder needs in the Project. (ii) Undertake socioeconomic analysis of the project cities and project beneficiaries to assess public perceptions of the environment and the proposed subprojects, estimates of willingness to pay, socioeconomic and health benefits, etc. The analysis is to include an analysis of published statistics; surveys of beneficiaries by subproject, gender, and income group; and other methods as appropriate.

3 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila. 4 ADB. 2001. Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects. Manila. 18 Appendix 4

(iii) Conduct an assessment of poverty in accordance with ADB’s Guidelines for Incorporation of Social Dimensions in ADB Operations and Handbook on Poverty and Social Analysis.5 The assessment will include (a) estimation of the number of project beneficiaries with income below the official poverty line; (b) identification and characterization of vulnerable groups (e.g. ethnic minorities, single parent households, illegal residents, disabled persons, women and children, etc.); (c) assessment of project impacts on the poor and vulnerable groups; and (d) affordability analysis. (iv) Assist the project economist in carrying out distribution analysis of project benefits and costs, based on the outcome of the socioeconomic and poverty analysis, (v) Prepare a poverty reduction and social development strategy in accordance with ADB’s Handbook on Poverty and Social Analysis, based on the poverty assessment. The strategy should recommend measures to mitigate adverse impacts and enhance beneficial impacts on the poor and vulnerable groups. (vi) Prepare a gender action and/or intervention plan, based on the characterization of women as a vulnerable group. (vii) Prepare an ethnic minority development plan or specific action for ethnic minorities in accordance with ADB’s Indigenous Peoples Policy, (Please Incorporate) based on the characterization of ethnic minorities as vulnerable groups. (viii) Collect and analyze health data, including morbidity and mortality rates caused by diseases associated with poor water supply and sanitation and , and assist the project economist in preparing a health impact and/or benefit analysis of the Project. (ix) Analyze the project impacts with respect to Millennium Development Goal 7, Targets 10 and 11. (x) Develop a project performance monitoring system to estimate benefits and impacts, including relevant benchmark for health indicators.

8. Resettlement (international – 1 person month, domestic – 1.5 person months).

(i) Assess the policy and legal framework for resettlement, identify any gaps relative to ADB policies, and propose measures to the gap between ADB and PRC policies. Review draft resettlement plans (RPs) for each subproject to assess compliance with ADB’s Handbook on Resettlement.6 (ii) Define categories for impact and compensation eligibility of affected people in collaboration with the EA and local government officials; and prepare an entitlements matrix based on the PRC Land Administration Law, recent policy documents, local government regulations, and ADB’s Policy on Involuntary Resettlement.7 Assess and justify that the compensation standards in the entitlements matrix are designed to achieve full replacement for lost assets, income, and livelihoods. (iii) Prepare a consultation plan for the EA and assist the EA and local government officials in consulting with affected communities, local leaders, proponents, and stakeholders who may oppose the Project. Assess their concerns and consider possible changes in the project design to minimize land acquisition and resettlement effects. Assist the EA in preparing a resettlement information

5 ADB. 2001. Handbook on Poverty and Social Analysis. Manila. 6 ADB. 1998. Handbook on Resettlement: A Guide to Good Practice. Manila. 7 ADB. 1998. The Bank’s Policy on Involuntary Resettlement. Manila.

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booklet.8 Ensure that Chinese versions of the RP will be distributed to all affected villages and households, all relevant local government offices, and affected village leaders. (iv) Conduct due diligence for resettlement completed in the past 5 years for closely related projects and associated project components which are not financed by ADB. (v) Review the organizational structure and capacity for resettlement implementation and recommend improvements and actions required before the start of land acquisition. Provide training, as required, to the PMO and local government officials on ADB's Policy on Involuntary Resettlement9 requirements and procedures. (vi) Assess and justify that the overall resettlement budget is sufficient to acquire the land and implement the RP. (vii) Assist the CMG and YMG to prepare a detailed resettlement implementation schedule that is linked to the overall Project schedule. Assist the PMO in revising individual subproject RPs as required. (viii) Prepare a summary RP for the Project based on individual subproject RPs. The summary RP should be based on preliminary design data. Based on an assessment of the socioeconomic condition of affected persons, prepare livelihood and/or income restoration programs in consultation with affected persons.

9. Institutional Development (international – 1 person month, domestic – 2 person months).

(i) Assess the institutional capacity of the JPG, CMG, and YMG in formulating urban development plans. (ii) Assess the technical and managerial capacity of implementing agencies to implement, operate, maintain, and manage subproject facilities. (iii) Prepare an institutional capacity-building program for responsible water and wastewater management companies, the solid waste management entity, the central heating company, JMG, CMG, and YMG. The capacity-building program may include consulting services, training, etc. (iv) Assess the organizational structure, staffing, etc. of the PMO to determine its capacity to implement the Project. Recommend appropriate measures to strengthen the capacity of the PMO. (v) Prepare a corporate development plan and associated training program for relevant subproject companies (water supply, wastewater, solid waste management, and central heating) in line with ADB’s Guidelines for Financial Management and Analysis of Projects.10 (vi) Evaluate and assist in the design of contractual and functional relationships between entities that will be jointly responsible for the delivery of subproject services. This analysis may include, as appropriate, drafting of water purchase agreements, cost-sharing agreements or agreements to allocate subproject management, operation and maintenance responsibilities between responsible entities. (vii) Assist in the evaluation of opportunities for private sector delivery of subproject services.

8 ADB has sample formats available. 9 ADB. 1998. The Bank’s Policy on Involuntary Resettlement. Manila. 10 ADB. 2005. Financial Management and Analysis of Projects. Manila.