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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 363 16-CN PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$147 MILLION AND A Public Disclosure Authorized PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$5 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A Public Disclosure Authorized SECOND SHANDONG ENVIRONMENT PROJECT January 30,2007 Urban Development Sector Unit East Asia and Pacific Region Public Disclosure Authorized 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. CURRENCY EQUIVALENTS (Exchange Rate Effective May 9,2006) Currency Unit = Renminbi Yuan (RMB) Renminbi Yuan 8.0065 = US$1.O US$0.1249 = RMB 1.0 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS FOR OFFICIAL USE ONLY Vice President: James W. Adams Country ManagerDirector: David Dollar Sector Manager: Keshav Varma Task Team Leader: Shenhua Wang This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. CHINA Second Shandong Environment Project CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ..................................................... 1 1. Country and Sector Issues ...................................................................................... 1 2. Rationale for Bank Involvement .............................................................................. 2 3 . Higher Level Objectives to Which the Project Contributes .................................... 3 B. PROJECT DESCRIPTION ..................................................................................... 4 I . Lending Instrument ................................................................................................. 4 2. Project Development Objective and Key Indicators ............................................... 4 3 . ProjectComponents ................................................................................................ 5 4. Lessons Learned and Reflected in the Project Design ............................................ 5 5. Alternatives Considered and Reasons for Rejection ............................................... 6 C . IMPLEMENTATION .............................................................................................. 7 1. Partnership Arrangements ...................................................................................... 7 2. Institutional and Implementation Arrangements .................................................... 7 3 . Monitoring and Evaluation of Outcomes/Results ................................................... 8 4. Sustainability ........................................................................................................... 9 5 . Critical Risks and Possible Controversial Aspects ................................................. 9 6. Loan and Grant Conditions and Covenants ......................................................... IO D. APPRAISAL SUMMARY ..................................................................................... 11 1. Economic and Financial Analyses ........................................................................ 11 2. Technical............................................................................................................... 13 3 . Fiduciary ............................................................................................................... 13 4. Social ..................................................................................................................... 14 5. Environment.......................................................................................................... 15 6. Safeguard Policies ................................................................................................ 16 7. Policy Exceptions and Readiness.......................................................................... 17 8. Compliance with Readiness Criteria.................................................................... 18 Annex 1: Country and Sector Background .................................................................. 19 Annex 2: Major Related Projects Financed by the Bank and/or Other Agencies .... 27 Annex 3: Results Framework and Monitoring ............................................................ 28 Annex 4: Detailed Project Description.......................................................................... 32 Annex 5: Project Costs ................................................................................................... 38 Annex 6: Implementation Arrangements ..................................................................... 41 Annex 7: Financial Management and Disbursement Arrangements......................... 43 Annex 8: Procurement.................................................................................................... 51 Annex 9: Economic and Financial Analysis ................................................................. 61 Annex 10: Safeguard Policy Issues ................................................................................ 79 Annex 11: Project Preparation and Supervision ....................................................... 100 Annex 12: Documents in the Project File ................................................................... 103 Annex 13: Statement of Loans and Credits ................................................................ 105 Annex 14: Country at a Glance ................................................................................... 110 Annex 15: Incremental Cost Analysis ......................................................................... 112 Annex 16: GEF Review by Scientific and Technical Advisory Panel ...................... 122 Annex 17: Strategic Partnership Investment Fund ................................................... 130 Map Section IBRD35288. 34859 CHINA SECOND SHANDONG ENVIRONMENT PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASUR Date: January 30,2007 Team Leader: Shenhua Wang Country Director: David R. Dollar Sectors: Sewerage (76%); Water supply Sector ManagedDirector: Keshav Varma (1 3%); Solid waste management (1 1%) Project ID: PO77752 Themes: Pollution management and Lending Instrument: Specific Investment Loan environmental health (P) Environmental screening category: Full Assessment Global Supplemental ID: PO90377 Team Leader: Shenhua Wang Lending Instrument: Specific Investment Loan Sectors: Sanitation (1 00%) Focal Area: I-International waters Themes: Access to urban services and housing Supplement Fully Blended?: Yes (PI [XI Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For Loandcreditdothers: Total Bank Financing: US$147.00 million Proposed Terms: Variable Spread Loan Grace Period: 5 years Years to Maturity: 20 years Commitment Fee: 0.75% ofundisbursed balance, subject to waiver Front-End-Fee on Bank Loan: 1% subiect to waiver RECONSTRUCTION AND DEVELOPMENT GLOBAL ENVIRONMENT FACILITY 5.00 0.00 5.00 Total: 134.11 147.00 281.11 Borrower: The People's Republic of China Responsible Agency: SPPMO No. 46 Xiaoweisi Road Jinan Shandong Province China 250001 Tel: 86-531-8708 8023; 8791 5106 Fax: 86-531-8794 1408 sppmo@jn-public .sd.cninfo .net; sppmo@ 163 .com :Y 7 8 9 10 11 12 13 14 4nnual 0.00 10.00 20.00 25.00 30.00 32.00 20.00 10.00 Sumulative 0.00 10.00 30.00 55.00 85.00 117.00 137.00 147.00 -Y 7 8 9 10 11 12 13 14 4nnual 0.00 0.50 0.50 0.50 1.oo 1SO 0.50 0.50 Sumulative 0.00 0.50 1.oo 1SO 2.50 4.00 4.50 5.00 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [XIYes [ ]No Have these been approved by Bank management? [XIYes [ ]No Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [XIYes [ ]No Ref: .# PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ No Ref:.I PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The development objective is to improve the environmental conditions in participating municipalitieskounties through a package ofpriority interventions, including upgrading and development ofwastewater collection and treatment facilities, river embankment rehabilitation, solid waste management, water supply improvements, industrial pollution monitoring, and enhancement ofthe financial performance and efficiency ofkey urban environmental service agencies. Global Environment objective Re$ PAD B.2, Technical Annex 3 The Global Environmental Objective ofthe GEF activity is to reduce land-based pollution along the Yantai coast and the Bohai Sea through development ofa pilot septic-tank management system in Yantai and dissemination ofthe Yantai model in Shandong Province and in other parts of China. Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical 4nnex 4 The proposed project has the following four components: (1) wastewater collection network and I treatment facilities in Gaomi, Huantai, Qixia, Weifang, Weihai, Yantai and Zaozhuang, with associated river embankment rehabilitation in Qixia, Weifang and Zaozhuang, and development of a pilot septic tank management system in Yantai co-financed by
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